Nissan Shatai : Corporate Governance Report_March 25, 2024

Corporate Governance

Date of last revision: March 25, 2024

Nissan Shatai Co., Ltd.

President: Haruhiko Yoshimura

Inquiries: Tel. [phone]

Code No.: 7222

https://www.nissan-shatai.co.jp

Details of Nissan Shatai's corporate governance policies and procedures are set out below.

I. Fundamental Corporate Governance Policies and Basic Information on Capital Structure, Corporate Attributes, and Other Matters

1. Fundamental Policies

We have clarified the management's responsibility to provide explanations and are carrying out proper and timely disclosure of information to shareholders and other stakeholders. Furthermore, to continually enhance corporate value, we are ensuring proper execution of business operations by establishing internal control systems, and further enhancing our corporate governance.

Reasons for not taking actions in line with principles of the Corporate Governance Code (Updated)

Supplementary Principle 2-4-1 Ensuring diversity in the promotion, etc. of core human resources

Regarding employees with a foreign nationality and mid-career hires, please refer to the content described in [Disclosure based on principles of the Corporate Governance Code] → [Supplementary Principle 2-4-1 Ensuring diversity in the promotion, etc. of core human resources] → "(ii) Voluntary and measurable goals and their status."

Supplementary Principle 4-1-3 - Succession plan for the Chief Executive Officer

The policy for the appointment of the next Chief Executive Officer is to select an individual who has an extensive knowledge of the automobile industry and the ability to bring about change, translate words into actions, and other characteristics required of a manager. The Chief Executive Officer selects candidates and the Board of Directors makes a decision upon deliberation based on the discussions and advice of the Nominations and Remuneration Committee.

Principle 4-11 - Preconditions for Board of Directors and Board of Statutory Auditors effectiveness

Nissan Shatai has six directors. Four directors are internal directors, who are individuals with specialized knowledge about their respective areas of responsibility, including experience with overseas operations, and experience of company management. Two directors are independent outside directors who have extensive knowledge and experience as senior executives outside the automobile industry. We believe that this composition is suitable with respect to achieving both the diversity and proper size ofthe Board of Directors. Nissan Shatai believes that measures concerning gender diversity should be further studied.

Disclosure based on principles of the Corporate Governance Code (Updated)

Principle 1-4 - Investments other than for pure investment purposes

Although Nissan Shatai holds no listed stocks as investments other than for pure investment purposes, Nissan Shatai examines each individual stock considering management policies, management strategies, management plans and holding risks such as social conditions, in addition to the necessity of regional contributions and the status of transactions with the company. The President approves the appropriateness of continuing to hold those stocks and reports the decision to the Board of Directors. Furthermore, when exercising voting rights pertaining to cross-shareholdings, Nissan Shatai judges whether to support or oppose a proposal in light of the purpose of holding the stocks and after sufficiently considering the management policies and strategies of the company.

Principle 1-7 - Related party transactions

We use procedures prescribed in the Companies Act for transactions with one or more directors having a conflict of interests. Transactions of automobiles with the parent company are performed according to a manufacturing service agreement and the prices for automobile are determined by negotiations that take into account the total cost of manufacturing. The Business Monitoring Committee, which consists of independent outside directors and independent outside statutory auditors, discuss the process and contents of these negotiations and submit their advice to the Board of Directors. Nissan Shatai's Board of Directors confirms the process and contents of these negotiations taking account of the advice of the Business Monitoring Committee.

Supplementary Principle 2-4-1 - Ensuring diversity in the promotion, etc. of core human resources

(i) Polices

Vibrant utilization of people with a wide range of values makes it possible to leverage corporate capabilities to the fullest extent and maintain sustainable growth. Nissan Shatai and Nissan Shatai Kyushu have advocated "promoting diversity" as an important item in our Medium-term Management Plan since fiscal 2015. With a basic policy of "being a company where all workers can fully utilize their skills," we continuously implement actions to deliver even better results by supporting a healthy lifestyle for all employees, not only those involved in childcare and nursing care.

In the 2023-2027 Medium-term Management Plan, we broaden the scope to "diversity, equity, and inclusion" and intend to put effort into activities that advance fairness and acceptability, not only diversity. In addition to "the active participation of women" and "assisting in realization of childcare and nursing care along with work," we aim to build a corporate culture that is comfortable for all employees with greater acceptance of diversity values and views, including age, nationality.

(ii) Voluntary and measurable goals and their status  Promoting active participation of women

Nissan Shatai and Nissan Shatai Kyushu are earnestly developing a culture and designing systems on behalf of promoting active participation of women. We seek to expand the percentage of women in new university graduate hires and improve thework environment to facilitate continuation of a career. We also encourage cultivation based on a career plan with the goal of promoting selection in managerial jobs. Roughly 5% of managers were women as of end-March 2023, and we are working to promote empowerment of more women with a goal of 10% in the future.

In the 2023-2027 Medium-term Management Plan, we intend to formulate and implement an initiative plan for acquisition of " Eruboshi " certification. Additionally, we will strengthen corporate PR for a wider segment among new university graduates and activities that lead to employment aimed at bolstering career hires and selection of an even wide range of human resources.

Item	Initiative content	Fiscal 2022 goals	Fiscal 2022 results
Female manager ratio	Implement career discussions	4.7％ (nine people)	4.2% (eight people)
Paternity leave usage ratio	Implement briefing by managers and supervisors Raise awareness of the program via the internal newsletter	－	52.4%
Paid holiday usage ratio	Provide monthly result updates to the manager and implement usage promotions	Average 14 days company-wide	Average 17.5 days company-wide



Utilization of diverse human resources

Nissan Shatai Group does not set specific numerical goals for managerial positions given to foreign employees and mid-career employees but instead appoints managers based on the concept of " making assignments and appointments of the right person for the right job in accordance with personal capabilities and characteristics," rather than relying on hiring categories or attributes.

In hiring people with disabilities, Nissan Shatai Group advocates maintaining employment at a level above the legally required percentage and actively implementing hiring activities. Besides hiring new university graduates, it participates in company introductions sponsored by Hello Work and hires a few mid-career people annually. Since fiscal 2021, it launched the Sunshine team that prepares the workplace environment and is contributing to development of a pleasant workplace.

Items	Initiative content	Fiscal 2022 goal	Fiscal 2022 result
Percentage of employees with disabilities (consolidated)	Hire new graduate and mid-career hiring "Sunshine" launch	2.50%	2.66%

(iii) Human Resources Development Policy and Implementation Status  Human Resource Development

Nissan Shatai Group arranges training operations for individuals to attend classes in accordance with their growth. These training activities range from basicknowledge needed in the work world to cultivation of management human resources with broad understanding.

Furthermore, with the aim of fostering a culture of constant improvement, Nissan Shatai Group strongly promotes improvements in product and work process quality via QC circle activities in skilled workplaces and also conducts activities that visualize and resolve issues and Quality Function Deployment (QFD) activities that utilize a quality function deployment methodology in administrative and technology workplaces. It puts efforts into skill education to enhance work efficiency in which employees prepare their own program utilizing management and facilitation capabilities required for managerial positions and digital tools.

The personnel evaluation system promotes employee and company growth by basing compensation on employee performance and contributions. Furthermore, the internal awards program that recognizes employee efforts and results aims to boost enthusiasm and motivation.

(iv) Company environment improvement policy and implementation status

•  Reinforcement of systems and preparation of the environment

  In addition to existing flex work, Short working hours system, and promotion of using annual paid holidays, we introduced family support leave that can be applied to childcare, nursing care, and other situations, and teleworking system, and we are also reinforcing systems that support the joint realization of work and childcare/nursing care. We are also promoting the use of assistance equipment that lightens the load of picking up heavy items and automation to facilitate the engagement of women in skilled workplaces.

  We are reinforcing the environment to enable the continuation of careers and realization of performance through childbirth and childcare and continuously implementing education to foster an internal culture that makes it easy for men to participate in childcare too. In April 2019, we opened a preschool within the company called "Kids' Caravan" and created an environment where it is easy to work during the childcare period.

  Thanks to these initiatives, we bolstered our systems for childcare and nursing care compared to when we started and significantly enhanced employees ' understanding of diversity.

  (Results of an internal questionnaire on childcare and nursing care programs)

  Fiscal 2018 questionnaire	Fiscal 2022 questionnaire
  Understanding and affirmative response rate 59％	Understanding and affirmative response rate 76％

•  Platinum Kurumin

  Nissan Shatai was the first company with 300 or more employees in Hiratsuka to receive certification based on Article 13 of the Act on Advancement of Measures to Support Raising Next-Generation Children, which is commonly known as " Kurumin " certification, in May 2017. Additionally, since July 2020, we continuously acquired "Platinum Kurumin" certification available to "Kurumin" certified companies that conduct even more advanced initiatives.

•  Health management

With a corporate policy that "Only people with sound mind and body are able to work with vigor, peace of mind, and integrity," Nissan Shatai and Nissan Shatai Kyushu arrange operations with industrial physicians, public health nurses, medical nurses, counselors, and others, and cooperate with external specialty agencies, and address health maintenance and enhancement activities as organizational capabilities.

Nissan Shatai Group provides health guidance based on health diagnosis results and conducts food seminars and other events at preventing lifestyle diseases. It also conducts mental health measures such as workplace improvement activities for high stress workplaces based on stress check results and seminars. These data-based efforts have successfully clarified issues and supported activities to prevent mental and physical difficulties ahead of time. It implements the PDCA cycle annually for these activities to review results and intends to deepen and continue activities. Thanks to these efforts, it received certification as a "Health and Productivity Management Organization - White 500" from METI and the Nippon Kenko Kaigi since 2019.



Employee engagement

Nissan Shatai Group implements workplace improvement activities that address workplace issues and requests. It has prioritized items from the many requests regarding heat-related measures, toilets, changing rooms, welfare buildings, common areas, and dormitories for single people and proceeded with improvements. It intends to continue efforts through close communication with employees and confirmation of requests. Furthermore, Nissan Shatai Group prepares and distributes a pamphlet that covers company topics, connections to SDGs, contributions to local society, awards received at external events, and other results that reflect employee efforts and are a source of pride. It plans to continue preparing the pamphlet to encourage feelings of happiness and pride regarding work at the group by enabling all employees to share and understand these company initiatives.

Principle 2-6 - Roles of corporate pension funds as asset owners

Nissan Shatai outsources the specific management of assets in the corporate pension funds to several asset management firms and the company's accounting section monitors the performance of these firms. There is a Corporate Pension Fund Operations Oversight Committee that includes labor union representation and managers at Nissan Shatai involved with human resources, labor relations, and finance and accounting. On a regular basis, this committee receives reports on the results of monitoring of asset management performance, confirms suitability of the composition of assets, asset management performance and other matters, evaluates the asset management firms and performs other tasks on a regular basis. The objectives are to prevent conflicts of interest between pension funds beneficiaries and Nissan Shatai and to ensure the soundness of pension funds asset management. In addition, to ensure that this framework functions properly, people with the necessary experience and characteristics are assigned to these activities and there are training programs for these people.

Principle 3-1 - Full disclosure

(i) Company objectives (e.g., business principles), business strategies and business plans

This information is in the Management Philosophy and Medium-term Management Plan section of the Nissan Shatai website.http://www.nissan-shatai.co.jp/EN/COMPANY/PHILOSOPHY/http://www.nissan-shatai.co.jp/EN/IR/MANAGEMENT/PLAN/

(ii) Basic views and guidelines on corporate governance based on each of the principles of the Code

This information is stated in "I. 1. Fundamental Policies" of the Nissan Shatai Corporate Governance Report and in "Initiatives to Comply with the Code" in the "For Investors" section of the Nissan Shatai website.http://www.nissan-shatai.co.jp/EN/IR/GOVERNANCE/CODE/index.html

(iii) Board policies and procedures in determining the remuneration of the senior management and directors

The policy and procedure for determining remuneration for directors are explained in "II. 1 Directors' Remuneration" in the Corporate Governance Report.

Just as for directors, remuneration for senior management is determined each year based on results of operations and the performance of each individual.

(iv) Policies and procedures for the Board of Directors to appointment/dismissal senior management and to nominate director and statutory auditor candidates The most important roles of the Board of Directors are discussing and reaching decisions by objectively and multilaterally examining items submitted regarding practicality, suitability, risk and other items, based on an exchange of opinions from many viewpoints that use their experience, knowledge, specialized skills and other resources of directors and statutory auditors at meetings, and supervising and auditing in a suitable and timely manner the execution of these decisions. Suitable candidates for directors and statutory auditors are submitted at shareholders meetings based on the discussions and advice of the Nominations and Remuneration Committee in order to make it possible to perform these roles.

Individuals with deep understanding of our business and our operating environment and, as leaders of the organization, capable and experienced in adequately and with speed implementing decisions taken by the Board of Directors will be appointed. A senior management is terminated in the event that the behavior of an individual is improper or inappropriate for the leader of an organization or that an individual is determined to be unsuitable to serve as the leader of an organization.

(v) Explanation of an appointment/dismissal or nomination when the Board of Directors, according to the policies explained in the preceding item (iv), appoints or dismisses a senior management or nominates a director or statutory auditor Director and statutory auditor candidates are nominated according to the policies described in "Principle 3-1 - Full disclosure" item (iv).

Explanations of specific nominations are provided in Reference Materials for General Shareholder Meeting.

Senior managements are appointed and dismissed according to the policies explained in "Principle 3-1 - Full disclosure" item (iv).

Supplementary Principle 3-1-3 - Sustainability initiatives (i) Sustainability initiatives

Nissan Shatai and Nissan Shatai Kyushu approach the environment, society, employees, and respect for human rights as management issues from the standpoint of sustainability, and one of the pillars of our 2023-2027 Medium-term Management Plan advocates establishment of a "sustainable corporate foundation." The "sustainable corporate foundation" mainly involves promotion of initiatives aimed at realizing carbon neutrality in 2050 and also company climate in which anyone can work with motivation and peace of mind.

We report initiatives related to sustainability to the Board of Directors at appropriate times.

We establish a Risk Management Committee with the Director & President as the Committee Chair to promote risk management, discover and identify matters that interfere with business continuity and risks that threaten stakeholder safety and reassurance, and review and implement necessary measures. These processes aim to prevent risks ahead of time and minimize damages and prevent reoccurrence if they occur. We identify and assess risks based on the frequency of occurrence and scale of damages and manage serious risks via the Risk Management Committee.

(ii) Investment in human capital and intellectual property, etc. [Human Capital]

Employees are the source of our corporate growth and advancements. Nissan Shatai Group hence sees employees as "human resources and assets" rather than "personnel." We believe the employees working at our company are the most vital assets and strive to cultivate and educate human resources with the aim of being a company that can co-exist with society, the environment, and nature.

Nissan Shatai Group discusses important points related to human capital in a meeting comprised of the President and Senior Vice Presidents and reaches decisions on proposals that should be submitted to the Executive Comittee. We set KPI related to diversity, active participation of women, long-hour labor, and leave usage, confirm progress, and report to the Board of Directors as appropriate. Regarding risk and responses related to impact of resource shortages on work, the Risk Management Committee discusses these topics and reports the results to the Board of Directors.

[Intellectual Property]

In the automobile industry, technological progress involving vehicle safety, environmental protection, convenience and other items is accelerating, and there is a strong demand for technological capabilities that can reliably respond to the next generation of vehicles. Additionally, many of our vehicles have a long life cycle, and we recognize that next-generation power trains and implementation of advanced technologies are an urgent necessity. Amidst this environment, we have set "Evolution and deepening of uniqueness" as one of the important issues for the 2023-2027 medium-term management plan, and we will continue to explore innovation, efficiency and flexibility through technologies and ideas brimming with uniqueness. Furthermore, we will tackle the "Creation of appealing products" and aim to meet the diversifying needs of our customers in a timely manner and create products and value which excite our customers. For this reason, we believe that it is essential to establish new technologies and new construction methods to solve problems such as the development of fundamental technologies for the future and responding to next-generation vehicles,and a technical committee has been established to encourage active proposals from within Nissan Shatai and to make necessary investments.

(iii) TCFD or equivalent frameworks

In environment-related initiatives, based on recommendations by the Task Force on Climate-Related Financial Disclosures (TCFD), we intend to build governance and risk management that address climate change and review risks and opportunities as well as responses in accordance with the climate change scenario. We plan to advance responses recognized risks and opportunities and promote initiatives to realize a "sustainable corporate foundation."

We formed an Environment Committee and are promoting organizational activities to reduce the environmental burden by formulating environment-related policies, targets, and goals, confirming progress with the environmental management plans of each department, and discussing revisions to the environment management system. The Director & Senior Vice President, who is responsible for the overall supervision of environment-related activities, chairs the Environment Committee and periodically reports content from the Environment Committee at the Executive Committee chaired by the Director & President. The Director & Senior Vice President reports discussions and decision items from the Environment Committee at the Board of Directors.

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For our review of climate change risks and opportunities that affect business, we envisioned a society based on the IEA's4℃ and 2℃ scenarios and the IPCC's 1.5℃ special report. The following table presents recognized risks and opportunities. We also intend to cautiously review impact on the company's financial conditions.

Category	Risks and opportunities
Risks	Policy and legal regulations	Impact of technology development and production costs to comply with even stricter car fuel economy and emission regulations
Increase in energy costs due to deployment and expansion of a carbon tax
Market change	Decline in new vehicle sales volume due to change in consumer sentiment such as increased use of public transportation, bicycles, and mobility services
Price upturn	Upturn in raw material prices accompanying increase in demand related environmental responses
Abnormal weather	Plant disaster accompanying abnormal weather related to hotter temperatures (suspended operations, restoration investments, etc.)
Severing of the supply chain by abnormal weather related to hotter temperatures
Opportunities	Increase in demand driven by development of CASE-related products
Reduction of energy costs through expansion of investments in energy-saving measures

IEA: International Energy Agency

IPCC: Intergovernmental Panel on Climate Change

CASE: Connected, Autonomous, Shared & Services, Electric

In the 2023-2027 Medium-term Management Plan, Nissan Shatai Group intends to implement the following activities aimed at minimizing recognized climate change risks and maximizing opportunities.

■ Realization of technology that improves the global environment via carbon neutrality and responds to customer needs

◇Rigorous utilization of existing technology items ・ Promotion of LEDs for all lighting, renewals to energy-saving facilities, further visualization of energy consumption, and promotion of eco-friendly offices

◇Deployment of clean energy ・ Deployment of solar power and other renewable energy ◇Development of technologies needed for responses to CASE and other trends ◇Realization of quality that exceeds customer expectations

◇Response to legal and social requirements

■ Preparation for disasters and a business continuity plan (BCP)

◇Preparation for serious disasters

◇Response to parts supply issues

Nissan Shatai Group intends to review issues and responses and proceed with actions in addressing risks related to climate change by operating the Risk Management Committee, Environment Committee, and Environment Management System.

Nissan Shatai Group set the following 2030 goals premised on attaining carbon neutrality in 2050.

Reduction rate for CO2 emissions per unit produced at Nissan Shatai and Nissan Shatai Kyushu (compared to fiscal 2019)

・Nissan Shatai 10% reduction

・Nissan Shatai Kyushu 24% reduction

The following table presents GHG emissions in Scope 1 and 2 at Nissan Shatai and Nissan Shatai Kyushu.

■ Fiscal 2022 GHG total emissions(corporate carbon footprint)

Unit: t-CO2

Scope 1 ：17,013

Scope 2 ：29,527

Scope 1 + 2 ：46,540

Nissan Shatai Co., Ltd. ：20,915

Nissan Shatai Kyushu Co., Ltd. ：25,625

*Nissan Shatai's covered locations: Head Office and Shonan Plant, Techno Center, and Hadano Office

(ⅳ) Respect for human rights

 Human rights philosophy

Nissan Shatai and Nissan Shatai Kyushu considers the strict adherence to corporate rules and applicable laws and practices fundamental to its business activity. The human rights of all stakeholders must be respected and all Nissan Shatai and Nissan Shatai Kyushu employees must act while upholding the highest ethical standards. We do not condone discrimination on the basis of race, nationality, gender, religion, disability, age, place of origin, gender identity, sexual orientation or any other characteristic nor infringement on human rights in the supply chain, such as forced labor and child labor.

 Initiatives related to human rights

Nissan Shatai and Nissan Shatai Kyushu conduct initiatives related to human rights based on the following code of conduct and guidelines to ensure respect for the human rights of all stakeholders as a member of the Nissan Group.

⚫ Global Code of Conducthttps://www.nissan-shatai.co.jp/EN/ENVIRONMENT/HUMANRIGHTS/PDF/NISSAN_GCC_E_2308.pdf ⚫ Corporate Social Responsibility Guidelines for Suppliershttps://www.nissan-shatai.co.jp/EN/ENVIRONMENT/HUMANRIGHTS/PDF/CSR_Guidelines_Suppliers_e.pdf

Supplementary Principle 4-1-1 - Summary of scope of delegations to senior executive by the Board of Directors

The Board of Directors makes decisions about items that must be made by the Board of Directors in accordance with laws and regulations and about important items concerning business operations as stipulated in the Board of Directors Rules. For other items, the internal regulations (delegation of authority) designate individuals with the authority to make decisions and specify the decision-making process. The goals are increasing transparency of the decision-making process and the efficiency of business operations.

Principle 4-9 - Independence standards and qualifications for independent outside directors

Candidates for independent outside directors are nominated and submitted to a general shareholders' meeting after discussions and examinations based on requirements for outside directors of the Companies Act and standards for independent outside directors of the Tokyo Stock Exchange.

Supplementary Principle 4-10-1 - Authority and role of the Nomination Committee and Remuneration Committee

Same as explained in "II. Management Organization for Operational Decision-Making, Execution, and Supervision, and Other Corporate Governance Structures - 2. Functions Including Business Execution, Audit, Supervision, Appointments, and Remuneration Determination (Outline of Current Corporate Governance Systems)" of the Nissan Shatai Corporate Governance Report.

Supplementary Principle 4-11-1 - Ensuring the effectiveness of the Board of Directors