Nikon Report 2021

NIKON
REPORT
2020
Year Ended March 31, 2020
NIKON REPORT 2020
Our Philosophy
Trustworthiness and Creativity

Our corporate philosophy is “Trustworthiness and Creativity.”
These are simple words, but they are not easily put into practice.
These important words represent unchanging principles to which we will always be dedicated.
Our Vision
Unlock the future with the power of light

Unleashing the limitless possibilities of light.
Striving to brighten the human experience.
Focused, with purpose, on a better future for all.
THIS IS THE ESSENCE OF NIKON.
Our Qualities of Mind
Curiosity
We show our passion for progress through a wide range of interests to cultivate fresh ideas.
Acceptance
We warmly embrace diverse ideas and delight in differences among people and cultures.
Inspirational Power
We share our ideas with infectious enthusiasm to effect positive change in the world.
1 NIKON REPORT 2020
CONTENTS
BUSINESS STRATEGY 2 Medium-Term Management Plan

—Establishing a Foundation for Sustainable Growth
5 Measures in Response to Global COVID-19 Pandemic
6 Message from the President
10 Nikon’s Core Strengths—Technologies and Brand
14 Nikon’s Value Creation
SPECIAL FEATURE 16 Vision for Growth Strategy and Value Provided to Society
FINANCIAL STRATEGY 20 Message from the CFO
BUSINESS PERFORMANCE 22 Nikon’s Business Structure

24 Overview of Each Business
SUSTAINABILITY 26 Strengthening of Management Capital
CORPORATE GOVERNANCE 32 Corporate Governance
FINANCIAL AND CORPORATE DATA 37 Organizational Structure

38 Financial Highlights
40 Non-Financial Highlights / ESG External Ratings
41 Information
Editorial Policy Position of the NIKON REPORT

NIKON REPORT has been prepared as an integrated report for the purpose of provid-
ing shareholders, investors, and a wide range of other stakeholders with a better NIKON REPORT
understanding of the Nikon Group’s efforts to achieve medium- to long-term growth (Integrated report)
and corporate value improvements. NIKON REPORT communicates Nikon’s strategies for growth to
stakeholders through simple narratives.
Materiality and Completeness
This report explains the Nikon Group’s growth strategies in the form of a simple nar-
rative focused on highly material information. More detailed information on the topics
Non-Financial Financial
touched on in this integrated report can be found on the “Investor Relations” and
“Sustainability” pages of the Company’s corporate website.
Sustainability Investor Relations
https://www.nikon.com/about/sustainability/ https://www.nikon.com/about/ir/
Reporting Period Nikon provides detailed information on its social and environmental Detailed investor relations information is available in financial results
activities through its sustainability reports and other documents. presentations and annual security reports.
April 1, 2019–March 31, 2020
(This report includes information on some activities taking
place after April 1, 2020.)
Cautionary Statement
Forward-looking statements for plans, strategies, projections, earnings, and other performance
data contained herein are based on information currently available to the Company, and all
potential risks and uncertainties are taken into account. The Company asks that investors
understand that changes in conditions may cause actual performance to significantly differ from
these projections.
This report covers the activities of domestic and overseas Nikon Group companies, centered
on Nikon Corporation. In principle, the terms “the Company” and “Nikon” refer to Nikon
Corporation, while “the Group” and “the Nikon Group” refer to Nikon Corporation and its Group
companies.
As for the numerical values relating to the financial content of this report, figures displayed in
billions of yen are truncated, and figures displayed in millions of yen are rounded to the nearest unit.
2 NIKON REPORT 2020
BUSINESS CORPORATE FINANCIAL AND

BUSINESS STRATEGY SPECIAL FEATURE FINANCIAL STRATEGY SUSTAINABILITY
PERFORMANCE GOVERNANCE CORPORATE DATA
Medium-Term Management Plan—Establishing a Foundation for Sustainable Growth
In May 2019, Nikon announced a Medium-Term Management Plan spanning the period from the fiscal year ended March 31, 2020, to the fiscal
year ending March 31, 2022. This period has been defined as a time for “Establishing a Foundation for Growth” to achieve sustained improve-
ments in corporate value. During this period, we will prioritize improving profitability of existing businesses while implementing strategies
centered on generating new core pillars of profit to steadily enhance Nikon’s long-term profit-generating capability.
1 Overview of Medium-Term Management Plan (Process for Formulating Growth Strategies Based on
Risks and Opportunities)
In formulating the Medium-Term Management Plan, we analyzed macro trends (social issues and needs) and the operating environment while examin-
ing and evaluating the markets in which we can leverage Nikon’s core opto-electronics and precision technologies. Through this process, the Material
Processing Business was selected as a priority theme.
Risks and Opportunities
Macro Trends
(Social Issues and Needs) Digital
Industry 4.0 IoT AI
Rising medical
Aging
transformation costs
Progress in efforts to transform Monodzukuri (manufacturing) frameworks through the spread of IoT;
Shrinking workforces, soaring personnel expenses, aging of skilled workers, rising demand for manufacturing automation and
mass-customization, etc. in developed and other countries
Imaging Products Business FPD Lithography Business Semiconductor Lithography Business
Market to enter adjustment phase, diverging Massive improvements in earnings despite

Ongoing market shrinkage projected
from strong demand seen in recent years continuously intense competition
Ongoing opaqueness in operating environments of existing businesses;

Top priority - generation of new core pillars of profit
Evaluation of Candidate Markets

Examination of markets in which Nikon’s Market Scale Industry Structure M&A and Alliances
core opto-electronics and precision Does the market have significant Can Nikon leverage Are there potential
technologies can be leveraged scale and growth potential? its strengths? candidates?
Narrowing of candidate
markets Growth Strategies
Areas of Long-Term Growth

Central Medium-Term Plan Theme
Vision Systems /
Material Processing Business Digital Manufacturing
Robotics
Healthcare
Overview of Medium-Term Management Plan
Our Goal “Leading Company in Precision and Optics”

Generate New Core Pillars of Profit Improve Profitability of Existing Businesses
Develop new growth engines
through active investment in new fields Enhance profitability of existing businesses Reform cost structure
(Establish Material Processing Business)
Enhance Monodzukuri (Manufacturing) Foundation

Establish “Monodzukuri structure” through digital manufacturing
Enhance Corporate Governance Structure Management KPI Targets

Appointment of executive management, succession planning /
Establishment of system through which monitoring and evaluation of manage- FY2021/3: ROE at a level higher than 8%
ment’s strategic decision-making can be implemented effectively
3 NIKON REPORT 2020

Medium-Term Management Plan—Establishing a Foundation for Sustainable Growth
2 Progress of Medium-Term Management Plan

In the first year of the Medium-Term Management Plan, we were able to enact strategies for building foundations for medium- to long-term growth,
despite being affected by the global COVID-19 pandemic at the end of the fiscal year.
Generate New Core Pillars of Profit See page 16~ for details.
In the Material Processing Business, a priority theme in the Medium-Term Management Plan, we launched optical processing machines, a new product
based on the concept of “optics-based machine tools,” with the aim of creating new markets and industries in the Monodzukuri (manufacturing) field.
With these products, we are proceeding to offer solutions to the issues faced by customers as we increase contact points with customers and develop
an understanding of their issues and needs. Meanwhile, Nikon is proactively engaging in co-creation with external partners. For example, we have
concluded a comprehensive business alliance with DMG MORI CO., LTD., and are investing in venture companies in fields pertaining to optical process-
ing machine development. Overall progress in areas of long-term growth is as follows.
Toward Realizing Growth (Overall)
Central Medium-Term Theme Areas of Long-Term Progress to Date

Material Processing Business Growth
Built structure for alliances with partners.
3D printers Laser processing systems Launched optical processing machines into the market.
Integrated optical processing
Digital Manufacturing Began collaboration with launch customers.
3D measurement systems machining solutions Supplied non-contact 3D metrology systems to
Future process-based manufacturing systems
machine tool manufactures.
Began shipments of lidar sensors as contract manufacturer.

Launched intelligent actuator unit for robotic joint units for
lidar Sports imaging business Robot vision Vision Systems / collaborative robots.
Robot modules Smart cameras High-performance robotics Robotics Developed and began sales of embedded cameras.
Started mass production of high precision optical
components for semiconductor related equipment.
Obtained manufacturing license for contract cell

Cell sorting Cell culture operation Drug discovery manufacturing.
assessment applications support Concluded contract with Heartseed Inc. to produce
Healthcare
Ophthalmological AI iPS cell-derived cardiomyocytes for clinical trials.
diagnosis Contract cell manufacturing Began preparing to start diagnosis support with AI for
retinal disease in Europe.
Business Expansion Scenario for Growth Areas in Medium to Long Term

Nikon is pursuing the medium- to long-term expansion of its operations in areas of growth centered
on the Material Processing Business through M&A, alliances, and partnerships with customers.
FY2021/3-22/3 FY2023/3-25/3 FY2026/3 and beyond
Scale up businesses Establish new core pillars of Nikon

Customer and product development
• Accelerate launch through M&A and • Deploy varieties of customer • Establish whole growth areas of Material
alliances applications Processing Business and Vision Systems/
• Forge partnerships with pilot custom- • Acquire major customers in each Robotics related businesses
ers and begin some joint projects industry to scale up M&A and synergies
• Agile cross-functional development • Grow to high profit business, making
approx. ¥100.0 billion in sales
Material Processing
Business
M&A and alliances
Vision System/
Robotics,
high-precision optical
components
4 NIKON REPORT 2020

Medium-Term Management Plan—Establishing a Foundation for Sustainable Growth Progress of Medium-Term Management Plan
Improve Profitability of Existing Businesses See page 22~ for details.
The Imaging Products Business was heavily impacted by the global COVID-19 pandemic as it continued to experience accelerated market shrinkage and
intensified competition. Meanwhile, although performance in the Precision Equipment Business was mostly in line with our plan, we are now feeling the
impacts of the pandemic. Looking ahead, we will work to generate stable cash flows from the Precision Equipment Business and quickly achieve profit-
ability in the Imaging Products Business.
Progress and Direction for Medium-Term Management Plan

Imaging Products Precision Equipment Healthcare
• FPD market has been performing steadily.
Business • Semiconductor market has been in stable growth,
• Market shrinkage is accelerating. • Performing steadily over medium to long term.
environment driven by 5G and IoT. The next big revenue opportu-
nity is an investment for 7nm.
• Steady growth in biological microscopes and
• Difficult to achieve the goal to stably secure fundus cameras.
• Revenue recognition was postponed to next
Progress ¥20.0 billion or more operating profit, • Obtained a license for manufacturing regenerative
FY2021/3, yet remains mostly in line with the plan.
announced last year. medicine products and established structure for
mass production of contract cell manufacturing.
• FPD lithography: Increase revenue by capturing
demand for high-resolution displays. • Strengthen competitiveness of products and
• Rebuild business and aim to achieve early • Semiconductor lithography: Achieve growth in solutions to improve profitability.
Direction
profitability by further restructuring. immersion sales, strengthen China business, and • Scale up contract cell manufacturing by pursuing
expand sales in semiconductor-related measuring new customer opportunities.
equipment.
Imaging Products Business: Progress of Restructuring

In the Imaging Products Business, further restructuring was announced in November 2019 as we laid out a policy of cutting
business costs* by ¥50.0 billion from the fiscal year ended March 31, 2019. While the market environment in this business is
expected to grow harsher, we are committed to implementing and accelerating further restructuring measures to rebuild the
Imaging Products Business and quickly achieve profitability in this business.
Overall
• Cut ¥50.0 billion in business costs vs. FY2019/3 during Medium-Term Management Plan
→ Pulled forward execution and pursued larger cuts to turn profitable in early stage, given the harsh market environment.
Development
• Further selection of product development; aggressively shift resources to growth areas
→ Continue focusing on mid-and high-end models, conducting communal designing and shifting resources, etc.
• Drastically revise sales strategy, optimize sales companies; thoroughly improve efficiencies
Sales → Thoroughly reduce sales and marketing expenses by leveraging digital marketing.
→ Drastically rebuild global sales network in this fiscal year.
• Optimize site function and size
Production → Utilize sites for other businesses, such as Precision Equipment, where demand is expected.
→ Optimize the number of staff at overseas sites by about 700 people. Continue to reduce fixed costs according to the decrease of
production volume.
* Business costs = fixed costs included in cost of sales + selling, general and administrative expenses
Cost Reductions
Under the Medium-Term Management Plan, Nikon is targeting cost reductions totaling ¥18.0 billion on a three-year aggregate basis. Progress
exceeding targets was achieved in the first year of the plan through efforts centered on procurement cost reductions. Going forward, we will imple-
ment new logistics reforms while pursuing further improvement of operation efficiency and advancing additional cost reduction measures with the
goal of once again surpassing reduction targets.
Streamline back-office Optimize marketing and Reform processes and shorten

Major Measures Optimize supply chain
functions production systems manufacturing lead time
Enhance Monodzukuri (Manufacturing) Foundation See page 28 for details.
Nikon is moving ahead with various reforms with the aim of establishing a “Monodzukuri structure” through digital manufacturing.
Enhance Corporate Governance Structure See page 32~ for details. / Management KPI Targets See page 20~ for details.
Measures for enhancing the Company’s corporate governance structure included the establishment of a Nominating Committee chaired by an external
director. In the fiscal year ended March 31, 2020, return on equity (ROE) came to 1.3%.
5 NIKON REPORT 2020

Measures in Response to Global COVID-19 Pandemic
Business activities prioritizing the health and safety of employees, their families,
customers, business partners, and members of communities surrounding business sites
above all else
Flexible management-level action in response to ever-changing conditions
The Nikon Group is taking steps in response to the global COVID-19 pandemic, prioritizing the health and safety of employees, their
families, customers, business partners, and members of communities surrounding business sites above all else. Specific measures
have included temporary layoffs, teleworking, and other measures based on the instructions and requests of authorities as well as the
conditions seen in different regions, such as the lockdowns instituted overseas and the state of emergency declaration made by the
Japanese government. As conditions are always changing, the Group is committed to taking flexible management-level action while
implementing the most extensive measures possible to prevent the spread of COVID-19. We will thus continue to monitor conditions
around the world and respond appropriately.
Risk Management To address the global COVID-19 pandemic, the Group has established an Emergency Management
Measures Headquarters based on the Pandemic Management Manuals and BCM Standards, which are part of the
Group’s risk management system.
With this response headquarters in place, the Group took crisis management and initial response mea-
sures, including steps to ensure the safety of employees and their families, formulating and implementing
personnel and IT measures that coincide with these efforts, collecting information regarding the current
impact on business (sales, supply chain, etc.), and compiling issues.
In implementing business measures, the Group will clarify the risks and opportunities associated with the
pandemic in order to formulate and enact measures to quickly recover its business and prepare for the ongo-
ing fight with COVID-19 and for the post-COVID-19 world based on a medium- to long-term perspective.
Response to Impacts The Imaging Products Business was heavily impacted by the global COVID-19 pandemic as the spread of its
on Business effects resulted in declines in demand, delays in procuring components, and the postponements of new
product launches. We are responding to these impacts through measures to secure component supplies and
flexible logistics measures while also stepping up online marketing efforts. In the Precision Equipment
Business, we are experiencing delays in installation projects due to the tightening of restrictions on interna-
tional travel. These impacts are being addressed by enhancing support measures through increased com-
munication with customers and the promotion of remote support.
Response to Impacts Nikon is contributing to the fight against COVID-19 by joining the “IP Open Access Declaration Against COVID-
on Society 19,” which allows free access to the Nikon’s domestic and overseas patents. We are also making donations to
fund basic research on the virus in order to support efforts to stop its spread. Furthermore, Subsidiary Sendai
Nikon Corporation is donating the face shields they produce to municipal governments and medical
institutions.
Looking toward the post-COVID-19 world
• Accelerating promotion of digital manufacturing

• Promoting unmanned and remote systems through Vision Systems/Robotics technologies
• Contributing to healthcare through cell culturing and microscope solutions
The fundamental value provided by Nikon will not change, even in the midst of the global COVID-19 pandemic. Accordingly, we will swiftly
advance the Medium-Term Management Plan to prepare to supply our distinctive Nikon value in the post-COVID-19 world.
6 NIKON REPORT 2020
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Message from the President
Nikon aspires to unlock the future by

creating new value and establishing a
foundation for growth.
Toshikazu Umatate
Representative Director
President
7 NIKON REPORT 2020
BUSINESS CORPORATE FINANCIAL

A AN
ND
BUSINESS STRATEGY SPECIAL FEATURE FINANCIAL ST
TRAT
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PERFOR
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CE GOVERNANCE CORPOR
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Nikon’s history could be said to be a chronicle of our efforts to

contribute to society by providing new value, driven by technological
Initiatives for Achieving Sustainable innovation and our desire to live up to customer expectations. For
example, we delivered cameras, something that once was only used
Improvements in Corporate Value by a select group of professionals, into the hands of the general popu-
lous. We also made large contributions to the development of
I would first like to take this opportunity to extend my sincere condo- the semiconductor industry through the launch of the first domesti-
lences to everyone who has fallen victim to COVID-19 or who has been cally manufactured commercial stepper. The inherit value of Nikon’s
otherwise impacted by the virus. existence is seen in the Company’s ability to act before its peers in
The Medium-Term Management Plan announced in May 2019 calls providing products and services featuring new value and functions
on us to pursue the goal of becoming a “Leading Company in Precision throughout society in both business-to-business (BtoB) and business-
and Optics,” keeping true to the principles of our corporate philosophy to-consumer (BtoC) capacities. We seek to create new value through
of “Trustworthiness and Creativity” and our vision of “Unlock the technological innovation and the proposal of solutions in growth fields
future with the power of light.” Under this plan, we have defined the in order to unlock the future.
three years beginning with the fiscal year ended March 31, 2020, as a
period for “Establishing a Foundation for Growth” to achieve sustained
improvements in corporate value and for solidifying foundations to
steadily enhance Nikon’s long-term profit-generating capability.
Looking back at the fiscal year ended March 31, 2020, the first year Promotion of Material Processing
of the plan, we launched a new series of optical processing machines,
concluded a comprehensive business alliance with DMG MORI CO., Business through Our Unique
LTD., and dedicated other efforts to the launch of the Material
Processing Business as part of our efforts to advance the strategic Technologies and Alliances
initiative of generating new core pillars of profit. Meanwhile, we moved
forward with initiatives for improving the profitability of existing busi- The Material Processing Business, a part of Nikon’s Digital Manufacturing
nesses, including cost structure reforms as well as drastic business efforts, one of the key focus areas of Nikon’s Medium-Term
restructuring measures in the Imaging Products Business, which is Management Plan. We will provide our customers with solutions to
facing market shrinkage to a degree exceeding expectations. At the their Monodzukuri (manufacturing) and business challenges. Based on
same time, our operations were affected by the global COVID-19 pan- Nikon’s unique optical processing technologies, we developed a pro-
demic that struck late in the fiscal year ended March 31, 2020. These cessing machine that uses beams of light instead of cutting tools by
impacts manifested in the form of decreased demand and delays in leveraging features that enable accurate measurement of a work-
new product launches in the Imaging Products Business as well as piece’s location. We are now accelerating our rollout of this business.
the postponement of the installation of certain systems in the There are three technology areas we are focusing on: additive pro-
Precision Equipment Business. Other businesses also suffered from a cessing for adding material to parts; removal processing to form high
rapid deterioration of market conditions. The end result was an unfor- accuracy features; and riblet processing for patterning precise
tunate year-on-year decline in revenue and profit. micron-scale structures on the surfaces of parts.
Achieving high accuracy with conventional machining methods in
which a metal piece is processed with cutting tools requires the work-
piece to be accurately placed and firmly clamped to withstand the
large cutting forces. These fixturing setups are extremely cumber-
some and time-consuming. In contrast, Nikon processing machines
Creation of New Value to can accurately measure the position of a workpiece, substantially
Unlock the Future reducing the burden of initial installation. Moreover, because we use
non-contact laser processing, there is no force applied to the work-
I would now like to discuss the type of value Nikon will endeavor to piece, so there is no need to secure it with clamps or a vise.
provide going forward amid changes in society. Prior to taking up the Additive processing, often called 3D printing or additive manufac-
mantle of president, I functioned as a substantive CTO. In this capacity, turing, enables the creation of complex geometries that are impossi-
I was responsible for identifying areas of long-term growth and for ble to build with conventional machining. In addition to building an
examining the future changes that might be seen in society as well as object from scratch, this method also allows us to add material to
the potential of the various technologies and products that will existing objects, so it can be used to repair chipped or worn parts.
become necessary going forward. These efforts led to the defining of Considering the high precision our additive processing machines can
three areas of long-term growth in the Medium-Term Management achieve, we expect they will be used for performing high accuracy
Plan: Digital Manufacturing, Vision Systems/Robotics, and Healthcare. repair work.
I believe that these areas will see significant demand from society Nikon is currently developing machines that are capable of removal
over the long term. processing. These machines can achieve high accuracy processing
One example of social trends going forward is social distancing. over an extremely wide area by leveraging the precision measure-
This massive adjustment in how people interact in society is trans- ment, calibration, and compensation technologies we have gained
forming manufacturing drastically. To address this change, Nikon will through years of experience with our semiconductor lithography sys-
accelerate its proposal of products that contribute to society, such as tems. Furthermore, these machines automatically repeat an iterative
collaborative robots that work together with people in the same space, process of removal and measurement to easily achieve submicron
and other offerings in the area of Vision Systems/Robotics. flatness and precision microfabrication.
8 NIKON REPORT 2020

Lastly, riblet processing is a method that incorporates biomimetics

to create functional surfaces. For example, sharkskin-like micro-
groove patterns can reduce fluid-dynamic drag. Patterning the sur- Drastic Restructuring of
faces of turbine blades or aircraft can improve fuel efficiency and
reduce CO2 emissions. We believe such an approach is important for Imaging Products Business
environmental considerations as well. Nikon is developing its own
riblet processing technology by applying its proprietary optical mea- The Imaging Products Business is one of our principal existing busi-
surement and precision control technologies to achieve high perfor- nesses and we are advancing drastic restructuring measures to
mance and efficient processing. rebuild it. The Imaging Products Business restructuring measures
We are generating synergies by forming alliances with other com- announced on November 2019 call for us to pursue a ¥50.0 billion
panies to gain the experience and knowledge necessary for value reduction in business costs* from the fiscal year ended March 31,
creation and also access sales channels for new customers. We are 2019. We are committed to accelerating more drastic restructuring
accelerating the growth of this business through mergers, acquisi- measures to achieve a quick return to profitability, accomplish even
tions, and additional alliances. Over the medium to long term, we aim greater cost reductions, and realize a dramatic improvement of profit-
to develop the Material Processing Business and other growth busi- ability amid the current challenging business environment.
nesses to the point that they are generating combined annual revenue The global COVID-19 pandemic is causing a massive shift in peo-
of more than ¥100.0 billion. ple’s lifestyles, making the Internet an even more integral part of our
culture. This trend is increasing the importance of imaging-related
tools and contents. It can also be expected that the distribution of
images will become increasingly more personalized in the future. In
light of this new social trend, Nikon will focus on product and technol-
Improvement of Profitability of ogy development as well as online services.
The imaging-related technologies Nikon has fostered over the
Existing Businesses course of its long history are an important asset with a wide range of
applicability, even in the areas of long-term growth. Meanwhile, the
Performance did not reach the level we had anticipated in the fiscal Imaging Products Business is branching out from its currently BtoC-
year ended March 31, 2020, the first year of the Medium-Term centric model to develop a broad spectrum of BtoB and other busi-
Management Plan. As for the fiscal year ending March 31, 2021, we nesses in pursuit of paths to further growth.
anticipate that our overall business environment will be the most We recognize that the current dire situation for the Imaging
challenging in years due to the impacts of the global COVID-19 Products Business is a result of an insufficient response to this issue
pandemic. on the part of management. To rectify this situation, we will exercise
The outlook for the Imaging Products Business is far from optimis- speed in enacting the reforms and other measures scheduled for the
tic as products, such as cameras, offered in this business are consid- period of the Medium-Term Management Plan in order to build the
ered luxury items. We therefore must grit our teeth and prepare for foundations for sustainable growth.
our second consecutive year of losses in this business. We aim to
* Business costs = fixed costs included in cost of sales + selling, general and adminis-
quickly return the Imaging Products Business to a position of trative expenses
profitability by further accelerating the restructuring of this business.
In the Precision Equipment Business and the Healthcare Business,
we anticipate a stable market over the medium to long term, and we
will thus be targeting profit growth by capitalizing on a wide range of
business opportunities. Certain FPD lithography system installation
projects were delayed until the fiscal year ending March 31, 2022.
Enhancement of Corporate
However, we still expect to be able to secure the funds necessary for Governance
growth through the steady generation of cash flows.
Through cost structure reforms, we had targeted cost reductions Nikon has been aggressively enhancing its corporate governance for
of ¥18.0 billion and succeeded in surpassing this target in the fiscal the past several years. In May 2019, we established the Nominating
year ended March 31, 2020. The volume of procured parts decreased Committee as a voluntary advisory body to the Board of Directors.
due to the reduction of production in the Imaging Products Business, Subsequent governance initiatives have included the formulation of
which resulted in an unfavorable situation in terms of procurement criteria for the election and removal of executives and a succession
cost reductions. Looking ahead, we will endeavor to once again exceed plan for the president as well as examinations of the ideal composition
our cost reduction targets by further streamlining back-office admin- of the Board of Directors. We also recently welcomed two new external
istrative processes, with logistics reforms being newly introduced into directors, Mr. Shigeru Murayama and Ms. Asako Yamagami, further
the scope of cost structure reform initiatives. improving the diversity of the Board of Directors. Ongoing initiatives
Nikon is in the process of identifying potential risks and opportuni- for enhancing corporate governance will be implemented in the future
ties so that it can achieve a quick recovery and formulate and enact in the pursuit of higher corporate value.
management measures for the coming era from a medium- to long-
term perspective.
9 NIKON REPORT 2020

Improvement of Employee Engagement Message to Our Stakeholders

Based on its corporate philosophy of “Trustworthiness and Creativity,” Whether it be economic conditions or people’s values, society is
Nikon delivers products and services in its quest to respond to the changing at an increasingly rapid pace. Against this backdrop, we will
needs of customers and live up to their expectations with pride. The remain dedicated in our actions and in our work to ensure that we
Nikon brand is founded on value created together with customers, and can provide our unique value. Of course, the pressing need to recover
our superior technological prowess underpins the strong trust we performance as quickly as possible will be among our top priorities
receive from customers. going forward.
Many people likely associate the Nikon brand with digital cameras Current conditions remain unpredictable, and we are therefore
and other offerings of our BtoC operations. However, we also develop striving to improve our responsiveness through the flexible imple-
a range of BtoB operations, such as the Precision Equipment mentation of new initiatives.
Business. To address this disparity in recognition, we have launched a As everyone at Nikon unites to overcome this adversity, we will also
brand strategy team to help entrench the image of the Nikon brand as commit swift efforts to establishing a foundation for growth.
one including BtoB fields among customers. This team is also respon- I am dedicated to living up to the expectations of our stakeholders.
sible for fostering a deeper understanding regarding the Nikon brand I hope you will continue to support us in our endeavors.
and the purpose of the Company among employees. Moreover, we are
working to reaffirm Nikon’s mission among employees as we improve
employee awareness and motivation in order to facilitate the estab-
lishment of a foundation for medium- to long-term growth.
Another measure for improving employee engagement was to hold
town hall meetings between employees and me, the president. These
meetings served as an opportunity for direct communication between
employees and myself. Taking place over a roughly eight-month
period beginning in July 2019, we held meetings at 14 business facili-
ties in Japan and overseas, which were attended by approximately
6,600 employees. At these meetings, I shared the sentiments that Representative Director
I had injected into the Medium-Term Management Plan through face- President
to-face communication with employees, and they in turn offered their
opinions and thoughts.
Quest to Become an Indispensable

Company to Society
There are three factors that I think management needs to focus on—
innovation, profitability, and sustainability—and I mentioned this belief
to employees a number of times at our town hall meetings.
In regard to innovation, we will constantly pursue the innovation of
technology and business, and provide products and services for the
future. As for profitability, it is vital for companies to effectively utilize
capital such as human resources, assets, and funds to increase profit.
From the perspective of sustainability, companies must contribute to
the resolution of social and environmental issues through corporate
activities that are considerate of the future of people and society. As we
advance forward, we will seek to give form to our corporate philosophy
of “Trustworthiness and Creativity” through our business activities to
contribute to the development of a sustainable society.
Moreover, we are committed to examining how we will contribute
and remain a meaningful company to society amid the changing social
climate and thereby clarifying how we should act now. As a corporate
citizen, we aim to become a beneficial member of society so that we
can receive appropriate compensation for the products and services we
provide. We believe that this approach will drive our future growth.
10 NIKON REPORT 2020

Nikon’s Core Strengths—Technologies and Brand
Over its history, spanning more than a century, Nikon has continued to respond to the needs of customers with the technological prowess it
has cultivated throughout this history, creating products and services that address social needs and breeding innovation. The Nikon brand we
have forged through this process is an intangible asset that inspires trust around the world. Even in times of volatility, Nikon will refine the
core strengths represented by its technologies and brand to heighten its corporate value.
Nikon’s Core Strengths
Technologies Brand
1 Technologies
Creation of Diverse Value Born through the

Merging of Technologies
Nikon provides a diverse range of products and services based on the world-leading opto-electronics and precision technologies it has cultivated since
its founding. With our opto-electronics technologies, we are able to control light across a wide range of wavelengths, spanning from X-rays to infrared
light, with a high degree of accuracy to create products and services for various purposes. Meanwhile, our precision technologies are able to contribute
to improved productivity in devices such as semiconductor lithography systems coupled with overlay accuracy to the level of a few nanometers.
With the goal of responding to the needs of society, we have conducted research and development in a broad spectrum of fields, such as optical,
precision measurement and manufacturing, image processing, material, software, and system technologies. The strength of Nikon lies in its basic
technologies, namely, its two highly refined core technology groups and peripheral technologies, and its ability to combine these technologies in order
to create diverse value. These strengths underpin the undeniable competitiveness of Nikon.
In the coming era, which will be characterized by diversifying values and issues as well as increasing volatility, Nikon will continue to refine the
strength of its technologies to meet customer expectations and respond to social needs while achieving sustainable growth by exercising its corporate
philosophy of “Trustworthiness and Creativity.”
Nikon’s Basic Technologies
Precision Measurement and

Optics
Manufacturing
Opto-
Precision
electronics
Image Processing Materials
Software and Systems
Corporate Value Improvement Initiatives
Technology Strategy Committee Co-Creation with External Partners

The Technology Strategy Committee formulates technology strategies Nikon is incorporating open innovation, which entails the proactive utili-
that contain provisions for exploring Nikon’s new fields of focus and for zation of external resources, into its business approach. On this front, we
improving the competitiveness of existing businesses. The committee have established private funds that invest in M&A, alliances, and venture
has also been deciding on directions for technology development and companies. We are also collaborating with venture capital partners.
priority areas for investment based on wide-ranging social issues and Through such efforts, we look to form the foundations for the develop-
needs. In order to improve Nikon’s corporate value, the committee will ment of future businesses and accelerate the development of new prod-
take a flexible approach toward responding to changes in the operating ucts and businesses.
environment and will lead and guide each business unit and division
throughout the Company in executing technology strategies.

Nikon’s Core Strengths—Technologies and Brand Technologies
Nikon is creating new value with its core opto-electronics and precision technologies and peripheral technologies as well as through the wide-ranging
combination and merging of these technologies. On this page, we will look at episodes in the Semiconductor Lithography Business, spanning from the
past to the present, in which Nikon has succeeded in delivering value to society by living up to customer expectations while merging essential technolo-
gies and through technological innovation.
Trustworthiness and Creativity Seen in Past Episodes
Semiconductor Lithography Business

Response to Customer Expectations 1
Merging of Essential Technologies

In 1976, Nikon amassed and merged its
essential technologies to develop a stepper at
the request of “the VLSI Technology Research
Association,” set up by the former Ministry of
International Trade and Industry. In 1980,
Nikon launched the NSR-1010G, the first
domestically produced commercial stepper.
Optical
Technologies
Ultra-micro Nikkor
Development of
semiconductor
Control
Trustworthiness for Living Up to industry through
Essential
Technologies
Technologies Customer Expectations and Creativity for start of
Ruling engines
Merging Essential Technologies Semiconductor
Lithography
Business
Measurement
Technologies
Interferometer and
laser technologies
Optimization of Sales and Service Systems

Transition from distributor system to direct
sales system, offering 24-hour-a-day
support
Creation of system for developing deep
understanding of customer needs
by creating opportunities for direct
discussion between the engineers of
Nikon and customers
More than 8,300 Nikon semiconductor lithography systems shipped worldwide

As of March 31, 2019

Nikon’s Core Strengths—Technologies and Brand Technologies
The strength generated by the merging of essential technologies, fostered over the course of our history, fuels Nikon’s efforts to create new businesses
through its growth strategies.
Trustworthiness and Creativity Seen in Growth Strategies
Material Processing Business

Merging of Essential Technologies
Essential technologies merging in response to customer issues
and needs
Merging and refinement of essential technologies to respond to
customer needs for high-mix, low-volume production and to the
digitization and automation trends
Launch of optical processing machines, refinement based on
customer feedback, proactive utilization of external technologies,
Optical and merging with Nikon technologies
Technologies
Engineering technologies flexibly Vision
applicable to processing applications
Trustworthiness for Living Up to

Realization
Essential Control
Technologies Customer Expectations and Creativity for
of flexible
Technologies Precision measurement Monodzukuri
feedback processing Merging Essential Technologies
with light
Measurement See page 16~ for details.

Technologies
Non-contact 3D metrologyy

Optimization of Sales and Service Systems
Conclusion of a comprehensive business alliance with DMG MORI
CO., LTD.
Utilization of global sales network of DMG MORI for sales of Nikon
Utilizationn of external technologies
techno optical processing machines
ugh M&A and allian
through alliances Establishment of new organization, Digital Solutions Business Unit,
for accelerating launch of growth strategies and reinforcement of
BtoB marketing and sales activities
Future Initiatives
Nikon is focused on merging its long-developed opto-electronics

Internal External
and precision technologies and other essential technologies in
High-Resolution Optical Comb-Based High-Speed Image
addition to coordinating and collaborating with other companies to Measurement Processing
Images
move forward with the early-stage development of its Material
Customer Needs
Processing Business.
Image Processing
The creation of new value through the merging of technologies Growth Fields
that represents the strength of Nikon is founded on our constant High-Precision Precision Pulsation
High-Speed Vision
Measurement & Control for Supplying
efforts to address customer needs. Feedback Powder
(Real-Time Feedback)
Nikon has formulated a plan for the expansion of its business in Coaxial Measurement
High-Speed Image
growth fields over the medium to long term. To ensure progress in line Vibration Control
Processing and Processing
(Curved Surface Processing)
with this plan, we will focus on strengthening relationships with cus-
tomers while devoting efforts toward building partnerships through
the advancement of joint development projects and other means.

Nikon’s Core Strengths—Technologies and Brand Brand
2 Nikon Brand
For more than a century since its establishment in 1917, Nikon has been achieving growth by continuing to unleash the limitless possibilities of light
and by responding to customer expectations and social needs.
Always valuing our trusting relationships with customers, we remain committed to our quest to provide new value to customers, driven by a sense
of pride and conviction, and have thereby grown Nikon into a well-known global brand.
The brand power Nikon has fostered over the years is being fully utilized in existing businesses as well as in the long-term growth areas defined in
the Medium-Term Management Plan, including the Material Processing Business, which has been positioned as a central theme for the period of the
plan. Our commitment to building brand value that satisfies customers will be a constant into the future.
Striving to ensure that customers continue to love the Nikon brand for years to come, we make efforts to improve corporate value a daily endeavor.
Trustworthiness and Creativity Seen in Past Episodes

Made-in-Japan Products Winning Global Praise
On December 10, 1950, the New York Times ran an article that was emblematic of Japan’s newfound presence as a technological superpower. This
special feature article sung the praises of Nikon cameras and NIKKOR lenses and drew inspiration from the high evaluations given by Mr. David
Douglas Duncan and other photographers for the LIFE photography magazine that had been called upon to cover the Korean War. Under condi-
tions of intense cold, when other cameras failed to function, it was only Nikon cameras that were able to pull through to record the grim reality
of the war.
This article propelled NIKKOR lenses to an undeniable position as a world-leading product and transformed the image of made-in-Japan
products.
In the years that followed, Nikon grew into a globally trusted brand that supports industry and people’s lives through the provision of products
and solutions.
Brand Symbol
The current brand symbol was created in 2003. The graphic’s sequential rays represent future possibilities, while the yellow
symbolizes expansion and passion and the black portrays reliability and quality.
Found in the corporate logos of Group companies, on product packaging and websites, and in advertisements, the brand
symbol is being used as a communication tool to foster widespread understanding of and promote the Nikon brand.
Branding Activities
Sponsorships Short Movie

For Nikon, honoring sports and athletes around the world is another Companion to all who have been driven by their curiosity and inquisitive-
enduring expression of our active pursuit toward pushing the limits of ness to tackle new challenges, Nikon aspires to help create a not-yet-
technology and innovation. imagined, prosperous future together with its customers. This sentiment
Through sports sponsorships, Nikon supports the athletes that is expressed in the “Nikon’s Challenge” short movie, available on Nikon’s
inspire people in their quest to surpass the limits of performance, and global website.
we intend to continue sponsoring athletes going forward.
The Open Fédération Internationale

de Natation (FINA)
“Nikon’s Challenge” can be accessed through the link below:

https://www.nikon.com/#modal_video_01

Nikon’s Value Creation
Macro Trends (Social Issues and Needs)
Digital transformation Industry 4.0 IoT AI Rising medical costs Aging
Input Business Strategies
Improve Profitability of
Financial Generate New Core Pillars of Profit
Existing Businesses
Capital
Areas of Long-Term Growth Existing Businesses
Material Processing Business Candidates for Cash Flow Generation

Manufactured Long-Term Growth • Maintain Nikon’s share in
Capital Areas of Growth during the Medium- • Assess opportunities important customer and
Term Management Plan Period for growth and product segments
• Aim for leadership position in the examine feasibility • Generate stable cash flows
Intellectual global market through profitability-first
Capital • Generate operating profit of business operations
several tens of billions of yen
in the future
Human
Capital
Nikon’s Core Strengths
Social and
Relationship
Capital Technologies Brand
Natural
Capital
Strengthening of Management Capital
Individual Initiatives
Intellectual Property
Financial Strategies
Initiatives
Enhancement of Monodzukuri
(Manufacturing) Foundation
Enhancement of Climate Change
Basic Research Measures
Sustainability
Medium-Term CSR Plan https://www.nikon.com/about/sustainability/
Corporate Governance
Corporate Governance https://www.nikon.com/about/ir/governance/
Reinvestment

Nikon’s Value Creation
Goal
A Leading Company in Precision and Optics

Contribute to an affluent and fulfilling society by driving innovation in various industries with products
and services utilizing opto-electronics and precision technologies
Outcome Value Provided by Businesses
Financial Capital
(As of June 12, 2020) Provision of Nikon’s Distinctive
Japan Credit Rating Agency, Ltd. (JCR) Value to Society
A+ Innovating Monodzukuri
Rating and Investment Information, Inc. (R&I) (Manufacturing) Processes
A Development of efficient production systems
using fewer resources and less energy
Realization of higher quality and precision
manufacturing through superior
Manufactured Capital manufacturing technologies
Capital Expenditures*
Promotion of further automation and efficiency
¥ 28,775 million at factories and increased energy savings
Intellectual Capital Making a Better Society

Strengthening Ratio of R&D Expenditures to Revenue* through Imaging and
of management
Sensing Technologies
capital and
advancement
of business
10.5% Coexistence of humans and robots
strategies Achievement of sophisticated and
Human Capital safe manufacturing facilities
Ratio of Local Hires in Upper Management* Presentation of more vibrant image experiences
(Outside of Japan)
23.4% Contributing to People’s

Health and Quality of Life
Social and Relationship Capital Support of drug discovery and realization
of regenerative medicines to overcome
Ratio of Transaction Volume Accounted for by
intractable diseases
Procurement Partners That Have Undergone
CSR Assessments* Contribution to early detection of diseases
Provision of new diagnosis support technologies
80%
Priority Themes of the Medium-Term CSR Plan
Natural Capital
Year-on-Year Reduction in CO2 Emissions from
Energy Consumption*
10.1% * For the fiscal year ended March 31, 2020

Respecting
human rights
Reinvestment
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Vision for Growth Strategy and Value Provided to Society
Digital Manufacturing
Nikon has defined three areas of long-term growth—Digital Manufacturing, Vision Systems/Robotics, and Healthcare—as the targets of its
efforts to generate new core pillars of profit. In the Digital Manufacturing field, the Material Processing Business has been identified as
a central theme for the period of the Medium-Term Management Plan.
Areas of Long-Term Growth
Central Medium-Term Plan Theme Vision Systems /

Digital Manufacturing Healthcare
Robotics
Material Processing Business
Background of Focus on the Area
Potential to capture leading position due to wide-ranging

applicability of Nikon’s precision measurement technologies,
Large market scale and significant growth potential
control technologies, non-contact 3D metrology technologies,
and expertise
Vision
Nikon aspires to supply processing solutions that transform industry with its proprietary material processing
technologies to realize flexible Monodzukuri (manufacturing) with light.
Substantially relieve pain points by special

Customers Energy Aerospace Automotive Healthcare Others
processing of customers’ core components.
Provide value through wide range of approaches such as Propose new value through a wide range of
equipment sales, contract processing business, etc. processing methods according to customer needs.
Phase 1: Phase 2: Phase 3:

Nikon Additive Processing Removal Processing Riblet Processing Leverage Nikon’s unique processing technology
utilizing optical measurement and precision control
Molding and additive Welding Measurement Laser beam
manufacturing beam Measurement & technologies.
machining
Realize unique value by enhancing component

performance, replacing existing processing
Nikon’s unique digital manufacturing utilizing optical technologies methods, and more.
Manufacturers inside and outside Japan, Construct an ecosystem complementing

Partners
tech companies, and start-ups Nikon’s material processing technologies.
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Vision for Growth Strategy and Value Provided to Society Digital Manufacturing
TO
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Launch of Optical Processing Machines
The Lasermeister 100A optical processing machine, an optics-based machine tool, was launched in April 2019 with
a compact design and low price that was unparalleled and defied preconceptions of 3D metal printers. This offering
was followed up by the Lasermeister 101A, which was released in May 2020. By expanding the conventional 3-axis
1 control mechanism to make the newly developed 5-axis control mechanism and increasing the number of applicable
powder types, this higher-level model helps customers meet their most diverse requirements.
Furthermore, a high-precision flat surface processing machine displayed at an exhibition in September 2019
introduced a means of precision removal of portions of metal surfaces using light. This machine represented the
announcement of a precision processing technology that allows for submicron flatness and precision microfabrica-
tion through repeating an iterative process of removal and measurement. Lasermeister 101A
Leveraging of Alliances
Nikon is actively engaging in alliances with other
Contract processing
companies. In the field of essential technologies, Essential technologies Equipment
services
we announced a capital and business alliance
with XTIA, Ltd. in February 2020. We have high Exvision
XTIA, Ltd. DMG MORI CO., LTD.
expectations for the technological breakthroughs Corporation
that can be achieved with this company’s optical Provide customer
Optical High-speed Provide global sales
comb-based measurement technologies. Another comb-based image network platforms
important asset is the high-speed image process- measure- processing
ing technologies of Exvision Corporation, which ment
2 has been converted into a subsidiary.

Meanwhile, the business alliance with DMG
MORI CO., LTD., formed in March 2020, will enable
Technological
synergies
Technological
alliances
Sales
alliances
Provide
systems
Provide
infrastructure
us to incorporate their insight as a leading machine

tool manufacturer into Nikon’s Material Processing Precision
Optics • Provide technologies • Provide series of optical
Business and accelerate the early-stage develop- measurement
related to measurement processing machines
ment of this business. Concrete initiatives are Nikon and cameras and knowledge pertaining
already underway with this company, including to high-precision process-
Image
joint sales activities for the Lasermeister 101A Controls • Provide laser scanners ing operations
processing
optical processing machine and the incorporation
of the LC15Dx non-contact laser scanner into DMG
MORI’s products.
Value Provided to Society
Phase 1: Additive Processing Phase 2: Removal Processing Phase 3: Riblet Processing

Molding and additive Welding Measurement Laser beam
manufacturing beam Measurement & Riblet Processing
machining
This processing method uses cyclical
application of minute grooves to create
a surface structure similar to shark-
Provide state-of-the-art processing solutions, utilizing high precision stage control, non-contact 3D metrology, and optics application technology skin (riblet structure), and the resulting
Differentiation • 3D optical alignment • Flat surface finishing using high-precision • Processing of precise, micron-sized sharkskin-like microgroove patterns can
points measurement and feedback processing structures on surfaces by combining laser reduce fluid-dynamic drag. In this
• No set up required
and detailed processing technologies manner, energy efficiency can be
improved by forming a suitable riblet
shape to create a smooth flow on the
• Repair dies (No replacement needed) • Replace metal hand scraping • Improve fuel efficiency of gas turbines processed surface.
• Repair turbine blade (No replacement or • Manufacture micromachining dies • Improve efficiency of wind power generation
welding needed) • Improve ultrahard tool durability and • Improve fuel efficiency of industrial
Providing value Started developing applications for customer
• Improve fuel efficiency of aircraft and
to customers processing efficiency helicopters equipment and reduce CO2
products Collaborating with launch customers aiming Started detailed studies with potential • Improve performance of home
market launch customers and development of dedicated appliances
machine tools
Contribute to reduction of environmental burden and standardization and simplification of processing technologies
By replacing cutting tools processing machines, which require seasoned engineers to perform set up procedures, with optical processing machines,
we will provide simple and diverse processing solutions matched to the wide-ranging needs of various customers.
Riblet processing, capable of forming riblets on functional 3D curved surfaces, will be utilized to address social issues by improving fuel efficiency,
increasing power generation efficiency, and suppressing noise production.
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Vision Systems / Robotics

In the Vision Systems/Robotics field, Nikon aims to cater to rapidly growing automation and labor-saving needs by supplying new solutions
that leverage the strength of its optical, image processing, and control technologies.
Significant business growth opportunities to fully leverage

Demand for industrial robots growing globally to facilitate
Nikon’s optical, image processing, and control technologies in
automation and labor-saving measures at factories
relation to sight, touch, and other senses of robots
Vision
Nikon is committed to contributing to the development of industrial infrastructure through the supply of vision
systems that provide the functionality of eyes to robots and other types of equipment as well as the
machine control systems that make precision handling possible.
TO
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Launch of C3 eMotion, Robotic Joints for Collaborative Robots, Contributing to More
Flexible and Easier Robot Design
The C3 eMotion is a robotic joint for collaborative robots. Utilizing multiple C3 eMotion units together
1 facilitates easier building of robots by manufacturers as well as a wide range of other engineers—even
those without know-how in robot design. Although robot design, control, and other processes are con-
sidered quite challenging under normal circumstances, Nikon strives to make these processes more
accessible for everyone and to provide new value. We are looking to expand into the areas of robotic
vision and hand systems in order to innovate robots’ hands and fingers.
C3 eMotionI (IAU-200)
Commencement of Lidar Contract Production and Shipments

Based on a manufacturing agreement concluded with Velodyne Lidar, Inc.—a leading U.S.
developer and manufacturer of lidar (light detection and ranging) sensors, which are a
core technology in autonomous driving—we commenced mass production of lidar sen-
2 sors in late 2019, and we were able to start shipments in November of this year as sched-
uled. We are also in the process of examining various possible collaborative ventures with
Velodyne, including the potential for technological coordination through the merging of
Nikon’s optical and precision technologies with lidar sensor technologies.
First shipment of lidar sensors
New Organization Established to Accelerate Growth Strategies

The Digital Solutions Business Unit was established to accelerate the launch of the Material Processing Business and the Vision Systems/
3 Robotics Business, which have been both positioned as part of our growth strategies. Tasks of this business unit will include the enhance-
ment of contact venues for BtoB sales and marketing as well as the acceleration of its growth strategy by coordinating with the Next
Generation Project Division, which was formed to house development functions and to promote Companywide open innovation activities.
Nikon will help realize a more comfortable society by supporting the evolution of robots and delivering new solutions to society pertaining to labor
shortages and the coexistence of humans and robots.
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Healthcare
The Healthcare field is expected to enjoy long-term market growth, therefore, Nikon is advancing long-term initiatives to guarantee satisfac-
tory business growth in this field.
There are significant business growth opportunities to

Healthcare and medicine are important themes for
capitalize on the strengths of Nikon, fostered through ongoing
society and therefore the markets in these areas are
contributions to the medical and bioscience fields
expected to grow over the long term
by observing the microscopic world for a century
Vision
Nikon aims to aid in drug discovery, help achieve practical application of regenerative medicines,
and support early detection and treatment of a variey of diseases to contribute to an improved
quality of life for various people.
TO
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Acquisition of a License for Manufacturing Regenerative
Medicine Products by Nikon CeLL innovation
Subsidiary Nikon CeLL innovation Co., Ltd., acquired manufacturing approval for regen-
erative medicine products in April 2020. This is an important milestone toward the practi-
cal use of regenerative medicine. This approval allows Nikon CeLL innovation to
commercially sell medical application cells approved by the Ministry of Health, Labour
1 and Welfare of Japan.

Nikon CeLL innovation, which was established in 2015 as a company dedicated to
regenerative medicine contract manufacturing, has provided a wide range of process
development and manufacturing services including everything from pre-clinical to com-
mercial manufacturing of cell and gene therapies. We will promote the establishment of
new treatments for diseases currently without effective treatments. Furthermore, we will
develop practical applications for regenerative medicine and participate in the expansion
of related industries.
Promotion of Ophthalmology Solutions

Subsidiary Optos Plc offers ultra-widefield retinal imaging devices that have claimed a
large share of the global market and is thereby supporting early detection and treatment
of eye diseases and follow-up observations of patients. In the fiscal year ended March 31,
2020, this company completed development of Silverstone, an ultra-widefield retinal
2 imaging device with a Swept-Source Optical Coherence Tomography (SS-OCT)* function.

With this one device, physicians can perform photography and tomography of 80% of the
retina. This convenience facilitates early disease detection while also greatly improving
Ultra-widefield retinal
imaging device with
SS-OCT function
Silverstone
medical workflows through shorter examinations.
* Swept-Source Optical Coherence Tomography:
Optos has also completed development of a diabetic retinopathy diagnosis support
An optical coherence tomography method that uses
system that utilizes a retinal camera and is powered by AI. Preparations are being laser light sources capable of changing light output
advanced to commence use of this system in Europe. wavelengths over time
Nikon provides microscope solutions that entail the development and supply of innovative microscopes; ophthalmology solutions that support early
diagnosis and, consequently, early treatment of diseases; and cell solutions that contribute to the regenerative medicine and drug discovery fields
through cell observation and analysis technologies. We will further leverage our optical technologies to make massive contributions to the medical and
bioscience fields.
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Message from the CFO
In order to “Respond to the Arising Crises” and

to “Establish a Foundation for Growth,” Nikon
will implement strategic capital allocation
through repeated dialogue with shareholders
and investors.
Muneaki Tokunari
Director
Executive Vice President
Medium-Term Management Plan and Imaging Products Business Restructuring

In May 2019, Nikon announced a Medium-Term Management Plan set to conclude with the fiscal year ending March 31, 2022. This plan targets ROE of
8% or more by defining the priority strategies necessary to improve the profitability of existing businesses and to generate new core pillars of profit
through strategic investments.
In addition, we announced policies for restructuring measures for the Imaging Products Business in November 2019, with the goal of responding to
rapid market shrinkage. From a strategic perspective, the Imaging Products Business will be focused on products for professionals and hobbyists,
which are a source of consistent demand. In terms of efficiency, we are streamlining development, production, sales, and management systems. In May
2020, we set the target of realizing reductions in business costs* of more than ¥50.0 billion during the period of the Medium-Term Management Plan in
comparison with the fiscal year ended March 31, 2019.
* Business costs = fixed costs included in cost of sales + selling, general and administrative expenses
Performance in Fiscal Year Ended March 31, 2020, and Condition of Two Main Businesses
In the fiscal year ended March 31, 2020, consolidated revenue came to ¥591.0 billion, a year-on-year decrease of 17%; operating profit was ¥6.7 billion,
down 92%; and profit attributable to owners of the parent totaled ¥7.6 billion, a drop of 88%.
Revenue was down in all businesses. Both operating profit and profit attributable to owners of the parent fell sharply as a result of the additional
impairment losses for non-current assets recorded in the Imaging Products Business and the Industrial Metrology Business after careful review of
future profits that considered the significant deterioration of the business environment and the impacts of the global COVID-19 pandemic.
The Imaging Products Business, one of Nikon’s main businesses, accounting for 38% of total revenue, has achieved certain results from the restruc-
turing of mirrorless camera sales and the attachment ratio of interchangeable lenses and has reduced business costs by approximately ¥25.0 billion.
However, the business was significantly affected in the late stage of the fiscal year when demand plummeted and new product launches had to be
postponed due to the impacts of the global COVID-19 pandemic. Coupled with the recording of restructuring relevant expenses and impairment losses
of non-current assets, the Imaging Products Business posted an operating loss of ¥17.1 billion in the fiscal year ended March 31, 2020.
It can be expected that the Imaging Products Business will continue to face a shrinking market going forward, and that the Imaging Products
Business will regretfully be forced to record an operating loss again in the fiscal year ending March 31, 2021. The entire industry has entered into a
period of transformation. Under these circumstances, we aim to quickly achieve profitability in the Imaging Products Business by accelerating its
restructuring and by taking further measures, including increasing the amount of cost reduction and advancing our action plan.
The Precision Equipment Business, accounting for 41% of Nikon’s total revenue, managed to secure operating profit of ¥46.7 billion in the fiscal year
ended March 31, 2020, which was still a decrease from the previous fiscal year. The sales volume of systems in Semiconductor Lithography Business
grew and led to increases in revenue and profit. Regarding the FPD Lithography Business, the sales volume of systems decreased as customers were
at their shifting point of capital investment demand pertaining to small- and medium-sized panels, and installations of certain equipment planned for
the fiscal year ended March 31, 2020, were suspended because of the COVID-19 pandemic.

Message from the CFO
The Precision Equipment Business is expected to benefit from steady demand over the medium to long term amid the trend toward higher resolution
in the FPD Lithography Business and the progress of 5G communications and Internet of Things (IoT) technologies in the Semiconductor Lithography
Business. However, revenue for the fiscal year ending March 31, 2021, could still be somewhat impacted by the global COVID-19 pandemic as timing of
equipment shipments and installations are dependent on the feasibility of sending engineers overseas.
Financial Soundness
On March 31, 2020, the equity ratio stood at 53.7% on a consolidated basis, and we had secured on-hand liquidity amounting to more than ¥400.0 billion
through the combined total of cash on hand and commitment lines of credit for working capital. These figures indicate that Nikon’s financial base has
maintained a sufficient degree of soundness. Leveraging this financial soundness, we will lay the groundwork for responding to the crises we face while
establishing a foundation for growth through strategic investments and other means.
Capital Allocation and Shareholder Returns

An important mission of a CFO is to determine how to allocate the capital entrusted to us by shareholders in order to maintain the financial soundness
needed to respond to crises and establish a foundation for growth while issuing shareholder returns. One of the top priorities of the Medium-Term
Management Plan is to generate new core pillars of profit through aggressive investment in new areas. Nikon will continue to adhere to this basic policy
on capital allocation going forward.
More precisely, we intend to apportion up to 40% of available capital, from on-hand funds and medium- to long-term operating cash flow forecasts,
to strategic investments, mainly in new areas of business. At the same time, 35% of available capital will be devoted to research and development while
15% is directed toward capital investments. In these investments, we will carefully select themes from the perspective of medium- to long-term profit-
ability to ensure that funds are allocated to purposes that contribute to improved competitiveness. The remaining 10% or more of available capital will
be used for shareholder returns.
In regard to shareholder returns, we will continue to adhere to our policy of targeting a cumulative total return ratio of 40% or more over the period
of the Medium-Term Management Plan. However, I regret to inform you that we have decided to move away from the previously announced target of
issuing a full-year dividend of ¥60 per share or more in light of the rapid market fluctuations and decrease in available capital that occurred recently.
We recognize that providing consistent returns to shareholders is an important management issue, therefore, we are committed to carefully moni-
toring changes in the operating environment as we strive to achieve the ideal balance of financial soundness, growth investments, and shareholder
returns from a medium- to long-term perspective.
Basic Policy for Medium- to Long-Term Capital Allocation

Focus resources on strategic investments to establish new core pillars of profit
Strategic Investments R&D Capital Investment Dividends and Other Proportion
New Fields
(Material Processing Business, and 10% 5% 40% to 50%
other long-term growth areas) Max 40%
Existing Fields 25% 10% 30% to 40%
10% or more; total return
Returns to Shareholders 10% or more
ratio of 40% or more
Total 40% 35% 15% 10% or more 100%
Scope: On-hand funds – working capital + 5-year cumulative operating cash flows (before deducting R&D)
Stakeholder Engagement and Ongoing Enterprise Value Improvement

I was appointed as Nikon’s CFO in April 2020. At my previous company, I also worked as the CFO for a number of years. In this capacity, I continuously
engaged in reciprocal communication with shareholders and other investors, utilizing the input gained therein to drive ongoing improvements in enter-
prise value.
Dialogue with shareholders and other investors is an important venue for learning and discovery. In the future, I will promote both timely information
disclosure and frank communication to help reflect the input from capital markets into management so that it can be utilized when formulating busi-
ness strategies and capital measures.
At the same time, I recognize that the trust of our customers, business partners, employees, society, and various other stakeholders is imperative
to the ongoing improvement of enterprise value. By engaging in reciprocal communication with those multi-stakeholders on various occasions, I aim to
return Nikon to the growth track, even in this difficult operating environment.

Nikon’s Business Structure
Leveraging its core opto-electronics and precision technologies, Nikon has developed a varied business portfolio. This portfolio includes the
Imaging Products Business, which supplies digital cameras and interchangeable lenses; the Precision Equipment Business, which offers FPD
lithography systems and semiconductor lithography systems; the Healthcare Business, which provides biological microscopes and ultra-
widefield retinal imaging devices; and the Industrial Metrology Business, which handles industrial microscopes and metrology systems.
IMAGING PRODUCTS BUSINESS
The Imaging Products Business continues expand-

ing the possibilities of imaging by providing cameras
produced based on knowhow and technologies
accumulated over Nikon’s long history, as well as
a variety of image-sharing application and online
service.
PRECISION EQUIPMENT BUSINESS
The Precision Equipment Business supports the

creation of a super smart society through the develop-
ment and production of FPD lithography systems for
manufacturing liquid crystal panels and OLED panels,
as well as lithography systems that produce
semiconductors.
Revenue by Business Segment

(Fiscal year ended March 31, 2020)
Industrial Metrology
and Others
¥591.0 billion 10.7%

Imaging Products
Healthcare Business
Business
10.5% 38.2%
Precision Equipment
Business
40.6%

Nikon’s Business Structure
HEALTHCARE BUSINESS
The Healthcare Business contributes to improving

people’s quality of life all over the world by providing
microscope solutions, cell solutions (regenerative
medicine/drug discovery support) and ophthalmol-
ogy solutions to the bioscience and medical fields.
INDUSTRIAL METROLOGY AND OTHERS
The Industrial Metrology Business provides the

measuring and inspection systems necessary for
sophisticated Monodzukuri (manufacturing) activities
to produce vehicles, aircraft, electronic components,
and other articles. We are also contributing to the
evolution of industries, science and technology
including material processing, robotics and aero-
space field.
Revenue by Region
(Fiscal year ended March 31, 2020)
Europe China United States
14.8% 19.5% Japan 34.0% Others
14.9% 16.8%

Overview of Each Business
Imaging Business
1 Risks CLO
OSE--UP
P
Shrinkage of digital camera market beyond expectations Firmware Updates that Inspire Creativity
Restrictions on customer purchasing activities and decline in purchasing
appetite due to impacts of the global COVID-19 pandemic
Nikon continuously institutes firmware updates to Z
2 Opportunities and Measures series cameras to further heighten the performance
of the Nikon Z mount system. Nikon is more commit-
Rising market demand related to videos
ted than ever to delivering new photography and
Enhancement of online marketing and creation of touch points for videography experiences through timely firmware
increased customer–brand engagement updates developed based on an understanding of
customer needs. Roughly half a year after the release
DX-format mirrorless camera of the full-frame mirrorless cameras Z 7 and Z 6, we
Nikon Z 50 introduced the Eye-Detection AF function that makes
it easier to focus on people’s eyes, a feature for which
Fast standard prime there was a great deal of demand. In February 2020,
manual-focus lens
NIKKOR Z 58mm f/0.95 S Noct
these cameras saw another update, this time install-
ing the Animal-Detection AF function. Through these
updates, we are constantly expanding the potential of
3 Achievements photography and videography. We continue to evolve
Release of the compact and lightweight Nikon Z 50 for various customer our products based on customer feedback, for exam-
segments ple, by making them compatible with CFexpress
memory cards and improving operability. Going for-
Proactive launch of NIKKOR Z lenses, expanding the lineup to 13 lenses
ward, we will continue to flexibly adapt to user needs
Realization of added value to existing products by improving performance so that we can keep providing photography experi-
and providing new functions through firmware updates ences that inspire creativity by making such experi-
Capital investment in wrnch, Inc., a venture company that develops ences more enjoyable and convenient.
computer vision and deep learning software, etc.
Precision Equipment Business (FPD Lithography Business)

1 Risks CLO
OSE--UP
P
Shifting point of customer investment and fluctuations in demand Identification of Customer Needs and
Postponement of system sales timing due to shipment delays or Enhancement of Businesses
suspensions as a result of the impacts of the global COVID-19 pandemic
2 Opportunities and Measures Nikon is always attentive to its customers as it strives
to deliver systems and services that match their needs.
Increase of profit from new FPD lithography systems and service
Customer needs are varied, for example, the need
businesses
for compatibility with high-resolution or new-mecha-
Further incorporation of customer needs through enhanced communication nism displays, increased productivity, and relocation
and reinforcement of risk resilience by localizing installation and service or overhauls of systems. We are accelerating our
teams in overseas markets system development and service provision efforts
from a forward-looking perspective founded on an
accurate understanding of these needs.
Furthermore, Nikon is utilizing its installed base
FPD Lithography system
FX-68S to deliver services that address customer needs in an
FPD Lithography systems ideal manner, such as operational support business
FX-103SH/103S and measures for reducing peripheral costs, in order
to enhance its businesses.
3 Achievements
Improvement of resolution, precision, and productivity of FPD lithography
systems and achievement of compatibility with premium displays
Increase the resolution and productivity of Gen10.5/Gen8/Gen6 lithography
systems
Identification of customer needs and enhancement of service business

Overview of Each Business
Precision Equipment Business (Semiconductor Lithography Business)

1 Risks CLO
OSE--UP
P
Dependence on certain customers and contraction of ArF immersion Sales of Litho Booster Alignment Station, an
lithography system market due to transition to EUVL for cutting-edge Advanced Measurement Device for New Fields
process development
Shipment delays or suspensions and declines in demand as a result of Litho Booster is a high-performance alignment sta-
impacts of the global COVID-19 pandemic tion built on the proprietary technologies Nikon has
2 Opportunities and Measures cultivated in the semiconductor lithography system
field. Prior to lithography processing, this system
Focus on profit-efficiency, emphasizing business negotiations and quickly and precisely measures the absolute values
product lineups of grid and shot distortions for all wafers. Combining
Expansion of service businesses Litho Booster with a lithography system and setting it
Sales promotion for Litho ArF Immersion scanner ArF Scanner to feed-forward correction value to the lithography
Booster and other measurement NSR-S635E NSR-S322F system improves overlay accuracy without reducing
devices for new fields throughput and thereby allows for high-accuracy
Reinforcement and expansion of measurement performance and consequently, revo-
businesses in China lutionary process control.
Nikon is proposing this
system to customers as
3 Achievements a solution for improving
product yield and capital
Promotion of enhancement of NSR-S635E systems to achieve higher investment efficiency.
overlay accuracy and productivity by adapting systems for conditions of
customer processes
Support for the 5 nm generation
Sales of Litho Booster alignment station, a new measurement device that
applies lithography system technologies
Alignment Station Litho Booster
Healthcare Business / Industrial Metrology and Others
Accomplishments in the Healthcare Business Accomplishments in the Industrial Metrology

Business
Launch of Silverstone ultra-widefield retinal
imaging device with SS-OCT function, world’s Contributions to Monodzukuri (manufacturing) in the
first*1 device capable of taking tomographic automobile industry with non-contact 3D metrology and
images of designated position in approximately nondestructive inspection / testing technologies
80% of retina Automobile manufacturers perform quality management by measuring
Nikon’s subsidiary Optos Plc has developed Silverstone, an ultra- the bodies of automobiles while they are in the assembly process, and care
widefield retinal imaging device with a Swept-Source Optical must be taken to ensure that these measurements do not result in dents in
Coherence Tomography (SS-OCT)*2 function. This device is the bodies of completed automobiles. Nikon has supplied its Laser Radar
capable of photographing approximately 80% of the retina in one non-contact large-volume inspection system to numerous automobile
shot and is the first device in the world to make it possible to manufacturers. This system allows for automobile bodies to be measured
acquire tomographic images from that area. Silverstone is able more quickly than with prior methods and in a non-contact manner.
to visualize everything from the center of the retina to its periph- The supply of this system has therefore contributed to increased productiv-
erals while also providing a cross-section view of the retina, all ity in the automobile industry. In addition, we offer X-ray inspection sys-
without needing to use a mydriatic agent to dilate the pupil. This tems that enables automobile manufacturers to inspect the inside of
functionality allows for the detection of minute signs of abnor- automobiles for defects without damaging the vehicle. These systems
mality in eye structures. Furthermore, Silverstone boasts addi- contribute to the quality management processes automobile manufactur-
tional benefits in the form of massive improvements in ers must perform in order to maintain or improve safety. Moreover, these
examination workflows while supporting early detection and systems are used for components rang-
treatment of eye diseases and follow-up observations. ing from compact electronic components
to large-scale cast components to help
*1 As of March 25, 2020; first among marketed retinal imaging devices accord-
ing to Nikon’s surveys manufacturers develop new quality
*2 An optical coherence tomography method that uses laser light sources management frameworks and auto-
capable of changing light output wavelengths over time mate production processes.
For more detailed information on Nikon’s businesses, please refer to the following webpage:
https://www.nikon.com/about/corporate/businesses/

By providing value to society with products and services supported by and created with its various management capital, the Nikon Group has
a long history of practicing its corporate philosophy of “Trustworthiness and Creativity.” We will further enhance the management capital that
supports Nikon’s value creation to accomplish our goal of becoming a “Leading Company in Precision and Optics.”
Financial Manufactured Intellectual

Capital Capital Capital
To ensure sustainable and stable business As a manufacturer, Monodzukuri (manufac- Patents, trademarks, and other intellectual
activities, it is essential for us to utilize the turing) is the essence of business activities assets are vital to the competitiveness and
capital entrusted to us by shareholders, the for Nikon. By integrating Groupwide manu- prosperity of Nikon’s business. We there-
profit gained through business activities, facturing activities on a cross-business fore acquire, maintain, and utilize these
and funds procured through borrowings in basis, the Company has established a assets in a strategic and lawful manner. In
a balanced, efficient, and effective manner. Monodzukuri structure through digital regard to the strength of our technologies,
Nikon is turning its attention to decisive manufacturing. We are taking steps to we will advance R&D activities in a wide
investments in medium- to long-term apply existing technologies to new fields, range of fields based on our opto-electronics
improvements in enterprise value while embrace new development themes, and and precision technologies to develop state-
maintaining its focus on financial health. realize drastic improvements to productiv- of-the-art technologies and maintain our
Management Capital That Supports Nikon’s Value Creation
ity. A broad scope has been defined for technological edge. We continue to focus on
these activities, encompassing production recruitment and cultivation of the human
systems, Monodzukuri technology, procure- resources necessary for these activities.
ment, and quality management.
Credit Ratings Capital Expenditures Ratio of R&D Expenditures to Revenue

(As of June 12, 2020) Fiscal year ended March 31, 2020 Fiscal year ended March 31, 2020
Japan Credit Rating Agency, (IFRS)
Ltd. (JCR)
A+ ¥28,775 million
10.5 %
Rating and Investment Information,
Quality Management
Inc. (R&I)
A Fiscal year ended March 31, 2020
Serious product accidents
Intellectual Properties
Fiscal year ended March 31, 2020
Net Cash
related to safety*
* Based on the definition of serious product

0 Disclosed patent
applications in Japan
632
¥184.8 billion
accidents used in the Japan’s Consumer
Product Safety Act.
Patent registrations in the
United States
294
Ratio of Equity Attributable to Owners of
the Parent to Total Assets Companies Supported via Investment by
(“Equity ratio” under Japanese GAAP) Nikon
Fiscal year ended March 31, 2020 Fiscal year ended March 31, 2020
53.7 %
Venture companies /
Venture capital
partners 22 companies
Financial Strategies See page 20~ for details. Production System Reform Intellectual Property Initiatives
Priority Measures of Medium-Term Management Plan
Enhancement of Basic Research

Measures for Enhancing
Management Capital
Monodzukuri Technology Reform
Human Resource Development of Monodzukuri Technology
Quality Management Reform
Procurement Reform

Human Social and Natural

Capital Relationship Capital
Capital
A corporate culture encouraging bold action Nikon views its business partners as just Companies utilize various types of natural
geared toward creating new corporate value that: partners that help raise the value it capital in their business activities, meaning
is imperative for Nikon’s sustainable growth. provides to society. We therefore form stra- that preservation of the global environment
We aspire to provide workplace environ- tegic partnerships with other companies as is a prerequisite to business continuity. In
ments in which diverse employees can fully well as with universities, and various other light of climate change and other global
exercise their ambitions and talents. To this organizations. In addition, communication environmental issues, Nikon has formulated
end, the Company has adopted impartial, with stakeholders, including customers the Nikon Long-Term Environmental Vision,
performance-based systems for employee and shareholders, is utilized to improve to realize three pillars deemed important
evaluation and treatment and supports management and business activities, and to its business activities: a decarbonized
employees in pursuing self-directed career to enhance the trustworthiness of Nikon. society, a resource circulating society, and
Management Capital That Supports Nikon’s Value Creation
planning and skills development. a healthy and environmentally safe society.

In addition, we have established Medium-
Term Environmental Goals to guide us in
pursuing the objectives of our environmen-
tal vision in reducing environmental impacts
across the entire supply chain.
Ratio of Local Hires in Upper Ratio of Transaction Volume Accounted Reduction in CO2 Emissions from Energy
Management for by Procurement Partners That Have Consumption
Undergone CSR Assessments
(Outside of Japan) Fiscal year ended March 31, 2020
Fiscal year ended March 31, 2020 Fiscal year ended March 31, 2020 Year-on-year
23.4 % 80 %
reduction
10.1 %
Waste Reduction
Ratio of Female Employees Shareholders and Institutional Investors
with Which Meetings Have Been Held Fiscal year ended March 31, 2020
39.2
Year-on-year reduction 8.8 %
Accidents Resulting in Fatalities

%
Approx. 500 companies
(total)
* Excluding valuable resources
Water Withdrawal Reduction

Number of Employees Participating in Fiscal year ended March 31, 2020
0 Town Hall Meetings with the President

Fiscal year ended March 31, 2020 Year-on-year reduction 5.6 %
Approx. 6,600 employees

at 14 business facilities worldwide
Intellectual Property Initiatives Financial Strategies See page 20~ for details. Climate Change Measures
Priority Measures of Medium-Term Management Plan

Measures for Enhancing
Management Capital
Human Resource Development of Monodzukuri Technology
Procurement Reform

Enhancement of Monodzukuri (Manufacturing) Foundation

Under its Medium-Term Management Plan, Nikon aspires to become a “Leading Company in Precision and Optics.” To this end, we are advancing four
reforms geared toward the enhancement of Nikon’s Monodzukuri foundation along with measures for developing the human resources that will support
these reforms in order to establish a foundation for growth.
Enhancement of Monodzukuri (Manufacturing) Foundation

Production system reform Monodzukuri technology reform Procurement reform Quality management reform
Human resource development of Monodzukuri technology
Overview of Reforms
Nikon has established the Production Technology Division, the Optical Engineering Division, and the Research & Development Division as cross-business
unit organizations. Measures specifically aimed at the enhancement of our Monodzukuri foundation by setting up systems, framework, and technologies
to establish engineering chain management (ECM) and practicing supply chain management (SCM) to pursue Companywide optimization of manufac-
turing in a manner that blurs the lines between business units.
Engineeri
Engine ering
ng Cha
Chain
in Man
Manage
agemen
mentt
(ECM)
(EC M)
Product planning
Component Monodzukurii Technology

Procurement Reform
Development Reform
Conceptual design Development of high-productivity

Cost reductions processes utilizing AI and
IoT technologies
Procurement Product design

Production System Reform Quality Management Reform
Compatibility with high-mix,

variable-volume production Trial manufacturing Prevention of quality issues
(mass customization) Production technology
Quality assurance
Production preparation
Production
Purchasing Manufacturing Purchasing Sales services
planning
Supply Chain Management (SCM)
Human Resource Development in Monodzukuri Technology Fields to Support Four Reforms for Enhancing
Monodzukuri Foundation
Nikon is working to solidify its foundations for sustainable growth by training human resources directly involved in manufacturing, and enhancing its
capacity for engineering in a manner that takes manufacturing into account. In addition to strengthening manufacturing capabilities, we are also
focused on developing human resources with the capacity to continually create new value by tackling new challenges.
In April 2020, we launched the Technical College program to systematically endow junior employees with the knowledge and skills necessary for
manufacturing at Nikon and to foster engineers with an abundance of wide-perspective-based creativity. Efforts are also being directed toward expert
training pertaining to quality management and procurement as well as quality management for fostering a shared understanding of manufacturing
knowledge.

Strengthening of Management Capital Enhancement of Monodzukuri (Manufacturing) Foundation
Production System Reform

Compatibility with High-Mix, Variable-Volume Production (Mass Customization)
To drive the Groupwide evolution of the Nikon Group’s optical technologies, we are moving forward with the development of production systems, target-
ing improvements in production technologies and productivity, to enhance our Monodzukuri systems. For this purpose, the development and engineering
functions of optical components and units, core elements of our product competitiveness, that were previously dispersed among business units have
been consolidated within the Optical Engineering Division. Similarly, optical component and unit manufacturing and production technology functions
have been concentrated within subsidiary Tochigi Nikon Corporation. The consolidated production equipment, staff, technologies, and other resources
are being utilized to improve productivity through synergies. Going forward, we will promote compatibility using high-mix, variable-volume production
(mass customization) to respond to customers’ diversifying needs through efficient manufacturing.
High-Mix, Variable-Volume Production

(Mass Customization)
Components
Products Materials
Components
Products Materials
Components
Products Materials
Components
Diversified Shared
Monodzukuri Technology Reform

Development of High-Productivity Processes Utilizing AI and IoT Technologies
Nikon is developing innovative Monodzukuri technologies, including those for utilizing digital data and adopting automation. For example, we are accu-
mulating the Monodzukuri techniques and technologies into digital data and deploying the results analyzed by AI to the production site using IoT. This
process is making it possible to automate production schedules, track production processes, and pursue standardization. Moreover, we are promoting
digital manufacturing to realize high-mix, variable-volume production of high-quality products through the optimization of costs and lead times.
Procurement Reform
Cost Reductions
Nikon is reinforcing its financial base in its pursuit of cost reductions that will help fuel future growth investments. Nikon’s Medium-Term Management
Plan targets an aggregate total of ¥18.0 billion for three-year cost reductions. The reform of cost structures including procurement reforms will have an
important role to play in accomplishing this goal. We are cutting costs through reductions to direct and indirect costs, optimization of supply chains, and
installation of information infrastructure. In addition to these measures, further cost reductions are being targeted through logistics reforms, such as
modal shifts and warehouse optimization, which were newly included in the scope of reforms starting from the fiscal year ending March 31, 2021.

Prevention of Quality Issues
The Nikon Group views quality, encompassing the safety and environmental friendliness of products and services, as the utmost priority in its operations
and imperative to the trustworthiness of Nikon. To prevent quality issues, we are advancing quality management reforms in the Groupwide quality
management frameworks and the quality assurance activities of business units. We have also revised our quality management system to further reduce
costs from quality losses during production, and ongoing improvement activities are being implemented in this regard.

Intellectual Property Initiatives / Enhancement of Basic Research /

Climate Change Measures
Nikon is engaging in intellectual property initiatives and working toward the enhancement of basic research as the foundation for the ongoing improve-
ment of the technological prowess and brand power that are its core strengths. We are also implementing climate change response measures and
addressing other social and environmental issues based on the Medium-Term CSR Plan to develop Nikon into a company that grows together with
society.
Intellectual Property Initiatives

Nikon processes a range of intellectual properties, including the advanced technologies and designs produced by its business units and R&D divisions,
and these intellectual properties underpin the market competitiveness of Nikon products.
Basic Policies Accumulation of

Future promising intellectual
The Legal & Intellectual Property Division pursues extensive coordina- property rights
tion with business units and R&D divisions and drafts intellectual prop- Present
erty strategies that contribute to the growth of existing businesses and
the creation of new businesses. Ongoing intellectual property initiatives Past
are advanced based on these strategies.
Long dedicated to intellectual property initiatives, Nikon’s past intel- Intellectual Intellectual
property property
lectual property initiatives now support its present business activities Intellectual
initiatives initiatives
property
while the intellectual property initiatives the Company is advancing today initiatives
will form the foundations for the new businesses of tomorrow.
Intellectual property strategies
Major Activities
The Legal & Intellectual Property Division is engaged in invention gen- Patent Applications Published in Japan and Patents Registered in
eration activities that entail involvement in the development of new busi- the United States
nesses, starting from the exploration phases, in order to produce Applications / Patents
inventive ideas that will become sources of business competitiveness. 800
These inventive creation activities are divided into several steps, ranging
from theme selection to patent portfolio development, to facilitate pro-
active intellectual property activities. 600
The number of patent applications published in Japan and patents
registered in the United States is one of the important indicators for
intellectual property activities. These numbers are shown in the graph 400
to the right. To generate new core pillars of profit, as described in the
Medium-Term Management Plan, Nikon is ramping up inventive cre-
ation activities in growth fields, quickly responding to opportunities for 200
investment and alliances, and reorganizing its intellectual property

portfolios. Moreover, we proactively form business alliances with out-
0
side partners to facilitate the accomplishment of the goals of the 2017 2018 2019 2020
Medium-Term Management Plan. Patent applications published in Japan Patents registered in the United States
Protection of Brand and Designs

Trademark rights for the Nikon brand that we have cultivated throughout our long history have been acquired in the roughly 200 countries and regions
where such rights can be obtained. We are also engaged in the wide-ranging global acquisition of design rights pertaining to the valuable designs
produced by Nikon. We take steps to protect these trademarks and design rights, including the enhancement of the monitoring of e-commerce sites,
coordination with customs to implement protective measures at customs, and confrontations with the violators of these rights. Through ongoing vigi-
lance in combating the sale of counterfeit and infringing products, we are ensuring that customers can purchase our products with peace of mind. These
efforts contribute to the safety and security of society and to the accomplishment of other objectives of the United Nations’ Sustainable Development
Goals (SDGs).
Going forward, we will maintain our vigilance in protecting the Nikon brand and improving its value on a global scale.

Strengthening of Management Capital Intellectual Property Initiatives / Enhancement of Basic Research / Climate Change Measures

Nikon’s superior technological prowess is one of the Company’s strengths. We are taking a long-term perspective as we engage in a diverse range
of ongoing R&D activities to reinforce existing businesses and create new businesses. We thereby aim to further hone the technological prowess that
supports our growth strategies.
Basic Policies
The technologies developed over the course of years of basic research are used in Nikon’s businesses while also making large contributions in growth
fields. The Company recognizes that swiftly incorporating the results of R&D projects into its businesses is vital to the effective implementation of the
Medium-Term Management Plan. R&D activities are being shaped by this recognition.
Major Activities
Nikon’s optical technologies and AI-powered measurement technologies are important essential technologies for growth fields.
Nikon has released a number of highly regarded research theses in areas such as research and development in growth fields, optical ISSN 2435-1288
theory, and mathematical theory. In the fiscal year ended March 31, 2020, Nikon succeeded in commercializing a foreign-material Nikon
Research
detection and inspection system that was jointly developed together with AOHATA Corporation. This system utilizes Nikon’s spectro- Report
Vol.1 2019
scopic technologies and deep learning AI to deliver revolutionary quality management solutions.
Furthermore, Nikon has been issuing Nikon Research Reports since the fiscal year ended March 31, 2020, to communicate the
successes of its R&D activities to a wide range of stakeholders. These reports contain a breadth of information on Nikon’s R&D
successes. Major focuses include the technologies included in new products and the technologies that have been recognized by
academic and other external institutions. These technologies are based on Nikon’s core opto-electronics and precision
technologies.
For more detailed information on Nikon’s R&D activities, please refer to the following webpage:
https://www.nikon.com/about/technology/rd/
Climate Change Measures

Nikon is further advancing measures for responding to climate change, as this is important to accomplishing the goals of the Medium-Term CSR
Plan, which is aimed at realizing a sustainable society, and mitigating business risks.
Basic Policies
Previously, a “low-carbon society” was positioned as one of the pillars of Nikon’s Long-Term Environmental Vision. However, this pillar was changed to
a “decarbonized society” in February 2020 to accelerate climate change response measures. The Nikon Medium-Term Environmental Goals were also
revised in conjunction with this change. Nikon is committed to reducing greenhouse gas emissions across its supply chain while also helping lower
emissions from society through its business activities.
Major Activities
Approximately 80% of the greenhouse gas emissions from across Nikon’s supply chain Greenhouse Gas Reduction Targets in
are accounted for under Scope 3.* Of these emissions, the three categories of pur- Nikon Medium-Term Environmental Goals
chased goods and services, use of sold products, and upstream transportation and Thousands of t-CO2e
distribution represent a particularly large portion. For this reason, the reduction of 31%
Base year
Scope 3 and other greenhouse gas emissions has been positioned among the Nikon reduction
Medium-Term Environmental Goals, and reductions are being pursued through a 1,314 Target year
number of activities accordingly. For example, we are working to heighten the efficiency
906
of production and development processes and to make greater use of renewable energy. 26%
In addition, Nikon is focusing on making smaller, lighter, and more energy-efficient reduction
264 195
products that are even friendlier to the environment. 2014 2031
In November 2019, the Nikon Medium-Term Environmental Goals were approved by
Scope1+2 Scope 3 (3 categories) Scope 3 (others)
the Science Based Targets international initiative, confirming that these targets are
based on scientific evidence. Notes:
Scope 1: Direct greenhouse gas emissions from fuel use at Company facilities
Moreover, Nikon has announced its support for the recommendations of the Task Scope 2: Indirect greenhouse gas emissions from use of purchased electricity
Force on Climate-related Financial Disclosures. and heat
Scope 3: Indirect greenhouse gas emissions from business activities across
the supply chain (excluding those associated with Scope 1 and 2).
For more detailed information on Nikon’s climate change measures, please refer to the following webpage:
https://www.nikon.com/about/sustainability/report/

Based on its corporate philosophy, the Nikon Group will carry out highly transparent management by fulfilling its fiduciary responsibilities
toward shareholders as well as its responsibilities toward all stakeholders, including customers, employees, business partners, and society,
with a sincere and diligent attitude.
The Nikon Group will strive to achieve sustainable growth and enhancement of its corporate value over the medium to long term by improv-
ing management efficiency and transparency, and further strengthening the supervisory function over management in light of the purpose of
Japan’s Corporate Governance Code.
Measures for Enhancing Corporate Governance
Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ending
March 31, 2016 March 31, 2017 March 31, 2018 March 31, 2019 March 31, 2020 March 31, 2021
(Launch of the (Completion of the (New Medium-Term
restructuring) restructuring) Management Plan
announced)
Increase of • Transition to a • Increase in ratio of • Increase in ratio of • Increase in ratio of

Board of company with an Audit external directors external directors external directors
and Supervisory 29% (4/14 directors) 36% (4/11 directors) 42% (5/12 directors)
Directors’ Committee → 36% → 42% → 45%
diversity, (4/11 directors) (5/12 directors) (5/11 directors)
strengthening • Start of evaluation of • Increase of Board of • Increase of Board of
of supervisory Board of Directors’ Directors’ diversity Directors’ diversity
function over effectiveness • Establishment of • Separation of position
management Nominating of chairman of the
Committee (appoint- Board and represen-
ment of external tative director
director as (Strengthening of
chairperson) supervisory function
• Separation of repre- over management)
sentative director and • Commencement of
chairman of the Board implementation of
from the position of succession plan for
officer president
• Appointment of
external director as
chairperson of
Compensation
Committee
• Formulation of
criteria for the
election and removal
of directors and
officers
• Formulation of
succession plan for
president
Responsibilities • Revision of executive • Freezing of • Revision of executive • Resumption of

toward manage- compensation system performance-based compensation system performance-based
to increase link stock remuneration emphasizing capital stock remuneration
ment to performance following start of efficiency in tandem with new
(Compensation) (introduction of restructuring after Medium-Term
performance-based discontinuation of Management Plan
stock remuneration Medium-Term announcement
linked to the Medium- Management Plan
Term Management
Plan)

CLO
OSE--UP
P Recent Corporate Governance Enhancement Initiatives
1. Establishment of Nominating Committee

Role and Position Major Matters Discussed
In May 2019, the Company established the Nominating Committee as Formulation of criteria for the election and removal of the
a voluntary advisory body to the Board of Directors. External directors chief executive officer, president, and directors and nomination
comprise a majority of the members, and an external director chairs of candidates
the committee. The Nominating Committee primarily formulates cri-
Consideration of ideal composition of Board of Directors
teria for the election and removal of the chief executive officer, presi-
dent, and directors, nominates candidates, considers the composition Verification of appropriateness of matters pertaining to
of the Board of Directors, and oversees evaluation and assignment of evaluation and assignment of officers
officers so as to ensure that decisions on the election and removal of Formulation of succession plan for president
directors and officers are transparent and objective.
Establishment of Succession Plan for President

The succession plan for the president includes the following provisions:
1 Linkage of Medium-Term Management Plan cycle and succession plan cycle
Reinforcement of president’s commitment to the Medium-Term Management Plan
Facilitation of smooth transition to new Medium-Term Management Plan under leadership of new president
2 Designation of selection, cultivation, evaluation, and final proposal of successor candidates to Nominating Committee as mission of
current president
3 Nomination of final candidate and proposal to Board of Directors by Nominating Committee after it has monitored the process of
candidate cultivation
Increase of Board of Directors’ Diversity

Nikon continues to increase the diversity of its Board of Directors. In June 2020, the Company appointed its first female director (external
director and Audit and Supervisory Committee member), raising the ratio of external directors from 42% to 45%.
2. Increase in Link Between Executive Compensation and Performance

Nikon seeks to furnish executive compensation systems that motivate executives to sustainably improve corporate and shareholder value, enhance
their willingness and morale, and help keep, cultivate, and reward excellent personnel.
Performance-based stock remuneration was introduced in 2015 before it was frozen in 2016 in conjunction with the launch of restructuring. This
form of compensation was later resumed when the new Medium-Term Management Plan was announced in 2019.
As a result, executive compensation at Nikon currently comprises fixed monthly compensation as well as bonuses, stock options, performance-
based stock remuneration, and other performance-based compensation. The ratio of performance-based compensation is dependent on an
executive’s position and duties and exceeds 50% of total compensation for certain position and duties.
Monthly compensation (fixed) Ratio of performance-based compensation

President 1 57%
Executive vice presidents and senior vice presidents 1 51%
Corporate vice presidents 1 44%

System
Aiming to further enhance corporate governance, Nikon adopted a company with an Audit and Supervisory Committee. This position further strengthens
the supervisory function of the Board of Directors as it strives to streamline decision-making and clarify management responsibility arising through
delegation of authority.
Nikon’s Corporate Governance Organization (As of June 26, 2020)
General Shareholders’ Meeting

Election and Removal Election and Removal Audit and Election and Removal
Inquiry
Supervision
Audit and Supervisory Committee Nominating Committee
Reporting of findings
Board of Directors
Inquiry
Cooperation
Compensation Committee
Audit and Reporting of findings
Cooperation Supervision
Accounting Auditor
Supervision
Accounting
Cooperation
audit
Report
Internal Audit Department President CSR Committee
Executive Committee Business Conduct Committee
Environmental Committee
Audit
Risk Management Committee

Officers
Export Control Committee
Each department / Group companies
Quality Committee
External Directors
In the appointment of its external directors, the Company attaches importance to ensuring their independence. Nikon appoints external director candi-
dates from among those with a wealth of knowledge and experience as executives of other companies or with expertise and experience as specialists
such as attorneys and certified public accountants, and who are qualified to take part in the management supervision function from a fair and objective
standpoint independent of management.
Criteria for determining independence of external directors

In addition to the criteria for external directors under the Companies Act, the Company judges an external director candidate to be independent if he/
she does not fall under any of the following criteria.
a) The candidate serves or served the Group in the past.
b) The candidate is a “major client or supplier”* of the Company or an executive thereof.
c) The candidate is a major shareholder of the Company or an executive of said major shareholder.
d) The candidate served in the past at a company whose directors are concurrently serving as external directors of the Company and vice versa.
e) The candidate is a person who belongs to a company or organization that receives a donation from the Company, or a person who served in the past
at such a company or organization.
f) The candidate’s relative within the second degree of kinship serves as an important executive of a “major client or supplier” of the Group or the
Company.
* “Major client or supplier” refers to a client or supplier that falls into either of the following.
(1) A client or supplier with whom the Company has a transaction that falls into the following, in any of the past three years
• a party that receives payment from the Company equivalent to 2% of the party’s consolidated net sales or 100.0 million yen, whichever is greater
• a party that makes payments to the Company equivalent to 2% of the Company’s consolidated net sales or 100.0 million yen, whichever is greater
(2) A consultant, an accounting professional, or a legal professional who receives compensation from the Company in excess of 10.0 million yen per year (average over the past three
fiscal years)

Reasons for Appointment

Reasons for Appointment of External Director, except Audit and Supervisory Committee Members
Name Reasons for Appointment
Akio Negishi serves as President, Representative Executive Officer of Meiji Yasuda Life Insurance Company, and possesses many
Akio Negishi years of management experience and exceptional knowledge, and we believe that he will be able to contribute to our manage-
ment overall from a big-picture perspective.
Shigeru Murayama served as Representative Director of Kawasaki Heavy Industries, Inc. and other important positions, and
Shigeru Murayama possesses long years of management experience and outstanding insight, and we believe that he will be able to contribute to the
Company’s overall management from a big-picture perspective.
Reasons for Appointment of External Directors Who Are Audit and Supervisory Committee Members
Name Reasons for Appointment
Kunio Ishihara has a career as Representative Director of Tokio Marine & Nichido Fire Insurance Co., Ltd., etc. and possesses
Kunio Ishihara long years of management experience and outstanding insight, and we believe that he will be able to contribute to securing the
soundness and appropriateness of the management, as well as to increasing transparency.
Shiro Hiruta served as Representative Director of Asahi Kasei Corporation and other important positions, and possesses long
years of management experience and outstanding insight, and we believe that he will be able to contribute to the Company’s
Shiro Hiruta
overall management from a big-picture perspective and that he can also contribute to securing the soundness and appropriate-
ness of the Company’s management as well as to the enhancement of its transparency.
Asako Yamagami has work experience as an in-house lawyer and possesses expertise and experience as a lawyer regarding
Asako Yamagami compliance and other matters. We believe that she will be able to contribute to securing the soundness and appropriateness of
the Company’s management as well as to the enhancement of its transparency.
Evaluation of the Board of Directors’ Effectiveness

Nikon asks a third-party organization to analyze and evaluate the effectiveness of its Board of Directors in order to further improve its functions. The
efforts to address issues identified through the previous evaluation (for the fiscal year ended March 31, 2019) as well as the issues identified in this
evaluation (for the fiscal year ended March 31, 2020) and the future responses are outlined below.
• A third-party organization conducted a survey and individual interviews of all directors on general matters related to the Board of
Directors, its composition, meeting preparations, and details of deliberations, among others, to evaluate Board effectiveness and
Evaluation Method
identify issues.
• Based on the evaluation results, discussions were held at a meeting of the Board of Directors on how to improve its functions.
Efforts to Address Issues Identified in Previous Evaluation

• Initiation of governance reforms
Established the Nominating Committee in May 2019 to formulate criteria for the election and removal of directors and officers
and a succession plan for the president
Evaluation Results • Strengthening of supervisory functions of independent external directors
Increased the diversity of the Board of Directors and enhanced its supervisory functions (ratio of external directors increased
to 45% in June 2020)
• Strengthening of secretariat function of the Board of Directors
Strengthened collaboration between the secretariat and executive departments and promoted timely and accurate information
disclosure
• Monitor progress of Medium-Term Management Plan and growth strategies

Strengthening of progress monitoring of Medium-Term Management Plan and invigoration of discussion on growth
strategies
Main Issues Identified in
• Commence full-fledged implementation of succession plan
This Evaluation and
Full-fledged implementation of succession plan for the president, spearheaded by the Nominating Committee
Future Response
• Strengthen secretariat function of the Board of Directors
Increase of volume and quality of information provided to external directors to support enhancement of discussion at
meetings of the Board of Directors
Taking into account the issues raised by this evaluation, Nikon plans to continue implementing measures to further enhance Board effectiveness going
forward.

Compensation of Directors and Officers

Compensation for Directors (Fiscal year ended March 31, 2020)
Directors other than those who
Directors who are Audit and
are Audit and Supervisory
Category Supervisory Committee members Total
Committee members (of which
(of which External Directors)
External Directors)
8 5 13
Number of persons
Fixed monthly (2) (3) (5)
Fixed compensation
compensation Amount of compensation 294 104 398
(million yen) (26) (45) (71)
5 5
Number of persons —
(—) (—)
Bonuses
Amount of compensation 21 21
―
Performance-based (million yen) (—) (—)
compensation 5 5
Number of persons ―
Performance-based stock (—) (—)
remuneration Amount of compensation 99 99
―
(million yen) (—) (—)
5 5
Subscription rights to Number of persons ―
(—) (—)
Stock compensation shares granted as
stock-related compensation Amount of compensation 101 101
―
(million yen) (—) (—)
8 5 13
Number of persons
(2) (3) (5)
Total
Amount of compensation 514 104 619
(million yen) (26) (45) (71)
* The number of persons and the amount of compensation pertaining to fixed compensation/fixed monthly compensation and total shown above include one director who is not an Audit
and Supervisory Committee member (who is not an external director) who retired at the conclusion of the 155th Annual General Shareholders’ Meeting held on June 27, 2019 and the
amount of compensation pertaining to the said director.
* The amount of performance-based stock remuneration shown above indicates the amount of performance-based stock remuneration for directors other than those who are Audit and
Supervisory Committee members (excluding non-executive directors) recorded as provisions of reserve during the fiscal year.
* The amount of subscription rights to shares granted as stock-related compensation shown above indicates the amount of compensation, etc. concerning subscription rights to shares
granted to directors other than those who are Audit and Supervisory Committee members (excluding non-executive directors) recorded as expenses during the fiscal year.
Compensation System
Executive compensation will be determined to satisfy the following basic criteria.
• Executive compensation should motivate executives to sustainably improve corporate and shareholder value, as well as enhance their
Basic Policies on
willingness and morale.
Compensation
• Executive compensation should help keep, cultivate, and reward excellent personnel.
• The decision-making process for the compensation system should be objective and transparent.
a) The compensation system for executive directors and officers comprises the following components. The distribution ratio for compensa-
tion is determined by changing the proportion of performance-based compensation and stock compensation to fixed compensation
according to position and duties.
<Fixed compensation>
• Fixed monthly compensation
This monetary compensation is not based on performance.
<Performance-based compensation>
• Bonuses
This monetary compensation is based on the degree of accomplishment and qualitative assessment of the capital efficiency and profit-
Compensation System ability of the Group as a whole and divisions in charge on a single-year basis, and is determined within the range of 0% to 200% of the
and Performance-based standard payment.
Structure • Performance-based stock remuneration
Stock compensation is determined within the range of 0% to 150% in accordance with achievement of the Company’s overall capital effi-
ciency and other financial performance indicators, in the final fiscal year of the Medium-Term Management Plan to be resolved every
three fiscal years, with the aims of sharing value with shareholders and enhancing willingness and morale for improving medium- to
long-term performance.
<Stock compensation>
• Subscription rights to shares granted as stock-related compensation
Subscription rights to shares are granted with the aims of sharing value with shareholders and enhancing willingness and morale for
improving long-term performance, within the range not exceeding 5% of the share dilution ratio.
b) The compensation system for non-executive directors consists only of fixed compensation (“fixed monthly compensation”).
The Compensation Committee discusses and advises on related systems in order to determine the level and system appropriate to the duties
on account of compensation levels of major Japanese companies that globally develop their businesses so as to determine the compensation
Method for Determining amount consistent with the performance of the Group and its business scale. The Compensation Committee discusses the establishment of
Compensation Level and executive compensation policies, consideration of the compensation system, and specific calculation method. Based on the results of those
Amount deliberations, the compensation for directors other than those who are Audit and Supervisory Committee members is determined by resolu-
tion of the Board of Directors, and the compensation for directors who are Audit and Supervisory Committee members is determined by
consultation among directors who are Audit and Supervisory Committee members.
For more detailed information on Nikon's corporate governance, please refer to the following webpage:
https://www.nikon.com/about/ir/governance/

Organizational Structure
(As of July 1, 2020)
General Shareholders’ Meeting
Audit and Supervisory Committee
Board of Directors Nominating Committee
Compensation Committee
President
Executive Committee
Internal Audit Department
Information Security Department
Corporate Strategy Division
Finance & Accounting Division
Human Resources & Administration Division
Legal & Intellectual Property Division
IT Solutions Division
Research & Development Division
Optical Engineering Division
Next Generation Project Division
Design Center
Production Technology Division
Imaging Business Unit
FPD Lithography Business Unit
Semiconductor Lithography Business Unit
Healthcare Business Unit
Industrial Metrology Business Unit
Digital Solutions Business Unit
Customized Products Business Unit
Glass Business Unit


Financial Highlights
Nikon Corporation and Consolidated Subsidiaries Note: Figures for the fiscal year ended March 31, 2015, and prior are prepared in accordance with Japanese GAAP.
Years ended March 31 Figures for the fiscal year ended March 31, 2016, and thereafter are prepared in accordance with IFRS.
Growth Potential / Profitability

Revenue*
Billions of yen
1,200 In the Imaging Products Business,
1,010.4 980.5 although revenue from mirrorless cam-
887.5 918.6
857.7 841.0 eras grew, revenue from the business as
800 749.2 717.0 708.6 a whole decreased due to the rapid market
591.0 shrinkage and delay of new product
launches resulting from the impacts of
400 the global COVID-19 pandemic. In the
Precision Equipment Business, revenue
was down as customers are at their
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 shifting point of investment and installa-
Japanese GAAP IFRS tions of certain equipment planned for the
* “Net sales” under Japanese GAAP fiscal year ended March 31, 2020, have
been suspended until the following fiscal
year because of the COVID-19 pandemic
in the FPD Lithography Business.
Operating Profit / Operating Margin

Billions of yen %
100 15 There was a significant decrease in profit
80.0 82.6 caused by the global COVID-19 pandemic
80 12 along with additional impairment losses
11.7
62.9 of non-current assets in the Imaging
60 54.0 56.2 9
51.0 Products Business and Industrial
8.7 43.4
40 35.2 7.8 6 Metrology Business, recognized after
6.1 6.4 careful review of cash flow projections
5.0 5.1
20 4.2 6.7 3 reflecting the significant deterioration of
0.7 1.1 the business environment. However, the
0.1
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Group was able to cut business costs by
Japanese GAAP IFRS approximately ¥25.0 billion year on year
Operating profit (left scale) Operating margin (%) (right scale) mainly due to progress in the restructur-
ing measures announced for the Imaging
Products Business in November 2019.
Profit Attributable to Owners of the Parent* / ROE

Billions of yen %
80 20 Profit attributable to owners of the
66.5 parent decreased by ¥58.9 billion year
59.3 on year, to ¥7.6 billion, in the fiscal
60 15
14.4 46.8 year ended March 31, 2020. Accordingly,
42.4
40 34.7 10 ROE was down by 9.9 percentage points
27.3 29.9 11.2
9.2
to 1.3%.
9.0
20 7.2 18.3 5
5.5
6.3 7.6
3.9
0
3.3 0.7 1.3 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Japanese GAAP IFRS
Profit attributable to owners of the parent (left scale) ROE (%) (right scale)
* “Net income (loss) attributable to owners of the parent” under Japanese GAAP
Cash Flows
Billions of yen
150 During the fiscal year ended March 31,
123.6 125.0
114.1 107.5 2020, net cash provided by operating
100.0 97.3 90.2
100 activities was ¥16.4 billion while net cash
70.9 71.3 68.9
51.8 56.6 used in investing activities was ¥21.2
50 46.3 43.5
15.0 24.3 16.4 billion. Free cash flow came to a negative
0 ¥4.8 billion following lower profits, a
(23.5)
(13.2)
(24.9) (25.3)
(4.8) decrease in advances received in the
–50 (34.0) (43.1) (40.6) (34.8) (21.2) Precision Equipment Business, and
(49.1) (83.1)
(65.1) changes of payment terms for the
–100
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 domestic partner companies.
Japanese GAAP IFRS
Net cash provided by operating activities Net cash used in investing activities Free cash flow

Financial Highlights
Efficiency
Inventories / Inventory Turnover Period
Billions of yen Months
300 7.5 The balance of inventories as of March
263.0 269.4 263.7
236.4 244.9 239.9 235.5
253.3 246.5 31, 2020, was ¥246.5 billion, a decrease
220.3 of ¥6.8 billion from the end of the previ-
200 5.0 ous fiscal year, and the inventory turn-
5.0 over period was 5.0 months. Emphasizing
3.8 3.8 3.8 4.1 the efficiency of invested capital, the
100 3.3 3.2 3.1 3.4 2.5
3.0 Group continues to manage inventory
assets in an appropriate manner.
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Japanese GAAP IFRS
Inventories (left scale) Inventory turnover period (months) (right scale)
Safety
Interest-Bearing Debt / D/E Ratio
Billions of yen Times
150 141.4 139.1 0.60 Interest-bearing debt as of March 31,
127.1 128.3 128.9 2020, was ¥139.1 billion. This amount
115.4 112.6 included an increase of approximately
100 87.4 86.3 0.40 ¥17.0 billion in lease liability following the
85.3
application of IFRS 16 as of April 1, 2019.
The Group is committed to maintaining
50 0.26 0.20
0.22 0.20
0.23
0.20 0.21 0.22 0.21 0.26 sound financial conditions in funding.
0.17
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Japanese GAAP IFRS
Interest-bearing debt (left scale) D/E ratio (times) (right scale)
Growth Investments
R&D Expenditures*1 / Ratio of R&D Expenditures to Revenue*2
Billions of yen %
90 15 R&D expenditures in the fiscal year
76.4 74.5 ended March 31, 2020, totaled ¥62.2
68.7 66.7 66.7 62.2
60.7 63.6 60.7 63.9 billion, a decrease of ¥1.7 billion year on
60 10 year, and the ratio of R&D expenditures
9.0
10.5 to revenue rose by 1.5 percentage points,
7.9 8.5 8.5
7.5 7.6 7.6 7.8 to 10.5%. While pursuing overall optimi-
30 6.8 5 zation, the Group will continue to invest
in establishing foundations for medium-
to long-term growth in new and existing
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 businesses.
Japanese GAAP IFRS
R&D expenditures (left scale) Ratio of R&D expenditures to revenue (%) (right scale)
*1 “R&D costs” under Japanese GAAP *2 “Ratio of R&D costs to net sales” under Japanese GAAP
Shareholder Returns
Cash Dividends per Share / Dividend Payout Ratio
Yen %
90 210 Approximately 29.2 million shares of
159.8
200.7 treasury stock were acquired in the fiscal
60
year ended March 31, 2020, for a total of
60 140 ¥40.0 billion, of which approximately 22.5
40 million shares were retired. In light of the
38 36
31 32 32 highly volatile business environment, the
30 70 Company continued to adhere to its policy
19 69.1 18 16
of targeting a total return ratio of 40% or
41.0 35.7 more but deviated from its target for
27.6 25.4 29.0 27.1 23.8
0 0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 full-year dividend payments of ¥60 per
Japanese GAAP IFRS share due to maintain growth investment
Cash dividends per share (left scale) Dividend payout ratio (%) (right scale) capacity and crisis response capabilities.
For more detailed information on Nikon’s financial information and performance, please refer to the following webpage:
https://www.nikon.com/about/ir/

Non-Financial Highlights / ESG External Ratings
Non-Financial Highlights
Nikon Corporation and Consolidated Subsidiaries
Years ended March 31
Ratio of Female Employees*1 Sales Trends of Refurbished Semiconductor Lithography Systems

% Units Units
80 40 400
348 358
66.6 65.5 391 402
61.2 60.8 59.0 371
60 30 300
21 20
(60.0%) (48.8%)
40 20 200
13
10 11
(43.3%)
(29.4%) 24.4％
15.9 16.8 15.5
20 13.5 13.3 10 100
11.0 11.5 13.2 13.5

10.6
0 0 0
2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
Group companies outside Japan Group companies in Japan Nikon Corporation Units sold (left scale) Cumulative total (right scale)
Figures in parentheses ( ) represent the portion of total sales volume.
*1 Figures represent numbers of permanent employees and non-regular staff of the Nikon Group
(consolidated). From the fiscal years ended March 31, 2016 to 2018, employees who were sec-
CO2 Emissions from Energy Consumption*2 onded to affiliates are counted as those of their original companies. From the fiscal year ended
March 31, 2019, onward, employees seconded to affiliates are counted as those of the affiliates.
Thousands of t-CO2 t-CO2 / million yen
*2 The following values were used for CO2 conversion factors.
300 0.33 0.36 Electric power: [In Japan] The CO2 emission factors without adjustment for each electric
0.30 0.31 0.30 power utility noted in “List of Basic Emissions Factors by Electric Power Utility” specified in
250 0.28 0.30 the Act on Promotion of Global Warming Countermeasures; [UK] Residual mix; [US] NERC
regional residual mix; [Other countries outside Japan] Individual countries factor in
200 74 66
0.24
75 65 International Energy Agency (IEA) factors. However, there is no conversion factor for Laos, so
150 60 0.18 Thailand’s factor is used.
City gas: [Japan] The gas company eigenvalues noted in the guidance document for Periodic
100 0.12 Report pursuant to the Act on the Rational Use of Energy (Energy Conservation Act) were multi-
161 156 150 148 132 plied by the values given in Appended Table 2 of “List of Calculation Methods and Emissions
50 0.06
Factors for Calculation, Reporting and Announcement Systems” specified in the Act on Promotion
0 0 of Global Warming Countermeasures, and by 44/12; [UK] Factors from the Report on Greenhouse
2016 2017 2018 2019 2020 Gases; [Other countries outside Japan] Same value as a typical Japanese gas company.
Nikon Corporation and Group companies in Japan (left scale) Heat and other fuels: The factors noted in “List of Calculation Methods and Emissions Factors
Group manufacturing companies outside Japan (left scale) for Calculation, Reporting and Announcement Systems” specified in the Act on Promotion of
Emissions per unit of sales (right scale) Global Warming Countermeasures.
CO2 emissions from energy consumption in Japan are calculated by subtracting amounts of
hydroelectric power as well as amounts of energy associated J-Credits and Green Heat
Certificates from total energy consumption, and multiplying that by the basic emission factors.
ESG External Ratings

(As of June 30, 2020)
CDP Climate Change A List/ FTSE4Good Index Series MSCI Japan ESG Select Leaders Index* S&P Japan 500 ESG Index
CDP Supplier Engagement Leader
SAM Industry Mover 2020 FTSE Blossom Japan Index MSCI Japan Empowering Women Index (WIN)* ECPI Indices
Dow Jones Sustainability Indices MSCI ESG Leaders Indexes* S&P/JPX Carbon Efficient Index SNAM Sustainability Index
“DJSI World” and “DJSI Asia Pacific”
2020
Sompo Sustainability Index
* The inclusion of Nikon Corporation in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement or promotion of Nikon
Corporation by MSCI or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or service marks of MSCI or its affiliates.

Information
Corporate Data (As of March 31, 2020)

Nikon Corporation Number of Employees Stock Status
Shinagawa Intercity Tower C, 20,190 (Consolidated) Total number of shares
2-15-3, Konan, Minato-ku, authorized to be issued:
Tokyo 108-6290, Japan 1,000,000,000 shares
Total number of shares issued:
Date of Establishment Capital
378,336,521 shares
July 25, 1917 ¥65,476 million
Note: As a result of the cancellation of treasury stock
performed on March 31, 2020, the total number
of shares issued decreased by 22,542,400
year on year.
Investor Information (As of March 31, 2020)

Number of Shareholders Financial Instruments Exchange Listing Share Registrar
40,624 Tokyo Stock Exchange Mitsubishi UFJ Trust and Banking Corporation
(Ticket Symbol: 7731) 4-5, Marunouchi 1-Chome, Chiyoda-ku,
Tokyo 100-8212, Japan
Composition of Shareholders Stock Price Range and Trading Volume
Treasury Stock 2.8% Domestic Financial Stock Price

Instruments Firms 2.2% Yen
Other Domestic 2,400 2,178 2,176

Corporations 7.3% 1,950 1,895
1,800 1,619 1,595 1,587
Japanese Individuals 1,717 1,397
Domestic Financial 1,673
and Others 9.8% Institutions 51.7% 1,524 1,516
1,200 1,366 1,276 1,285
Foreign Shareholders
26.2% 600 845
Major Shareholders
Trading Volume*
Number of Percentage Thousands of shares
Shares Held of Shares
Name of Shareholder 90,000
(Thousand Held (%)
Shares)
64,250
The Master Trust Bank of Japan, Ltd. 60,000
45,881 12.5 47,565
39,987 40,707 41,529 37,626 43,573 38,934
(Trust Account)
30,000
Japan Trustee Services Bank, Ltd. (Trust Account) 20,106 5.5
Meiji Yasuda Life Insurance Company 19,537 5.3 0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Japan Trustee Services Bank, Ltd. 2019 2020
7,692 2.1
(Trust Account 7) * Trading volume is the average of monthly performance.
MUFG Bank, Ltd. 7,378 2.0
The Joyo Bank, Ltd. 6,801 1.8
Japan Trustee Services Bank, Ltd.

6,598 1.8
(Trust Account 5)
Japan Trustee Services Bank, Ltd.

5,074 1.4
(Trust Account 4)
The Shizuoka Bank, Ltd. 4,996 1.4 NIKON CORPORATION

Corporate Strategy Division
For further information,
Mitsubishi Heavy Industries, Ltd. 4,828 1.3 Shinagawa Intercity Tower C, 2-15-3, Konan,
please contact:
Minato-ku, Tokyo 108-6290, Japan
Note: 10,639,962 shares of treasury stock are excluded from the above major sharehold- Tel. +81-3-6433-3600
ers. The percentage of shares held is calculated after deducting treasury stock.
Shinagawa Intercity Tower C, 2-15-3, Konan, Minato-ku, Tokyo 108-6290, Japan
www.nikon.com

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NIKON

Trustworthiness and Creativity

Unlock the future with the power of light

Our Qualities of Mind

BUSINESS STRATEGY 2 Medium-Term Management Plan

FINANCIAL STRATEGY 20 Message from the CFO

BUSINESS PERFORMANCE 22 Nikon’s Business Structure

SUSTAINABILITY 26 Strengthening of Management Capital

CORPORATE GOVERNANCE 32 Corporate Governance

FINANCIAL AND CORPORATE DATA 37 Organizational Structure

Editorial Policy Position of the NIKON REPORT

BUSINESS CORPORATE FINANCIAL AND

Medium-Term Management Plan—Establishing a Foundation for Sustainable Growth

Risks and Opportunities

Market to enter adjustment phase, diverging Massive improvements in earnings despite

Ongoing opaqueness in operating environments of existing businesses;

Evaluation of Candidate Markets

Areas of Long-Term Growth

Overview of Medium-Term Management Plan

Our Goal “Leading Company in Precision and Optics”

Enhance Monodzukuri (Manufacturing) Foundation

Enhance Corporate Governance Structure Management KPI Targets

BUSINESS CORPORATE FINANCIAL AND

Medium-Term Management Plan—Establishing a Foundation for Sustainable Growth

2 Progress of Medium-Term Management Plan

Toward Realizing Growth (Overall)

Central Medium-Term Theme Areas of Long-Term Progress to Date

Began shipments of lidar sensors as contract manufacturer.

Obtained manufacturing license for contract cell

Business Expansion Scenario for Growth Areas in Medium to Long Term

FY2021/3-22/3 FY2023/3-25/3 FY2026/3 and beyond

Scale up businesses Establish new core pillars of Nikon

BUSINESS CORPORATE FINANCIAL AND

Improve Profitability of Existing Businesses See page 22~ for details.

Progress and Direction for Medium-Term Management Plan

Imaging Products Business: Progress of Restructuring

Streamline back-office Optimize marketing and Reform processes and shorten

Enhance Monodzukuri (Manufacturing) Foundation See page 28 for details.

BUSINESS CORPORATE FINANCIAL AND

Measures in Response to Global COVID-19 Pandemic

Looking toward the post-COVID-19 world

• Accelerating promotion of digital manufacturing

Message from the President

Nikon aspires to unlock the future by

BUSINESS CORPORATE FINANCIAL

Message from the President

Nikon’s history could be said to be a chronicle of our efforts to

BUSINESS CORPORATE FINANCIAL AND

Message from the President

Lastly, riblet processing is a method that incorporates biomimetics

BUSINESS CORPORATE FINANCIAL AND

Message from the President

Improvement of Employee Engagement Message to Our Stakeholders

Quest to Become an Indispensable

BUSINESS CORPORATE FINANCIAL AND

Nikon’s Core Strengths—Technologies and Brand

Nikon’s Core Strengths

Creation of Diverse Value Born through the

Nikon’s Basic Technologies