Kurita Water Industries Ltd.

Shareholder Relations Meeting forthe fiscal year ending March 31, 2020
(Securities code: 6370)

February - March 2020

Contents
I

Kurita Group Overview

P1-6

II

Medium-Term Management Plan MVP-22(Maximize Value Proposition 2022)

P 7 -10

III

Corporate Governance Initiatives of Kurita

P11-21(Reference)P22-24

I

Kurita Group Overview

Company Overview & Shareholder Composition
Company Overview

Shareholder Composition (As of September 30, 2019)◼ Name: Kurita Water Industries Ltd.

◼ Representative: Michiya Kadota, President◼ Date of Establishment: July 13, 19491

◼ Location: Nakano Central Park East, 10-1,
Nakano 4-chome, Nakano-ku, Tokyo◼ Fiscal Year-end: March 31◼ Stock Exchange Listing: First Section of the Tokyo Stock Exchange◼ Paid-in Capital: ¥ 13,450,751,434◼ Issued Common Stock: 116,200,694 shares◼ Number of Shareholders: 22,884 (As of September 30, 2019)

Shareholding Ratio (As of September 30, 2019)

Shares(thousand)

Ratio

Japan Trustee Services Bank, Ltd. (Trust Account)

7,937

7.04%

2

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

6,674

5.92%

3

Nippon Life Insurance Company

5,979

5.31%

4

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

3,660

3.25%

5

Japan Trustee Services Bank, Ltd. (Trust Account 5)

2,167

1.92%

6

Tokio Marine & Nichido Fire Insurance Co., Ltd.

2,155

1.91%

7

MUFG Bank, Ltd.

2,056

1.82%

8

BNP PARIBAS SECURITIES SERVICES PARIS /JASDEC FRENCH RES / UCITS ASSETS

1,786

1.58%

9

JP MORGAN CHASE BANK 385151

1,784

1.58%

10

BNYMSANV AS AGENT / CLIENTS LUX UCITSNON TREATY 1

1,764

1.56%

Rank

Shareholder

Treasury Stock 3.1%
Individuals
10.0%

Foreigners
44.1%

Financial Institutions
35.8%

Securities Firms
1.6%

Note: In addition to the above, the company has 3,591 thousand shares of treasury stock.
Japan Trustee Services Bank, Ltd. (Trust Account) includes 312 thousand shares of treasury stock for
performance-linked stock compensation to directors.

Other Domestic
Firms 5.4%
1

Kurita Group Philosophy System
Systemizing our mission and visions based on the corporate philosophy

Corporate
Philosophy

Core
ValuesCorporate VisionCorporate Philosophy
Study the properties of water, masterthem, and we will create
an environment in which nature andman are in harmony

Basic Policy

1. Kurita Group Code of Conduct

Corporate Vision

2. Corporate Governance Policies
3. Basic Policies for Constructing an Internal Control System
4. CSR Policy
5. Kurita Group BCM Policy (Business Continuity Management)
6. Kurita Group Business Policy“A Creator of unique value to thesolution of water and environment,”
contributing to the realization ofa sustainable society.
2

CSR Policy
In order for the Kurita Group to continue to grow as it works torealize its corporate philosophy, CSR has been positioned at theheart of management strategy
Definition

The Kurita Group’s responsibility for its impacts on society

Objectives

1. Creating and maximizing shared value for the Kurita Group and society
2. Identifying, preventing and mitigating possible adverse impacts by
the Kurita GroupCSR Policy

Provide solutions to issues related to water and the environment, and fulfill
responsibility for the future
Basic themes

Growth opportunity themes

1. Provide highly safe services andproducts

4. Solve issues related to water resources

2. Conduct fair business activities

6. Reduce waste

3. Respect human rights

7. Advance industrial production technologies

5. Realize sustainable energy use

3

Kurita’s Business Domains
From factory entrance to exit
Industrial water / groundwater

Manufacturing line
Water Treatment

Manufacturing process

Water treatment facilities◼ Pre-treatment◼ Soft water production◼ Pure water production

Power generation
systems

Process treatment
chemicals◼ Process treatment

Air conditioning
systems

Cooling tower

Water Treatment

Refrigeration systems

Ultrapure water production
systems

Cooling water treatment chemicals◼ Cooling water treatment◼ Ultrapure water production

Wastewater treatment

BoilerUtilities

Boiler water treatment chemicals

Wastewater Reclamation◼ Boiler, vaporizer and condenser
water treatment

Wastewater reclamation system

Wastewater
treatment chemicals
Wastewater
treatment systems

RO membrane treatment
chemicalsIndustrial
waste

Waterway
and sewage
discharge

4

History of Value Creationx 10

Contributing to the resolution of customers’ and society’s issues in the areas of waterand the environment
Net sales
2015(billion yen)
300

1949

1965

Founded as a company in the Water
Treatment Chemicals business (boiler
water treatment chemicals)

Expanded into process treatment
chemicals

2002

1975

Established an overseas company
for the Water Treatment Chemicals
business in Brazil

Acquired a water
treatment chemicals
business in Europe

Launched ultrapure watersupply business

200

1951
Entered the Water Treatment
Facilities business

1973

1991

Entered the electronics
industry

Launched soil
remediation services

2017/2019100

Acquired water treatment related companies in the
United States

1958
Expanded into
maintenance services

0
1949Founded (Kobe)

1947

1955

1961
Listed on the Tokyo Stock
Exchange and the Osaka
Securities Exchange

1974
Head office built in Shinjuku, Tokyo

1973

2012
Relocated head officeto Nakano, Tokyo

1991

2010

Economic andIndustrial history

Post-war recovery
periodHigh economic growth period

Stable growth period

Information society development period

Period of IoT advancement

Business
perspective

Industrial water
treatment

Response to environmental
regulations

Contribution to improvement of
productivity

Reduction of energy consumption and waste
Response to new environmental regulations

Recovery and reuse of resources andenergyAcceleration of global expansion
(M&A)

5

Changes in Net Sales and Margin

x 10(billion yen)

259.4

260

(%)
30.0

236.8
204.9

14.9
130

214.4

199.7

14.0

193.8
178.5

181.2

14.8

15.0

180.1

214.2

189.4
178.1

15.2
15.0

11.7
10.3
8.4

9.3

9.1

9.5

9.4

3/20163/20173/20183/2019003/20083/20093/20103/20113/2012█ Net sales

3/20133/20143/2015⚫ Operating income margin
6

II Medium-Term Management Plan MVP-22(Maximize Value Proposition 2022)

Basic Policy and Priority Measures
Basic Policy

Maximize customer intimacy by dismantling preconceived ideas
and dramatically raising the quality and speed of our work.

Priority Measures⚫ Development of CSV Business⚫ Rebuilding of manufacturing system
for water treatment facilities⚫ Strengthening the foundation andpromotion of research anddevelopment⚫ Enhancement of total solutions⚫ Creation of new business and thepromotion of innovation⚫ Establishment of the Group governancesystem7

Management Targets and Required Measures
Emphasis on profitability and capital efficiency
Management Targets
Net sales organic growth rate

Business profit margin

Return on equity (ROE)

3 ％ or more
15 ％10 ％ or more

Adoption of management using return on
invested capital (ROIC)

Measures(1) Expansion of the service contract
business model for sharing createdvalue(2) Creation of comprehensive
contracts for maintenance andoperations management originatingfrom major EPC projects(3) Restructuring and downsizing of
low-margin businesses and assets

8Acceleration of Total Solutions
Focus on development and advancement of total solutions

Improvement of profitability

Deeper totalsolutions andfaster market
deployment▶ Accumulation and expansionof accomplishments▶ Deployment of total solutions▶ Creation of total solutions▶ Development of total solutions
1st
year

2nd
year

3rd
year

4th
year

5th
year

MVP-22 Plan
9

Acceleration of Investment and Utilization of Capital
Concentrated investment in growth fields, andefficient and effective use of capital
Utilizationof liabilities
Compression ofassetsShare buybacks
Dividends

M&A

Operatingcash flow

Sources of funds

Capitalexpenditures⚫ Consider implementing after taking into
account demand for funds and share price⚫ Continue dividend increases wheneverpossible⚫ Utilize for obtaining business basis and newtechnologies⚫ Accelerate investments in ultrapure watersupply business and total solutions

Uses of funds
10III Corporate Governance Initiatives of Kurita

Basic Concept and Basic Policies
Basic Concept

Basic Policies (5 Items)

Corporate Philosophy(1) Ensuring the rights and equality of shareholders(2) Appropriate level of cooperation with stakeholders
other than shareholders(3) Ensuring appropriate information disclosure andtransparency of information(4) Duties of the Board of Directors and the Audit &Supervisory Board, etc.
(5) Dialogue with shareholders and investors

Study the properties of water, master them, and wewill create an environment in which nature and man
are in harmony

Establishment of Corporate GovernancePurpose⚫ Transparent, fair, prompt, and decisive decisionmaking⚫ Highly effective management supervision

Sustainable Growth and Medium- and Long-Term
Enhancement of Corporate Value
Respect for the rights and positionof stakeholders and meeting their expectations
Customers

Business
Partners

Employees

Shareholders/
Investors

Local
Communities

Policies (16 Items)
Minor revisions were made in the fiscal year ending
March 2020, mainly associated with the voluntary
application of IFRS
Major Changes
Redefined “important transaction” in “Related Party
Transactions” as an IFRS account item11

Capital Policy (Changes in Dividends and Dividend Payout Ratio)
The dividend payout ratio target is 30% to 50% over five years
(yen)
120

Dividends
forecast to
rise for 16th
consecutive
year

100

(%)
60.0

56.1
52.4
45.4

50.0

44.3
39.9

80

32.6

30.6
60

25.1

26.9

26.8

25.4

26.8

35.0

40.0

32.7

28.4

30.0

22.5

40

20.0

20

18

22

28

32

34

36

38

40

42

44

46

48

50

52

54

62
10.0

0

0

3/2005 3/2006 3/2007 3/2008 3/2009 3/2010

3/2011█ Dividend per share

3/2012 3/2013 3/2014 3/2015 3/2016 3/2017 3/2018 3/2019 3/2020⚫ Dividend payout ratio

Forecast

12

Corporate Governance Structure
Voluntarily establish a Nomination & Remuneration Advisory Council anda Successor Planning Committee
Company with an Audit & Supervisory Board
General Meeting of Shareholders
Election/
Dismissal

Consultation

Nomination &Remuneration Advisory
Council

Successor Planning
Committee

Board of Directors

Election/
Dismissal
Audit & Supervisory Board

Audit

Resolution

Cooperation

Audit report

President
Reporting
E&S (Environmental & Social)Committee, Investment
Committee and Various Other
Committees

Accounting Auditor

Audit

Election/
Supervision[Business Execution]

Cooperation

Members of the Audit &Supervisory Board

Advisory

Reporting Discussion/
ReportingElection/
Dismissal

Cooperation

Internal Auditing
Department

Executive Committee
Discussion/
ReportingInstructions

Internal audit

Accounting Audit & Internal Control Audit

Operating Divisions
13

Size and Composition of the Board of Directors
The Board of Directors as a whole complements the necessary knowledge,
experience and diversity for management decision making◼ Members: 11 (including 3 independent external directors)
Sales
Name

Corporateplanning

Finance/
Accounting
Legal affairs
HR

Development
Production
Technology◼ Term: 1 year
Knowledge and experience expected of external
directors
Corporate
management

Environment

International

Koichi Iioka

—

—

—

Michiya Kadota

—

—

—

Kiyoshi Itou

—

—

—

Toshitaka Kodama

—

—

—

Yoshio Yamada

—

—

—

Hirohiko Ejiri

—

—

—

Toshimi Kobayashi

—

—

—

Yasuo Suzuki

—

—

—

Japan

Tsuguto Moriwaki(external director)
Ryoko Sugiyama(external director)
Keiko Tanaka(external director)

Overseas

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

*Note: This chart is based on information contained in Proposal 3 of the Notice of Convocation of the 83rd Ordinary General Meeting of Shareholders.

There shall be three or more directors in total. At least two of these directors shall be
external directors to ensure the independence and objectivity of the Board of Directors.

14

Process of the Successor Planning Committee
Planned development of successors
Selection of successor candidates
Assessment

Recommendation

Selection

Development of successor candidates
Interview
Assessment

Confirmation

Review
Identify areas for
improvement

Interview

Setting
initiatives

Confirmation

Successor
Planning
Committee

Board ofDirectors

Candidates for President
President

President
Successor
Planning
Committee

Externalorganization

Board ofDirectors

President

Externalorganization
Executive senior
managing director or
above

Directors

Directors

Candidates for director

Feedback to candidates, assignment, appointment, etc.
Successor Planning Committee members
Matter for discussion

Members

Selection of president’s successor candidate

Three external directors
One full-time external member ofthe Audit & Supervisory Board

Selection of directors’ successor candidates
Selection of Executive officers’ successor candidates
Setting of development measures for
successor candidates

In addition to the above four, the president,
chairman, and executive senior managing directors
15

Nomination & Remuneration Advisory Council andInvestment Committee
The Nomination & Remuneration Advisory Council
is composed mainly of external officers
Nomination & Remuneration
Advisory Council

Investment Committee

Increase transparency in the decision-making
process regarding remuneration for directors
and nomination of directors and members of
the Audit & Supervisory Board.
• Three external directors• Full-time external member of the Audit &Supervisory Board• President

Purpose/Role

Members* In cases of nomination of candidates for director andremuneration of directors

Meetings held
Cases reviewed(As of January 31, 2020)

5
13

Results• Review investments and financing to besubmitted to the Board of Directors or the
Executive Committee for deliberation• Report results of reviews and major
discussion points to directors and membersof the Audit & Supervisory Board
Chair

Deputy Executive GM, Corporate
Planning and Control Division

Members

GM, Corporate Planning Department
GM, Risk Management Department
GM, Finance & Accounting Department
GM, Overseas Finance Control
Department

Meetings held
Cases reviewed

13
14(As of December 31, 2019)16

Evaluation of the Board of Directors
The effectiveness of the Board of Directors is analyzed
and evaluated to identify the future issues
Implementation Method

Evaluation Results(Period Covered: January–December 2018)

Frequency

Once a year

Method- Self-evaluation
Discussion of written survey (with respondents
identified) and tabulated results

Evaluation
Items(1) Board of Directors roles and responsibilities(2) Collaboration with external directors andmembers of the Audit & Supervisory Board(3) Board of Directors composition(4) Board of Directors operation(5) Contributions of individual directors andmembers of the Audit & Supervisory Board⚫ Average self-evaluation results were generally good in all 6
items.
⚫ Of these, evaluation item (2) was rated particularly high.
⚫ Low ratings were given to improvement of systems forsupporting risk-taking by the Group and creation of theGroup’s risk management system.

Issue⚫ Further improvement of governance standards for the Kurita
Group as a whole, including group companies in Japan andoverseas, is necessary.

Measures(6) Dialogue with shareholders

Note: The evaluation of the Board of Directors for the period from January to December 2019 iscurrently underway.

⚫ Further improve the systems and structures provided by theCompany⚫ The Board of Directors will accurately evaluate operational
status17

Main Governance Initiatives for the Fiscal Year Ending
March 2020
Expected Benefits

Initiatives for FY ending 03/2020
Selection and development ofcandidates for President anddirector

Composition of the Board of
Directors

Improvement of the selection and development process• Expansion of scope of candidates to broader range oftiers• Implementation of interviews of potential candidates byexternal directors as needed in the selection process• External directors:

2→3• Internal directors:

10 → 8Development of management personnel in the medium tolong term

Ensuring independence, objectivity and diversity of theBoard of Directors

12 → 11

Total:

Sales in FY ending 03/2020: 2/28 stocks
Reduction of shareholding ofother listed companies(Reference)

Investment of the funds acquired from the sales topromising businesses

FY ended 03/2018: 9/46 stocks
FY ended 03/2019: 13*/37 stocks* Includes partial sales

Provision of information andtraining to directors and membersof the Audit & Supervisory Board

Seminars by outside instructors

3 timesOn-site visits by external directors

2 times

External director participation ininternal committees

11 times(April - December 2019)• Learning about management strategy such as
integrated thinking• Promotion of external directors’ understanding of theCompany’s businesses and initiatives
18External Directors
Increased number of external directors to strengthen their functions◼ Term: 1 year

◼ Restrictions on concurrent positions: Allowed to serve concurrently at up to three listed companies, including Kurita

Tsuguto Moriwaki

Ryoko Sugiyama

Keiko Tanaka

Appointed as
director of Kurita

June 2015

Appointed as
director of Kurita

June 2017

Appointed as
director of Kurita

June 2019

Significant
positionsconcurrently
held

None

Significant
concurrent
positions• Head and Representative Director,
Gifu Shimbun Co., Ltd.
• External Director and Audit andSupervisory Committee Member,
LECIP Holdings Corporation• External Director, UACJ Corporation• Director, Gifu Sugiyama Memorial
Foundation, a public interest
incorporated foundation

Significant
concurrent
positions• Vice President, Nissan Financial
Services Co., Ltd.

Board
attendanceReason forelection

11/11 (100%)
Mr. Moriwaki is an individual who
possesses a great deal of knowledge
about manufacturing and corporate
reform. The Company believes that he is
an individual capable of utilizing thisknowledge as well as his experience of
having served in important positions
such as representative director in othercompanies to deliver opinions from an
outside perspective and increase therationality and transparency of theCompany’s management.

Note: Board attendance is for April–December 2019.

Board
attendanceReason forelection

9/11 (81.8%)
Ms. Sugiyama is an expert in theenvironment and wastes, and has held
important positions such as external
director of listed companies.
The Company believes that she iscapable of expressing opinions from an
outside perspective different from theCompany’s and increasing the rationality
and transparency of the Company’s
management.

Board
attendanceReason forelectionNew

8/8 (100%)
Ms. Tanaka has been active in businessfields that differ from those of the Kurita
Group and possesses a great deal ofknowledge on public relations andmarketing, as well as having held theposition of Ambassador Extraordinary
and Plenipotentiary of Japan to
Uruguay. The Company believes that
she is capable of expressing opinionsfrom an outside perspective different
from the Company’s and increasing therationality and transparency of theCompany’s management.

19Effective Functioning ofMembers of the Audit & Supervisory Board
Attendance at Board of Directors meetings and active input
Attendance(April–December 2019)

Name

Experience, Abilities, ExpertiseBoardmeetings

Yukihiko Muto
New

Kenjiro Kobayashi
External ｍemberof the Audit &Supervisory
Board

Independent
Officer

Shigekazu Torikai
External ｍemberof the Audit &Supervisory
Board

Independent
Officer

Possesses a wealth of knowledge and experience on finance, accounting andmanagement.
Has had a distinguished career in fields separate from the Kurita Group;
possesses highly specialized expertise in finance, corporate planning, newbusiness development, and a wealth of experience in international business.

Possesses specialized expertise as a lawyer and a wealth of experience andinsight into corporate legal matters.

8

Audit meetings

6
8 meetings

11

6 meetings
8

11 meetings
11

8 meetings
8

11 meetings

8 meetings

1. Members of the Audit & Supervisory Board attend meetings held by the Board of Directors, Executive Committee, E&S Committee and otherimportant meetings while auditing directors’ execution of duties
2. Support for members of the Audit & Supervisory Board and cooperation with Internal Auditing Department• Head of Audit Office assists administratively to ensure members can properly perform audit work
• Members direct audit staff as necessary for support work20Remuneration System for Directors and Members of the
Audit & Supervisory Board
Review director performance evaluation indicators
to aim for achievement of management goals
Fixed (57%)*

Directors(excluding external
directors)

Variable (43%)*
Contribution toshareholding
schemeFixed remuneration

Performancelinked
remuneration

Evaluation Indicators
⚫
⚫
⚫
⚫
⚫
⚫
⚫

Performancelinked stockcompensation

Evaluation Indicator

CommonPresident, Chairman, Executive GM
of Corporate Planning and Control
Division
Executive GM of R&D Division
Executive GM of Engineering Division
Executive GM of Solution Business
Division
Executive GM of Next Generation
Business Division
Executive GM of Sales Division

Consolidated operating income
ROE⚫ Profit attributable toowners of parent

Ratio of projects completed, R&D investment efficiency (consolidated)
YoY change in consolidated gross profit margin
YoY change in consolidated operating income margin

Timing of Payment

YoY change in division’s consolidated net sales⚫ Upon retirement

YoY growth in division’s consolidated net sales and YoY change in consolidated
operating income margin

Fixed (100%)External directors
Members of the
Audit & Supervisory
Board

Fixed remuneration

Contribution toshareholding
scheme* Calculated using actual remuneration amounts for the fiscal year ended March 2019.
21

(Reference)
Efforts for Dialogue with Shareholders/Investors
New Initiatives(Implemented for
FY ending 03/2020)

Preparation of Integrated Report

Early forwarding of the notice of convocation

June 1999-

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

June 2006-

Promotion of dialogue through SR visits
Preparation of the notice of convocation (reference materials) in English

November 2011June 2013-

Previous Key Initiatives

Preparation of English translation of CG report

October 2016-

Quick disclosure prior to notice of convocation

June 2016-

Production of notice of convocation in color, addition of more information

June 2018-(published together with shareholder report; added candidate photos, graphs, etc.)

Provision of more English-translated information in notice of convocation

June 2018-22

(Reference) Initiatives Concerning the E in ESG
Creation of shared value with customers and society in the CSV business
Example of CSV Business(Reclaimed Water Supply Service)

Definition of CSV Business
Products, technologies, and businessmodels that contribute significantly towater-saving, CO2 emissions
reduction and waste reduction
compared to previous levels

CSV Business Selection Standard
CSV businesses demonstrate thefollowing standards with regard towater-saving, CO2 emissions reduction,
and waste reduction:1) Are significantly more effective thanprevious or competing technologies.
2) Are new technologies or applications ofexisting technologies in new markets.
3) Contribute to the action plans presented
in the SDGs.

Ability to develop selling methods

Servicecontract

Customer
Ability to develop applications

Utility facilities

Ability to develop
technologies

Water treatment
data and expertise

Supply ofreclaimed
water

IoT
Air conditioning
systems
Manufacturing
process

Remotemonitoring

Savingwater
Wastewater reclamation system(Assets owned by Kurita)

MaintenanceWastewaterfrom plant

23

(Reference) Initiatives Concerning the S in ESG
We are engaged in the development of human resources
who will support a sustainable society
National Museum of
Emerging Scienceand Innovation(The Wonderful World ofWater)

EcoPro 2019
(Water Reclamation Station)

KidZania Tokyo(The Universe – Water
Reclamation Laboratory)

JSEC 2019(Japan Science &Engineering Challenge)24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.