August

Date….

Since 1996, Canon has been promoting its long-term management plan, the “Excellent Global Corporation Plan,” under the philosophy of kyosei, with the aim of being a corporate group that continuously contributes to society through technological innovation and is worthy of admiration and respect worldwide.

Highlights of Financial Results

During the first half of the current business term, amid concerns of a substantial drop in revenue and profits as a result of the Great East Japan Earthquake’s influence on our production, we concentrated all our energy into efforts such as early restoring of buildings and facilities, securing supply of components, and so on, with cooperation of many people from various sectors.

As a result, consolidated net sales declined only slightly, by 2.9% in comparison to the first half of 2010, partly due to the contribution of the consolidation of Océ N.V. in March last year. Consolidated net income attributable to Canon Inc. fell 12.2% in comparison to the first half of 2010, but even under such difficult circumstances, we still managed to earn 109.3 billion yen profit.

Business Conditions by Operations 1

Office Business Unit

The market for office network digital multifunction devices performed well in general, despite a slight contraction of the domestic market due to the earthquake. Under such conditions, the disruption of component supplies due to the earthquake and other impacts resulted in unit sales falling short of last year’s level not only in Japan but also in Europe and China. However, sales in the U.S. was solid. Especially the “imageRUNNER ADVANCE C2030/2020” color machine introduced last year as a compact model within the “imageRUNNER ADVANCE” series new generation multifunction devices sold well in the U.S., Europe and Asia.

* Shown equipped with options including the “POD deck A1”

imagePRESS C7010VPS

First jointly developed product with Océ N.V., combining our multifunctional color production printer, which boasts outstanding image quality and fine-details approaching that of offset printing, with an Océ printer controller.

In the market for digital production printers, we worked vigorously to develop sales for the “imagePRESS C7010VP,” which has realized high image quality approaching that of offset printing, the high-speed, monochrome “imageRUNNER ADVANCE 8000 PRO/6000” series, and other products introduced last year. Excluding the domestic market, which was significantly affected by the earthquake, healthy increases in unit sales were recorded with particularly strong performance in Europe. We have also begun to introduce the “imagePRESS C7010VPS,” starting with the U.S. and then European markets. This is the first jointly developed product with Océ N.V., which is the “imagePRESS C7010VP” equipped with Océ N.V.’s high-performance printer controller “PRISMAsync.”

Satera MF4410

A4 monochrome laser multifunction device offering output of 23 pages per minute and combining copying, printing, and scanning functions in a stylish, compact body.

As for multifunction devices for small to mid-sized businesses, domestic sales fell below the previous term’s level because of product supply shortages and price declines resulting from the earthquake, and sales in other regions resulted in the previous term’s level. Unit sales, however, expanded, particularly in Europe.

Regarding laser printers, orders for OEM-brand products, which plummeted in the first half of 2009, in turn, embarked on a rapid recovery, and unit sales continued to grow during the first half of the current business term. For Canon-brand products, sales development efforts for products such as the A4 monochrome machine “Satera LBP6700,” offering both 40 pages per minute high-speed output and high energy efficiency, held unit sales steady in Japan, while generating significantly higher sales in Europe.

As for large-format inkjet printers, the gradual and modest recovery trend that began last year has continued, and sales of the “imagePROGRAF” series performed well overall, despite challenging conditions in Europe. In February, the introductions of the “iPF8300S/6300S,” new products in the same series offering both the high image quality needed for tasks such as poster printing and proofing (color proofing) and high productivity, met with positive market receptions.

As a result of the above, net sales for this business unit increased by 1.7% in comparison to the first half of 2010.

imagePROGRAF iPF8300S

Large-format inkjet printer capable of handling needs ranging from poster printing to proofing (color proofing) all with the best balance of high speed and high image quality.

Business Conditions by Operations 2

Consumer Business Unit

The market for digital SLR cameras continued to grow, despite the impacts of the earthquake primarily on the domestic market since April. Under such conditions, we introduced and worked to develop sales of the “EOS Kiss X5” entry-level model equipped with the “Scene Intelligent Auto” mode for obtaining the optimal image quality for the shooting conditions and the “Vari-angle Clear View LCD monitor” making it possible to shoot from any angle. Meanwhile, sales of the “EOS Kiss X4” and the advanced amateur model “EOS 60D,” both introduced in the previous term, remained solid. Sales growth was especially strong in Asia, where unit sales surpassed those for the first half of the previous business term.

*    Shown interchangeable lenses, EF-S18-55mm F3.5-5.6 IS II (fitted to the camera) and EF-S55-250mm F4-5.6 IS

EOS Kiss X5

Entry-level model digital SLR camera equipped with advanced fully automatic “Scene Intelligent Auto” mode and the “Vari-angle Clear View LCD monitor” making it possible to shoot from any angle.

PowerShot SX230 HS

Compact digital camera equipped with a 14x optical zoom lens for a wide variety of shooting needs, “HS SYSTEM” for low-light environments and GPS for automatic recording photo location information.

The market for compact digital cameras showed steady growth among emerging economies. Under these circumstances, we introduced three “IXY” series products, including the “IXY 31S” equipped with a 3.2-inch touch panel LCD monitor, and seven “PowerShot” series products, including the “PowerShot SX230 HS,” the first Canon camera equipped with GPS. Despite component supply shortages caused by the earthquake, which led to unit sales falling below the previous term’s level, sales shares were maintained, notably in the markets of North America, Europe and China.

In the digital video camcorder market, we introduced new products and raved high reviews. These new products include the “iVIS HF M41/ M43,” equipped with the high-performance “HD CMOS PRO” CMOS sensor used in professional HD video camcorders, and the “XA10,” which features the smallest, lightest-weight body we have ever offered in a professional video camcorder.

Growth of the inkjet printer market was small at an overall level, but sales in the Asian, Central and South American, and other emerging economies remained strong. Furthermore, with damage from the earthquake kept to a minimum, our unit sales grew more than the growth in the market. We also introduced and worked to develop sales for the “PIXUS MX883,” “PIXUS MX420,” and other new business-use products. These efforts also produced steady sales of consumables. In February, we announced the introduction of the “DreamLabo 5000,” a new product for the retail photo industry (produces photo prints, albums, and other such products based on orders accepted through retail stores or websites) and our full-scale entry into the commercial photo printer market.

Meanwhile, in the image scanner market, we steadily built our sales, further solidifying our No. 1 market share position, despite the contracting overall market.

As a result of the above, net sales for this business unit decreased by 9.5% in comparison to the first half of 2010.

PIXUS MX883

Business-use inkjet multifunction device equipped with a 3.0-inch TFT monitor, “Dual Function Panel” that changes depending on function, and other features that vastly improve ease of use.

Business Conditions by Operations 3

Industry and Others Business Unit

Despite some lingering earthquake impacts during the first half of the current business term, the market for semiconductor lithography equipment, which experienced a rapid recovery in the previous term, is expected to perform higher growth than the previous term on an annual basis. Behind the anticipated performance is enormous demand for smartphone flash memory and others, which has device manufacturers eager to make capital investments. Under such conditions, the “FPA-5510iZ” and other i-line steppers have won strong customer support for their outstanding reliability, and unit sales grew as a result.

As for LCD lithography equipment, panel manufacturers actively invested in facilities for small- and mid-size LCD panels in response to heightened demand for smartphones and tablet PCs. Investments in facilities for the large-size panels that we excel at, however, reversed the course from the previous term, leaving unit sales significantly below the result for the first half of the previous business term.

In medical equipment, unit sales of our mainstay digital radiography systems rose steadily on rapid growth in the Chinese and other Asian markets. Both the “CXDI-50G” with its proven track record and the “CXDI-70C Wireless,” which leverages wireless technology to offer medical professionals vast improvements in operability, have been received well, and sales of them steadily expanded. In the area of ophthalmic products, unit sales of non-mydriatic digital retinal cameras, such as the “CR-2” introduced last year, rose.

FPA-5510iZ

High throughput i-line stepper employing the FPA-5500 series platform with proven high performance and reliability, and a high-acceleration-compatible wafer stage.

CXDI-401C

Digital radiography system equipped with highly sensitive, high-resolution area sensor and offering high-definition, high-image-quality diagnostic images at low radiation doses.

In document scanners handled by Canon Electronics Inc., although sales struggled for check scanners (Image Scanners specialized for scanning bills and check) in North America, sales grew steadily in the domestic and European markets and increased in other markets including Asia and South America.

The die bonders handled by Canon Machinery Inc. booked fewer orders and sales. The company’s FA system-related devices, meanwhile, enjoyed significantly higher sales powered by growing orders for facilities related to secondary batteries for automobiles in places such as China and South Korea.

The semiconductor film deposition equipment handled by Canon ANELVA Corporation increased in sales on vigorous capital investment by semiconductor manufacturers in countries outside of Japan. Sales of film deposition equipment for magnetic heads and disks, however, declined on weak demand for PCs.

As a result of the above, net sales for this business unit decreased by 4.3% in comparison to the first half of 2010.

imageFORMULA DR-C125

Stylish document scanner that realizes an exceptionally small footprint by employing the new “Round Scan” paper transport technology.

TOPICS 1

Providing Aid to Areas Hit by the Great East Japan Earthquake

To aid the relief efforts for those affected by the Great East Japan Earthquake, the Canon Group made a donation of 300 million yen to the Japanese Red Cross Society. We also donated portable digital radiography systems that mainly consist of Canon’s medical digital radiography system “CXDI-55G” to support the medical activities of the said organization.

In addition to the above, the Canon Group is providing a diverse range of support such as the donation of 100 million yen to Fukushima Prefecture by Fukushima Canon Inc., free provision of a web conference system to businesses in disaster areas by Canon Marketing Japan Inc., and other support including donation and loan of products and provision of aid supplies. We will continue to contribute to the restoration and reconstruction of the affected areas.

TOPICS 2

In February, Canon Inc. and the Kyoto Culture Association (NPO) donated to Kenninji Temple a high-resolution facsimile of the “Wind God and Thunder God Screens” (by Tawaraya Sotatsu), a national treasure in the temple’s collection.

The “Wind God and Thunder God Screens” that has been donated this time is created as part of the fourth stage of the “Cultural Heritage Inheritance Project (Tsuzuri Project),” a social contribution activity for preserving cultural heritage and making use of high-resolution facsimiles launched by Canon Inc. and the Kyoto Culture Association in 2007.

This facsimile was also displayed in the Japanese pavilion at the Expo 2010 Shanghai China.

TOPICS 3

Holding of the “Junior Photographers Photo Exhibition”

Canon Inc. held the “Junior Photographers Discovery! Impression! Exhibition 2011” from February to July at six locations nationwide and displayed about 70 pieces of unique photographs taken by children. “Junior Photographers” is a photo project to provide children with opportunities to convey their discoveries and impressions to others by means of photography.

Camera courses, photo sessions and presentation sessions have been held in cities in which nature is still alive and areas which are kept green.

Since the project started in 2004, the number of participants has reached around 6,500 in total, and the project area is spread throughout Japan.

TOPICS 4

Canon Vietnam Implemented Planting Forest Project

In March, Canon Vietnam Co., Ltd. implemented its Planting Forest Project, in continuation of its activities from last year.

The project is part of the social contribution activity “For a Green Vietnam.” Through the activity of planting forests, the project aims to protect the environment of Vietnam by reducing the amount of CO₂ and alleviating natural disasters such as typhoons and floods, as well as to contribute to promoting housing stability for local residents.

On March 26, in Bac Giang Province, participants in the project, including the President & CEO of Canon Vietnam Co., Ltd., as well as teachers and around 500 pupils from a local high school, planted protective forest in around 20 hectares of land.

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

                         Consolidated Balance Sheets

Company Profile (As of June 30, 2011)

Canon Inc.

Headquarters [Tokyo]

Kawasaki Office [Kanagawa Pref.]

Ayase Plant [Kanagawa Pref.]

Hiratsuka Plant [Kanagawa Pref.]

Oita Plant [Oita Pref.]

Tamagawa Office [Kanagawa Pref.]

Kosugi Office [Kanagawa Pref.]

Toride Plant [Ibaraki Pref.]

Fuji-Susono Research Park [Shizuoka Pref.]

Yako Office [Kanagawa Pref.]

Utsunomiya Plant [Tochigi Pref.]

Ami Plant [Ibaraki Pref.]

R&D, Manufacturing and Marketing

Canon Electronics Inc. [Saitama Pref.]

Canon Finetech Inc. [Saitama Pref.]

Canon Precision Inc. [Aomori Pref.]

Canon Components, Inc. [Saitama Pref.]

Canon ANELVA Corporation [Kanagawa Pref.]

Canon Machinery Inc. [Shiga Pref.]

Tokki Corporation [Niigata Pref.]

Manufacturing

Oita Canon Inc. [Oita Pref.]

Canon Chemicals Inc. [Ibaraki Pref.]

Oita Canon Materials Inc. [Oita Pref.]

Fukushima Canon Inc. [Fukushima Pref.]

Nagahama Canon Inc. [Shiga Pref.]

Marketing

Canon Marketing Japan Inc. [Tokyo]

Canon System & Support Inc. [Tokyo]

Canon IT Solutions Inc. [Tokyo]

Canon Software Inc. [Tokyo]

Shares of the Company (As of June 30, 2011)

            Number of Shares Held             

            (thousands of shares)            

            Shareholding Ratio             

            (%)             

  Japan Trustee Services Bank, Ltd. (Trust Account)

  The Dai-ichi Life Insurance Company, Limited

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

  Moxley and Co.

  JP Morgan Chase Bank 380055

  State Street Bank and Trust Company

  State Street Bank and Trust Company 505223

  Deutsche Securities Inc.

  SSBT OD05 OMNIBUS ACCOUNT - TREATY CLIENTS

  Sompo Japan Insurance Inc.

Notes:

  1st Share Options

  2nd Share Options

  3rd Share Options

  4th Share Options

Website

Telephone    

Address

Stock Transfer Agency Department of Mizuho Trust & Banking Co., Ltd.

8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-8507

For those shareholders who receive dividends by way of “Receipt of Dividend”

How to receive dividends is shown on the backside of Receipt of Dividend.

We recommend one of the following three methods as a safer and more expeditious way to receive dividends. For more information, please ask your securities company etc.

i)         The method of depositing the dividends of all the issues, including shares of the Company, that are managed by a shareholder using securities company accounts into said securities company accounts (System of allocating dividends to securities company accounts in proportion to the number of shares held in respective accounts).

ii)         The method of transferring the dividends of all the issues, including shares of the Company, held by a shareholder into one and the same bank deposit account (System of receiving dividends in the account registered for receipt of dividends).

iii)       The method of transferring dividends into an account at a financial institution such as a bank, including Japan Post Bank (System of designating an account for each issue held).

* It is not possible to use method i) for shares that are managed in a special account.

* In the case of method ii), it is not possible to choose a Japan Post Bank account as the account into which the dividends are transferred.

Business term

Ordinary general meeting of shareholders

Record date for above

Record date for interim dividends

Manager of the register of shareholders

/ Account management institution

for the special account (tokubetsu koza)

2-1, Yaesu 1-chome, Chuo-ku, Tokyo

Mizuho Trust & Banking Co., Ltd.

Business handling place

Stock Transfer Agency Department, Head Office

Mizuho Trust & Banking Co., Ltd.

Number of shares constituting one unit

Newspaper in which public notices are inserted

Stock exchange listings

Securities code

30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501