NSK : Announces the Execution of a Joint Venture Agreement Accompanying Changes in a Consolidated Subsidiary and a Specified Subsidiary (Sub-subsidiary)

May 12, 2023

NSK Announces the Execution of a Joint Venture Agreement Accompanying Changes in a

Consolidated Subsidiary and a Specified Subsidiary (Sub-subsidiary)

Tokyo, May 12, 2023 - NSK Ltd. (TSE: 6471, herein after referred to as "NSK") has today entered into a joint venture agreement ("Joint Venture Agreement") with Japan Industrial Solutions III Investment Limited Partnership ("JIS"). It is agreed i) NSK Steering & Control, Inc. ("NS&C"), a consolidated subsidiary which controls NSK's global steering business, will issue class shares equivalent to 50.1% of voting rights of NS&C by way of third-party allotment ("Third-Party Allotment") to JIS, ii) NS&C will distribute special dividend to NSK prior to the Third-Party Allotment (the series of transactions including such share issuance and distribution of special dividend are hereinafter referred to as the "Transaction") and iii) JIS and NSK will jointly operate NS&C. As a result of the Transaction, NS&C and NSK Steering Systems Co., Ltd. ("NSS"), a subsidiary of NS&C and a specified subsidiary /sub-subsidiary of NSK, will become equity-method affiliated companies.

1. Background and Purpose

The automotive industry is currently facing major transformation. In addition, supply chain disruptions triggered by Covid-19 outbreak, semiconductor shortages, geopolitical risks including the Ukraine situation, and global inflation have added to the increasingly challenging business environment. In this environment, as announced in the Mid-Term Management Plan 2026 ("MTP2026") dated May 13, 2022, NSK has initiated business structural reforms to enhance the automotive steering business; and at the same time, NSK has been pursuing alliance discussions with external partners. As a result, NSK has decided today to enter into the Joint Venture Agreement with JIS regarding NS&C.

JIS has extensive experience and expertise in investing and providing managerial support in a wide range of industries, including the automotive industry, and possesses knowledge and network of information based on its track record and experience. NSK has come to a conclusion that inviting JIS as the partner to the steering business is important amid an increasingly uncertain business environment, with an aim to further progress with measures to improve the steering business as quickly as possible. Specifically, NSK will work with JIS to consider a variety of measures, including the following.

• Further structural reforms to improve profitability
• Promote independent operation (review governance structure and processes)
• Explore opportunities for alliances with strategic partners
• Strengthen monitoring system

2. Outline of the Joint Venture Agreement

NS&C will issue 10,041 class shares by way of third-party allotment, all of which will be subscribed by JIS for 20 billion yen. Prior to the Third-Party Allotment, NS&C plans to distribute special dividend to NSK. As a result of the Transaction, the ownership structure of voting rights NS&C will be as follows. NSK currently plans to implement the aforementioned structure, however, in an event that the structure of the Transaction has a significant impact on NSK's financial results due to material changes in external environment, NSK may choose to take the alternative scheme where NSK will subscribe the class shares issued by NS&C and transfer all of which to JIS, after obtaining the consent from JIS. (The shareholder composition and shareholding ratios will remain unchanged in the event of a change in scheme)

NSK

100.0%

NS&C

100.0%

NSS

NSK

JIS

49.9% 50.1%

NS&C

100.0%

NSS

As a result of this transaction, NS&C will become an affiliate of NSK accounted by equity method. NSK will continue to support NS&C's sustainable growth and enhancement of corporate value as a shareholder. In addition, NSK may acquire the class shares subscribed by JIS in case certain conditions are fulfilled.

3. Outline of the relevant Subsidiary/Specified Subsidiary (Sub-subsidiary)

(1) Outline of the relevant Subsidiary

(1)	Company name	NSK Steering & Control, Inc.
(2)	Head office	1-6-3 Osaki, Shinagawa-ku, Tokyo
(3)	Representative	Narihito Otake
		Representative Director and President
(4)	Description of business	Sales, research, and development of automotive steering products.
		Manufacturing, sales, research, and development of automotive
		electronic components and software.
(5)	Capital	200 million yen
	(As of May 12, 2023)
(6)	Date established	September 30, 2010
(7)	Major shareholders	NSK Ltd. 100%
	and ownership
	(as of May 12, 2023)
(8)	Relationship between	Capital	NSK owns 100% of the outstanding shares of this
	NSK and the	relationship	subsidiary.
	subsidiary
	Personal	NSK's executive officers serve as directors of the
		relationship	subsidiary.
		Business	The subsidiary manufactures and sells products to
		relations	NSK and NSK supplies parts and services to the
			subsidiary.
		Related	The subsidiary is a consolidated subsidiary of NSK
		Party Status	and falls under the category of a related party.
(9)	Actual results of the	Net sales	4,100 million yen*
	subsidiary for the fiscal
	year ended March 31,
	2022

*The figures are the financial position and operating results before NS&C took over the steering business from NSK on April 1, 2023.

(2) Outline of the relevant Specified Subsidiary (Sub-subsidiary)

(1)	Company name	NSK Steering Systems Co.
(2)	Head office	1-6-3 Osaki, Shinagawa-ku, Tokyo
(3)	Representative	Katsumi Kobayashi
		Representative Director and President
(4)	Description of business	Manufacturing of automotive components
(5)	Capital	7,500 million yen (As of May 12, 2023)
(6)	Date established	February 21, 2001
(7)	Major shareholders	NSK Steering & Control, Inc. 100%.(As of May 12, 2023)
	and ownership
(8)	Relationship between	Capital	NSK indirectly owns 100% of the outstanding
	NSK and the	relationship	shares of this subsidiary.
	subsidiary
	Personal	NSK's executive officers serve as directors of the
		relationship	subsidiary.
		Business	NSK sells the products manufactured by the
		relations	subsidiary and provides services to the subsidiary.
		Related	The subsidiary is a consolidated subsidiary of NSK
		Party Status	and falls under the category of a related party.

1. Financial position and operating results of the subsidiary for the past three years (million JPY)

Fiscal year end	March 31, 2021	March 31, 2022	March 31, 2023
Net assets	16,549	15,431	14,087
Total assets	30,458	31,028	29,021
Net assets per share	110,329.32 yen	102,878.67 yen	93,915.98 yen
Net sales	48,792	42,031	47,106
Operating income	695	-881	-1,290
Ordinary income	639	-940	-1,331
Net income Attributable to	434	-682	-1,344
Owners of the Parent
Net income per share	2,899.21 yen	-4,550.65 yen	-8,962.69 yen
Dividend per share	2,900.00 yen	－	－

4. Overview of the Underwriters of the Class Shares

(1)	Company name	Japan Industrial Solutions III Investment Limited Partnership
(2)	Head office	2-2-2 Marunouchi, Chiyoda-ku, Tokyo
(3)	Grounds, etc. for	Limited Partnership Act for Investment
	incorporation
(4)	Purpose of formation	Acquisition, etc. of securities
(5)	Partnership	September 30, 2021
	formation date
(6)	Overview of limited	Development Bank of Japan Inc.
	liability partners	Mizuho Bank, Ltd.
		Sumitomo Mitsui Banking Corporation
		MUFG Bank, Ltd.
(7)	Outline of operating	Name	Japan Industrial Solutions, Inc.
	partner (Unlimited
	Location	2-2-2 Marunouchi, Chiyoda-ku, Tokyo
	liability partner)
	(General Partner)	Name and title	Yuichi Hiromoto
		of	President & CEO
		representative
		Description of	Investment business etc.
		business
		Capital stock	100 million yen
(8)	Relationship of NSK	Relationship	There is no capital, personal, or transactional
	with the said fund	between NSK	relationships between NSK and the said fund
	and the operating	and the said
	partner	fund
		Relationship	There is no capital, personal, or transactional
		between NSK	relationships between NSK and the operating
		and the	partner
		operating
		partner