Corporate Governance Enhancement Initiatives

Secure Independence of External Directors: More diverse board composition

Changes in board composition

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	As of the end of
	June 2019	June 2020	June 2021	June 2022	June 2023
Total number of directors (incl. Audit and Supervisory Committee members)	12	11	11	11	12
o/w external directors	5	5	5	5	*6
o/w those from major shareholders, etc.	3	2	2	0	0
o/w female directors	0	1	1	1	2

(*) External Directors as of the end of June 2023

Mr. Shigeru Murayama, Senior Strategic Advisor, Kawasaki Heavy Industries, Ltd.
Mr. Makoto Sumita, former Chairman & Director, TDK Corporation
Mr. Tsuneyoshi Tateoka, former Vice Minister of Economy, Trade and Industry
Mr. Shiro Hiruta, former Counsellor, Asahi Kasei Corporation
Ms. Asako Yamagami, Partner, ITN law office
Ms. Michiko Chiba, Commissioner of Certified Public Accountants and Auditing Oversight Board

Nominating Committee members

4 external directors and 1 internal director (chaired by an external director)

Officer compensation system aimed at enhancing corporate value

New system of officer compensation linked to business performance in effect since FY2022

Compensation system and performance-based structure

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	Fixed compensation	Performance-based compensation
	Fixed monthly compensation	Short-term business performance	Medium-term business performance	Long-term business performance
	Fixed monthly compensation	Bonus	Performance-based stock remuneration	Restricted stock remuneration
Ratio of compensation	1	0.6-0.7	0.1-0.225	0.3-0.45
Linked KPI	—	"Consolidated operating profit" and "ROE" Performance assessment of each division in charge Qualitative assessment of responses to issues assigned to individual executive directors, officers and executive fellows etc.	Financial target —"Revenue," "operating margin," and "ROE(*1)" Strategic targets —"Operating profit" of growth drivers and services/components —KPI achievement of sustainability strategy, etc. (Assignment restrictions until retirement)	(Assignment restrictions until retirement)
Degree of linkage with performance	—	0-200%	0-150%	Linked to stock price
Payment method	Cash		Stock
Malus and clawback (*2)	Applies

(*1) ROE refers only to the last fiscal year of the Medium-Term Management Plan.
(*2) Malus: A clause that allows for the reduction or cancellation of vested incentive compensation before its payment if fraud or misconduct by the officer is identified.
Clawback: A clause to have paid compensation returned in situations similar to the above.

Compensation Committee members

2 external directors and 2 internal director (chaired by an external director)

Establishment of the Independent External Directors' Meeting

The Company has established an Independent External Directors' Meeting whose members are all external directors in November 2022. The meeting serves as an opportunity for the members to freely exchange opinions and have discussions from an independent and objective standpoint about issues and matters to be deliberated by the Board of Directors. Based on the results of this meeting, the Independent External Directors' Meeting makes proposals to the Board of Directors and helps stimulate discussions at Board of Directors' meetings.

History of Enhancing Corporate Governance

Nikon Report (Integrated Report)