NISSAN SHATAI CO., LTD.

The Group depends on Nissan Motor Co., Ltd., its parent company, for 98.2% of net sales, and shifts in Nissan's sales strategy or production system policies directly affect the Group's operating results. Production of the AD is scheduled to end in October 2025, and production of the NV200 Vanette is scheduled to end in March 2027; after the reduction in vehicle production, there are plans to utilize the Shonan Plant as a service parts base. In response, the Group is promoting the expansion of transactions outside the parent company group in the Specialty Vehicles business and Support business.

Amid a long-term declining trend in domestic automobile production, the Nissan Motor Group is proceeding with global plant restructuring to address excess production capacity, creating a risk that the Company's automotive-related business will compete with the parent group's domestic and overseas production bases. If the competitive relationship changes significantly due to changes in product strategy, this could affect the Company's financial position and operating results. The Company aims to differentiate itself through improved efficiency in mixed-flow production of frame and monocoque vehicles and through enhancement of core technologies.

The Company has inherent vulnerability to production stoppages in the event of supply interruptions or delays from suppliers caused by semiconductor supply tightness, geopolitical risks (such as instability in the Middle East), large-scale disasters, or cyberattacks. Concentration of orders with specific suppliers and the existence of a limited number of technology suppliers heighten this risk, and revisions to production plans or declines in the utilization rate could affect business performance. The Company addresses this through consideration and evaluation of alternative suppliers, appropriate inventory level management, and BCP formulation.

The majority of the Company's automobile sales by unit volume are for overseas markets, with major destinations concentrated in North America, Central and South America, and the Middle East. If sharp fluctuations in demand materialize due to transportation delays or stoppages caused by a closure of the Strait of Hormuz, or due to changes in trade policy such as tariffs affecting North America, this could have a significant impact on the Company's financial position and operating results. The Company intends to closely monitor the measures and developments undertaken by Nissan Motor.

In this once-in-a-century period of industry transformation centered on carbon neutrality and CASE/SDV, if the Company, which handles conventional automobile production, falls behind in responding to next-generation technologies, there is a risk of losing market competitiveness for its produced vehicles and facing intensified competition from companies entering from other industries. Next-generation powertrains and advanced technology response are challenges, and delays in addressing them could adversely affect the Company's financial position and operating results. The Company is responding by promoting the adoption of advanced safety equipment such as collision-mitigating brakes and by mapping technical know-how in preparation for product events.

With nearly all operations dependent on information systems, the risks of increasingly malicious cyberattacks, including ransomware, system downtime due to natural disasters or power outages, and leakage of confidential information or personal data are rising sharply. Should an incident occur, it could affect business performance and financial condition through business suspension, data loss, and reduced credibility. The Company is implementing measures ranging from hardware measures such as geographically distributed server placement to software measures, and is advancing BCP formulation.

Along with the adoption of new technologies, if product liability issues or large-scale product recalls occur, this could result in substantial losses as well as damage to brand image, significantly affecting the Company's financial position and operating results. The Company carries product liability insurance, but this may not cover all damages. The Company has established a Quality Committee chaired by the President and has built a system in which the development, production, and quality assurance departments work together to resolve issues at an early stage.

Retirement benefit expenses and obligations are calculated based on actuarial assumptions such as the discount rate and the long-term expected rate of return on pension assets, and there is a risk that asset values will fluctuate due to trends in domestic and overseas stock and bond markets. If actual results differ from the assumptions, the impact will be recognized over future periods and may affect expenses and obligations. The Company addresses this through periodic reviews of the appropriateness of the asset mix by the Corporate Pension Management Committee and diversified entrustment to multiple asset management institutions.

The Company holds many fixed assets, such as factory buildings and manufacturing equipment, and if asset values decline or the business environment deteriorates significantly such that investment recovery is no longer expected, impairment treatment may become necessary, adversely affecting the Company's financial position and operating results. Changes in plant operations resulting from the planned end of production of certain vehicles (the AD and NV200 Vanette) may affect asset valuations.

Violations of various laws and regulations, such as the Companies Act, the Financial Instruments and Exchange Act, the Road Vehicles Act, and the Antimonopoly Act, or actions contrary to social expectations, could result in legal penalties, litigation, or social sanctions, potentially leading to a decline in sales and deterioration of operating results. This risk is increasing year by year due to the growing number of laws and rules that must be observed and rising social expectations regarding corporate social responsibility. The Company has incorporated compliance into its code of conduct and medium-term management plan management items, including efforts to prevent the fading of awareness regarding the completed vehicle inspection issue, and is working to raise awareness among officers and employees.