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<div style="font-family: 'Times New Roman',Times,serif">
<div align="left" style="font-size: 10pt; margin-top: 12pt"><b>14. Legal Reserve and Retained Earnings</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The Corporation Law of Japan provides that an amount equal to 10% of distributions from retained
earnings paid by the Company and its Japanese subsidiaries be appropriated as a legal reserve. No
further appropriations are required when the total amount of the additional paid-in capital and the
legal reserve equals 25% of their respective stated capital. The Corporation Law of Japan also
provides that additional paid-in capital and legal reserve are available for appropriations by the
resolution of the stockholders. Certain foreign subsidiaries are also required to appropriate their
earnings to legal reserves under the laws of the respective countries.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Cash dividends and appropriations to the legal reserve charged to retained earnings for the years
ended December 31, 2010, 2009 and 2008 represent dividends paid out during those years and the
related appropriations to the legal reserve. Retained earnings at December 31, 2010 did not reflect
current year-end dividends in the amount of ¥79,850 million which were approved by the stockholders
in March 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">The amount available for dividends under the Corporation Law of Japan is based on the amount
recorded in the Company’s nonconsolidated books of account in accordance with financial accounting
standards of Japan. Such amount was ¥1,304,811 million at December 31, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 6pt">Retained earnings at December 31, 2010 included Canon’s equity in undistributed earnings of
affiliated companies accounted for by the equity method in the amount of ¥15,133 million.
</div>
</div>
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