Basic Policy on Internal Control System

In accordance with Japanese Companies Act and its enforcement regulation, enacted in May 2006, we resolved the "Basic Policy on Internal Control System" at the Board of Directors, and prepare a framework to ensure fair business activity.

Basic Policy

(As amended on March 1 2013)

We believe that the reinforcement of our company's corporate governance plays a pivotal role in achieving "a fair and transparent management deserving of stakeholders' confidence", and we intend to increase its effectiveness by improving the quality of our internal controls. We acknowledge that the achievement of effective and efficient business processes, the accuracy of financial reports, the compliance with relevant laws and regulations, and the preservation of company's assets are the management's responsibility. Accordingly, we will prepare and refine a framework, including our internal regulations as well as our organization, to ensure fair business activity in compliance with the Japanese Companies Act and relevant regulations.

1. A framework to ensure that performance of a director's or an employee's duty is in compliance with relevant laws and the articles of incorporation
   1. We have established the "Nikon CSR Charter", which shows Nikon Group's basic stance on corporate social responsibility. Additionally, the "Nikon Code of Conduct" defines the standards of behavior to ensure sensible conduct by directors and employees, based on a high level of morality, pursuant to relevant laws and internal regulations.
   2. Putting special emphasis on a social responsibility-oriented management, we established the "CSR Committee", which aims at fostering, educating as well as disseminating CSR awareness. Established as its sub-committee, the "Business Conduct Committee" regularly performs its function to ensure legitimate, fair, and sound corporate behavior. Finally, established as its dedicated department, CSR Department integrates and promotes activities pertaining to CSR and corporate compliance.
   3. Preparation and refinement of our corporate compliance framework are vigorously pursued, in order to prevent or correct behaviors that violate social rules or corporate ethics. The "Code of Conduct Hotline" has been created as the report/consultation system in this respect.
   4. Internal Audit Department has been established as an independent organization, reporting directly to the President. This Department examines whether operations within the Nikon Group are conducted in compliance with relevant laws and internal rules, and when necessary, makes recommendations as to how such operations can be improved.
   5. Regarding elimination of anti-social forces and groups, we have defined our basic policy and standards in the "Nikon CSR Charter" and the "Nikon Code of Conduct." Additionally, we have established a system to liaison with attorneys and police forces, to take steadfast action as an organization.
2. A framework to ensure an efficient performance of directors' duties
   1. The executive officer system provides a clear definition of the authority and responsibility in performance of an officer's duty, resulting in quick decision-making as well as an efficient performance of the officer's duty.
   2. The "Rules of Organization and Authority" clearly defines the scope of authority and responsibility for each post as well as each organization, to ensure organized and efficient performance of duties.
   3. The following organizations and meeting bodies are established to enable efficient decision-making and performance of duties by the directors:
      The "Executive Committee," primarily consisting of full-time directors, deliberates about and resolves major issues regarding management, general internal controls, and guidelines about general operations of the company's business, in accordance with the basic direction of management as determined by the Board of Directors. Major issues are reported to the Executive Committee by each department. Depending upon its purpose, other organizations and meeting bodies such as the "Executive Meeting", as well as other committees are established.
   4. In accordance with our corporate philosophy of "Trustworthiness & Creativity," management targets are defined within annual plans as well as within the Medium Term Management Plans, and implemented as specific measures. In order to achieve annual targets, management of operations is carried out through our "internal company system", an operation-based framework including subsidiaries engaged in the same business. The regularly held "Business Activity Review Meeting" evaluates the achievement's progress level, identifies issues, if any, and results are evaluated and validated based on the "Achievement Evaluation System".
3. A framework aimed at preservation and control of information relating to the directors' performance of their duties
   1. Information regarding resolutions, approvals, and reports pertaining to directors' performance of their duties are preserved in documentary format and until such time as provided in the "Rules of the Board of Directors", the "Rules of the Executive Committee", and the "Nikon Group Information Management Rules". The information control system is designed to allow access, when needed, from directors, corporate auditors, as well as auditors.
   2. As for security of information, Information Security Headquarters have been established as an independent organization reporting directly to the President. The Headquarters have controlled centralized management for security of information within the Nikon Group and managed to coordinate and reinforce an information management framework within the Nikon Group. Further, the Nikon Group Information Management Rules have been established and the Rules intend to make definitions of the access level per category and relevance, password control, measures for preventing leaks, manipulations and destructions of proprietary information and other matters generally and thoroughly known by employees and directors within the Nikon Group.
4. A framework including rules concerning risk of loss management
   1. In accordance with our recognition of identification, assessment, and control of risk factors potentially affecting operations and business continuity as critical issues, we have established the "Risk Management Committee" and identified critical risks and prepared specific countermeasures against risks and are developing a framework to appropriately control risks surrounding Nikon Group.
   2. We have prepared and implemented manuals and rules pertaining to fields such as corporate ethics, protection of personal information, environmental control, quality control, export control, insider trading prevention, and disaster prevention, which reinforce the management framework concerning prevention of loss.
   3. A framework is in place whereby Internal Audit Department audits other departments about their risk management, evaluates their effectiveness, and reports to the Board through the representative director when necessary, so that corrective measures can be implemented.
5. A framework to ensure fairness of operations within Nikon Group, including parent companies and subsidiaries
   1. The "Authorization Standards for Subsidiaries" defines the scope of authority and responsibility for subsidiaries in Japan and abroad. Thorough control and guidance based on such standards are currently implemented.
   2. The "Basic Policy on internal control over financial reporting" has been established to ensure credibility of financial reporting by Nikon Corporation or other entities belonging to Nikon Group. Systems to enable the foregoing are being developed and improved.
   3. Audits of companies within Nikon Group are carried out by corporate auditors and outside auditors. Additionally, we will reinforce our internal audit department and expand the scope of audits.
   4. In order to encourage ethical behavior at all levels in the area of corporate compliance within Nikon Group, standards such as the "Nikon Code of Conduct" have been established under the "Nikon CSR Charter", a basic policy on corporate social responsibility for Nikon Group. Furthermore, regarding the reporting/consultation system concerning corporate compliance, various systems such as the "Code of Conduct Hotline" have been established and functioning.
6. Implementation of matters concerning employees assisting corporate auditors based on such corporate auditor's request, and matters concerning such employees' independence from other officers
   1. Several employees are appointed as dedicated assistants to corporate auditors, in order to ensure an efficient procedure of the Corporate Auditors' Meeting as well as to ensure the increased effectiveness of the audit.
   2. Transfer of the assistants or evaluation of the assistants' performance requires prior agreement by the corporate auditors, to ensure independence of such employees from other officers.
7. A reporting framework to corporate auditors, including reporting by directors or employees
   1. A corporate auditor has the authority to attend major meetings, such as the "Executive Committee", "Executive Meeting" or the "Business Activity Review Meeting". This ensures that the corporate auditors constantly understand and audit the status of operations and the decision-making process.
   2. A framework is developed to ensure prompt and effective reporting regarding facts that can potentially cause damage to our company, information obtained through the reporting/consultation system concerning corporate compliance, or items to be reported at the Corporate Auditors' Meeting as previously agreed with directors.
   3. Internal Audit Department reports the status of internal audit as well as the results of the audit to the corporate auditors. The corporate auditors perform an effective audit in close cooperation with Internal Audit Department, by requesting, if necessary, further investigations by Internal Audit Department.
8. A framework to ensure effective audit by the corporate auditors
   1. While ensuring independence, this framework enables the corporate auditor to hold regular meetings with the representative director in order to exchange opinions regarding issues to be dealt with by the company, or important tasks pertaining to audits, and to make necessary requests, consequently deepening the mutual understanding between them.
   2. Corporate auditors hold regular meetings with outside auditors, to actively exchange opinions and information.