Kurita Water Industries Ltd.
FY2016 Shareholder Relations Meeting(Securities code: 6370)

February 2017

Ⅰ Overview of the Kurita Group
Ⅱ Corporate Governance Initiatives of Kurita(Reference) Efforts for Dialogue with Shareholders

Ⅰ. Overview of the Kurita Group
1. Company Profile and Shareholder Composition
2. Framework of “The Kurita 21st Century Vision”
3. Kurita’s Business Domains
4. Status of Competition and Kurita’s Strengths
5. Net Sales and Business Mix
6. Priority Measures

Ⅰ. Overview of the Kurita Group
1. Company Profile and Shareholder Composition
Corporate Data Company Name

: Kurita Water Industries Ltd.

 Fiscal year end

 Representative: Michiya Kadota, President Stock Exchange Listing : First Section of the Tokyo Stock Exchange: March 31

 Date of Establishment : July 13, 1949

 Paid-in Capital: ¥13,450,751,434

 Head Office Location

 Issued Common Stock: 119,164,594 shares: Nakano Central Park East, 10-1,
Nakano 4-chome, Nakano-ku, Tokyo Number of Shareholders : 26,681 (As of September 30, 2016)

Shareholder Composition (Top 10)
Ranking

Name

Shareholding Ratio
Shareholdings(Thousand shares)

Percentage of
total
shares issued

1Japan Trustee Services Bank, Ltd. (Trust Account)

6,439

5.40%

2

Nippon Life Insurance Company

5,979

5.01%

3

The Master Trust Bank of Japan, Ltd. (Trust Account)

3,620

3.03%

4

Japan Trustee Services Bank, Ltd. (Trust Account 9)

2,847

2.38%

5

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,155

1.80%

6

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,056

1.72%

7

NORTHERN TRUST CO. (AVFC) RE - SSD00

1,861

1.56%

8

NORTHERN TRUST CO. (AVFC)
RE U.S. TAX EXEMPTED PENSION FUNDS

1,772

1.48%

9

NORTHERN TRUST CO.(AVFC) RE - HSD00

1,663

1.39%

10

BANK JULIUS BAER AND CO., LTD.

1,579

1.32%

Treasury Stock*
2.5%
Individuals
11.3%

Financial
Institutions
30.9%

Securities
Firms
1.4%

Foreigners
45.7%

Other
Domestic Firms
8.3%

Note : In addition to the above, the company has 2,968 thousand shares of treasury stock.
Japan Trustee Services Bank, Ltd. (Trust Account) includes 339 thousand shares of treasury stock for performance-linked stock remuneration for directors.

1

Ⅰ. Overview of the Kurita Group
2. Framework of “The Kurita 21st Century Vision”
Study the properties of water, master them,and we will create an environment in which
nature and man are in harmony

Corporate
Philosophy
Corporate
VisionManagement Guidelines
Core Values

Becoming an advanced water andenvironmental management company
1. World’s Top-Class Water and Environment
Business
2. Creation of New Business3. Technology-Driven Company
4. Full Use of the Group’s Comprehensive
Strength
5. Enhanced Development of Human
Resources
6. Fulfillment of Social Responsibility

Kurita Group Code of Conduct Relationship with society and the global environment

Fairness

Transparency

Integrity Relationship with shareholders and investors
 Relationship with customers and business partners
 Relationship with employees

SafetyCompatibility2

Ⅰ. Overview of the Kurita Group
3. Kurita’s Business Domains
Industrial water/tap water/
groundwater

Manufacturing line
Water Treatment

Manufacturing process

Water Treatment
Facilities
 Pre-treatment
 Soft water production
 Pure waterproduction

Power generation
systems

Air conditioning
systems

Cooling
tower
Refrigeration systems

Water Treatment

Water Treatment
Chemicals Cooling water
treatment

Water Treatment
Facilities
 Ultrapure waterproduction

Water Treatment
Chemicals Process treatment

Boiler
Water Treatment Chemicals
 Boiler, vaporizer Condenser water treatment

Utilities

Wastewater
Reclamation
Water Treatment
Facilities

From Factory Entrance to Exit

Wastewater
treatment
Water Treatment
Chemicals
Water Treatment
Facilities

Industrial
waste

Waterway
and sewage
discharge

3

Ⅰ. Overview of the Kurita Group
4. Status of Competition and Kurita’s Strengths
Water Treatment Chemicals

Water Treatment Facilities,
and Maintenance Services

Nomura Micro
Science

Ecolab(Nalco)Ovivo

KemiraSolenisMiura
HakutoKuritaKobelcoEco - Solutions

HitachiOrganoSeveral dozen
companies

Combine water treatment chemicals, water treatment facilities,
and maintenance services to provide optimal solutions

4

Ⅰ. Overview of the Kurita Group5. Net Sales and Business Mix
Service Business Revenue
in the Water Treatment Facilities Segment

Water treatment chemicals
Water treatment facilities (services)
Water treatment facilities (hardware)(Billions of Yen)
100

(Billions of Yen)

180.1

90.3

0

150.4

91.5

154.9

94.9

182.6

98.9

33.6

27.7

34.5

31.8

03/201303/201403/2015

03/2016

32.4

82.7

83.7

60.0

58.8

146.4

90.3

189.4

178.1

56.1
110

216.0

214.4

220

180.8

98.1

50

8.5

91.5

31.6

8.1

Servicebusiness
revenue

94.9

32.2

8.3

49.4

51.8

54.4

03/201303/201403/2015

98.9

98.1

32.0

28.6

Ultrapurewater supply
business

6.3

Tool
cleaning

60.6

63.2

Maintenance,etc.

03/2016

03/2017
Projection

6.3

35.2
03/2017
Projection

05

Ⅰ. Overview of the Kurita Group
6. Priority Measures
1-1

Expansion of the Water Treatment Chemicals business overseas
Expansion of synergy with
KEG in products,
development and production

Establishment of a local
subsidiary in Vietnam

Implementationof North American
M&A

Rebuilding and strengtheningof the base function inSoutheast Asia
Strengthening of businessin the Middle East
Establishment of a local
subsidiary in UAE
6

Ⅰ. Overview of the Kurita Group
6. Priority Measures
1-2

Overview of M&A in North America

Company Overview
Name : Fremont Industries, LLC
Location : Shakopee, Minnesota, U.S.A.
Businesses : Manufacture and sale of water
treatment chemicals
Sales : US$30.94million (2015)

Acquisition Overview
Percentage of Equity : 100%
Interests Acquired

Aim of Acquisition
To gain a water treatment chemicals
business base in North America

Acquisition Cost : Approximately
US$40million
Agreement Signing Date : December 19, 2016
Closing : January 3, 2017
* Above dates are in U.S. Central Time (CST)7

Ⅰ. Overview of the Kurita Group
6. Priority Measures
2

Change of the service business, using IT

SensorData collection

Cloud
Monitor screen

Customer’sfacilities such as
boilers, cooling
tower and water
treatment facilities

Proposal

Analysis

Real-time monitoring

Optimum chemical dosing control
and maintenance

Creation ofcompetitive advantage

Change of the way of working
and how to proceed with work
Establishment of
the IT Strategy Division8

Ⅰ. Overview of the Kurita Group
6. Priority Measures
3

Promotion of services in the Water Treatment Facilities business

Ultrapure water supply business

KuritaCustomers’
Semiconductor/
LCD manufacturing
plant
Ultrapure
water

More aggressive overseas
development

Exploitation of the small andmidsize market by KWSS
(Kurita Water Supply Service)

Payment
Build, own, operate
and maintain

Exploitation of other markets
that use ultrapure water9

Ⅱ. Corporate Governance Initiatives of Kurita
1.

Basic Concept and Basic Policies

2.

Corporate Governance System Chart

3.

Capital Policy

4.

Evaluation of the Board of Directors

5.

Continuous Board of Directors' Reforms

6.

Independent External Directors

7.

Criteria for Determining Independence

8.

Composition and Actions of the Nomination & Remuneration Advisory Council

9.

Changes in Compensation System for Directors and Members of the Audit & Supervisory Board

10.

Holding of Listed Shares Owned for Policy Purposes

Ⅱ. Corporate Governance Initiatives of Kurita
1. Basic Concept and Basic Policies
Basic Concept

Basic Policies (5 Items)

Corporate Philosophy
Study the properties of water, master them,and we will create an environment in which
nature and man are in harmony(1) Ensuring the rights and equality of shareholders(2) Appropriate level of cooperation with stakeholders
other than shareholders

Establishment of Corporate Governance(3) Ensuring appropriate information disclosure andtransparency of information

Purpose(4) Duties of the Board of Directors and the Audit &Supervisory Board, etc.

 Transparent, fair, prompt and decisivedecision-making
 Highly effective management supervision

Sustainable Growth and Medium- andLong-term Enhancement of Corporate Value
Respect for the rights and position of
stakeholders and meeting their expectations
Shareholders

Customers

Employees

Local
Communities(5) Dialogue with shareholders and investors

Policies (16 Items)
Review the Policies at least once a year
or when necessary.

Business
Partners10

Ⅱ. Corporate Governance Initiatives of Kurita
2. Corporate Governance System Chart
Company with the Audit & Supervisory Board

General Meeting of Shareholders
Election & Dismissal
Audit

Nomination andRemuneration
Advisory Council
Advisory

Election & Dismissal

Audit &
Supervisory Board

Board of Directors
Consultation

Business
Operations

Discussion& Report

Resolution,
Election &SupervisionInternal Auditing
Department

Executive Committee

Compliance Committee& various committees

Current Board of Directors

Discussion& Report

Accounting Auditor

Cooperation Cooperation

Audit Report

President
ReportCooperation

Members of the Audit& Supervisory Board
Audit

Election & Dismissal

Internal Audit

Instruction

Accounting Audit & Internal Control Audit

Operating Divisions

Current Audit & Supervisory Board

Number of directors

11

Number of members of the
Audit & Supervisory Board

Number of directors whoare external directors

2 (Designated as
independent officers)

Number of external membersof the Audit & Supervisory
Board

2 (Designatedas independent
officers)

Term of office

1 yearTerm of office

4 years

3[Size and Structure of the Board of Directors]
 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 theindependence and objectivity of the Board of Directors.
 The Board of Directors consists of human resources withhigh level of expertise in business areas, corporate
planning, finance, accounting, legal affairs andtechnologies, etc.

11

Ⅱ. Corporate Governance Initiatives of Kurita
3. Capital Policy
1

Uses of Cash (policy)¥85.0 ‒ ¥88.0 billion

Operatingcash flow¥85.0 ‒ ¥88.0 billion
Dividends

 Strive to continue raising dividends, aiming fora payout ratio of 30-50% over 5 years.

Share buybacks

 Prioritize investment in promising businesses
and consider share buybacks using surplus
funds.

M&A
CapitalExpenditures

Generation of cash Consider M&A in North America.
 Invest in the ultrapure water supply business,among other businesses, in Japan andoverseas.

Uses of cash

For three years from the fiscal year ended March
31, 2016 to the fiscal year ending March 31, 2018

 We will endeavor to curb surplus funds and increases in shareholders’ equity upon securing operating
funds and contingency funds.
 We will maintain ROE at a level that exceeds cost of shareholders’ equity and will strive to increase it.
12

Ⅱ. Corporate Governance Initiatives of Kurita
3. Capital Policy
2

Past ROE(%)

Return on equity (ROE)

16

177.3
9.4

192.6

9.3

198.0

8.8

208.9

207.9

(Billions of yen)

Equity

217.7

222.3

227.9
220.0

8.1

8

110.0

5.5

0

3/20093/20103/20113/20123/20134.4

4.7

3/20143/20155.6

3/20160.0

Notes : * Equity = Net assets – Non-controlling interest* For ROE, equity is calculated using the average from the beginning to the end of the period.

13

Ⅱ. Corporate Governance Initiatives of Kurita
3. Capital Policy
3

Dividend Policy
Dividend per share

(Yen)
60

Dividend payout ratio

56.1

Rough standard of dividend
payout ratio is the average of
30 to 50% over five years

50

(%)
60

52.4
44.3

45.4

48.3

40

30

40

25.1

26.9

25.4

26.8

0

18
3/200522

3/200628

3/2007

26.8

28.4

30.6
30

22.5

20

10

50

32

34

36

38

40

42

44

46

48

50
20

10

3/20083/20093/20103/20113/20123/20133/20143/20153/20163/2017
Projection

014

Ⅱ. Corporate Governance Initiatives of Kurita
4. Evaluation of the Board of Directors
Implementation method
Frequency

Once a year

MethodSelf evaluation
Discussion of written survey (withrespondents identified) and tabulated
results

Evaluation
Items

Evaluation Results Average of self-evaluations generally good in all
6 items
 There were some disparities among items
 External directors indicated that “setting longerterm goals and deliberations on strategic
proposals” and “deliberations for more
specifically carrying out policies” are inadequate

1. Board of Directors roles andresponsibilities
2. Collaboration with external
directors and external members of
the Audit & Supervisory Board

Issues and Initiatives

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

 Enhance the Board of Directors so that it canfocus deliberations on priority issues
 Bolster the business execution framework andtransfer authority from the Board of Directors topersonnel who carry out business operations

15

Ⅱ. Corporate Governance Initiatives of Kurita
5. Continuous Board of Directors’ Reforms
FY2016 Initiatives
Organizational Design

Management Oversight andExecution

Board of Directors Size andComposition

Board of Directors andExecutive Committee
Operation
Director and Audit &Supervisory Board Member
Training

Actions

Consider becoming a company with the
Audit & Supervisory Committee

Put off making a change in FY2016, will continue
to study this option

Narrow the matters approved anddeliberated by the Board of Directors

Added governance-related agenda items

Transfer business execution authority to
the Executive Committee

Invigorated discussions in Executive Committee

Consider the number of members andmember composition

Discussed reducing the number of people andpossible changes to member composition

Consider securing diversity

Considered a female external director nominee

Create records of statements at Board of
Directors meetings and have all directors
review them (perform for each meeting)

Invigorate discussions

Training and self-improvement utilizing
outside management research institutes

Newly-appointed directors regularly participatedin external study groups, and other executive
officers gave reports following self-improvement
initiatives
16

Ⅱ. Corporate Governance Initiatives of Kurita
6. Independent External Directors
Role and Duties

Seiji Nakamura

 Evaluating the outcomes of the management
actions of the Kurita Group

1965

Joins Mitsui O.S.K. Lines, Ltd.

2000

Becomes Representative Director & Executive Vice President of
Mitsui O.S.K Lines, Ltd.

2003

Becomes Representative Director & President of MOL Ferry Co.,
Ltd.

2007

Becomes a member of the Policy Board of the Bank ofJapan/Retires in 20122013-

Becomes Director of the Company (present post)

 Evaluating how directors and executive officers run
businesses Expressing opinions from the standpoint ofsustainable 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

Tsuguto Moriwaki
1967

Joins Kobe Steel, Ltd.

1999

Becomes Managing Director of Kobe Steel, Ltd.
Becomes Representative Director & President of Kobelco
Construction Machinery Co., Ltd.

2002

Becomes Representative Director & Executive Vice President ofKobe Steel, Ltd.

2004

Becomes Representative Director & President of Shinsho
Corporation

2010

Becomes Adviser to Shinsho Corporation/Retires in 20122015-

Becomes Director of the Company (present post) Appointment term is 1 year, maximum of 4 years
 Can serve concurrently at up to 3 companies,
including Kurita

Notes : Currently, both directors have attended 100% of FY2016 Board of
Directors Meetings.

17

Ⅱ. Corporate Governance Initiatives of Kurita
7. Criteria for Determining Independence
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.
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 partyc. A current major business partner of the Company*3 or a major business partner at some time during the past year, or aperson 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 thepast year a lot of money or property other than remuneration for officers from the Company
e. A current major shareholder of the Company*4 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 (theperson only)
g. A person who executes the operations of an organization to which the Company currently makes a donation (theperson only)
Notes *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 10% or more ofthat person’s 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 theconsolidated 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 “major shareholder of the Company” means a shareholder who has voting rights that account for 10% or more of the voting rights of the Company.

18

Ⅱ. Corporate Governance Initiatives of Kurita
8. Composition and Actions of the Nomination & Remuneration Advisory Council
Members
 Candidates for directors
 Candidate forrepresentative director

 Candidates for directors

with special titles

FY2016 Actions

 2 external directors
 Full-time external member of the

Audit & Supervisory Board Decided the suitability of all

candidates

 President

 Full-time external member of theNomination

Audit & Supervisory Board Candidates for memberof the Audit &Supervisory Board Full-time internal member of the

Audit & Supervisory Board

 President, General Manager of Decided the suitability of Audit &Supervisory Board candidates

Administrative Division

 General Manager of Corporate

Planning Division 2 external directors

Remuneration

 Full-time external member of the

Audit & Supervisory Board

 President Evaluated directors’ performance Deliberated the appropriateness of

ROE level

19Ⅱ. Corporate Governance Initiatives of Kurita
9. Changes in Compensation System for Directors and Members of the Audit & Supervisory Board

Current policy
Contribution toshareholding
schemeFixed compensation

Performancelinked
component

New policy(1) Directors (excluding external directors)
Fixed compensation

Contribution toshareholding
scheme(2) External directors, Members of the Audit & Supervisory Board
Fixed compensation

Performancelinked
component

Performancelinked stockcompensation
Paid at retirement
Contribution toshareholding
scheme20

Ⅱ. Corporate Governance Initiatives of Kurita
10. Holding of Listed Shares Owned for Policy Purposes
In some cases, Kurita Water Industries Ltd. holds stock of listedcompanies as strategic cross-holdings in order to strengthenbusiness relationships

Policies

FrequencyOnce a year and as necessaryIf the total of the business profits and the dividends received
fall short of expectations for 5 consecutive years

Scandals, etc.



Sold 3 stocks

Deliberated the criteria for review of holdings

Shared an awareness of issues related to cross-holdings

Review of Holdings
Criteria

FY2016 Activity

21

(Reference) Efforts for Dialogue with Shareholders
New Efforts
 Preparation of English translation of CG report

October 2016-

 Quick disclosure before sending out General Meeting of Shareholders convocation notice

June 2016-

 Providing more detailed information in the convocation notice2016 Notice

Activities of external directors are described in greater detail.

Current Matters of Focus
 Results briefing for institutional investors (four times a year)
 Implementation of roadshow overseas (three times a year) Early forwarding of the convocation notice

June 1999-

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

June 2006-

 SR visit
 Preparation of the convocation notice (reference materials) in English

November 2011June 201322

■ U R L ■h t t p : / / i r. k u r i t a . c o . j p / e n /■ M A I L ■ir@kurita.co.jp

This document is prepared for the purpose of providing information.
The plans and values contained in this document are decided based on information available at thepresent time. They contain risks and uncertainties, and therefore may differ from actual results.