MEISEI INDUSTRIAL : Notice Concerning Board of Directors’ Opinion on Shareholder Proposals

[Translation for reference only]

ENGLISH TRANSLATION OF JAPANESE-LANGUAGE DOCUMENT

This is an English translation of the original Japanese-language document and is provided for convenience only. In all cases, the Japanese-language original shall take precedence.

			May 10, 2023
C o m p a n y n a m e :	M e i s e i I n d u s t r i a l C o . , L t d .
R e p r e s e n t a t i v e :	Toshiteru Otani, Representative
		Director, Chairman and CEO
( T S E P r i m e M a r k e t , C o d e 1 9 7 6 )
		Susumu	Yamamoto, Executive
C o n t	a c t :	Officer,	General Manager of
		Finance Division
( T E L	+ 8 1 - 6 - 6 4 4 7 - 0 2 7 5 )

Notice Concerning Board of Directors' Opinion on Shareholder Proposals

Meisei Industrial Co., Ltd. announced today that it has been informed in writing by Nippon Active Value Fund plc ("Proposing Shareholder") of the proposals ("Shareholder Proposals") it plans to make at the 81st Annual General Meeting of Shareholders ("General Meeting of Shareholders") to be held on June 22, 2023, and that Meisei Industrial's Board of Directors has resolved at its meeting held today to oppose the said Shareholder Proposals, as described below.

Ⅰ． Details of the Shareholder Proposals

1. Agenda

1. Approval of Remuneration Amount for Restricted Stock-based Compensation Plan
2. Stock Buyback
3. Amendments to the Articles of Incorporation Regarding the Number of Outside Directors

2. Outline of Proposals and Reasons for Proposals

An outline of the proposals and reasons for the proposals are as described in the attachment entitled "Details of the Shareholder Proposals."

This attachment is a copy of the original text of the relevant sections of the Shareholder Proposals submitted by the Proposing Shareholder, except for formal adjustments.

II. Meisei Industries Board of Directors' Opinion on Shareholder Proposals

1. Approval of Remuneration Amount for Restricted Stock-based Compensation Plan

1. Opinion of the Board of Directors

The Board of Directors opposes this Shareholder Proposal.

(2) Reasons for Dissent

The Company's basic policy on remuneration for its directors (excluding directors who are Audit & Supervisory Committee members and outside directors; the same applies hereinafter) is to maintain a remuneration system that enables the Company to appoint and retain talented individuals who can put its management philosophy into practice and fully functions as an incentive to continuously improve its corporate value, while promoting the sharing of value with shareholders. The Company determines an appropriate level of remuneration for directors in light of their respective responsibilities.

Based on this basic policy and the resolution of a general meeting of shareholders, remuneration for the Company directors currently consists of a base cash salary (fixed compensation), bonuses (performance-based compensation), and a stock-based compensation plan (non-monetary compensation). In fiscal 2021, the ratio of each type of compensation, which was determined in reference to objective data from external organizations and in light of the scale of the Company's operations and other factors, was approximately 60% for the base salary (fixed compensation), 30% for bonuses (performance-based compensation), and 10% for stock-based compensation.

Among these, the base salary (fixed compensation) is determined by the Board of Directors after taking into consideration the nature and contribution of the duties performed as well as the Company's situation. Its decision regarding remuneration is informed by the opinions of the Nomination and Remuneration Committee, the majority of whose members are independent directors. The total amount for all bonuses (performance-based compensation) is determined in accordance with the Company's internal regulations, using ordinary income, which the Company considers to be an appropriate indicator for evaluating its performance, as a quantitative performance indicator. The amounts for bonuses paid to individual directors are determined by the Board of Directors, taking into account the director's contribution to business performance and other factors, and in light of the opinions of the Nomination and

Remuneration Committee regarding decisions on remuneration.

Shareholders approved the introduction of a stock-based compensation plan using a trust at the 76th Annual General Meeting of Shareholders held on June 28, 2018. The plan is designed to create a stronger link between directors' remuneration and the Company's stock value. By sharing the same benefits and risks associated with stock price fluctuations that shareholders experience, directors have a greater motivation to boost the Company's performance over the medium to long term and increase its corporate value. Under the plan, a trust set up by the Company using funds which are separate from the maximum amount of remuneration set aside for directors (330 million yen a year, excluding employee salaries) acquires Company shares, which are then delivered to directors through the trust in a quantity equivalent to the number of points the Company has awarded them. After considering various factors, including the recommendations of the Nomination and Remuneration Committee, the Company decided to make directors who are Audit & Supervisory Committee members ineligible for performance-based compensation, including bonuses, because they are expected to audit the performance of duties by directors and to strengthen the Board of Directors ability to audit corporate management.

The Company believes that such a well-balanced remuneration system enables it to appoint and retain talented individuals who can put its management philosophy into practice and meet the expectations of a wide range of stakeholders, including shareholders. It also ensures appropriate incentives and value-sharing with shareholders, thereby leading to the continued enhancement of its corporate value.

The Shareholder Proposal, on the other hand, seeks to provide additional compensation that is separate from the above-mentioned compensation package under this remuneration system, which includes:

１．monetary compensation claims for the grant of up to a maximum of 437,500 shares of restricted stock to be provided to the Company's directors for an amount not exceeding 350 million yen per year, and

２．monetary compensation claims for the grant of up to a maximum of 87,500 shares of

restricted stock to be provided to the Company's directors who are Audit & Supervisory Committee members for an amount not exceeding 70 million yen per year.

The Company believes that this Shareholder Proposal would provide an excessive remuneration package that lacks any balance between the base salary (fixed compensation) and performance-based compensation, and that providing performance-based compensation to directors who are Audit & Supervisory Committee members would be inconsistent with the Company's current policy and stance described above.

For the above reasons, the Company's Board of Directors opposes the Shareholder Proposal.

2. Stock Buyback

1. Opinion of the Board of Directors
   The Board of Directors opposes this Shareholder Proposal.
2. Reasons for Dissent
   Since its founding in 1944, Meisei Industrial has consistently contributed to the effective

utilization of energy for more than 70 years through its core business involving thermal insulation work and technology. It has done this with a commitment to its three management principles, i.e., to create customers and secure their trust, contribute to society, and challenge toward the future. Today, efforts are being made on a global scale to stop global warming and promote the use of new energy sources that will replace fossil fuels, initiatives which have risen to the top of everyone's agenda in recent years.

Under the slogan "Challenge for a New Stage," the Company's Medium-Term Management Plan (FY2021 - FY2023) announced on May 7, 2021 focuses on strategies for sustained growth, including the development of construction methods and technologies that will pave the way to a carbon-free world. The Company is aggressively expanding into new fields that have an affinity with its existing businesses, and cultivating business areas that will be a new pillar of strength to augment the thermal insulation business. On top of that it is looking to M&As while making capital investments aimed at increasing production capacity and bolstering the

Company's operational foundation. The Company is also focusing on securing and developing human resources to beef up its sales capabilities and boost its corporate power through the use of digital technology. Through these efforts the Company plans to generate 55 billion yen in net sales and 4.6 billion yen in profit for the fiscal year ending March 31, 2024, the final year of the Medium-Term Management Plan. The Company has already recorded net sales of 55.8 billion yen and profit of 4.6 billion yen for the fiscal year ended March 31, 2023.

Besides that, since the Company sees ensuring a stable return of profits to shareholders while maintaining and strengthening its financial position as a key management initiative, it has consistently paid dividends regardless of business performance trends. As announced in the Notice of Changes in Dividend Policy dated April 25 of this year, the Company changed its basic policy. The Company previously would pay a stable dividend of 12 yen per share or a dividend at a payout ratio of about 30% in accordance with its business performance, whichever was higher. However, it now will pay a stable dividend of 20 yen per share or a dividend at a payout ratio of about 30% to 40% in accordance with its business performance, whichever is higher. The Company believes that this change will be acceptable to shareholders.

On twelve different occasions, from fiscal 2007 to fiscal 2021, the Company bought back stock, repurchasing 17,130,200 shares (25.8% of the total number of shares issued in fiscal 2007) for a total of approximately 6.54 billion yen and canceled 10 million shares during the same period. This was just one of the measures the Company implemented to enhance returns to shareholders and improve capital efficiency.

Although the Company fully recognizes the importance of capital policy, including the return of profits to shareholders and stock buybacks, it has determined that passing a resolution to repurchase a total of 4 billion yen of its own shares within one year, as put forth in the Shareholders Proposal to be submitted at the Annual General Meeting of Shareholders, would not be appropriate in light of the Company's current management strategy. This is because it could undermine the financial resources for its growth investments and lead to the deterioration of its financial position, which could thwart medium- to long-term growth and continued enhancement of its corporate value.

The Company will continue to conduct share buybacks in full consideration of its operating