May 17, 2024
To our shareholders
5-3 Hikarinooka, Yokosuka-shi, Kanagawa
Nifco Inc.
Masaharu Shibao, President & Representative Director
Announcement of Officer Nomination Policies and Compensation Policies
Nifco Inc. hereby announces that its Board of Directors resolved at the meeting held on May
17, 2024 to adopt the Officer Nomination Polices and the Officer Compensation Polices for
FY2024 and beyond. We therefore announce the details as below.
Note: The revision of the performance-linked stock compensation is to be resolved at the 72th
General Meeting of Shareholders.
【Officer Nomination Policies】
Basic philosophy regarding Corporate GovernanceOur company has continued to grow based on the Nifco Spirit, which has been cultivated since
its founding in 1967 and has a "challenge spirit" and "creativity" at its core. Based on this history,
and with the determination to move forward to a further stage of growth, we have once again
established our company's Purpose/Mission/Values as follows.
Starting from the "My Purpose" that each employee has, by fulfilling our Mission through ourcompany's Values and realizing our company's Purpose, we will grow sustainably while
maintaining the uniqueness of Nifco and we aim to become a company that continues to betrusted by all stakeholders, including employees, customers, shareholders, investors, users,
partner companies, and local communities.

■Purpose

Sparking Innovation by fastening small insights with Technology
for a better world■Mission

Generate excitement as a creative company■Values

Overcoming Challenges
Continuous Breakthroughs
Open Communication
Innovative Collaboration

We consider it necessary to respond to the drastically changing social and economic
environment flexibly and appropriately by strictly enforcing compliance and implementing
appropriate risk management. At the same time, we believe it important to thoroughly
disseminate and practice such principles.
Based on the above philosophy, we endeavor to fully implement corporate governance as apriority issue, and to promote reinforcement of Group management.
1. Required elements for Chief Executive Officer (CEO)The anticipated candidate profile of CEO of the Company is an individual who can realize andembody Nifcoʼs corporate philosophy (Purpose, Mission, Values). Based on the philosophy ofcorporate governance described above, the Company has defined the required elements(responsibilities and authority, main duties, expected results, competency, knowledge and skills,mindset, experience, etc.) for the CEO. The details of the competency and mindset are as follows.
Required elements

Description

Philosophy・Realization of

Has a deep understanding of Nifcoʼs corporate philosophy andValues

corporate

corporate culture and embodies them with his/her own judgment

philosophy

and words and actions.

EthicalMakes decisions that not only lead to gaining benefits for Nifco butstandards

also contribute to society based on corporate social responsibility

Establishment

Gains insight into the future image of the market and users,of vision anddevelops business models and strategies that generate competitive

strategyadvantages, and determines key indicators and order of priority.

Promotion ofUnderstands and respects people with different cultures and ways ofDiversities

thinking and encourages diverse human resources to work together

Competency

in the organization to create new ideas and technologies
Transformation

Informs and motivates related persons of the need for change andleadershipreform, proactively takes the lead in creating and driving change,and promotes sustainable growth of the company through new
business creation.

BreakthroughLearns from the history of Nifco, which has continued to provide
new surprises to the world and is persistent in thinking outside thebox and beyond frameworks and overcoming difficulties to create
new surprises and joy.

Response toAscertains the latest information about the business, identifies riskschangesand opportunities sensitively, makes timely decisions onadjustments, discontinuance or withdrawal and implements them.

Construction &Constructs an organization and mechanisms suitable for strategies

reinforcementand develops human resources through allocation of managementof organization

resources and delegation of authority.

Personality

Is well trusted by related persons inside and outside the Company

and virtue

who are willing to follow his/her footsteps because of his/her
profound broadmindedness underpinned by sincerity, integrity andhumanity.

Learning

Respects and listens to diverse opinions and information, has anability andattitude to consider various ways of thinking and ideas, and createscuriosity

new perspectives

Passion andHas always a passion for and commitment to growth andcommitment

achievement of goals rather than being satisfied with the status quo
and takes various measures to thoroughly get things done

2. Appointment and dismissal criteria
The Company shall appoint and dismiss senior management officers with an emphasis on theirunderstanding of the business environment and management conditions that are necessary forformulating management strategies and ability to demonstrate strong leadership in promptly
and properly executing the management strategies set forth by the Board of Directors as wellas their experience, particularly in global business.
The Company shall appoint the CEO in consideration of the advice and recommendations of
the Nomination, Compensation, and Governance Committee based on the required elements fora CEO described above.
The Company shall dismiss the CEO based on discussions held promptly by the Committee
and the Board of Directors, should any act that raises suspicion of meeting the following criteria
for dismissal arise.
(1) When there has been an act suspected of being wrongful, unjust or a breach of trust.
(2) When he/she is found to be ineligible as CEO due to misconduct, such as a violation of theCompanies Act or related laws and regulations.
(3) When the qualities of the CEO are in doubt considering the business environment related to
the required elements for a CEO described above.
(4) When the process of performing his/her duties or the results thereof are insufficient, and it
has been judged that it would be inappropriate to keep him/her in the position of CEO.
Each year, the Nomination, Compensation, and Governance Committee shall evaluate the CEO
based on the required elements for a CEO described above, his/her performance, as well asother factors, and advise the Board of Directors on his/her reappointment for the following yearafter confirming the CEOʼs plans for the coming years and his/her willingness to continue servingas CEO.
3. Succession plan
The CEO succession plan shall be discussed by the Nomination, Compensation, andGovernance Committee based on the required elements for a CEO described above. Specifically,based on a selection process developed through the discussions at the Committee, periodic cycleof creating and updating a candidate pool, conducting assessments by external experts, anddeveloping individuals is done before narrowing down the candidates.

The Board of Directors

shall monitor whether the succession plan is appropriately carried out based on the report on
the deliberations of the Committee.
4. Term of office
The term of office of Directors who are not Audit & Supervisory Committee Members (including
Independent External Directors) shall be one (1) year, and the appropriateness of theirreappointment shall be determined annually.
The term of office of Directors who are Audit & Supervisory Committee Members shall be two(2) years, and the appropriateness of their reappointment shall be determined every two years.
5. Decision-making process
In order to enhance the independence, objectivity, and transparency of the details of theappointment and dismissal criteria for Directors and decision-making process for nominations,the Company established the Nomination and Compensation Committee on December 10, 2018as an advisory body of the Board of Directors, and it is chaired by and a majority of its members
are Independent External Directors. The Committee was then renamed the Nomination,Compensation, and Governance Committee on October 28, 2020, in order to further strengthen
the Companyʼs actions on corporate governance.
The Nomination, Compensation, and Governance Committee, in principle, convenes no fewer
than four (4) times a year, and deliberates mainly on the Directorsʼ appointment and dismissal
criteria and the CEO succession plan and provides advice and recommendations to the Board ofDirectors.
In order to adopt an objective viewpoint and specialized knowledge from outside the Company,
the Nomination, Compensation, and Governance Committee may seek advice from an external
consultant or other experts on the details of the Directorsʼ appointment and dismissal criteria,
the CEO succession plan, etc., taking into consideration factors such as external data, theeconomic environment, industry trends, and management conditions.

6. Engagement policy
The Company shall promptly disclose the details of the Directorsʼ appointment and dismissal
criteria, the CEO succession plan, etc. to its shareholders through the Annual Securities Report,
Business Report, Corporate Governance Report or the corporate website, etc. that will be
prepared and disclosed in accordance with various laws and regulations. In addition, theCompany will actively promote engagement with institutional investors.

【Officer Compensation Policies】
Basic philosophy regarding corporate governanceOur company has continued to grow based on the Nifco Spirit, which has been cultivated since
its founding in 1967 and has a "challenge spirit" and "creativity" at its core. Based on this history,
and with the determination to move forward to a further stage of growth, we have once again
established our company's Purpose/Mission/Values as follows.
Starting from the "My Purpose" that each employee has, by fulfilling our Mission through ourcompany's Values and realizing our company's Purpose, we will grow sustainably whilemaintaining the uniqueness of Nifco and we aim to become a company that continues to betrusted by all stakeholders, including employees, customers, shareholders, investors, users,
partner companies, and local communities.

■Purpose

Sparking Innovation by fastening small insights with Technology
for a better world■Mission

Generate excitement as a creative company■Values

Overcoming Challenges
Continuous Breakthroughs
Open Communication
Innovative Collaboration

We consider it necessary to respond to the drastically changing social and economic
environment flexibly and appropriately by strictly enforcing compliance and implementing
appropriate risk management. At the same time, we believe it important to thoroughly
disseminate and practice such principles.
Based on the above philosophy, we endeavor to fully implement corporate governance as apriority issue, and to promote reinforcement of Group management.

1. Basic policy for Officer Compensation
The Company shall set the following basic policy for compensation for Directors and Executive
Officers (hereinafter, referred to as “Officer compensation”) based on the basic philosophy
regarding Corporate Governance.
(1) Officer compensation shall be designed to contribute to the realization of our Purpose:“Sparking Innovation by fastening small insights with Technology for a better world.”

(2) Officer compensation shall be designed as an independent, objective, and transparent
compensation plan that is held accountable to our stakeholders, including employees,
customers, and shareholders.
(3) Officer compensation shall be designed to be attractive to our employees.
2. Compensation level
The Company determines the level of Officer compensation based on the abovementioned
basic policy, taking into account the Companyʼs management environment and after examining
and analyzing periodically the compensation levels of major companies of the same and of thesame size using an external database, etc.
３．Structure of compensation(1) Compensation composition ratio
The compensation composition ratio of the Representative Director, President & CEO is asfollows.
It is designed so that a bonus and stock compensation accounts for more than half of the totalcompensation.

Compensation for Directors who are not Audit & Supervisory Committee Members, andExecutive Officers consists of "Base Salary,” "Bonus" and "Stock compensation.” As for
Independent External Directors and Directors who are Audit & Supervisory Committee Members,
their compensation is “Base Salary” only.
The compensation of the Chairman and Director shall be based on the response to importantmanagement issues designated by CEO and the Board of Directors and the results thereof.
(2) Overview of each compensation item
① Base Salary
Base salary is determined based on positions according to the job responsibility involved andis paid as a monthly fixed compensation to secure excellent human resources.
② Bonus (annual incentive)
Bonus is paid to provide an incentive for the contribution to improve company performancefor each single fiscal year, as an incentive for the Groupʼs consolidated business performance.
Consolidated sales and operating profit are used as KPI for bonus assessment to strengthen
the earnings capabilities, and qualitative evaluation is also incorporated. The amount of bonus

shall vary in principle from 0% to 200% of the base amount.
The evaluation ratio of each indicator is as follows.
Indicator

President

Directors

Executive Officers

Consolidated Sales

20％

20％

15％

Consolidated OP

70％

60％

55％

Qualitative Evaluation

10％

20％

30％

* The target values are the consolidated financial indicators to be announced at the beginningof each fiscal year after a resolution of the Board of Directors.
* Qualitative evaluation for the President & Representative Director will be conducted by the
Nomination, Compensation, and Governance Committee, which is composed mainly ofIndependent External Directors.
* The evaluation of overseas executive officers also includes the performance of theirrespective regions.
The target values and coefficients for each indicator are as follows:
Target Values

Coefficients

Consolidated

Consolidated financial indicators to be announced at theVaries in the range

Sales

beginning of each fiscal year after a resolution of theof 0〜2.0

Board of Directors
Consolidated

Sames as above

Varies in the range

OPof 0〜2.0

Qualitative

To be fixed individually according to each officerʼs

Varies in the range

Evaluation

responsibility, and the Nomination, Compensation, andof 0〜2.0

Governance Committee shall decide after consultation③ Stock compensation (mid-to-long term incentive)
The Companyʼs shares will be granted to the officers with the aim of further enhancing theirmotivation to contribute to improve the Companyʼs business performance and corporate value
from a mid-to-long term viewpoint and increase value-sharing with shareholders. The Stockcompensation consists of performance-linked compensation (PS 50%) and non-performancelinked compensation (RS 50%).
Since 2016, the stock compensation system has been adopted in which company shares aredelivered to each eligible person using a trust mechanism.

Until now, points were awarded

during the term of office, and the companyʼs stock equivalent to the number of cumulative points
were awarded upon retirement.

From 2024, the system is changed to a method of granting

restricted shares through a trust mechanism during each officer's term of office (the "RS TrustSystem"), creating a system that allows its officers to share value with our shareholders evenmore than before.
In addition, in order to respond more flexibly to changes in the social environment, theCompany has implemented a rolling Mid-Term Management Plan, in which the Plan is reviewed
every year to further strengthen incentives for mid-to-long term goals in light of the perspectiveof shareholders and investors.

The performance-linked portion, which accounts for 50% of stock compensation, isdetermined based on the evaluation of the achievement of targets for performance indicators(Cumulative OP, ROIC, TSR) in the mid-term management plan, and is determined within therange of 0% to 200%. The above indicators will be reviewed in a timely and appropriate manner
each time the rolling mid-term plan is set.
The evaluation ratio of each indicator is as follows.
Indicator

Evaluation Ratio

OP (cumulative 3 years)

50%

ROIC

40%

TSR

10%

The target values and coefficients for each indicator are as follows:
Target Values
OP(cumulative3 years)

ROICTSR

Coefficients

Cumulative total value for the period of the targeted

Varies in the range

rolling Mid-Term Plan (for 3 years in principle).

of 0〜2.0

Value after the period of the targeted rolling Mid-Term

Varies in the range

Plan (after 3 years in principle).

of 0〜2.0

Comparison against TOPIX including dividends of theVaries in the range

day before and the last day of the targeted rolling Mid-of 0〜2.0

Term PlanThe non-performance-linked portion, which accounts for 50% of stock compensation, shall bepaid as stock compensation to grant a fixed number of shares in order to further enhance thelink with shareholder value for a mid to long term.
(3) Forfeiture of compensation (Malus and clawback provision)
In the event that the Board of Directors resolves to implement a correction of financial results
due to a serious accounting error or misconduct or determines that there were serious,
inappropriate acts during their terms of office, the Board of Directors may restrict the payment
or claim the return of bonuses and Stock compensation after going through deliberation by theNomination, Compensation, and Governance Committee.
4. Guidelines for holding own shares
The Company will promote holding of its own shares by Directors and Executive Officers inorder to further raise their motivation to improve the Companyʼs business performance andincrease its share price from the viewpoint of shareholders.
5. Decision-making process
In order to enhance the independence, objectivity, and transparency of the details of theappointment and dismissal criteria for Directors and decision-making process for nominations,the Company established the Nomination and Compensation Committee on December 10, 2018as an advisory body of the Board of Directors, and it is chaired by and a majority of its members
are Independent External Directors. The Committee was then renamed the Nomination,Compensation, and Governance Committee on October 28, 2020, in order to further strengthen
the Companyʼs efforts on governance going forward. The Nomination, Compensation, andGovernance Committee, in principle, convenes no fewer than four (4) times a year, anddeliberates on individual compensation amounts and qualitative assessments to provide advice
and recommendations to the Board of Directors.

In order to adopt an objective viewpoint and specialized knowledge from outside the Company,
the Nomination, Compensation, and Governance Committee may seek advice from an external
consultant or other experts on the details of compensation levels and systems, taking into
consideration factors such as external data, the economic environment, industry trends, andmanagement conditions.

6. Engagement Policy
The Company shall promptly disclose the details of the Officer compensation plan to its
shareholders through the Annual Securities Report, Business Report, Corporate Governance
Report or the corporate website, etc. that will be prepared and disclosed in accordance withvarious laws and regulations. In addition, the Company will actively promote engagement withinstitutional investors.
--END--