NIKON REPORT 2019 Year Ended March 31, 2019 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA COVER STORY Innovating Monodzukuri Processes Further automation and mass-customization are proceeding at manufacturing sites. Nikon widens the industrial possibilities by innovating Monodzukuri (manufacturing) processes to higher level and more diverse within the Digital Manufacturing field. Opto-Electronics Technologies Social Issues Core Competence Nikon’s Solutions and Needs Precision Technologies NIKON REPORT 2019 1 Eco-Friendly Factories Building efficient production systems 3D Printers with fewer resources and less energy 3D Measurement Laser Processing Systems Systems High Level of Digital In the Future Manufacturing Technologies Manufacturing Realizing higher quality and precision manufacturing Integrated Future Optical Processing Process-Based Machining Manufacturing Solutions Systems Smart Factories Promoting further automation and efficiency at factories 2 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA COVER STORY Making a Better Society through Imaging and Sensing Technologies Through Vision Systems / Robotics, Nikon brings the features of eyes to society, from factories to public spaces and our homes, leading to a more exciting future with safety and comfort. Opto-Electronics Technologies Social Issues Core Competence Nikon’s Solutions and Needs Precision Technologies NIKON REPORT 2019 3 Coexistence of Lidar Humans and Robots Realizing sophisticated and High- safe manufacturing sites Sports Imaging Performance Business Robots Cities with Vision Systems / In the Future Safety and Security Robotics Building smart city and better transportation systems Smart Cameras Robot Vision Expansion of Imaging Experiences Robot Modules Providing the joy of watching sports and exercising to people around the world 4 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA COVER STORY Contributing to People’s Health and QOL To realize people’s desire to stay healthy, Nikon supports the advancement of life sciences and medicine in the Healthcare field with the vision of improving people’s QOL (Quality of Life). Opto-Electronics Technologies Social Issues Core Competence Nikon’s Solutions and Needs Precision Technologies NIKON REPORT 2019 5 Realization of Drug Discovery and Cell Sorting Regenerative Medicines for Intractable Diseases Contract Cell Drug Discovery Manufacturing Support Healthcare In the Future Contribution to Early Detection of Diseases Cell Culture Ophthalmological Operation and AI Diagnosis Assessment Applications Provision of New Diagnosis Technologies 6 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA Management Message Nikon will endeavor to advance the new Medium-Term Management Plan, establish foundations for growth, and become a “Leading Company in Precision and Optics” in order to achieve sustainable improvements in enterprise value over the medium to long term. Nikon Report 2019 features clear and concise explanations from us and business unit representatives on the new Medium-Term Management Plan and other medium- to long-term growth strategies. This report also compiles important information pertaining to the value creation and foundation-building initiatives aimed at realizing sustainable growth. We kindly ask all of our stakeholders, including shareholders and investors, to read this report. Toshikazu Umatate Masashi Oka Representative Director Representative Director President & CEO Senior Executive Vice President & CFO NIKON REPORT 2019 7 CONTENTS INTRODUCTION 8 Our Philosophy / Our Vision / Our Qualities of Mind 10 Nikon’s Value Creation Process (Sustainability Strategy) BUSINESS STRATEGY 12 Message from the President & CEO 18 Overview of the Restructuring 20 New Medium-Term Management Plan —Establishing a Foundation for Sustainable Growth 24 Message from the CFO 26 Performance Highlights SPECIAL FEATURE 32 Evolutions of Products and Services Based on Opto-Electronics and Precision Technologies 34 Goal of Becoming a Leading Company in Precision and Optics BUSINESS PERFORMANCE 40 Nikon’s Business Structure 42 Overview of Business Units 42 Imaging Business Unit 44 FPD Lithography Business Unit 46 Semiconductor Lithography Business Unit 48 Healthcare Business Unit CORPORATE GOVERNANCE 50 Directors and Officers 52 Corporate Governance 57 Message from the Chairman of the Board 58 Interviews with External Directors SUSTAINABILITY 62 Management Resources That Support Nikon’s Value Creation FINANCIAL AND 68 Management’s Discussion and Analysis CORPORATE DATA 72 Financial Information 131 Organization of the Nikon Group 132 Corporate Data / Investor Information 133 Independent Practitioner’s Assurance / ESG External Ratings Statements contained in this report regarding the plans, projections, and strategies of Nikon Corporation and its subsidiaries and affiliates that comprise the Nikon Group that are not historical fact constitute forward-looking statements about future financial results. As such, they are based on data that is obtainable at the time of announcement in compliance with the Nikon Group’s management policies and certain premises that are deemed reasonable by the Nikon Group. Hence, actual results may differ, in some cases significantly, from these forward-looking statements due to changes in various factors, including—but not limited to—economic conditions in principal markets, product and service demand trends, customer capital expenditure trends, and currency exchange rate fluctuations. This report covers the activities of domestic and overseas Nikon Group companies, centered on Nikon Corporation. In principle, the terms “the Company,” “Nikon Corporation,” 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 hundred millions of yen are truncated, and figures displayed in millions of yen are rounded to the nearest unit. 8 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA Based on our philosophy of “Trustworthiness and Creativity,” Trustworthiness we continue to provide products and services that make people happy. and Creativity NIKON REPORT 2019 9 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. 10 INTRODUCTION BUSINESS STRATEGY SPECIAL FEATURE BUSINESS CORPORATE SUSTAINABILITY FINANCIAL AND PERFORMANCE GOVERNANCE CORPORATE DATA Nikon’s Value Creation Process (Sustainability Strategy) Nikon strives to be a “Leading Company in Precision and Optics” by utilizing its core compe- tence and assets cultivated to date and continues to pursue innovation. We thereby hope to achieve ongoing business growth and contributions to society in order to realize sustainable improvements in both enterprise value and social value. Management Resources ( P62 ) Nikon’s Business Activities Medium-Term New Fields Financial Management Plan Capital Areas of Core Competence Long-Term Growth ( P20 ) Generating New Core Pillars of Profit Imaging Products Improving Profitability of Business Existing Businesses Manufactured Opto-Electronics Capital ( P42 ) Enhancing Monodzukuri (Manufacturing) Foundation Technologies Enhancing Corporate Governance FPD Lithography Structure Business ( P44 ) Intellectual Capital Medium-Term CSR Plan Semiconductor ( P64 ) Lithography Business Precision ( P46 ) Respecting Human Rights Technologies Securing Outstanding Human Human Resources Capital Healthcare Business Work–Life Balance ( P48 ) Quality and Procurement Management Climate Change Measures Complying with the Code of Conduct Social and Relationship Industrial Metrology Capital and Others Natural Capital Input Corporate Value Creation Strategy NIKON REPORT 2019 11 Stakeholder Goal Engagement 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 Contributing to Society through Business Activities Innovating Monodzukuri (Manufacturing) Processes Corporate Philosophy Continue to provide Trustworthiness products and services that and Creativity make people happy Making a Better Society through Imaging and Sensing Technologies Contributing to People’s Health and QOL (Quality of Life) Corporate Value Creation Strategy Products and Services Outcome