RESULTS FOR THE FOURTH QUARTER AND THE FISCAL YEAR ENDED DECEMBER 31, 2016

CONSOLIDATED RESULTS

January 31, 2017

(Millions of yen, thousands of U.S. dollars, except per share amounts)

Actual Projected

Year ended

Year ended

Change(%) Year ended

Year ending

December 31, 2016

December 31, 2015

December 31, 2016

December 31, 2017 Change(%)

Net sales

¥

3,401,487

¥

3,800,271

- 10.5

$ 29,323,164

¥

4,000,000

+

17.6

Operating profit

228,866

355,210

- 35.6

1,972,983

255,000

+

11.4

Income before income taxes

244,651

347,438

- 29.6

2,109,060

260,000

+

6.3

Net income attributable

to Canon Inc.

¥ 150,650

¥ 220,209

- 31.6

$ 1,298,707

¥ 170,000

+ 12.8

Net income attributable to Canon Inc. shareholders per share:

- Basic

¥

137.95

¥

201.65

- 31.6

$ 1.19

¥

155.67

+

12.8

- Diluted

137.95

201.65

- 31.6

1.19

-

-

As of

As of

Actual

Change(%) As of

December 31, 2016

December 31, 2015

December 31, 2016

Total assets

Canon Inc. shareholders' equity

¥ 5,138,529

¥ 2,783,129

¥ 4,427,773

¥ 2,966,415

+ 16.1

- 6.2

$ 44,297,664

$ 23,992,491

Notes: 1.Canon's consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.

2.U.S. dollar amounts are translated from yen at the rate of JPY 116= U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2016, solely for the convenience of the reader.

NON-CONSOLIDATED RESULTS

Year ended

Year ended

Actual

(Millions of yen, thousands of U.S. dollars, except per share amounts)

Year ended

December 31, 2016

December 31, 2015 Change(%)

December 31, 2016

Net sales

¥ 1,763,987 ¥

2,091,139

- 15.6 $

15,206,784

Operating profit 67,543 169,238 - 60.1 582,267

Ordinary profit 158,359 269,818 - 41.3 1,365,164

Net income

¥ 133,055

¥ 211,963

- 37.2

$ 1,147,026

Net income per share:

- Basic

¥ 121.84 ¥

194.10

- 37.2 $

1.05

- Diluted 121.84 194.10 - 37.2 1.05

Dividend per share 150.00 150.00 - 1.29

As of

As of

Actual

Change(%) As of

December 31, 2016

December 31, 2015

December 31, 2016

Total assets Net assets

¥ 3,176,703

¥ 1,452,646

¥ 2,437,924

¥ 1,484,157

+ 30.3

- 2.1

$ 27,385,371

$ 12,522,810

Notes: U.S. dollar amounts are translated from yen at the rate of JPY 116= U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of December 30, 2016, solely for the convenience of the reader.

Canon Inc. 30-2, Shimomaruko 3-chome, Ohta-ku,

Headquarter office Tokyo 146-8501, Japan

Phone: +81-3-3758-2111

I. Operating Results and Financial Conditions 2016 in Review

Looking back at the global economy in 2016, the trend of recovery in the U.S. economy became stronger as employment conditions and consumer spending progressively improved from the latter half of the year. In Europe, although the economy grew moderately, centered on Germany, the outlook for the region's economy has grown increasingly uncertain due to concerns over the UK's decision to exit the EU and the political unrest in Syria. The Chinese economy continued its deceleration trend while the economies of emerging countries such as Russia and Brazil remained stagnant. In Japan, the economy remained weak due to weak consumer spending. Looking at the global economy as a whole, although higher growth than the previous year was expected at the beginning of the year, the global economy overall experienced its lowest level of growth since the financial crisis precipitated by Lehman Brothers' bankruptcy.

As for the markets in which Canon operates amid these conditions, regarding the demand for office multifunction devices (MFDs) and laser printers, the demand for color models enjoyed strong growth due to the trend of shifting from monochrome to color machines, while the demand for monochrome shrunk due to the continued economic slowdown in emerging countries. As for cameras, along with the ongoing contraction of the market, especially for digital compact cameras, the market suffered from a shortage of components arising from the earthquake in Kumamoto earlier in the year. Additionally, demand for inkjet printers continued to decline. Within the Industry and Other sector, demand for lithography equipment used in the production of flat panel displays (FPDs) and manufacturing equipment for organic LED (OLED) displays enjoyed strong growth thanks to active capital investment by panel manufacturers.

The average value of the yen during the year was ¥108.58 against the U.S. dollar, a year-on-year appreciation of approximately ¥13, and ¥120.25 against the euro, a year-on-year appreciation of approximately ¥14, which had a negative impact of ¥280.4 billion on net sales and of ¥101.8 billion on operating profit.

During 2016, color-model office MFDs achieved higher growth than the market average, making up for the continued decline of monochrome models, which led to the same level of unit sales as the previous year overall. Although the unit sales of laser printers were below level compared with the same period of the previous year until the third quarter, due to the sluggish economic conditions in the emerging countries, signs of bottoming out started to appear in the fourth quarter. Looking at the interchangeable-lens digital cameras, sales volume for the year exceeded that of the previous year, supported by sales of new products, while sales volume for digital compact cameras declined compared with the previous year amid the ongoing contraction of the market. Sales volume for inkjet printers declined for consumer products, while sales volume of wide format inkjet printers for business use exceeded the previous year. In contrast, sales of FPD lithography equipment and OLED panel manufacturing equipment increased, boosted by increased capital investment by panel manufacturers. Consequently, along with the negative impact of the appreciation of the yen, net sales for the year decreased 10.5% year on year to ¥3,401.5 billion. The gross profit ratio decreased by 1.7 points year on year to 49.2% mainly due to the negative effect of yen's appreciation. Despite a reduction in operating expenses of 8.5% year on year, partly due to Group-wide efforts to reduce spending, operating profit decreased by 35.6% to ¥228.9 billion. Other income (deductions) increased by ¥23.6 billion due to foreign currency exchange gains while income before income taxes decreased by 29.6% year on year to ¥244.7 billion and net income attributable to Canon Inc. decreased by 31.6% to ¥150.7 billion.

In December 2016, all shares of Toshiba Medical Systems Corporation (TMSC) were obtained following the completion of necessary clearance procedures by antitrust authorities, and TMSC joined the Canon Group.

Basic net income attributable to Canon Inc. shareholders per share for the year was ¥137.95, a year-on-year decrease of ¥63.70.

Results by Segment

Looking at Canon's full-year performance by business unit, beginning with the Office Business Unit, unit sales of office MFDs increased overall from the previous year thanks to strong sales of color models, even with the continued decrease in sales of monochrome models. This growth was supported by steady sales of the color A3 (12"x18") imageRUNNER ADVANCE C5500-series models, which were released this year, and the small-office/home-office color A3 (12"x18") imageRUNNER C3300-series models, which were launched in the previous year, along with expanded sales of imagePRESS C10000VP-series models, which target the production printing market. Among high-speed continuous-feed printers, unit sales of the Océ-produced VarioPrint i300, a high-speed sheet-fed color inkjet press, increased year on year. Although the unit sales of laser printers had been below level against the same period of the previous year until the third quarter, due to the sluggish economic conditions in the emerging countries, unit sales exceeded the same period of the year at fourth quarter along with a smooth transition to new models as planned. These factors, coupled with the negative effect of unfavorable currency exchange rates, resulted in total sales for the business unit of ¥1,807.8 billion, a year-on-year decline of 14.4%, while operating profit totaled ¥169.5 billion, a year-on-year decline of 41.7%.

Within the Imaging System Business Unit, sales volume for interchangeable-lens digital cameras grew compared with the previous year owing to healthy demand for the EOS-1D X mark II and the EOS 5D mark IV, which were launched this year, and the launch of a new addition to the Company's strengthening compact-system camera lineup, the EOS M5, which features a built-in EVF. As for digital compact cameras, along with the ongoing contraction of the market, sales volume declined amid difficulties in procuring components due to the earthquake in Kumamoto earlier in the year, with much of the profitability generated by sales of high-added-value models that deliver high image quality and zoom capabilities. As for inkjet printers, although sales volume declined compared with the previous year due to a shrinking market for consumer products, sales of models equipped with large-capacity ink tanks that were launched in the fourth quarter of 2015 experienced healthy demand mainly in emerging countries, while demand was high mainly in Japan for newly designed models for home use that were launched in 2016. Additionally, wide format inkjet printers, new imagePROGRAF PRO-series models, which target the professional photo and graphic art market, saw an increase in unit sales. As a result of these factors, along with the negative effect of unfavorable currency exchange rates, sales for the business unit decreased by 13.3% to ¥1,095.3 billion while operating profit totaled ¥144.4 billion, a year-on-year decline of 21.3%.

In the Industry and Other Business Unit, unit sales of semiconductor lithography equipment decreased from the previous year amid the postponement of some capital investments by customers. As for FPD lithography equipment, unit sales of lithography systems employed in the fabrication of mid- and small-size panels increased in response to growing demand for high-definition OLED displays used in mobile devices. Also, sales of manufacturing equipment for OLED displays, which is sold by Canon Tokki, increased amid brisk capital investment by panel manufacturers. In addition, sales of network camera increased compared with the previous year thanks to efforts to strengthen the product lineup. Consequently, sales for the business unit increased 11.4% year-on-year to ¥584.7 billion while operating profit grew by ¥20.5 billion to ¥7.4 billion.

Cash Flow

During 2016, cash flow from operating activities totaled ¥500.3 billion, an increase of ¥25.6 billion compared with the previous year owing to improvements in working capital. Cash flow from investing activities increased ¥383.5 billion year on year to ¥837.1 billion mainly due to the acquisition of all of the shares of TMSC. Accordingly, free cash flow totaled negative ¥336.8 billion, a decrease of ¥357.9 billion compared with the previous year.

Cash flow from financing activities recorded proceeds of ¥355.7 billion, mainly owing to a bank borrowing related to the acquisition of TMSC.

Owing to these factors, as well as the negative impact from foreign currency translation adjustments, cash and cash equivalents decreased by ¥3.4 billion to ¥630.2 billion from the end of the previous year.

Non-consolidated Results

Non-consolidated net sales totaled ¥1,764.0 billion, a year-on-year decrease of 15.6%, while ordinary profit decreased by 41.3% to ¥158.4 billion and net income decreased by 37.2% to ¥133.1 billion.

Outlook

As for the outlook in 2017, the U.S. economy is expected to grow thanks to its continued gradual recovery as employment conditions improve and expectations surrounding the financial policy of the new administration. Looking at the European economy, the declining cohesion of the EU resulting from the U.K.'s decision to leave the EU has caused increasing uncertainty for economic growth projections. As for emerging economies, although the outlook indicates signs of recovery for Russia and Brazil whose economies have experienced negative growth so far, the economic slowdown in China is expected to be prolonged.

The outlook for the Japanese economy, despite signs of a recovery in employment conditions, indicates

prolonged sluggish consumer spending and the market is expected to remain along a path of moderate growth. Overall, while the U.S. economy performs the role of the driving force of the world economy, the global economy is expected to move toward a moderate recovery.

In the businesses in which Canon is involved, among office MFDs, demand for color models makes up for the market contraction of monochrome models and demand is expected to remain in line with that of the previous year overall. Although demand for laser printers is expected to remain at the same level as that for the previous year, demand for color models and laser multifunction models with high potential consumable sales is expected to increase. As for interchangeable-lens digital cameras, although demand is waning mainly in developed countries, the sluggish demand condition is improving gradually, which is expected to bottom out. Projections for digital compact cameras indicate continued market contraction, centered mainly on low-priced models. With regard to inkjet printers, demand is expected to continue declining mainly for consumer models. Looking at industrial equipment, within the semiconductor lithography equipment segment, the market is expected to remain at the same level as the previous year while the outlook for FPD lithography equipment and OLED display manufacturing equipment points to continued active capital investment by panel manufacturers. The network camera market is also expected to grow in response to increasing marketing and production site efficiency-enhancing needs, in addition to disaster monitoring and crime prevention functions.

With regard to currency exchange rates for the year, on which the Company's performance outlook is based, Canon anticipates exchange rates of ¥110 to the U.S. dollar and ¥120 to the euro, representing a depreciation of approximately ¥1 against the U.S. dollar and approximately same level against the euro compared with the annual average rates of the previous year.

Upon taking into consideration the impact of the acquisition of TMSC and the current economic forecast, Canon projects full-year consolidated net sales in 2017 of ¥4,000.0 billion, a year-on-year increase of 17.6%; operating profit of ¥255.0 billion, a year-on-year increase of 11.4%; income before income taxes of ¥260.0 billion, a year-on-year increase of 6.3%; and net income attributable to Canon Inc. of ¥170.0 billion, a year-on-year increase of 12.8%.

Basic Policy Regarding Profit Distribution and Dividends for the Current Fiscal Year

Canon is being more proactive in returning profits to shareholders, mainly in the form of a dividend, taking into consideration medium-term profit forecasts along with planned future investments, cash flow and other factors.

In 2016, Canon undertook such large investments for future growth as the acquisition of TMSC. Thanks, however, to efforts to boost product competitiveness and strengthen the Company's financial position through a management focus on profitability and cash flow, Canon was able to maintain its strong financial position. Taking this into consideration while seeking to actively provide a stable return to shareholders, Canon has decided to distribute a full-year dividend of ¥150 per share, (interim dividend of ¥75 per share [already distributed] and year-end dividend of ¥75), which is the same as the previous year's dividend.

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project" or "should" and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon's targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon's annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

  1. Number of group companies

    December 31, 2016

    December 31, 2015

    Change

    Subsidiaries Affiliates

    367

    9

    317

    5

    50

    4

    Total

    376

    322

    54

  2. Group structure and major companies

Outside Customers

Sales Companies

Japan

Americas

Europe

Other

Canon Marketing Japan Inc.

Canon U.S.A.,Inc.

Canon Europe Ltd.

Canon (China) Co.,Ltd.

Canon System and Support Inc.

Canon Canada,Inc.

Canon Europa N.V.

Canon Singapore Pte.Ltd.

etc.

Canon Solutions America, Inc.

Canon (UK) Ltd.

Canon Hongkong Co.,Ltd.

Canon Financial Services, Inc.

Canon France S.A.S.

Canon Australia Pty.Ltd.

TOSHIBA AMERICA

Canon Deutschland GmbH

Canon India Pvt., Ltd.

MEDICAL SYSTEMS, INC.

Canon Ru LLC

etc.

etc.

Canon (Schweiz) AG

Canon Nederland N.V.

Canon Middle East FZ-LLC

TOSHIBA MEDICAL

SYSTEMS EUROPE B.V.

etc.

Canon Inc.

Domestic Manufacturers

Overseas Manufacturers

Office

Office

Canon Electronics Inc. Canon Finetech Inc. Nisca Corporation Canon Chemicals Inc. Canon Precision Inc. Nagahama Canon Inc.

Oita Canon Materials Inc. etc.

Imaging System

Canon Virginia,Inc. Océ-Technologies B.V.

Canon Dalian Business Machines, Inc. Canon Zhongshan Business Machines Co., Ltd.

Canon (Suzhou) Inc. Canon Vietnam Co.,Ltd.

Canon Prachinburi (Thailand) Ltd. etc.

Imaging System

Oita Canon Inc. Fukushima Canon Inc. Nagasaki Canon Inc.

Oita Canon Materials Inc. Canon Finetech Inc.

Canon Components, Inc. etc.

Canon Inc., Taiwan Canon Zhuhai, Inc.

Canon Hi-Tech(Thailand)Ltd. Canon Vietnam Co.,Ltd.

Canon Opto(Malaysia)Sdn.Bhd. etc.

Industry and Other

Industry and Other

Canon Electronics Inc. Canon Components, Inc. Canon Precision Inc.

Canon Machinery Inc.

Canon ANELVA Corporation Canon Tokki Corporation

TOSHIBA MEDICAL SYSTEMS CORPORATION

TOSHIBA ELECTRON TUBES&DEVICES CO.,LTD.

etc.

Product Supply Parts Supply

Axis Communications AB etc.

Other Companies

Canon Software Inc.

Canon Research Centre France S.A.S.

Canon Information Systems Research Australia Pty.Ltd.

Canon IT Solutions Inc. etc.

  1. Basic Policy

    Under the corporate philosophy of kyosei-living and working together for the common good-Canon's basic management policy is to contribute to the prosperity and well-being of the world while endeavoring to become a truly excellent global corporation targeting continued growth and development.

  2. Management Goals

    Based on this basic management policy, Canon launched the Excellent Global Corporation Plan in 1996 and, from Phase I through to Phase IV, has worked to strengthen its management base and improve corporate value. In 2016, under the slogan "Embracing the challenge of new growth through a grand strategic transformation," Canon embarked on a new five-year initiative: Phase V of the Excellent Global Corporation Plan. Under this plan, Canon aims to facilitate growth through structural transformation by reinforcing existing businesses and taking steps to cultivate and strengthen new businesses.

    Regarding new businesses, Canon is particularly focused on areas where market expansion is expected in the future, namely such B2B spheres as commercial printing, network cameras, healthcare and industrial equipment. As part of such efforts, Toshiba Medical Systems Corporation (TMSC), a leading company in the medical equipment industry, was made a Canon subsidiary in December of 2016, the first year of Phase V. Through this acquisition, Canon was able to make significant progress in establishing a foundation for new businesses.

  3. Business Challenges and Countermeasures

Although the IMF is projecting a modest pickup in the global economy in 2017, political and economic circumstances are expected to remain highly uncertain.

2017 marks not only the second year of Phase V of the Excellent Global Corporation Plan, but also Canon's 80th anniversary. To ensure that 2017 is a year befitting this milestone, Canon is addressing the following key challenges under the theme "Further promoting grand strategic transformation by accelerating reforms."

  1. Thoroughly bolster existing business

    In order to successfully transform its business structure, Canon will work to improve profitability by reinforcing the existing businesses that will support this transformation. Specifically, Canon will accelerate the development of "Dantotsu Products," which are products with unique appeal and strengths that realize high profitability thanks to their difficulty to imitate. At the same time, Canon will advance such initiatives as automation, in-house production, and procurement reform, in order to achieve a cost-of-sales ratio of 45%. Additionally, Canon will expand its business domains, developing new business models in response to the internet of things (IoT) and cloud environments.

  2. Strengthen and grow new businesses and create future businesses

    For commercial printing, with the aim of becoming a comprehensive printing company, Canon will accelerate product development in order to make a full-scale entry into the fast-growing package printing market. Regarding network cameras, Canon will work to strengthen camera intelligence, by not only improving image quality, but leveraging the image-processing and image-analytics technologies at its disposal in order to create market-specific solutions. As for healthcare, Canon will formulate new growth strategies, built around TMSC, and will exert the Group's comprehensive strength to provide innovative products and high-quality services on a global scale. For industrial equipment, such as IC lithography equipment that utilizes nanoimprint lithography, Canon will formulate new business strategies to pioneer a "fourth industrial revolution" driven by artificial intelligence and IoT.

  3. Restructure the global sales network

    In the B2B sphere, success or failure is determined by the capacity to devise and implement solutions. In addition to training highly skilled sales engineers with a breadth of technical knowledge spanning both hardware and software, Canon will establish a sales structure with networks that expand to corporations and governments. Additionally, Canon will formulate global sales strategies that take full advantage of the expansion and development of e-commerce.

  4. Strengthen R&D through open innovation

    Canon will enhance R&D efficiency in existing business fields and be selective in investment in promising new fields. On top of this, aiming to establish and expand service businesses, Canon will train software engineers, develop systems and accelerate the establishment of an external cooperation system.

  5. Cultivate global human resources and reinvigorate the Canon spirit

An enterprising spirit and the San-ji (Three Selfs) Spirit of self-motivation, self-management, and self-awareness, have been basic components of Canon's corporate DNA since its foundation. Canon is now working to re-instill these values as we promote the development of human resources that are able to exert leadership in a global environment.

IV．Basic Concept Regarding the Selection of Accounting Standards

Canon is listed on the New York Stock Exchange and, since registering its American Depositary Receipts on the OTC (over-the-counter) market in 1969, has prepared its consolidated financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") over the long term.

Canon has continued to adopt U.S. GAAP in order to maintain the continuity of financial statements from the past and to maintain international comparability.

V. Financial Statements

  1. CONSOLIDATED BALANCE SHEETS

    CONSOLIDATED

    ASSETS

    As of

    December 31, 2016

    Millions of yen As of

    December 31, 2015 Change

    Current assets:

    Cash and cash equivalents Short-term investments

    ¥ 630,193

    3,206

    ¥ 633,613

    20,651

    ¥ (3,420)

    (17,445)

    Trade receivables, net

    641,458

    588,001

    53,457

    Inventories

    560,736

    501,895

    58,841

    Prepaid expenses and other current assets

    264,155

    313,019

    (48,864)

    Total current assets

    2,099,748

    2,057,179

    42,569

    Noncurrent receivables

    29,297

    29,476

    (179)

    Investments

    73,680

    67,862

    5,818

    Property, plant and equipment, net

    1,194,976

    1,219,652

    (24,676)

    Intangible assets, net

    446,268

    241,208

    205,060

    Goodwill

    936,424

    478,943

    457,481

    Other assets

    358,136

    333,453

    24,683

    Total assets

    ¥ 5,138,529

    ¥ 4,427,773

    ¥ 710,756

    LIABILITIES AND EQUITY

    Current liabilities:

    Short-term loans and current portion of long-term debt

    ¥ 1,850

    ¥ 688

    ¥ 1,162

    Trade payables

    372,269

    278,255

    94,014

    Accrued income taxes

    30,514

    47,431

    (16,917)

    Accrued expenses

    304,901

    317,653

    (12,752)

    Other current liabilities

    273,835

    171,302

    102,533

    Total current liabilities

    983,369

    815,329

    168,040

    Long-term debt, excluding current installments

    611,289

    881

    610,408

    Accrued pension and severance cost

    407,200

    296,262

    110,938

    Other noncurrent liabilities

    142,049

    130,838

    11,211

    Total liabilities

    2,143,907

    1,243,310

    900,597

    Equity:

    Canon Inc. shareholders' equity:

    Common stock

    174,762

    174,762

    -

    Additional paid-in capital

    401,385

    401,358

    27

    Legal reserve

    66,558

    65,289

    1,269

    Retained earnings

    3,350,728

    3,365,158

    (14,430)

    Accumulated other comprehensive income (loss)

    (199,881)

    (29,742)

    (170,139)

    Treasury stock, at cost

    (1,010,423)

    (1,010,410)

    (13)

    Total Canon Inc. shareholders' equity

    2,783,129

    2,966,415

    (183,286)

    Noncontrolling interests

    211,493

    218,048

    (6,555)

    Total equity

    2,994,622

    3,184,463

    (189,841)

    Total liabilities and equity

    ¥

    5,138,529

    ¥

    4,427,773

    ¥

    710,756

    As of

    Millions of yen

    As of

    Notes:

    December 31, 2016

    December 31, 2015

    1. Allowance for doubtful receivables

      ¥ 11,075 ¥

      12,077

    2. Accumulated depreciation 2,578,342 2,570,806

    3. Accumulated other comprehensive income (loss):

      Foreign currency translation adjustments (13,960) 87,038

      Net unrealized gains and losses on securities 15,251 14,055

      Net gains and losses on derivative instruments (2,742) 182

      Pension liability adjustments (198,430) (131,017)

    4. CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

      CONSOLIDATED

      Consolidated statements of income

      Results for the fourth quarter Millions ofyen

      Three months ended

      Three months ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Net sales

      ¥ 965,173 ¥

      1,042,638

      - 7.4

      Cost of sales 505,066 519,830

      Gross profit 460,107 522,808 - 12.0 Operating expenses:

      Selling, general and administrative expenses

      305,987

      332,471

      Research and development expenses

      73,952

      83,295

      379,939

      415,766

      Operating profit Other income (deductions):

      80,168

      107,042

      - 25.1

      Interest and dividend income

      1,178

      1,196

      Interest expense

      (219)

      (73)

      Other, net

      (8,492)

      796

      (7,533)

      1,919

      Income before income taxes

      72,635

      108,961

      - 33.3

      Income taxes

      22,751

      35,660

      Consolidated net income

      49,884

      73,301

      Less: Net income attributable to noncontrolling interests Net income attributable to Canon Inc..

      5,054

      ¥ 44, 30

      4,397

      ¥ 68,904

      - 34..9

      Results for the fiscal year Millions ofyen

      Year ended December 31, 2016

      Year ended

      December 31, 2015 Change(%)

      Net sales

      ¥ 3,401,487 ¥

      3,800,271

      - 10.5

      Cost of sales 1,727,654 1,865,887

      Gross profit 1,673,833 1,934,384 - 13.5

      Operating expenses:

      Selling, general and administrative expenses

      1,142,591

      1,250,674

      Research and development expenses

      302,376

      328,500

      1,444,967

      1,579,174

      Operating profit Other income (deductions):

      228,866

      355,210

      - 35.6

      Interest and dividend income

      4,762

      5,501

      Interest expense

      (1,061)

      (584)

      Other, net

      12,084

      (12,689)

      15,785

      (7,772)

      Income before income taxes

      244,651

      347,438

      - 29.6

      Income taxes

      82,681

      116,105

      Consolidated net income

      161,970

      231,333

      Less: Net income attributable to noncontrolling interests Net income attributable to Canon Inc.

      11,320

      ¥ 150,650

      11,124

      ¥ 220,209

      - 31.6

      CONSOLIDATED

      Consolidated statements of comprehensive income

      Results for the fourth quarter Millions ofyen

      Three months ended

      Three months ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Consolidated net income

      Other comprehensive income (loss), net of tax:

      ¥ 49,884

      ¥ 73,301

      - 31.9

      Foreign currency translation adjustments

      189,007

      (3,984)

      Net unrealized gains and losses on securities

      5,184

      2,779

      Net gains and losses on derivative instruments

      (4,514)

      (65)

      Pension liability adjustments

      (72,975)

      (5,529)

      116,702

      (6,799)

      Comprehensive income

      166,586

      66,502

      + 150.5

      Less: Comprehensive income attributable to

      noncontrolling interests 5,584 3,420

      Comprehensive income attributable to Canon Inc.

      ¥ 161,002

      ¥ 63,082

      + 155.2

      Results for the fiscal year Millions ofyen

      Year ended December 31, 2016

      Year ended

      December 31, 2015 Change(%)

      Consolidated net income

      Other comprehensive income (loss), net of tax:

      ¥ 161,970

      ¥ 231,333

      - 30.0

      Foreign currency translation adjustments

      (107,666)

      (55,504)

      Net unrealized gains and losses on securities

      997

      2,010

      Net gains and losses on derivative instruments

      (2,948)

      2,785

      Pension liability adjustments

      (70,355)

      (6,543)

      (179,972)

      (57,252)

      Comprehensive income (loss)

      Less: Comprehensive income attributable to

      (18,002)

      174,081

      -

      noncontrolling interests 1,745 11,973

      Comprehensive income (loss) attributable to Canon Inc.

      ¥ (19,747)

      ¥ 162,108 -

    5. DETAILS OF SALES

      CONSOLIDATED

      Results for the fourth quarter Millions of yen

      Sales by business unit Three monthsended

      Three months ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Office

      ¥

      485,850

      ¥

      534,007

      -

      9.0

      Imaging System

      324,742

      366,183

      -

      11.3

      Industry and Others

      175,634

      166,211

      +

      5.7

      Eliminations (21,053) (23,763) -

      Total

      ¥ 965,173 ¥

      1,042,638

      - 7.4

      Millions of yen

      Sales by region Three months ended

      Three months ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Japan

      ¥

      205,096

      ¥

      203,737

      + 0.7

      Overseas:

      Americas

      267,467

      311,596

      - 14.2

      Europe

      262,324

      300,727

      - 12.8

      Asia and Oceania 230,286 226,578 + 1.6

      760,077 838,901 - 9.4

      Total

      ¥ 965,173 ¥

      1,042,638

      - 7.4

      Results for the fiscal year Millions of yen

      Sales by business unit Yearended

      Year ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Office

      ¥

      1,807,819

      ¥

      2,110,816

      -

      14.4

      Imaging System

      1,095,289

      1,263,835

      -

      13.3

      Industry and Others

      584,660

      524,651

      +

      11.4

      Eliminations (86,281) (99,031) -

      Total

      ¥ 3,401,487 ¥

      3,800,271

      - 10.5

      Millions of yen

      Sales by region Yearended

      Year ended

      Change(%)

      December 31, 2016

      December 31, 2015

      Japan

      ¥

      706,979

      ¥

      714,280

      - 1.0

      Overseas:

      Americas

      963,544

      1,144,422

      - 15.8

      Europe

      913,523

      1,074,366

      - 15.0

      Asia and Oceania 817,441 867,203 - 5.7

      2,694,508 3,085,991 - 12.7

      Total

      ¥ 3,401,487 ¥

      3,800,271

      - 10.5

      Notes:1. The primary products included in each of the segments are as follows: Office Business Unit :

      Office multifunction devices (MFDs) / Laser multifunction printers (MFPs) / Laser printers / Digital production printing systems / High speed continuous feed printers / Wide-format printers / Document solutions

      Imaging System Business Unit :

      Interchangeable lens digital cameras / Digital compact cameras / Digital camcorders / Digital cinema cameras / Interchangeable lenses / Compact photo printers / Inkjet printers / Large-format inkjet printers / Commercial photo printers / Image scanners / Multimedia projectors / Broadcast equipment / Calculators

      Industry and Others Business Unit :

      Semiconductor lithography equipment / FPD (Flat panel display) lithography equipment / Digital radiography systems / Diagnostic X-ray System / Computed Tomography / Magnetic Resonance Imaging / Diagnostic Ultrasound System / Clinical Chemistry Analyzer / Ophthalmic equipment / Vacuum thin-film deposition equipment /

      Organic LED (OLED) panel manufacturing equipment / Die bonders / Micromotors / Network cameras / Handy terminals / Document scanners

      2. The principal countries and regions included in each regional category are as follows: Americas: United States of America, Canada, Latin America

      Europe: United Kingdom, Germany, France, Netherlands, European countries, Middle East and Africa Asia and Oceania: China, Asian countries, Australia

      CANON INC. AND SUBSIDIARIES

    6. CONSOLIDATED STATEMENTS OF EQUITY

      CONSOLIDATED

      Millions of yen

      Common Stock

      Additional paid-in capital

      Legal reserve

      Retained earnings

      Accumulated other comprehensive income (loss)

      Treasury stock

      Total Canon Inc. shareholders' equity

      Noncontrolling interests

      Total equity

      Balance at December 31, 2014

      ¥ 174,762

      ¥ 401,563

      ¥ 64,599

      ¥ 3,320,392

      ¥

      28,286

      ¥ (1,011,418)

      ¥

      2,978,184

      ¥

      162,574

      ¥ 3,140,758

      Equity transactions with noncontrolling interests and other Dividends to Canon Inc. shareholders

      Dividends to noncontrolling interests Acquisition of subsidiaries

      Transfers to legal reserve

      Comprehensive income: Net income

      Other comprehensive income (loss), net of tax: Foreign currency translation adjustments

      Net unrealized gains and losses on securities Net gains and losses on derivative instruments Pension liability adjustments

      Total comprehensive income

      Repurchases and reissuance of treasury stock

      (29)

      690

      (174,711)

      73

      1,008

      44

      (29,627)

      (29,583)

      (174,711)

      (174,711)

      (3,958)

      (3,958)

      77,086

      77,086

      (690)

      -

      -

      220,209

      220,209

      11,124

      231,333

      (57,592)

      (57,592)

      2,088

      (55,504)

      1,509

      1,509

      501

      2,010

      2,785

      2,785

      -

      2,785

      (4,803)

      (4,803)

      (1,740)

      (6,543)

      162,108

      11,973

      174,081

      (176)

      (42)

      790

      790

      Balance at December 31, 2015

      ¥ 174,762

      ¥ 401,358

      ¥ 65,289

      ¥ 3,365,158

      ¥

      (29,742)

      ¥ (1,010,410)

      ¥

      2,966,415

      ¥

      218,048

      ¥ 3,184,463

      Equity transactions with noncontrolling interests and other Dividends to Canon Inc. shareholders

      Dividends to noncontrolling interests Acquisition of subsidiaries

      Transfers to legal reserve

      Comprehensive income: Net income

      Other comprehensive income (loss), net of tax: Foreign currency translation adjustments Net unrealized gains and losses on securities

      Net gains and losses on derivative instruments Pension liability adjustments

      Total comprehensive income (loss) Repurchases and reissuance of treasury stock

      27

      1,269

      (163,810)

      258

      (13)

      285

      (5,270)

      (4,985)

      (163,810)

      (163,810)

      (4,077)

      (4,077)

      1,047

      1,047

      (1,269)

      -

      -

      150,650

      150,650

      11,320

      161,970

      (101,257)

      (101,257)

      (6,409)

      (107,666)

      1,196

      1,196

      (199)

      997

      (2,924)

      (2,924)

      (24)

      (2,948)

      (67,412)

      (67,412)

      (2,943)

      (70,355)

      (19,747)

      1,745

      (18,002)

      (1)

      (14)

      (14)

      Balance at December 31, 2016

      ¥ 174,762

      ¥ 401,385

      ¥ 66,558

      ¥ 3,350,728

      ¥

      (199,881)

      ¥ (1,010,423)

      ¥

      2,783,129

      ¥

      211,493

      ¥ 2,994,622

    7. CONSOLIDATED STATEMENTS OF CASH FLOWS

      Millions of yen

      Year ended

      December 31, 2016

      Year ended

      December 31, 2015

      Cash flows from operating activities: Consolidated net income

      Adjustments to reconcile consolidated net income to net cash provided by operating activities:

      ¥ 161,970 ¥

      231,333

      Depreciation and amortization

      250,096

      273,327

      Loss on disposal of fixed assets

      5,203

      7,975

      Deferred income taxes

      7,188

      4,672

      (Increase) decrease in trade receivables

      (4,155)

      22,720

      Decrease in inventories

      6,156

      14,249

      Increase (decrease) in trade payables

      56,844

      (17,288)

      Decrease in accrued income taxes

      (16,456)

      (8,731)

      Decrease in accrued expenses

      (5,256)

      (25,529)

      Increase in accrued (prepaid) pension and severance cost

      5,489

      4,622

      Other, net

      33,204

      (32,626)

      Net cash provided by operating activities

      500,283

      474,724

      Cash flows from investing activities:

      Purchases of fixed assets

      (206,971)

      (252,948)

      Proceeds from sale of fixed assets

      6,177

      3,824

      Purchases of available-for-sale securities

      (84)

      (98)

      Proceeds from sale and maturity of available-for-sale securities

      1,181

      804

      Decrease in time deposits, net

      15,414

      47,665

      Acquisitions of businesses, net of cash acquired

      (649,570)

      (251,534)

      Purchases of other investments

      (4,460)

      (1,220)

      Other, net

      1,188

      (112)

      Net cash used in investing activities

      (837,125)

      (453,619)

      Cash flows from financing activities:

      Proceeds from issuance of long-term debt

      610,552

      717

      Repayments of long-term debt

      (856)

      (1,350)

      Decrease in short-term loans, net

      (80,580)

      -

      Purchases of noncontrolling interests

      (4,993)

      (29,570)

      Dividends paid

      (163,810)

      (174,711)

      Repurchases and reissuance of treasury stock

      (14)

      790

      Other, net

      (4,607)

      (6,078)

      Net cash provided by (used in) financing activities

      355,692

      (210,202)

      Effect of exchange rate changes on cash and cash equivalents

      (22,270)

      (21,870)

      Net change in cash and cash equivalents

      (3,420)

      (210,967)

      Cash and cash equivalents at beginning of year

      633,613

      844,580

      Cash and cash equivalents at end of year

      ¥ 630,193

      ¥ 633,613

    8. NOTE FOR GOING CONCERN ASSUMPTION

      Not applicable.

    9. SEGMENT INFORMATION

      SEGMENT INFORMATION BY BUSINESS UNIT

      Results for the fourth quarter Millions of yen

      Three months ended

      December 31, 2016 Office

      Net sales:

      Three months ended

      December 31, 2015 Change(%)

      External customers

      ¥ 484,656 ¥

      533,366

      - 9.1

      Intersegment 1,194 641 + 86.3

      Total 485,850 534,007 - 9.0

      Operating cost and expenses 437,225 461,764 - 5.3

      Operating profit

      ¥ 48,625

      ¥ 72,243

      - 32.7

      Imaging System

      Net sales:

      External customers

      ¥ 324,455 ¥

      365,944

      - 11.3

      Intersegment 287 239 + 20.1

      Total 324,742 366,183 - 11.3

      Operating cost and expenses 273,040 304,057 - 10.2

      Operating profit

      ¥ 51,702

      ¥ 62,126

      - 16.8

      Industry and Others

      Net sales:

      External customers

      ¥ 156,062 ¥

      143,328

      + 8.9

      Intersegment 19,572 22,883 - 14.5

      Total 175,634 166,211 + 5.7

      Operating cost and expenses 172,472 168,995 + 2.1

      Operating profit

      ¥ 3,162

      ¥ (2,784)

      -

      Corporate and Eliminations

      Net sales:

      External customers

      ¥ - ¥ - -

      Intersegment

      (21,053)

      (23,763)

      -

      Total

      (21,053)

      (23,763)

      -

      Operating cost and expenses

      2,268

      780

      -

      Operating profit

      ¥ (23,321)

      ¥ (24,543)

      -

      Consolidated

      Net sales:

      External customers

      ¥ 965,173 ¥

      1,042,638

      - 7.4

      Intersegment - - -

      Total 965,173 1,042,638 - 7.4

      Operating cost and expenses 885,005 935,596 - 5.4

      Operating profit

      ¥ 80,168

      ¥ 107,042

      - 25.1

      Results for the fiscal year Millions of yen

      Year ended

      December 31, 2016 Office

      Net sales:

      Year ended

      December 31, 2015 Change(%)

      External customers

      ¥ 1,804,862 ¥

      2,108,246

      - 14.4

      Intersegment 2,957 2,570 + 15.1

      Total 1,807,819 2,110,816 - 14.4

      Operating cost and expenses 1,638,333 1,820,230 - 10.0

      Operating profit 169,486 290,586 - 41.7 Total assets 961,749 1,020,758 - 5.8

      Depreciation and amortization 78,319 86,206 - 9.1

      Capital expenditures

      ¥ 72,189

      ¥ 73,819

      - 2.2

      Imaging System

      Net sales:

      External customers

      ¥ 1,094,291 ¥

      1,262,667

      - 13.3

      Intersegment 998 1,168 - 14.6

      Total 1,095,289 1,263,835 - 13.3

      Operating cost and expenses 950,876 1,080,396 - 12.0

      Operating profit 144,413 183,439 - 21.3 Total assets 391,661 452,283 - 13.4

      Depreciation and amortization 47,386 52,070 - 9.0

      Capital expenditures

      ¥ 25,564

      ¥ 38,337

      - 33.3

      Industry and Others

      Net sales:

      External customers

      ¥ 502,334 ¥

      429,358

      + 17.0

      Intersegment 82,326 95,293 - 13.6

      Total 584,660 524,651 + 11.4

      Operating cost and expenses 577,212 537,730 + 7.3

      Operating profit 7,448 (13,079) - Total assets 545,210 332,252 + 64.1

      Depreciation and amortization 41,053 45,064 - 8.9

      Capital expenditures

      ¥ 29,346

      ¥ 24,241

      + 21.1

      Corporate and Eliminations

      Net sales:

      External customers

      ¥ - ¥ - -

      Intersegment (86,281) (99,031) -

      Total (86,281) (99,031) -

      Operating cost and expenses 6,200 6,705 -

      Operating profit (92,481) (105,736) - Total assets 3,239,909 2,622,480 + 23.5

      Depreciation and amortization 83,338 89,987 - 7.4

      Capital expenditures

      ¥ 81,280

      ¥ 106,733

      - 23.8

      Consolidated

      Net sales:

      External customers

      ¥ 3,401,487 ¥

      3,800,271

      - 10.5

      Intersegment - - -

      Total 3,401,487 3,800,271 - 10.5

      Operating cost and expenses 3,172,621 3,445,061 - 7.9

      Operating profit 228,866 355,210 - 35.6 Total assets 5,138,529 4,427,773 + 16.1

      Depreciation and amortization 250,096 273,327 - 8.5

      Capital expenditures

      ¥ 208,379

      ¥ 243,130

      - 14.3

      In addition to the disclosure requirements under Topic 280, Canon has disclosed the segment information, "SEGMENT INFORMATION BY GEOGRAPHIC AREA", which is based on the location of Canon Inc. and its subsidiaries. Results from a survey of a representative sample of financial statement users, however, indicated that they consider the latter to be less useful than sales information based on the location where the product is shipped to customers, which is disclosed separately. For this reason, Canon decided to discontinue the disclosure of geographical segment information based on the location of Canon Inc. and its subsidiaries from this year, in order to avoid the risk of confusing users due to disclosing two similar types of geographical information and make disclosure more concise and transparent. Sales information based on the location where the products is shipped to customers is available on page 12 "3. DETAILS OF SALES in V. Financial Statements".

    10. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

      1. GROUP POSITION

        1. Number of Group Companies

          December 31, 2016

          December 31, 2015

          Change

          Subsidiaries Affiliates

          367

          9

          317

          5

          50

          4

          Total

          376

          322

          54

        2. Change in Group Entities Subsidiaries

          Addition: 61 companies

          Removal: 11 companies

          Affiliates (Carried at Equity Basis) Addition: 4 companies

        3. Subsidiaries Listed on Domestic Stock Exchange

          Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc.

        4. SIGNIFICANT ACCOUNTING POLICIES

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

          Recently Issued Accounting Guidance

          In November 2015, the Financial Accounting Standards Board issued an amendment which requires deferred tax assets and liabilities be classified as noncurrent in the consolidated balance sheets. Canon early adopted this amended guidance from the quarter beginning January 1, 2016, on a prospective basis, and prior periods were not retrospectively adjusted. Canon's current deferred tax assets were ¥ 55,108 million and current deferred tax liabilities were ¥ 2,682 million as of December 31, 2015.

        5. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

          1. NET INCOME ATTRIBUTABLE TO CANON INC. SHAREHOLDERS PER SHARE

            Results for the fiscal year Millions of yen

            Year ended

            December 31, 2016

            Year ended

            December 31, 2015

            Net income attributable to Canon Inc.

            -Basic

            ¥ 150,650 ¥

            220,209

            -Diluted 150,650 220,209

            Average common shares outstanding

            Number of shares

            -Basic 1,092,070,680 1,092,017,955

            -Diluted 1,092,070,680 1,092,052,886

            Net income attributable to

            Canon Inc. shareholders per share:

            -Basic

            ¥ 137.95

            Yen

            ¥

            201.65

            -Diluted 137.95 201.65

          2. ACQUISITIONS

            As necessary clearance from competition regulatory authorities regarding the acquisition of Toshiba Medical Systems Corporation (TMSC) shares were obtained, Canon exercised the share options acquired for consideration of cash, through a Shares and Other Securities Transfer Agreement concluded with Toshiba Corporation dated March 17, 2016, and acquired all of the shares of TMSC. The acquisition date was December 19, 2016 and the purchase price was ¥665.5 billion.

            Under Phase V of the Excellent Global Corporation Plan, a five-year initiative that Canon has been implementing since 2016, "embracing the challenge of new growth through a grand strategic transformation" has been set as a basic policy. With regard to "strengthening and growing new businesses, and creating future businesses," a particularly important strategy, Canon intends to develop a health care business within the realm of "safety and security," as a next-generation pillar of growth.

            Since the acquisition date of TMSC was near the balance sheet date, the allocation of the purchase price to the assets acquired and liabilities assumed was incomplete and provisionally carried out as of December 31, 2016.

            On January 23, 2017, regarding the borrowing that was provisionally raised in March 2016 for this acquisition, a contract was concluded to refinance with an unsecured loan with a repayment due in December 2021. The loan is ¥ 610 billion as of December 31, 2016, and is included in long-term debt in the consolidated balance sheet.

          3. FINANCE RECEIVABLES AND OPERATING LEASES, MARKETABLE SECURITIES, DEFERRED TAX ACCOUNTING, EMPLOYEE RETIREMENT AND SEVERANCE BENEFITS, STOCK OPTIONS, DERIVATIVE CONTRACTS AND OTHERS

            The disclosure is omitted as it is not considered significant in this report.

          4. SUBSEQUENT EVENT

            5. There is no significant subsequent event.

          5. NOTE FOR NON-GAAP FINANCIAL MEASURES

            6. We have reported our financial results in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In addition, we have discussed our results using "Free cash flow" which is non-GAAP measure.

            We believe this measure is beneficial to an investor's understanding on Canon's current liquidity and the alternatives of use in financing activities because it takes into consideration its operating and investing activities.

            A reconciliation of this non-GAAP financial measure and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on the following table.

            Billions of yen Year ended

            December 31, 2016

            Net cash provided by operating activities

            500.3

            Net cash used in investing activities

            (837.1)

            Free cash flow

            (336.8)

            CANON INC.

            NON-CONSOLIDATED

            11. NON-CONSOLIDATED BALANCE SHEETS

            ( Parent company only )

            Millions of yen

            As of

            As of

            December 31, 2016

            December 31, 2015

            ASSETS

            Current assets:

            Cash

            ¥ 85,748

            ¥ 100,836

            Trade receivables

            476,744

            450,449

            Marketable securities

            -

            18,070

            Inventories

            155,780

            148,485

            Prepaid expenses and other current assets

            231,636

            154,575

            Allowance for doubtful receivables

            (1)

            (1)

            Total current assets

            949,907

            872,414

            Fixed assets:

            Net property, plant and equipment

            646,975

            659,258

            Intangibles

            25,264

            25,578

            Investments and other fixed assets

            1,554,652

            880,769

            Allowance for doubtful receivables-noncurrent

            (95)

            (95)

            Total fixed assets

            2,226,796

            1,565,510

            Total assets

            ¥ 3,176,703

            ¥ 2,437,924

            LIABILITIES AND NET ASSETS

            Current liabilities:

            Trade payables

            ¥ 314,921

            ¥ 301,792

            Short-term loans

            602,326

            461,686

            Accrued income taxes

            8,868

            22,805

            Accrued warranty expenses

            2,376

            3,920

            Accrued bonuses for employees

            4,397

            4,606

            Accrued bonuses for directors

            60

            144

            Other current liabilities

            123,758

            108,269

            Total current liabilities

            1,056,706

            903,222

            Noncurrent liabilities:

            Long-term loans

            610,000

            -

            Accrued pension and severance cost

            53,072

            45,985

            Reserve for environmental provision

            1,389

            1,618

            Accrued long service rewards for employees

            1,602

            1,449

            Other noncurrent liabilities

            1,288

            1,493

            Total noncurrent liabilities

            667,351

            50,545

            Total liabilities

            1,724,057

            953,767

            Net assets:

            Shareholders' equity

            1,443,164

            1,473,935

            Valuation and translation adjustments

            9,017

            9,091

            Subscription rights to shares

            465

            1,131

            Total net assets

            1,452,646

            1,484,157

            Total liabilities and net assets

            ¥ 3,176,703

            ¥ 2,437,924

            CANON INC.

            NON-CONSOLIDATED

            12. NON-CONSOLIDATED STATEMENTS OF INCOME

            ( Parent company only )

            Millions of yen

            Year ended

            Year ended

            December 31, 2016

            December 31, 2015

            Net sales

            ¥ 1,763,987

            ¥ 2,091,139

            Cost of sales

            1,279,902

            1,461,270

            Gross profit

            484,085

            629,869

            Selling, general and administrative expenses

            416,542

            460,631

            Operating profit

            67,543

            169,238

            Other income (deductions):

            Interest and dividend income

            91,406

            103,788

            Interest expense

            (3,386)

            (2,124)

            Other, net

            2,796

            (1,084)

            90,816

            100,580

            Ordinary profit

            158,359

            269,818

            Non-ordinary gain (loss), net

            (1,678)

            (2,447)

            Income before income taxes

            156,681

            267,371

            Income taxes

            23,626

            55,408

            Net income

            ¥ 133,055

            ¥ 211,963

            13. NON-CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

            ( Parent company only )

            Year ended December 31, 2016

            (Millions of yen)

            Shareholders' equity

            Valuation and translation adjustments

            Subscription rights to shares

            Total net assets

            Common stock

            Capital surplus

            Retained earnings

            Treasury stock

            Total shareholders' equity

            Net unrealized gains (losses)

            on securities

            Net deferred profits (losses) on hedges

            Additional paid-in capital

            Legal reserve

            Other retained earnings

            Reserve for special

            depreciation

            Reserve for deferral of capital gain on property

            Special reserves

            Retained earnings brought forward

            Balance at the beginning of current period

            ¥ 174,762

            ¥ 306,288

            ¥ 22,114

            ¥ 167

            ¥ 3,727

            ¥ 1,249,928

            ¥ 727,359

            ¥ (1,010,410)

            ¥ 1,473,935

            ¥ 8,851

            ¥ 240

            ¥ 1,131

            ¥ 1,484,157

            Changes of items during the period

            Transfer to reserve for special depreciation

            17

            (17)

            -

            -

            Reversal of reserve for special depreciation

            (46)

            46

            -

            -

            Transfer to

            reserve for deferral of capital gain on property

            390

            (390)

            -

            -

            Reversal of

            reserve for deferral of capital gain on property

            (135)

            135

            -

            -

            Dividends paid

            (163,810)

            (163,810)

            (163,810)

            Net income

            133,055

            133,055

            133,055

            Purchase of treasury stock

            (18)

            (18)

            (18)

            Disposal of treasury stock

            (3)

            5

            2

            2

            Net changes of items other than shareholders' equity

            -

            1,088

            (1,162)

            (666)

            (740)

            Total changes of items during the period

            -

            -

            -

            (29)

            255

            -

            (30,984)

            (13)

            (30,771)

            1,088

            (1,162)

            (666)

            (31,511)

            Balance at the end of current period

            ¥ 174,762

            ¥ 306,288

            ¥ 22,114

            ¥ 138

            ¥ 3,982

            ¥ 1,249,928

            ¥ 696,375

            ¥ (1,010,423)

            ¥ 1,443,164

            ¥ 9,939

            ¥ (922)

            ¥ 465

            ¥ 1,452,646

            Year ended December 31, 2015 (Millions of yen)

            Shareholders' equity

            Valuation and translation adjustments

            Subscription rights to shares

            Total net assets

            Common stock

            Capital surplus

            Retained earnings

            Treasury stock

            Total shareholders' equity

            Net unrealized gains (losses)

            on securities

            Net deferred profits (losses) on hedges

            Additional paid-in capital

            Legal reserve

            Other retained earnings

            Reserve for special

            depreciation

            Reserve for deferral of capital gain on property

            Special reserves

            Retained earnings brought forward

            Balance at the beginning of current period

            ¥ 174,762

            ¥ 306,288

            ¥ 22,114

            ¥ 341

            ¥ 3,693

            ¥1,249,928

            ¥ 692,960

            ¥ (1,011,418)

            ¥ 1,438,668

            ¥ 7,780

            ¥ (679)

            ¥ 1,553

            ¥1,447,322

            Cumulative effects of changes in accounting policies

            (2,951)

            (2,951)

            (2,951)

            Restated balance

            ¥ 174,762

            ¥ 306,288

            ¥ 22,114

            ¥ 341

            ¥ 3,693

            ¥1,249,928

            ¥ 690,009

            ¥ (1,011,418)

            ¥ 1,435,717

            ¥ 7,780

            ¥ (679)

            ¥ 1,553

            ¥1,444,371

            Changes of items during the period

            Transfer to reserve for special depreciation

            -

            -

            Reversal of reserve for special depreciation

            (174)

            174

            -

            -

            Transfer to

            reserve for deferral of capital gain on property

            157

            (157)

            -

            -

            Reversal of

            reserve for deferral of capital gain on property

            (123)

            123

            -

            -

            Dividends paid

            (174,711)

            (174,711)

            (174,711)

            Net income

            211,963

            211,963

            211,963

            Purchase of treasury stock

            (39)

            (39)

            (39)

            Disposal of treasury stock

            (42)

            1,047

            1,005

            1,005

            Net changes of items other than shareholders' equity

            -

            1,071

            919

            (422)

            1,568

            Total changes of items during the period

            -

            -

            -

            (174)

            34

            -

            37,350

            1,008

            38,218

            1,071

            919

            (422)

            39,786

            Balance at the end of current period

            ¥ 174,762

            ¥ 306,288

            ¥ 22,114

            ¥ 167

            ¥ 3,727

            ¥1,249,928

            ¥ 727,359

            ¥ (1,010,410)

            ¥ 1,473,935

            ¥ 8,851

            ¥ 240

            ¥ 1,131

            ¥1,484,157

            CANON INC.

            NON-CONSOLIDATED

            14. NOTE FOR GOING CONCERN ASSUMPTION

            ( Parent company only )

            Not applicable.

            (Current Titles are Shown in the Parentheses) Effective Date: March 30, 2017

            Directors

            1. Candidate for new Director to be appointed

              Toshio Homma (Executive Vice President, Chief Executive of Office Imaging Products Operations)

            2. Candidate for new Representative Director

              Representative Director

              / Executive Vice President

              Toshio Homma (Executive Vice President, Chief Executive

              of Office Imaging Products Operations)

            3. Candidate for Director to be promoted

            Executive Vice President & CTO Shigeyuki Matsumoto (Senior Managing Director&CTO,

            Group Executive of R&D Headquarters)

            (Current Titles are Shown in the Parentheses)

            Executive Officers (1/2)

            1. New Executive Officers to be appointed Effective date: April 1, 2017

              Toshio Takiguchi (President of Toshiba Medical Systems Corporation)

              Hideki Sanatake (Deputy Group Executive of Corporate Intellectual Property and Legal Headquarters)

              Tamaki Hashimoto (Group Executive of Consumer Inkjet Products Group)

              Hideto Kohtani (Group Executive of Office Imaging Products Digital Solution Group) Minoru Asada (Senior General Manager of Group Management Center)

              Kazuhiko Nagashima (Senior General Manager of Finance Accounting Center) Katsuhiko Shinjo (Deputy Group Executive of R&D Headquarters)

            2. Executive Officers to be retired

              Effective date: March 30, 2017

              Representative Director / Executive Vice President to be appointed

              Toshio Homma (Executive Vice President, Chief

              Executive of Office Imaging Products

              Operations)

              Effective date: March 31, 2017

              President of Canon Tokki Corporation Shigeyuki Uzawa (Managing Executive Officer, President

              of Canon Tokki Corporation)

              Managing Director of Canon Electronics Inc. to be appointed

              Akiyoshi Kimura (Managing Executive Officer, Group

              Executive of Corporate Planning

              Development Headquarters)

              Adviser to be appointed Akio Noguchi (Managing Executive Officer, Group

              Executive of Mixed Reality Solution

              Business Promotion Headquarters)

              Masato Okada (Executive Officer, Deputy Chief

              Executive of Image Communication

              Business Operations)

              (Current Titles are Shown in the Parentheses)

              Executive Officers (2/2)

            3. Candidate for Executive Officers to be promoted Effective date: April 1, 2017

            Executive Vice President Hideki Ozawa (Senior Managing ExecutiveOfficer,

            President of Canon (CHINA) Co. Ltd)

            Senior Managing Executive Officer Yasuhiro Tani (Managing Executive Officer,Group

            Executive of Digital System Technology

            Development Headquarters)

            Senior Managing Executive Officer Naoji Otsuka (Managing Executive Officer,Chief

            Executive of Inkjet Products Operations)

            Senior Managing Executive Officer Toshio Takiguchi (New appointment, President ofToshiba

            Medical Systems Corporation)

            Managing Executive Officer Shunsuke Inoue (Executive Officer, Group Executiveof

            Device Technology Development

            Headquarters)

            Managing Executive Officer Takayuki Miyamoto (Executive Officer, Chief Executiveof

            Peripheral Products Operations)

            Managing Executive Officer Katsumi Iijima (Executive Officer, Group Executiveof

            Information & Communication Systems

            Headquarters)

            Managing Executive Officer Hiroyuki Takeishi (Executive Officer, Chief Executiveof

            Optical Products Operations)

            This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project" or "should" and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon's targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon's annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

            January 31, 2017

            CONSOLIDATED RESULTS FOR THE FOURTH QUARTER AND THE FISCAL YEAR ENDED DECEMBER 31, 2016

            SUPPLEMENTARY REPORT

            TABLE OF CONTENTS

            1.

            SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2016).....................

            PAGE S 1

            2.

            SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2017/Projection)...

            S

            2

            3.

            SEGMENT INFORMATION BY BUSINESS UNIT (2016)..................................

            S

            3

            4.

            OTHER INCOME / DEDUCTIONS (2016)............................................................

            S

            3

            5.

            SEGMENT INFORMATION BY BUSINESS UNIT (2017/Projection)................

            S

            4

            6.

            OTHER INCOME / DEDUCTIONS (2017/Projection)..........................................

            S

            4

            7.

            BREAKDOWN OF PRODUCT SALES WITHIN BUSINESS UNIT...................

            S

            5

            8.

            SALES GROWTH IN LOCAL CURRENCY.........................................................

            S

            5

            9.

            PROFITABILITY ....................................................................................................

            S

            6

            10.

            IMPACT OF FOREIGN EXCHANGE RATES......................................................

            S

            6

            11.

            STATEMENTS OF CASH FLOWS........................................................................

            S

            6

            12.

            R&D EXPENDITURE .............................................................................................

            S

            7

            13.

            INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION...................

            S

            7

            14.

            INVENTORIES .......................................................................................................

            S

            7

            15.

            DEBT RATIO...........................................................................................................

            S

            7

            16.

            OVERSEAS PRODUCTION RATIO......................................................................

            S

            7

            17.

            NUMBER OF EMPLOYEES...................................................................................

            S

            7

            1. SALES BY GEOGRAPHIC AREA AND BUSINESS UNIT (2016) (Millions ofyen)

              2016

              2015

              Change year over year

              4th quarter

              Year

              4th quarter

              Year

              4th quarter

              Year

              Japan

              Office

              99,303

              378,834

              98,804

              379,277

              +0.5%

              -0.1%

              Imaging System

              63,174

              179,304

              66,958

              198,739

              -5.7%

              -9.8%

              Industry and Others

              42,619

              148,841

              37,975

              136,264

              +12.2%

              +9.2%

              Total

              205,096

              706,979

              203,737

              714,280

              +0.7%

              -1.0%

              Overseas

              Office

              385,353

              1,426,028

              434,562

              1,728,969

              -11.3%

              -17.5%

              Imaging System

              261,281

              914,987

              298,986

              1,063,928

              -12.6%

              -14.0%

              Industry and Others

              113,443

              353,493

              105,353

              293,094

              +7.7%

              +20.6%

              Total

              760,077

              2,694,508

              838,901

              3,085,991

              -9.4%

              -12.7%

              Americas

              Office

              153,027

              582,297

              175,923

              713,197

              -13.0%

              -18.4%

              Imaging System

              91,064

              297,403

              110,869

              352,946

              -17.9%

              -15.7%

              Industry and Others

              23,376

              83,844

              24,804

              78,279

              -5.8%

              +7.1%

              Total

              267,467

              963,544

              311,596

              1,144,422

              -14.2%

              -15.8%

              Europe

              Office

              158,562

              556,353

              185,623

              680,619

              -14.6%

              -18.3%

              Imaging System

              83,926

              293,894

              95,593

              335,312

              -12.2%

              -12.4%

              Industry and Others

              19,836

              63,276

              19,511

              58,435

              +1.7%

              +8.3%

              Total

              262,324

              913,523

              300,727

              1,074,366

              -12.8%

              -15.0%

              Asia and Oceania

              Office

              73,764

              287,378

              73,016

              335,153

              +1.0%

              -14.3%

              Imaging System

              86,291

              323,690

              92,524

              375,670

              -6.7%

              -13.8%

              Industry and Others

              70,231

              206,373

              61,038

              156,380

              +15.1%

              +32.0%

              Total

              230,286

              817,441

              226,578

              867,203

              +1.6%

              -5.7%

              Intersegment

              Office

              1,194

              2,957

              641

              2,570

              +86.3%

              +15.1%

              Imaging System

              287

              998

              239

              1,168

              +20.1%

              -14.6%

              Industry and Others

              19,572

              82,326

              22,883

              95,293

              -14.5%

              -13.6%

              Eliminations

              (21,053)

              (86,281)

              (23,763)

              (99,031)

              -

              -

              Total

              0

              0

              0

              0

              -

              -

              Total

              Office

              485,850

              1,807,819

              534,007

              2,110,816

              -9.0%

              -14.4%

              Imaging System

              324,742

              1,095,289

              366,183

              1,263,835

              -11.3%

              -13.3%

              Industry and Others

              175,634

              584,660

              166,211

              524,651

              +5.7%

              +11.4%

              Eliminations

              (21,053)

              (86,281)

              (23,763)

              (99,031)

              -

              -

              Total

              965,173

              3,401,487

              1,042,638

              3,800,271

              -7.4%

              -10.5%

              1. Sales by business unit (Millions ofyen)

                2017 (P)

                2016

                Year

                Year

                Office

                1,828,900

                1,807,819

                Imaging System

                1,092,000

                1,095,289

                Industry and Others

                1,158,000

                584,660

                Eliminations

                (78,900)

                (86,281)

                Total

                4,000,000

                3,401,487

                Change year over year

                Year

                +1.2%

                -0.3%

                +98.1%

                -

                +17.6%

                (P)=Projection

              2. Sales by region (Millions ofyen)

                3. 2017 (P)

                2016

                Year

                Year

                Japan

                922,000

                706,979

                Overseas

                3,078,000

                2,694,508

                Americas

                1,067,800

                963,544

                Europe

                985,600

                913,523

                Asia and Oceania

                1,024,600

                817,441

                Total

                4,000,000

                3,401,487

                Change year over year

                Year

                +30.4%

                +14.2%

                +10.8%

                +7.9%

                +25.3%

                +17.6%

                (P)=Projection

                2016

                2015

                Change year over year

                4th quarter

                Year

                4th quarter

                Year

                4th quarter

                Year

                Office

                484,656

                1,804,862

                533,366

                2,108,246

                -9.1%

                -14.4%

                External customers

                Intersegment

                1,194

                2,957

                641

                2,570

                +86.3%

                +15.1%

                Total sales

                485,850

                1,807,819

                534,007

                2,110,816

                -9.0%

                -14.4%

                Operating profit

                48,625

                169,486

                72,243

                290,586

                -32.7%

                -41.7%

                % of sales

                10.0%

                9.4%

                13.5%

                13.8%

                -

                -

                Imaging System

                324,455

                1,094,291

                365,944

                1,262,667

                -11.3%

                -13.3%

                External customers

                Intersegment

                287

                998

                239

                1,168

                +20.1%

                -14.6%

                Total sales

                324,742

                1,095,289

                366,183

                1,263,835

                -11.3%

                -13.3%

                Operating profit

                51,702

                144,413

                62,126

                183,439

                -16.8%

                -21.3%

                % of sales

                15.9%

                13.2%

                17.0%

                14.5%

                -

                -

                Industry and Others

                156,062

                502,334

                143,328

                429,358

                +8.9%

                +17.0%

                External customers

                Intersegment

                19,572

                82,326

                22,883

                95,293

                -14.5%

                -13.6%

                Total sales

                175,634

                584,660

                166,211

                524,651

                +5.7%

                +11.4%

                Operating profit

                3,162

                7,448

                (2,784)

                (13,079)

                -

                -

                % of sales

                1.8%

                1.3%

                -1.7%

                -2.5%

                -

                -

                Corporate and Eliminations

                -

                -

                -

                -

                -

                -

                External customers

                Intersegment

                (21,053)

                (86,281)

                (23,763)

                (99,031)

                -

                -

                Total sales

                (21,053)

                (86,281)

                (23,763)

                (99,031)

                -

                -

                Operating profit

                (23,321)

                (92,481)

                (24,543)

                (105,736)

                -

                -

                Consolidated

                965,173

                3,401,487

                1,042,638

                3,800,271

                -7.4%

                -10.5%

                External customers

                Intersegment

                -

                -

                -

                -

                -

                -

                Total sales

                965,173

                3,401,487

                1,042,638

                3,800,271

                -7.4%

                -100.5%

                Operating profit

                80,168

                228,866

                107,042

                355,210

                -25.1%

                -35.6%

                % of sales

                8.3%

                6.7%

                10.3%

                9.3%

                -

                -

                4. OTHER INCOME / DEDUCTIONS (2016) (Millions ofyen)

                2016

                2015

                4th quarter

                Year

                4th quarter

                Year

                Interest and dividend, net

                959

                3,701

                1,123

                4,917

                Forex gain (loss)

                (12,620)

                (2)

                (1,009)

                (22,149)

                Equity earnings

                of affiliated companies

                217

                890

                110

                447

                Other, net

                3,911

                11,196

                1,695

                9,013

                Total

                (7,533)

                15,785

                1,919

                (7,772)

                Change year over year

                4th quarter

                Year

                (164)

                (1,216)

                (11,611)

                +22,147

                +107

                +443

                +2,216

                +2,183

                (9,452)

                +23,557

                2017 (P)

                2016

                Change year over year

                Year

                Year

                Year

                Office

                1,825,000

                1,804,862

                +1.1%

                External customers

                Intersegment

                3,900

                2,957

                +31.9%

                Total sales

                1,828,900

                1,807,819

                +1.2%

                Operating profit

                177,500

                169,486

                +4.7%

                % of sales

                9.7%

                9.4%

                -

                Imaging System

                1,086,800

                1,094,291

                -0.7%

                External customers

                Intersegment

                5,200

                998

                +421.0%

                Total sales

                1,092,000

                1,095,289

                -0.3%

                Operating profit

                154,000

                144,413

                +6.6%

                % of sales

                14.1%

                13.2%

                -

                Industry and Others

                1,088,200

                502,334

                +116.6%

                External customers

                Intersegment

                69,800

                82,326

                -15.2%

                Total sales

                1,158,000

                584,660

                +98.1%

                Operating profit

                20,800

                7,448

                +179.3%

                % of sales

                1.8%

                1.3%

                -

                Corporate and Eliminations

                -

                -

                -

                External customers

                Intersegment

                (78,900)

                (86,281)

                -

                Total sales

                (78,900)

                (86,281)

                -

                Operating profit

                (97,300)

                (92,481)

                -

                Consolidated

                4,000,000

                3,401,487

                +17.6%

                External customers

                Intersegment

                -

                -

                -

                Total sales

                4,,000,,000

                3,,401,,487

                +17..6%

                Operating profit

                255,000

                228,866

                +11.4%

                % of sales

                6.4%

                6.7%

                -

                (P)=Projection

                6. OTHER INCOME / DEDUCTIONS (2017/Projection) (Millions ofyen)

                2017 (P)

                2016

                Year

                Year

                Interest and dividend, net

                (500)

                3,701

                Forex gain (loss)

                (10,200)

                (2)

                Equity earnings

                of affiliated companies

                1,300

                890

                Other, net

                14,400

                11,196

                Total

                5,000

                15,785

                Change year over year

                Year

                (4,201)

                (10,198)

                +410

                +3,204

                (10,785)

                (P)=Projection

                2017 (P)

                2016

                2015

                Year

                4th quarter

                Year

                4th quarter

                Year

                Office

                16%

                15%

                16%

                16%

                16%

                Monochrome copiers

                Color copiers

                22%

                22%

                21%

                21%

                20%

                Printers

                36%

                38%

                37%

                38%

                41%

                Others

                26%

                25%

                26%

                25%

                23%

                Imaging System

                60%

                61%

                61%

                60%

                62%

                Cameras

                Inkjet printers

                31%

                31%

                30%

                31%

                29%

                Others

                9%

                8%

                9%

                9%

                9%

                Industry and Others

                16%

                20%

                21%

                26%

                24%

                Lithography equipment

                Others

                84%

                80%

                79%

                74%

                76%

                (P)=Projection

                8. SALES GROWTH IN LOCAL CURRENCY (Year over year)

                2017 (P)

                2016

                Year

                4th quarter

                Year

                Office

                Japan Overseas

                -

                -

                +0.5%

                -4.2%

                -0.1%

                -9.2%

                Total

                +0.7%

                -3.2%

                -7.6%

                Imaging System

                Japan Overseas

                -

                -

                -5.7%

                -1.5%

                -9.8%

                -3.1%

                Total

                -0.5%%

                -2.2%%

                -4.1%%

                Industry and Others

                Japan Overseas

                -

                -

                +12.2%

                +12.9%

                +9.2%

                +27.6%

                Total

                +97.2%

                +9.0%

                +15.4%

                Total

                Japan Overseas

                Americas Europe

                Asia and Oceania

                +30.4%

                +13.6%

                +9.3%

                +8.0%

                +25.1%

                +0.7%

                -1.1%

                -4.6%

                -2.5%

                +11.2%

                -1.0%

                -3.6%

                -5.9%

                -5.5%

                +4.3%

                Total

                +17.1%

                -0.7%

                -3.1%

                (P)=Projection

                2017 (P)

                2016

                2015

                Year

                Year

                Year

                ROE *1

                6.1%

                5.2%

                7.4%

                ROA *2

                3.3%

                3.1%

                5.0%

                (P)=Projection

                *1 Return on Equity ; Based on Net Income attributable to Canon Inc. and Total Canon Inc. Shareholders' Equity

                *2 Return on Assets ; Based on Net Income attributable to Canon Inc.

                1. IMPACT OF FOREIGN EXCHANGE RATES

                  1. Exchange rates (Yen)

                    2017 (P)

                    2016

                    2015

                    Year

                    4th quarter

                    Year

                    4th quarter

                    Year

                    Yen/US$

                    Yen/Euro

                    110.00

                    120.00

                    109.48

                    118.10

                    108.58

                    120.25

                    121.60

                    132.81

                    121.13

                    134.20

                  2. Impact of foreign exchange rates on sales (Year over year) (Billionsof yen)

                    (P)=Projection

                    2017(P)

                    2016

                    Year

                    4th quarter

                    Year

                    US$

                    +21.8

                    (31.9)

                    (144.2)

                    Euro

                    (1.0)

                    (27.1)

                    (90.3)

                    Other currencies

                    (4.5)

                    (10.7)

                    (45.9)

                    Total

                    +16.3

                    (69.7)

                    (280.4)

                  3. Impact of foreign exchange rates per yen (Billions of yen)

                    (P)=Projection

                    2017 (P)

                    Year

                    On sales

                    13.4

                    US$

                    Euro

                    6.6

                    On operating profit

                    4.9

                    US$

                    Euro

                    2.4

                    (P)=Projection

                  4. STATEMENTS OF CASH FLOWS (Millions ofyen)

                    5. 2017 (P)

                    2016

                    2015

                    Year

                    4th quarter

                    Year

                    4th quarter

                    Year

                    Net cash provided by operating activities

                    500,000

                    156,920

                    500,283

                    143,892

                    474,724

                    Net cash used in investing activities

                    (250,000)

                    (12,216)

                    (837,125)

                    (89,154)

                    (453,619)

                    Free cash flow

                    250,000

                    144,704

                    (336,842)

                    54,738

                    21,105

                    Net cash provided by (used in) financing activities

                    (267,200)

                    (80,647)

                    355,692

                    (244)

                    (210,202)

                    Effect of exchange rate changes on cash and cash equivalents

                    (13,000)

                    31,656

                    (22,270)

                    (2,128)

                    (21,870)

                    Net change in cash and cash equivalents

                    (30,200)

                    95,713

                    (3,420)

                    52,366

                    (210,967)

                    Cash and cash equivalents at end of period

                    600,000

                    630,193

                    630,193

                    633,613

                    633,613

                    (P)=Projection

                    2017 (P)

                    2016

                    2015

                    Year

                    Year

                    Year

                    Office

                    -

                    94,440

                    105,298

                    Imaging System

                    -

                    91,752

                    90,236

                    Industry and Others

                    -

                    67,887

                    66,585

                    Corporate and Eliminations

                    -

                    48,297

                    66,381

                    Total

                    345,000

                    302,376

                    328,500

                    % of sales

                    8.6%

                    8.9%

                    8.6%

                    (P)=Projection

                    1. INCREASE IN PP&E & DEPRECIATION AND AMORTIZATION

                      (Millions of yen)

                      2017(P)

                      2016

                      2015

                      Year

                      Year

                      Year

                      Increase in PP&E

                      -

                      67,675

                      70,887

                      Office

                      Imaging System

                      -

                      23,482

                      35,634

                      Industry and Others

                      -

                      26,788

                      20,683

                      Corporate and Eliminations

                      -

                      53,652

                      67,916

                      Total

                      195,000

                      171,597

                      195,120

                      Depreciation and amortization

                      -

                      78,319

                      86,206

                      Office

                      Imaging System

                      -

                      47,386

                      52,070

                      Industry and Others

                      -

                      41,053

                      45,064

                      Corporate and Eliminations

                      -

                      83,338

                      89,987

                      Total

                      270,000

                      250,096

                      273,327

                    2. INVENTORIES

                      (P)=Projection

                      1. Inventories (Millions ofyen)

                        2016

                        2015

                        Difference

                        Dec.31

                        Dec.31

                        Office

                        205,656

                        225,327

                        (19,671)

                        Imaging SSyysstteem

                        127,386

                        155,767

                        (28,381)

                        Industry and Others

                        227,694

                        120,801

                        +106,893

                        Total

                        560,736

                        501,895

                        +58,841

                      2. Inventories/Sales* (Days)

                        2016

                        2015

                        Difference

                        Dec.31

                        Dec.31

                        Office

                        42

                        39

                        +3

                        Imaging System

                        41

                        43

                        (2)

                        Industry and Others

                        152

                        86

                        +66

                        Total

                        59

                        47

                        +12

                        *Index based on the previous six months sales.

                      3. DEBT RATIO

                        2016

                        2015

                        Difference

                        Dec.31

                        Dec.31

                        Total debt / Total assets

                        11.9%

                        0.0%

                        +11.9%

                      4. OVERSEAS PRODUCTION RATIO

                        2016

                        2015

                        Year

                        Year

                        Overseas production ratio

                        44%

                        48%

                      5. NUMBER OF EMPLOYEES

                        6. 2016

                        2015

                        Difference

                        Dec.31

                        Dec.31

                        Japan Overseas

                        72,913

                        124,760

                        68,325

                        121,246

                        +4,588

                        +3,514

                        Total

                        197,673

                        189,571

                        +8,102

                        * The effect of newly consolidated TMSC is included in "Industry and Others," and appears in both fiscal 2016 results and fiscal 2017 projections.

                Canon Inc. published this content on 31 January 2017 and is solely responsible for the information contained herein.
                Distributed by Public, unedited and unaltered, on 31 January 2017 06:14:07 UTC.

                Original documenthttp://www.canon.com/ir/results/2016/rslt2016e.pdf

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