FY2017 Shareholder Relations Meeting · Nakano 4-chome, Nakano-ku, Tokyo: March 31: First Section of the Tokyo Stock Exchange: ¥13,450,751,434: 116,200,694 shares: 22,964 (As of

FY2017 Shareholder Relations Meeting

Kurita Water Industries Ltd.

F e b r u a r y - M a r c h 2 0 1 8

(Securities code: 6370)

Overview and Priority Measures of the Kurita GroupⅠ

Ⅱ

P 1 - 9

P10-22

P23

Corporate Governance Initiatives of Kurita

(Reference) Efforts for Dialogue with Shareholders

I. Overview and Priority Measures of the Kurita Group

Company Profile and Shareholder Composition

1

Other

Domestic Firms

7.6%

Securities

Firms 1.7%

Financial

Institutions

30.7%

Individuals

10.2%

Foreigners

46.6%

Treasury Stock 3.1%

Company Name

Representative

Date of Establishment

Head Office Location

Fiscal year end

Stock Exchange Listing

Paid-in Capital

Issued Common Stock

Number of Shareholders

Shareholder Composition (Top 10)

Shareholding Ratio

Corporate Data

Note: In addition to the above, the company has 3,591 thousand shares of treasury stock.

Japan Trustee Services Bank, Ltd. (Trust Account) includes 333 thousand shares of treasury stock for performance-linked stock remuneration for directors.

: Kurita Water Industries Ltd.

: Michiya Kadota, President

: July 13, 1949

: Nakano Central Park East, 10-1,

Nakano 4-chome, Nakano-ku, Tokyo

: March 31

: First Section of the Tokyo Stock Exchange

: ¥13,450,751,434

: 116,200,694 shares

: 22,964 (As of September 30, 2017)

Ranking NameShareholdings

(Thousand shares)

Percentage of

total shares

issued

1 Japan Trustee Services Bank, Ltd. (Trust Account) 6,508 5.60%

2 Nippon Life Insurance Company 5,979 5.14%

3 The Master Trust Bank of Japan, Ltd. (Trust Account) 4,470 3.84%

4BNYMSANV AS AGENT/CLIENTS LUX UCITS NON

TREATY 12,894 2.49%

5 Japan Trustee Services Bank, Ltd. (Trust Account 9) 2,452 2.11%

6 Tokio Marine & Nichido Fire Insurance Co., Ltd. 2,155 1.85%

7 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 2,056 1.76%

8 Japan Trustee Services Bank, Ltd. (Trust Account 5) 2,043 1.75%

9 NORTHERN TRUST CO. (AVFC) RE SSD00 1,827 1.57%

10 BANK JULIUS BAER AND CO., LTD. 1,713 1.47%

(As of September 30,

2017)

(As of September 30, 2017)


Framework of “The Kurita 21st Century Vision”

2

Kurita Group Code of Conduct

Corporate

Philosophy

Corporate

Vision

Management

Guidelines

Core Values

Relationship with society and the global environment

Relationship with shareholders and investors

Relationship with customers and business partners

Relationship with employees

Study the properties of water, master them,

and we will create an environment in which

nature and man are in harmony

Becoming an advanced water and

environmental management company

(1) World’s Top-Class Water and Environment

Business

(2) Creation of New Business

(3) Technology-Driven Company

(4) Full Use of the Group’s Comprehensive Strength

(5) Enhanced Development of Human Resources

(6) Fulfillment of Social Responsibility

Fairness Transparency Integrity Safety Compatibility

The framework of “The 21st Century Vision” is scheduled

to be revised in April 2018.Note:


Strengthening of CSR Initiatives

3

CSR Policy (implemented on January 1, 2018)

Initiatives in FY2017Provide solutions to issues related to water and the environment, and fulfill responsibility for the

future

1. Provide highly safe services and products

2. Conduct fair business activities

3. Respect human rights

4. Solve issues related to water resources

5. Realize sustainable energy use

6. Reduce waste

7. Advance industrial production technologies

Establishment of CSR and Investor Relations

Department

Launch of E&S (Environmental & Social)

Committee

Positioning at core of next Medium-Term Management Plan

Stakeholder engagement

CustomersBusiness

PartnersEmployees

Shareholders

/Investors

Local

Communities

Evaluation of materiality

Board of Directors, E&S Committee,

Divisions, Group CompaniesC ADP


Kurita’s Business Domains

4

Manufacturing line

Cooling

tower

Water Treatment

Wastewater

Reclamation

Power generation

systemsAir conditioning

systems

Utilities

Wastewater

treatment

Manufacturing process

Pre-treatment

Soft water production

Pure water

production

■ Boiler, vaporizer

■ Condenser water treatment

Boiler Water Treatment Chemicals

Boiler

Wastewater

Reclamation Systems

Industrial water/ groundwater

Wastewater Treatment Chemicals

Wastewater

Treatment Systems

Cooling water treatment

Cooling Water

Treatment Chemicals

Refrigeration systems

Water Treatment

Facilities

Water Treatment

Ultrapure water production

Ultrapure Water

Production Systems

Industrial waste

Waterway and sewage

discharge

Process treatment

Process Treatment

Chemicals

From Factory Entrance to Exit


Status of Competition and Kurita’s Strengths

5

Nomura Micro Science

Ecolab（Nalco）

Miura

Hakuto

Kurita

Organo

Solenis Hitachi

Ovivo

Kobelco Eco -Solutions

Water Treatment Chemicals Water Treatment Facilities

Kemira

Buckman

Suez

Evoqua

A Company with a Good Balance of Two Businesses

27.7 34.5 31.8 34.5 45.3

91.5 94.9 98.9 97.8

99.0

58.8 60.0

83.7 81.9 90.7 178.1

189.4

214.4 214.2

235.0

0

120

240

03/2014 03/2015 03/2016 03/2017 03/2018Projection


Net Sales and Business Mix

6

51.8 54.4 60.6 62.6 65.4

8.1 8.3

6.3 6.4 6.6

31.6 32.2

32.0 28.8 27.0

91.5 94.9

98.9 97.8 99.0

0

50

100

03/2014 03/2015 03/2016 03/2017 03/2018Projection

Maintenance,

etc.

Tool cleaning

Ultrapure water supply

business

179.7

150.4154.9

182.6189.7

Service Business Sales in the Water

Treatment Facilities Segment

Service business

sales

(Billions of yen)

(Billions of yen)

Water treatment chemicals

Water treatment facilities (services)

Water treatment facilities (hardware)

The service business is achieving sustained growth.

Service business sales accounts for 81% of total sales (projection for the year ending

March 2018)


Priority Measures

7

Water Treatment Facilities

Water Treatment Chemicals

Domestic Overseas


Maintenance services

EPC

Overseas

Domestic

Overseas


Water Treatment Facilities


Maintenance services


EPC

Until March 2017 From April 2017

Business organizational reform1


Priority Measures

8

Business process reform

IoT / AI

Contract model

New technologies & new tools

Energy saving

Water conservation

Waste product

reduction

Stable utility operations

Existing technology and know-how

Provide value to customers and society

Increase efficiency of

manufacturing processes

Smart factories

Recycle and reuse of waste

products

Water risk management

Increase value offered2

Expanding the production system in Europe

Priority Measures

9

Expanding the water treatment business

using M&A

Seeking expansion in North America

Decided to acquire the paper and pulp process

treatment chemicals production base of Akzo Nobel

in France.

Aims to expand KEG’s paper and pulp process

treatment chemicals business and improve

profitability.

Developing the business base

Close cooperation within the Group

Use of alliances and M&A

Bolstering business in South Korea

Turned equity method affiliate Hansu

Co., Ltd. into a consolidated subsidiary

Expansion of the overseas business

foundations

3


II. Corporate Governance Initiatives of Kurita

Basic Concept and Basic Policies

10

Respect for the rights and position of stakeholders

and meeting their expectations

Purpose

Basic Concept Basic Policies (5 Items)

(1) Ensuring the rights and equality of shareholders

(2) Appropriate level of cooperation with stakeholders

other than shareholders

(3) Ensuring appropriate information disclosure and

transparency of information

(4) Duties of the Board of Directors and the Audit &

Supervisory Board, etc.

(5) Dialogue with shareholders and investors

Corporate Philosophy

Sustainable Growth and Medium- and Long-

term Enhancement of Corporate Value

Establishment of Corporate Governance

Transparent, fair, prompt and decisive decision-

making

Highly effective management supervision

CustomersBusiness

PartnersEmployees

Shareholders

/Investors

Local

Communities

Study the properties of water, master them, and we will create an environment in which nature and

man are in harmony

Policies (16 Items)

Review the Policies at least once a year or

when necessary.

Note: Criteria for Judging Independence were revised in FY2017.

Consultation


Corporate Governance System Chart

11

Board of Directors Accounting Auditor

Internal Auditing

Department

Operating

Divisions

E&S (Environmental & Social)

Committee, Investment

Committee & Various Other

Committees

General Meeting of Shareholders

Election &

Dismissal

Election &

Dismissal

Election &

Dismissal

AuditCooperation

Cooperation

CooperationAuditResolution,

Election &

Supervision

Discussion

& Report

Report

Instruction

Audit Report

Internal Audit

Accounting Audit & Internal Control Audit

Business

Operations

Company with the Audit & Supervisory Board

There are at least three directors on the Board of

Directors, of which two or more are external

directors. The inclusion of external directors is

meant to ensure the independence and objectivity

of the Board of Directors.

The Board of Directors consists of human

resources with high level of expertise in business

areas, corporate planning, finance, accounting,

legal affairs and technologies, etc.

Current Board of Directors

Number of directors 10

Number of directors

who are external

directors

2 (Designated as independent

officers)

Term of office 1 year

Current Audit & Supervisory Board

Number of members of the

Audit & Supervisory Board3

Number of external members

of the Audit & Supervisory

Board

2 (Designated as

independent officers)

Term of office 4 years

Discussion & Report

Nomination and

Remuneration

Advisory CouncilAdvisory

[Size and Structure of the Board of Directors]

President

Executive Committee

Audit & Supervisory Board

Members of the Audit &

Supervisory Board

Source of funds Use of funds(if small amount)

Use of funds(if large amount)


Capital Policy

12

Proactively invest funds in promising businesses and reduce assets.

Consider introducing capital efficiency indicators.

Operating cash flow

Reduce assetsShare buybacks

M&A

Capital

expenditures

Dividends

M&A

Capital

expenditures

Dividends

Utilize debt

Uses of Cash (policy)1


Capital Policy

13

Past ROE2

192.6 198.0 208.9 207.9

217.7 222.3 227.9 227.6 238.0

9.3 8.8

8.1

5.5 4.4 4.7

5.6 6.4

7.9

0.0

120.0

240.0

0

9

18

3/2010 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018Projection

Return on equity (ROE) Equity

Equity = Net assets - Non-controlling interest

For ROE, equity is calculated using the average from the beginning to the end of the period. The forecast value is shown for equity as of

March 31, 2018.

(%)(Billions of yen)

Notes: *

*

1822

2832 34 36 38 40 42 44 46 48 50 52

25.126.9 25.4

22.5

26.8 26.8 28.430.6

45.4

56.152.4

44.3

39.9

31.9

0

10

20

30

40

50

60

0

10

20

30

40

50

60

3/2005 3/2006 3/2007 3/2008 3/2009 3/2010 3/2011 3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018

Projection


Capital Policy

14

Dividend Policy3

(Yen) (%)

Dividend payout ratioDividend per share

Rough standard of dividend

payout ratio is the average of

30 to 50% over five years

Dividends are forecast to increase for the 14th consecutive year

3/2018

Projection


Overview of the Compensation System for Directors and Members of

the Audit & Supervisory Board

15

(1) Directors (excluding external directors)

(2) External directors, Members of the Audit & Supervisory Board

Contribution to

shareholding

scheme

Fixed compensationPerformance-linked

stock

compensation

Performance-

linked component

Fixed compensation

Contribution

to

shareholding

scheme

Paid at retirement

Evaluation indicatorEvaluation indicators- Common ⇒ Consolidated operating income

- President, General Manager of Corporate Planning Division, General Manager of Group

Administrative Division ⇒ ROE

- General Manager of Research and Development Division ⇒ Orders received for products

developed

- General Manager of Business Divisions, General Managers of Sales Divisions ⇒ Year-on-year

growth of consolidated sales of own division

- Profit attributable to

owners of parent


Evaluation of the Board of Directors

16

Implementation Method Evaluation Results

(Period Covered: January - December 2016)

Frequency

Method

Evaluation

Items

Once a year

Self evaluation

Discussion of written survey (with

respondents identified) and tabulated

results

1. Board of Directors roles and responsibilities

2. Collaboration with external directors and external members of the Audit & Supervisory Board

3. Board of Directors composition

4. Board of Directors operation

5. Contributions of individual directors and members of the Audit & Supervisory Board

6. Dialogue with shareholders

Average of self-evaluations generally good in all 6 items.

Of these, the evaluations of 2 and 5 are particularly high.

Meanwhile, the evaluations of 1, 4 and 6 were relatively low, and evaluations by external directors were particularly low.

Issues and Initiatives

Revision of corporate vision for contributing to long-term improvement of corporate value and establishment of specific targets concerning the environment and society.

Strengthening of evaluation system for increasing the quality of discussion of investments in the Board of Directors.

Clarification of themes and messages to be conveyed to shareholders.

The evaluation of the Board of Directors covering the period from January to December 2017 is currently underway.Note:


Continuous Board of Directors’ Reforms

17

FY2017 Initiatives Actions

Directing Management

Strategy

Improve discussion aimed at long-term

improvement of corporate value

Revised corporate vision

Establishment of CSR Policy

Formulation of new Medium-term

Management Plan

Management Oversight

and Execution

The following began to be implemented in FY2017

Transfer business execution authority to the

Executive Committee

Reduce matters to be reported concerning the

status of business execution

Invigorated discussions in the Board of

Directors

Board of Directors Size

and CompositionSecure diversity in the Board of Directors Appointed a female external director

Board of Directors and

Executive Committee

Operation

Establish an Investment Committee for conducting

advance screening of investmentsImproved quality of discussion

Director and Audit &

Supervisory Board

Member TrainingAdd training menu

4 workshops inviting external instructors

3 on-site tours and workshops on business

for external directors

Ryoko Sugiyama

1996Establishes Sugiyama & Kurihara Environmental Consultants, Inc.

Becomes Representative Director of Sugiyama & Kurihara

Environmental Consultants, Inc.

2007 Becomes Director of Sugiyama & Kurihara Environmental

Consultants, Inc. (present post)

2010Becomes Professor of Fuji Tokoha University

(current Tokoha University)

2010

Becomes External Director and Audit and

Supervisory Committee Member of LECIP Holdings Corporation

(present post)

2015 Becomes External Director of UACJ Corporation (present post)

2017- Becomes Director of the Company (present post)

Tsuguto Moriwaki

1967 Joins Kobe Steel, Ltd.

1999 Becomes Managing Director of Kobe Steel, Ltd.

Becomes President and Representative Director of Kobelco

Construction Machinery Co., Ltd.

2002Becomes Executive Vice President and Representative Director of

Kobe Steel, Ltd.

2004Becomes President and Representative Director of Shinsho

Corporation

2010 Becomes Adviser to Shinsho Corporation/Retires in 2012

2015- Becomes Director of the Company (present post)


Independent External Directors

Role and Duties

Evaluating the outcomes of the management

actions of the Kurita Group

Evaluating how directors and executive officers run

businesses

Expressing opinions from the standpoint of

sustainable growth and the medium-to long-term

enhancement of corporate value

Expressing opinions on important decision-making

matters, including the selection of candidates for

director and deciding on the remuneration of

directors, etc.

Term of Office and Restrictions on Serving Concurrently

on Other Companies’ Boards or Committees

Appointment term is 1 year, generally up to 4

years in succession

Can serve concurrently at up to 3 listed

companies, including Kurita

18

a. A person who currently executes the operations of the Company or its subsidiary or has executed such operations in the past 10

years

b. A person whose major business partner is currently the Company*2 or was the Company at some time during the past year, or an

individual who executes the operations of this party

c. A current major business partner of the Company*3 or a major business partner at some time during the past year, or a person who

executes the operations of the major business partner

d. A consultant, an accountant, or a legal professional who currently receives or has received at some point during the past year a lot of

money or property*4 other than remuneration for officers from the Company

e. A current major shareholder of the Company*5 or a person who executes the operations of a major shareholder

f. A person who executes the operations of an organization in which an external officer also currently assumes office (the person only)

g. A person who executes the operations of an organization to which the Company currently makes a donation (the person only)


Criteria for Determining Independence

19

Criteria for Judging Independence

A candidate for independent external director or any of his/her close relatives*1 must not fall under any of the following items.

Note: The yellow marking indicates sections revised in FY2017.

*1 The term “close relatives” means relatives within the second degree of kinship.

*2 The term “person whose major business partner is the Company” means a person whose sales in transactions with the Company make up 2% or more of

that person’s consolidated net sales.

*3 The term “major business partner of the Company” means a business partner with whom the Company’s sales in transactions make up 2% or more of the

consolidated net sales of the Company, or a business partner from which borrowings make up 1% or more of the consolidated total assets of the Company.

*4 The term “a lot of money or property” means money and other property that are equivalent to 10 million yen or more per year, other than remuneration for

officers.

*5 The term “major shareholder of the Company” means a shareholder who has voting rights that account for 10% or more of the vot ing rights of the Company.


Composition and Actions of the Nomination & Remuneration

Advisory Council

20

Members FY2017 Actions

Nomination

Candidates for

directors

Candidate for

representative director

Candidates for

directors with special

titles

2 external directors

Full-time external member of the


President

Decided the suitability of all candidates

Abolished honorary advisor

Candidates for

member of the Audit &

Supervisory Board



Full-time internal member of the


President

General Manager of Corporate

Planning Division

General Manager of Group

Administrative Division

Decided the suitability of Audit &

Supervisory Board candidates

Remuneration

2 external directors



President

Evaluated directors’ performance

Deliberated the appropriateness of ROE

level

The Chairman of the Nomination and Remuneration Advisory Council is an external director


Roles and Achievements of the Investment Committee

21

Roles

Evaluation of investments and financing to be submitted to the Board of Directors or

the Executive Committee for deliberation

Reporting of the evaluation results to Directors and Members of the Audit &

Supervisory Board

Members

FY2017 Actions(April - December 2017)

Number of

cases

reviewed

ResultsImprovement of quality of discussions in Board of Directors and Executive

Committee

Chairman

Investment and M&A deals

Capital expenditure projects

Borrowing and funding

Establishment of corporations

8

4

4

1

Total of 17

Members

Deputy General Manager of Group Administrative Division(person in charge of financial administration)

General Manager of Corporate Planning Department, General Manager of Accounting Department, General Manager of General Affairs Department, General Manager of Group Project Integration Department (Finance, Tax and IFRS Establishment)


Holding of Listed Shares Owned for Policy Purposes

22

Policies

In some cases, Kurita Water Industries Ltd. holds stock of listed

companies as strategic cross-holdings in order to strengthen

business relationships

Review of Holdings

Frequency Once a year and as necessary

Criteria

If the total of the business profits and the dividends received fall

short of expectations for 5 consecutive years

Scandals, etc.

FY2017 Activity Sold 9 of 46 stocks

(Reference) Efforts for Dialogue with Shareholders

23

New Efforts

Providing more detailed information in General Meeting of Shareholders

convocation notice

Statement of investment standards and corporate governance initiatives (results of evaluation of effectiveness

of Board f Directors, sale of shares owned for policy purposes, etc.)

Current Matters of Focus

Implementation of roadshow overseas (three times a year)

Early forwarding of the convocation notice

Adoption of the platform for the electronic exercise of voting rights of ICJ, Inc.

SR visit

Preparation of the convocation notice (reference materials) in English

Results briefing for institutional investors (four times a year)

2017 Notice

June 1999-

June 2006-

November 2011-

June 2013-

Preparation of English translation of CG report October 2016-

Quick disclosure before sending out General Meeting of Shareholders convocation

noticeJune 2016-

■ U R L ■

■ M A I L ■

h t t p : / / i r . k u r i t a . c o . j p /

i r @ k u r i t a . c o . j p

Forward-looking Statements

The plans and values contained in this document are decided based on information available at the

present time. They contain risks and uncertainties, and therefore may differ from actual results.

Documents

FY2017 Shareholder Relations Meeting · Nakano 4-chome, Nakano-ku, Tokyo: March 31: First Section of the Tokyo Stock Exchange: ¥13,450,751,434: 116,200,694 shares: 22,964 (As of