K

urita Water Industries Ltd. provides total solutions in the field of water and environmental
management, under the corporate vision of becoming “an advanced water andenvironmental management company.” Kurita’s core business is water treatment and related
products and services, but its business scope extends to the broader field of environmental
management. Consistent with this philosophy, Kurita provides not only products, such as
water treatment chemicals and facilities, but also high-value-added solutions, including
consulting and outsourcing services that draw on its unique expertise built up over half a century.
Based on the corporate principle, “Study the properties of water, master them, and we will
create an environment in which nature and man are in harmony,” Kurita is committed
to realizing its goal of becoming an advanced water and environmental managementcompany. Through these endeavors, Kurita aims to contribute broadly to meeting the needs of
its customers and of society.

Cover Story
The cover photograph shows a modular ultrapure waterproduction system being manufactured at Kurita’s Shizuoka
Plant, which will be installed at a semiconductor manufacturing
plant. This process includes stringent quality management
standards by Kurita employees, from module assembly to test
operation. Under this integrated approach, Kurita achieves very
short delivery times for these exceptionally high-quality
ultrapure water production systems.

Contents
Kurita at a Glance01

Message from the President

02

Corporate Governance06

Board of Directors and Corporate Auditors

07

Special Feature: New Medium-Term
Management Plan—Growth 2008

08

Review of Operations

12

Research and Development

17

Promoting Environmental Sustainability

18

Financial Section

19

Nonconsolidated Summary

45

Corporate Data

46

Investor Information

47

Note on Projections of Future Results
Projections of future results contained in thisannual report accord with Kurita’s plans,
prospects and strategies as decided by the
management on the basis of information
available at the time. Since projections of
future results lack the substance of fact andmay be based on data from other sources,
we are unable to guarantee the accuracy
and reliability of such information, and you
are requested not to rely on such projections
alone. Moreover, many factors affecting
business results are subject to uncertainty
and are therefore a source of risk. These
factors include, but are not limited to, thefollowing: macroeconomic changes, such aschanges in capital markets and large-scale
shifts in demand, especially insofar as those
influencing the markets and industries
directly related to our main businesses.

Kurita at a GlanceT

he Kurita Group offers a diverse lineup of water and environmental management products, technologies and services, as well as total solutions that incorporate outsourcing and consulting services.
The business of the Kurita Group can be divided into two main segments—the Water Treatment
Chemicals Business and the Water Treatment Facilities Business.

Water Treatment Chemicals Business
PRINCIPAL PRODUCTS and SERVICES◗ Boiler water treatment chemicals◗ Cooling water treatment chemicals◗ Wastewater treatment chemicals◗ Process treatment chemicals◗ Incinerator chemicals◗ Equipment and systems for water treatment chemicals◗ Customized services

Water Treatment Facilities Business
For the Electronics Industry

PRINCIPAL PRODUCTS and SERVICES◗ Ultrapure water production systems◗ Wastewater reclamation systems◗ Wastewater treatment facilities◗ Maintenance services◗ Ultrapure Water Supply Business◗ Tool cleaning
For General Industries

PRINCIPAL PRODUCTS and SERVICES◗ Deionized water production systems◗ Wastewater treatment facilities◗ Soil remediation◗ Chemical cleaning◗ Operation and maintenance services

Percentage of Net Sales

Water Treatment
Chemicals Business

31.4%
68.6%

Water Treatment
Facilities Business:
For the Electronics
Industry

Percentage of Operating Income

Water Treatment
Chemicals Business

46.0%

54.0%

Water Treatment
Facilities Business

Water Treatment
Facilities Business:
For General Industries(For the year ended March 31, 2006)

01
Kurita Water Industries Ltd.

Message from the President

Hiroshi Fujino
President

02
Kurita Water Industries Ltd.

Performance Overview

dividends while giving due consideration to

In the year ended March 31, 2006, the final

full-year performance and allocating theyear of our medium-term management plannecessary funds for future business expansion.

Powerful Advance 2005 (PA-5), we achieved

During the year under review, in the private

growth in net sales and operating income for

sector, robust capital investment activity in thethe third consecutive year.

electronics industry was chiefly driven by flat-

On a consolidated basis, total orders received

panel display (FPD) manufacturers, both in Japan

during the period rose 7.3% compared with theand overseas. In such basic materials industries

previous fiscal year, to ¥183,910 million, and net

as steel, oil refining and petrochemical, domestic

sales increased 7.9%, to ¥173,683 million.

capacity utilization and capital expenditures

Operating income grew 8.5%, to ¥17,311

remained firm, which contributed to growth inmillion, and net income increased 12.1%, toorders received and net sales by the Kurita¥10,519 million. Net income per share rose fromGroup. In contrast, in the public sector, declining¥71.76 in the previous fiscal year to ¥81.76.

public works budgets led to shrinkage in overall

Kurita declared a year-end dividend of

market size and intensified competition. These¥11.00 per share, up ¥2.00 compared withconditions had a negative impact on the Group’s

the previous fiscal year, bringing total annual

operating performance. In addition, crude oil

dividends to ¥22.00 per share after adding theprices, which began rising substantially in the¥11.00 interim dividend. This payment reflects

previous fiscal year, continued their advance

Kurita’s basic policy of maintaining stableunabated, leading to higher raw materials costs

Financial Highlights

Millions of yen

PercentagechangeThousands of
U.S. dollars

2006

2005

2006/20052006

For the year:
Net sales
Operating income
Income before income taxes
Net income¥173,683
17,311
18,20010,519¥160,896
15,951
16,376
9,383

+7.9%
+8.5
+11.1
+12.1

$1,478,531
147,365
154,933
89,546

At year-end:
Total assets
Total shareholders’ equity

212,774
145,366

192,428
136,366

+10.6
+6.6

1,811,305
1,237,473

Per share of common stock:
Net income
Cash dividends applicable to the year

¥81.76
22.00

Years ended March 31

Yen

U.S. dollars¥71.76
18.00

$0.70
0.19

Note: The U.S. dollar amounts are given solely for convenience at the rate of ¥117.47 to US$1, the prevailing rate on the Tokyo Foreign Exchange
Market on March 31, 2006.

for water treatment chemicals and increases inof environmental impact and risk, productivity

logistics costs.

improvement and cost reduction, the Kurita

Within this operating environment, the Kurita

Group aimed to provide effective solutions

Group worked to bolster the value added it pro-through its business operations. By doing so,vides and enhance its competitiveness by offering

we have sought to gain the trust and capture

finely tuned solutions and business models to

the imagination of our customers and themeet its customers’ increasingly sophisticatedcommunity at large. Simultaneously, we strove

needs. On a segment basis, the Water Treatment

to reinforce our earnings base and expand

Chemicals Business grew at a healthy rate, while

net sales and operating income by pursuingsuch profitable businesses as the Ultrapure

aggressive capital expenditure and business

Water Supply Business, tool cleaning and main-development strategies in line with this theme.

tenance services all posted robust growth within

Over the three years covered by the PA-5

the Water Treatment Facilities Business.

plan, the Kurita Group actively invested in its
outsourcing businesses, including the Ultrapure

Review of PA-5

Water Supply Business and tool cleaning, result-

The central theme of the PA-5 medium-term

ing in significant expansion of these businesses.

management plan, which reached completion

In the areas of wastewater treatment and soil

during the year under review, was “Win trust

remediation, we focused on reducing costs andand make a strong impression.” In other words,

environmental impact to meet customer

to address a range of issues including mitigation

requirements, while minimizing environmental

03
Kurita Water Industries Ltd.

Message from the President

risk to serve the greater needs of society.
To meet objectives in reinforcing our earnings

the Kurita Group will be able to move to its
next stage of growth.

base and expanding net sales and operating
income, in addition to the Water Treatment

New Medium-Term Management Plan:

Chemicals Business—a stable earnings source—

Growth 2008

we also grew sales in maintenance and otherIn April 2006, the Kurita Group launched a newservices in the Water Treatment Facilities

medium-term management plan, Growth 2008

Business. Combined sales from water treatment(G-8). This plan, consistent with previous

chemicals and services (within the Water

medium-term management plans, aims to realize

Treatment Facilities Business) accounted forour corporate vision for 2010: to become “an75% of consolidated net sales in the year ended

advanced water and environmental manage-

March 31, 2006.

ment company.” The plan marks the final stage

For the year under review, we were unable toachieve the original performance targets set inGroup, its global business expansion andto such factors as a jump in the price of crude

growth, and 2008, the final year the plan will

oil and a fall in demand in the public works

be implemented. In other words, G-8 communi-

market, both of which exceeded our initialcates the Kurita Group’s focus on advancing

estimates. On the positive side, during thecorporate value.

doubling net income per share.

The new plan carries the twin management
themes of “growth and innovation.” ThroughOver the course of the PA-5 plan, we imple-

innovation in the value it provides to customers,

mented a range of rationalization and efficiency

the Kurita Group continues evolving and trans-measures aimed at bolstering profitability.

forming itself. It aims to win the trust of

In our analysis and tool cleaning businesses, wecustomers and the wider community while

integrated and reorganized Group companies.

growing as a corporate Group. In line with theseIn our domestic Water Treatment Chemicals

aims, the G-8 plan calls for all products andBusiness, we made certain sales agents into

services to be underpinned by rigorous theory

subsidiaries with the aim of strengthening ourand empirical data, thereby providing superior

customer-focused operational structure, andquality and reliability to Kurita customers.

revamped our production system. To cater toKurita Water Industries Ltd.

The plan’s name, “G-8,” stands for the Kurita

the PA-5 plan. This result was mainly attributable

three years of the plan, we were successful in04

in the process of achieving this vision.

The G-8 plan’s performance targets include

increased demand, we also added new manu-

net sales totaling ¥200.0 billion, operating

facturing bases for water treatment facilities inincome amounting to ¥27.0 billion and net

Japan and China. To expedite research andincome totaling ¥15.4 billion in the year ending

development (R&D), we integrated most R&D

March 31, 2009. To reach these goals, we will

activities into one main location. These measuresbuild on the successful policies pursued underbolstered Group efforts to increase net sales andour previous medium-term management plan.

operating income over the three-year period,

Specifically, we aim to accelerate Kurita’s shift toand established a sound platform from which

high-value-added service businesses, expand

Kurita’s global business operations and carry out

To Our Stakeholders

aggressive investment in these areas.

In June 2006, Kurita Water Industries andIn addition, under the G-8 plan, in order toone of its employees were indicted under the

maintain the trust of stakeholders, including

unreasonable restraint of trade provisions of thecustomers and shareholders, Kurita is committed

Antimonopoly Act. This action concerned

to upholding stringent compliance standards.

construction projects for sludge (human waste)
treatment facilities. Despite the Company having

Outlook

implemented a wide range of compliance-

For the operating environment in the year end-

related policies in recent years, these were,ing March 31, 2007, we anticipate continuing

unfortunately, insufficient to prevent this regret-strength in such areas as FPD-related capital

table occurrence, and the Company offers its

expenditures in the domestic electronics sector,

unreserved apologies to its shareholders andand high capacity utilization and capital invest-

other stakeholders.

ment levels in basic materials industries. At the

Kurita takes this incident extremely seriously,same time, with crude oil prices hovering at or

and will extend its utmost efforts to insure suchnear historical highs, raw materials and logistics

lapses do not occur in the future. By redoublingcosts are likely to rise further. There is also

our compliance efforts, we will vigorously strive

concern over a range of macroeconomic risks,

to regain the trust lost owing to this incident.

including a possible slowdown in global

I look forward to the continuing support ofeconomic growth and an increase in foreign

shareholders and other stakeholders in Kurita’s

exchange rate and interest rate volatility.

future endeavors.

Conscious of these conditions, the Kurita
Group will pursue a rapid implementation of key

August 2006

strategies within its newly launched mediumterm management plan. These strategies include
profitability enhancement in each of its
businesses through the provision of high-valueadded products, and expansion of its service
businesses with a concomitant program ofinvestments to drive expansion. Based on thisplan, Kurita will aim to record orders totaling

Hiroshi Fujino
President¥187.0 billion, net sales amounting to ¥190.0
billion, operating income totaling ¥20.5 billion
and net income amounting to ¥11.5 billion in
the year ending March 31, 2007.

05
Kurita Water Industries Ltd.

Corporate Governance

Basic Stance
Kurita’s basic stance on corporate governanceseeks to improve the transparency and efficiency
of its management systems and realize a steadyincrease in corporate value over the long term.
Furthermore, Kurita aims to maximize the effectiveness of its operational execution and management
oversight functions.
Corporate Governance System
Kurita has adopted the corporate auditor system.
The Board of Corporate Auditors comprises four
corporate auditors, including two outside auditors.
In addition to conducting audits based on policies
and apportionment of responsibilities determinedby the Board of Corporate Auditors, the corporate
auditors also monitor and audit the operational
execution of representative directors and the
management performance of directors.
As of June 29, 2006, the Board of Directors
comprised 13 members, including one outside
director. The Board makes decisions on management policies and other important managerial
matters, and monitors and audits the operational
execution of representative directors.
The Executive Committee, which comprises five
directors including the representative directors,
deliberates on important matters pertaining toGroup management and bolsters the decisionmaking functions of the Board of Directors.

To reinforce the effectiveness of operational
execution, in June 2005 Kurita introduced an
executive officer system. At present, Kurita has
appointed seven executive officers.
In addition to these measures, the following
systems reinforce Kurita’s internal control andrisk management functions:◆ Internal Auditing Department
The Internal Auditing Department reports directly
to the president. It conducts internal audits,
including of Group companies, to identify issues
and problems related to the execution of operations, and submits proposals for improvement to
the president.
◆ Compliance Committee
The establishment of the Compliance Committee,
which reports directly to the president, reflects
the priority placed by management on ensuring
legal and ethical compliance. The Committee
oversees the activities of subordinate compliancecommittees set up in each business division. In
the year ended March 31, 2005, Kurita extended
its compliance initiatives to cover overseas Group
companies. To further strengthen its compliancesystem, Kurita has established an internal compliance consultation desk and a hotline operated byan independent third party, which employees
may consult anonymously.

Corporate Governance System
General Meeting of Shareholders

Board of Corporate Auditors

Board of Directors

President

Executive Committee

Internal Auditing Department, Compliance Committee

Operating Division

06
Kurita Water Industries Ltd.

Board of Directors and Corporate Auditors

Hiroshi Fujino

Takuo Ishida

Hiroshi Saitou

Kazufumi Moriuchi

President

Executive Senior
Managing Director

Managing Director

Managing Director

President*

Hiroshi Fujino

Executive Senior Managing Director*

Takuo Ishida

General Manager of Chemicals Division

Managing Directors

Directors

Hiroshi Saitou

General Manager of 2nd Facilities Division

Kazufumi Moriuchi

General Manager of 1st Facilities Division

Toshiaki Deguchi

General Manager of Research and Development Division
General Manager of Kurita Global Technology Center

Yoshinobu Watanabe General Manager of Geo-Environment Group,
2nd Facilities Division

Mitsuru Ogawa

General Manager of Administrative Division

Norio Takahashi

General Manager of 3rd Group, Chemicals Division
General Manager of Osaka Branch

Shigeto Tamura

General Manager of Production Group, 2nd Facilities Division

Tetsuo Saeki

General Manager of Global Business Group,
1st Facilities Division

Kaoru Kajii

General Manager of Production Group, 1st Facilities Division

Toshiyuki Nakai

General Manager of Corporate Planning Division

Shigeji Sugimoto
Corporate Auditors

Tohru Ishizaka
Chiaki Kuzuu
Masahiko Kurita
Kazuma Yura
*Representative Director(As of June 29, 2006)

07
Kurita Water Industries Ltd.

Special Feature: New Medium-Term Management Plan—Growth 2008

Positioning of the New Medium-Term Management Plan

Kurita’s Strengths
Cutting-edge technology

Sound financial healthBroad customer baseAchievements of PA-5

New Medium-Term Management Plan: Growth 2008
(April 2006–March 2009)

Twin themes: “Growth and Innovation”
Basic policy:“We will strive for daily innovation in the value we provide,
thereby winning the overwhelming trust of our customers.”

Key Strategies
Reinforcing
Kurita’s firm
foundation asa technologyoriented
company

Accelerating
Kurita’s shift toa service-based
business model

Expanding
Kurita’s global
business
operations

Revamping
Kurita’sorganizational
structure

Reinforcing
Kurita’s
compliancefunctions

Realizing our corporate vision of the Kurita Group for 2010:“An advanced water and environmental management company”

Win
customer trust

08
Kurita Water Industries Ltd.

Enhance
corporate value

Gain societal
recognitionand support

Formulation of G-8
In April 2006, the Kurita Group launched Growth
2008 (G-8) as its new medium-term management
plan. The plan marks the final stage in the process ofrealizing our corporate vision for the Kurita Groupfor 2010: “An advanced water and environmental
management company.”
Our corporate vision expands our businessdomain to encompass not only water but also waterand environmental management. Furthermore, wewill not limit ourselves to the supply of material
goods, such as water treatment chemicals and water
treatment facilities, but strive to transform the Group
into one that addresses a diverse array of customer
and community needs relating to water and theenvironment and provides effective solutions.
Since the Kurita Group formulated its corporate
vision in 1999, it has sought to realize it byrecognizing and contributing to the needs ofsociety through business operations built on
advanced technological capabilities.

To enhance Group profitability under PA-5, ourprevious medium-term management plan, operativefrom April 2003 to March 2006, we aimed to expand
our business domain and bolster value added
through the provision of solutions to issues faced bycustomers and society. By anticipating changes incustomer and market needs, we achieved significant
progress under the PA-5 plan.
The G-8 plan, launched April 2006, proposes thetwin themes of “growth and innovation.” Its key
policy is to be innovative in the value we provide
every day and win the overwhelming trust of ourcustomers. Under the plan, we are leveraging theGroup’s strengths built up through previous
medium-term management plans—cutting-edge
technology, sound financial health and a broadcustomer base—as a springboard to future growth.
By further enhancing these advantages, the Group is
working to transform itself, enabling it to continue
to address the needs of customers and society.

Three-Year Vision for Kurita
Based on these fundamental themes and goals, theG-8 plan aims to realize the following aspects of theKurita Group’s vision by the final year of the plan:
1. We will be providing unique value and cuttingedge services in the field of water and environmental management, enabling us to win the
overwhelming trust and loyalty of our customers,
both in Japan and overseas.
2. We will have improved not only our core businessprofitability but also will have dramatically bolsteredcorporate value through growth and expansion of
the entire Group.

3. We will have built a commanding competitive
position based on the Kurita Group’s proprietary
technologies. All Kurita products and services will
be backed up by sound theory and rigorous data,
ensuring superior quality and reliability.
4. We will have launched new businesses that areable to drive Group growth and expansion.
5. We will have developed strict compliance systems
and built relationships between the Kurita Group,
its employees and the community based ontransparency and fairness.

09
Kurita Water Industries Ltd.

Special Feature: New Medium-Term Management Plan—Growth 2008

Performance Targets and Key Strategies

Consolidated performance targets for the year ending March 31, 2009, are as follows:

Net sales ...............................................................................
Operating income ................................................................
Net income ...........................................................................
To realize the three-year vision outlined above andachieve the stated performance targets, the Kurita
Group is pursuing the following key strategies
under the G-8 plan:
Reinforcing Kurita’s firm foundation asa technology-oriented company
Under the G-8 plan, to realize our goal of becoming
an advanced water and environmental managementcompany, we recognize the necessity to support ouractivities with sound scientific theory and data. We
aim to base all facets of our business activities—theservices we provide, the safety and quality of our
products, our solution proposals and the reliabilityof our responses—on scientific judgment. This
includes continued striving for innovation in boththe theoretical and practical aspects of what we do.
Through these efforts, we are working to create
cutting-edge products and services and building ourcompetitive advantage. We believe this will enable
us not only to secure a sound earnings base but also
gain the trust and loyalty of our customers.

¥200.0 billion¥27.0 billion¥15.4 billion

confident this outsourcing business will be one of
the Group’s largest growth drivers over the courseof the G-8 plan.
As the Water Treatment Chemicals Businesshas generated steady income so far, we will now
concentrate on reinforcing intra-Group linkages
in water treatment chemicals, tool cleaning,
maintenance and soil remediation, and ourcustomer-focused operational structure. In doing so,
we are aiming to provide superior quality products
and services in an expedient manner.
By pursuing the strategies outlined above, by theyear ending March 31, 2009, we are projecting combined total sales from the Water Treatment Chemicals
Business and service businesses within the Water
Treatment Facilities Business to account for 80% ofconsolidated net sales.

Net Sales(Years ended or ending March 31)(Billionsof yen)240

Accelerating Kurita’s shift to a service-based
business model
The Group is working to accelerate the expansion ofits service businesses, which are a stable income
source and can serve as an engine for growth andprofitability.
Since its launch in 2002, the Ultrapure Water
Supply Business has expanded steadily, and, basedon the significant level of latent demand, we anticipate further growth. In response, we will continue
to invest aggressively in this business. We are

10
Kurita Water Industries Ltd.

200.0
180

173.7
63.0
54.5

120

80%

75%

76.1

96.4

60

0

43.1

40.6

2006

2009

Water Treatment Chemicals Business
Water Treatment Facilities Business (Service)
Water Treatment Facilities Business (Hardware)

Expanding Kurita’s global business operations
The Kurita Group also views overseas markets as a
key source of future growth. On a regional basis,
Asian markets are expected to exhibit the highest
growth rates, but we plan to invest ambitiously inthe development of our businesses in other regions
as well. To support growth in overseas markets, weare striving to develop globally competitive new
products and businesses.
By augmenting coordination among our Water
Treatment Chemicals Business, Water Treatment
Facilities Business and maintenance businesses, aswell as extending collaboration among Group
companies on a global scale, we are projecting overseas sales to comprise 15.5% of consolidated net
sales by the year ending March 31, 2009.
Overseas Sales Ratio(Years ended or ending March 31)(Billionsof yen)

240

200.0
180

173.7
21.8

31.0

15.5%

12.5%

120

151.9

169.0

2006

2009

60

0

Overseas sales
Domestic sales

Revamping Kurita’s organizational structure
To ensure implementation of the key strategies outlined above, in April 2006, Kurita Water Industries
revamped its organizational structure. The reforms
comprised three specific measures:
1. To speed up strategy implementation and clarify
responsibility for earnings, we introduced astructure that unifies all stages, from productdevelopment to production, to sales andmaintenance, for both water treatment chemicals
and water treatment facilities.

2. In our overseas businesses, we have establishedorganizational units responsible for controllingoverseas Group companies in both water treatment chemicals and water treatment facilities.
This move is aimed at making Kurita more
responsive to market changes and expediting
business expansion.
3. In the Water Treatment Facilities Business, we havecombined private and public sector businesses intoa single division in light of the decline in size of the
public sector business.
Reinforcing Kurita’s compliance functions
Under the G-8 plan, we express our commitment
to reinforce compliance functions. We believe
this is absolutely essential in building Kurita’strustworthiness through its capabilities relating towater and environmental management.
As well as reiterating the need for every employee
to comply with all laws and regulations, we areundertaking thorough staff training programs oncompliance issues to increase understanding of
our legal responsibilities throughout the Group. By
accumulating and reinforcing our efforts in this area,
we aim to gain public trust and grow into a Groupever more able to contribute significantly to thecommunities in which we operate.
We, the Kurita Group, are committed to upholding
and will continue to carry out our 2010 management
policy: “Through all our business activities, we strive
to build transparent and fair relationships with all
stakeholders—shareholders, customers, employees,
local communities and business partners.” We
believe this is an indispensable prerequisite for thesustainable development of any company.

11
Kurita Water Industries Ltd.

Review of Operations

Summary of Results
During the year ended March 31, 2006, in thedomestic market, sales of process treatment
chemicals for basic materials industries recorded
growth. This reflected high capacity utilization
during the period in the steel, oil refining, petrochemical, and pulp and paper industries. Kurita
also focused on proposals for wastewater treatment solutions, which fully utilize the Group’s
comprehensive strengths. Consequently, wastewater treatment chemicals, related equipment
and customized services all achieved robust
growth. In overseas markets, backed by solid
growth in the Asia region, sales increased at ahealthy pace.
On the cost side, rising crude oil prices pushed
up raw materials costs. In response, Kurita implemented a variety of cost-reduction measures tosecure profit margins, including manufacturing
efficiency improvements and optimization oflogistics.
As a result, segment orders received increased
3.4%, to ¥53,903 million, and sales rose 7.7%,
to ¥54,549 million, while operating income
climbed 7.1%, to ¥7,961 million.

Years ended March 31

Orders(Millions of yen)

46,572

46,95346,45047,51652,12053,90347,442

50,63754,54960,00048,00036,00024,00012,000Years ended March 31

Sales(Millions of yen)

45,70946,277

47,11660,00048,00036,00024,00012,000Years ended March 31(Millions of yen)

Operating Income and Operating Income Ratio

6,623

6,244

6,493

6,640

7,433

7,961

13.5

13.8

14.0

14.7

14.6

10,000

15
14.5

8,000

(%)

12

6,000

9

4,000

6

2,000

3

Years ended March 31

Selected Highlights

Kurita Water Industries Ltd.

Percentagechange2005¥46,191¥43,433+6.4%

Depreciation and amortization

1,608

1,465

+9.8

Capital expenditures

2,018

1,322

+52.6

Assets12

Millions of yen

2006

Responding to Customer Needs
For Kurita’s customers, which face intensifying
domestic and international competition, themost pressing issues are cost-cutting measuresat plants and environmental impact reduction.
By optimizing wastewater treatment, Kurita
contributes to solving such key issues faced bycustomers.
In response to customers seeking wastewater
treatment systems that will lower costs and reduce
environmental impact, Kurita is able to provide
systems that optimize the volume of wastewater
treatment chemicals used. This may involve, forexample, the use of inorganic flocculant in
combination with a chemical injection and dosing
system, which automatically controls chemicaldosage amounts based on wastewater quality andvolume. By adopting such a system, customers cansignificantly reduce the quantity of chemicals theyuse compared with a conventional system inwhich a fixed chemical dosage is used at regularintervals to treat wastewater. Kurita’s systems not
only reduce customers’ wastewater treatment
chemicals costs but also lower industrial waste
disposal costs, as the volumes of sludge-forming
chemicals are reduced. At the same time, oursystems contribute to lower environmental impact
through such benefits as more stable discharge
water quality and reduced volume of sludge tolandfill. Kurita has achieved a superior reputation
among customers by producing results ofthis kind in response to extremely demanding
expectations.
The type of solution outlined above leverages
Kurita’s comprehensive capabilities, including
the know-how of its Water Treatment Facilities
Business related to wastewater treatment.
Consequently, in this field, Kurita is able toprovide a level of value added unmatched byits competitors. Kurita can also provide this typeof high-value-added proposal in the form of a
blanket contract to reduce the various wastewater treatment costs of its customers. In thiscase, since it is possible to include a provision in
the contract whereby the benefits of cost reductions are shared with the customer, Kurita is able
to realize higher profitability compared with thestandard sales of wastewater treatment chemicals.
In our domestic operations, this is driving growthin similar contract-based businesses, while also
contributing to the fulfillment of one of our
key strategies—accelerating the shift to service
businesses.

industries as steel, oil refining, petrochemical, andpulp and paper. We expect these customers
to continue implementing measures to increase
productivity. Although there is the danger that
this may lead to downward pressure on water
treatment chemicals pricing, we believe it alsopresents many business opportunities for the
Kurita Group to provide solution proposals andcontribute to customers’ productivity improvements through its process treatment chemicals.
Furthermore, we are confident that customer
needs related to environmental impact reduction
will generate opportunities to differentiate theGroup from its competitors.
Our efforts to improve profit margins will focus
on such mainstay categories as boiler water treatment chemicals and cooling water treatment
chemicals as well as the expansion of customized
services.
On the organizational side, we have moved
to a unified structure comprising development,
technical services and sales functions. In particular,
for boiler water treatment chemicals, a high-valueadded product category, we have established a
specialist business unit responsible for driving
domestic sales expansion. Through such measures
we are aiming to increase market share and secure
profitability despite intense competition. We havealso set up a division within the Kurita head officeto supervise overseas business operations including
subsidiaries. This structure is designed to facilitate
flexible investment of management resources.
We anticipate the recent trend of rising raw
materials prices will continue through the year
ending March 31, 2007. To counter the effectsof this trend, we will work to realize further
efficiency gains in our manufacturing and logistics
to enhance profitability.

OutlookIn the year ending March 31, 2007, we forecast
capacity utilization at customers’ domestic facilities
to remain high, especially in such basic materials

13
Kurita Water Industries Ltd.

Review of Operations

Years ended March 31

Orders(Millions of yen)

108,406

93,53881,981

102,218

119,213130,007

99,377110,259

119,133

150,000
120,000
90,00060,00030,000Years ended March 31

Sales(Millions of yen)

107,725

96,401

94,512150,000
120,000
90,00060,00030,000Years ended March 31(Millions of yen)

Operating Income and Operating Income Ratio

9,195

4,537

5,730

6,845

8,515

(%)

9,349

10,000

10

8,000

8

6,000

6

4,000

4

2,000

2

Years ended March 31

Selected Highlights
Assets

14
Kurita Water Industries Ltd.

Millions of yen

2006

2005

¥124,280 ¥108,025

Percentagechange+15.0%

Depreciation and amortization

3,298

2,895

Capital expenditures

14,5195,383 +169.7+13.9

Summary of Results
In the year under review, in the electronics industry, orders and sales of ultrapure water production
systems recorded growth, driven by aggressive
capital investment among domestic FPD-related
manufacturers. In overseas markets, orders werestrong in South Korea and Taiwan. The Ultrapure
Water Supply Business—an outsourcing
business—steadily expanded, reflecting growing
customer needs in this area. Growth in the toolcleaning business also contributed to increased
sales and operating income in the electronics
industry.
In general industries, against a background ofrobust corporate performance in various basic
materials industries, water treatment facilities
orders increased from such sectors as steel, oil
refining, petrochemical and food processing.
In the soil remediation field, in addition toprojects related to land sales, the businessexpanded as projects involving factory sites
currently in operation began to increase.
However, in the public sector, as public works
budgets continued to be trimmed—leading tomarket shrinkage—and competition for projects
intensified, orders and sales declined andprofitability deteriorated.
As a result, segment orders received grew
9.1%, to ¥130,007 million, and sales rose 8.0%,
to ¥119,133 million, while operating income
climbed 9.8%, to ¥9,349 million.
Ultrapure Water Supply BusinessIn the Ultrapure Water Supply Business, Kurita
installs water treatment facilities—for which it
retains ownership—at the customer’s site, andthen operates and maintains these facilities tosupply the customer with ultrapure water. The
contracts on which these services are based are
long-term, usually between five and 10 years.
During this period, Kurita guarantees the quality

and volume of ultrapure water supplied, and thecustomer pays for the volume of ultrapure water
it uses each month. Up until now, the majority ofcustomers that have chosen to adopt this model
have been in the electronics sector, including
semiconductor, liquid crystal display (LCD) andplasma display panel (PDP) manufacturers.
In the past, Kurita’s business performance has
been significantly affected by cyclical fluctuations
in capital expenditure levels in the electronics
industry. The Ultrapure Water Supply Businessmodel insulates Kurita from such effects andprovides revenue stability over a long period.
For Kurita’s customers, the need for up-front
investment in water treatment facilities iseliminated. In addition, since Kurita provides
24-hour operation and maintenance of water
treatment systems, customers no longer needto employ and train their own water treatment
specialists.
This business model is based on a precise
understanding of customer needs, which isreflected in growing demand for the service.
Sales in the Ultrapure Water Supply Business are
expected to grow from ¥5.7 billion in the year
under review to ¥9.4 billion in the year ending
March 31, 2007. Since Kurita retains ownershipof the water treatment facilities used in thisbusiness, it applies stringent financial criteria to
its investment decisions as a means of ensuring
profitability. In the year under review, thisbusiness required capital investment amounting
to ¥11.9 billion, and for the year ending March 31,

2007, we are projecting capital investment
outlays totaling around ¥16 billion.
From Maintenance to Solutions
The reliable supply of pure water to production
facilities and the retention of normal wastewater
treatment functions have a direct impact on thestable operation of a customer’s factory.
Consequently, the maintenance of water
treatment facilities carries an extremely heavy
responsibility. Kurita’s sales engineers diagnose
the status of water treatment facilities andformulate both short- and long-term plans
encompassing component replacement cycles,
equipment maintenance and facility renovations.
These efforts are aimed at ensuring thecustomer’s factory continues to operate reliably
and efficiently.
Furthermore, through day-to-day maintenanceroutines, Kurita gains a firsthand understandingof water treatment-related issues faced by
the customer. This in turn enables Kurita topropose and implement appropriate solutions.
For example, in the crucial area of environmental
impact reduction, Kurita can provide energysavings proposals based on the selection ofefficient equipment, and implement wastereduction measures through improvements towastewater treatment systems. In these ways,
Kurita aims to build a high degree of trust with
its customers by providing a superior level ofvalue added.

Concept of Ultrapure Water Supply Business
Customer Plant

Supply ultrapure water
Payment of fees

• Ownership• Operation• Maintenance

KuritaUltrapure water production systems

15
Kurita Water Industries Ltd.

Review of Operations

OutlookIn the domestic electronics industry, during theyear ending March 31, 2007, in addition to FPD
manufacturers, we are projecting a continuation ofcapital investment to bolster production capacity
by manufacturers of FDP-related components andother electronic component makers. Within thisenvironment, we are predicting that semiconductor and FPD manufacturers will be a significant
source of growth for the Ultrapure Water Supply
Business. However, beyond these customer
categories, it seems likely there will be a temporary lull in large-scale investment, and, accordingly, we are taking a prudent view of domestic
demand for the ultrapure water production
system. In overseas markets, we are forecasting
robust demand to continue in South Korea,
Taiwan and China, leading to steady orders forwater treatment facilities. Based on the factors
mentioned above, our projections regarding theelectronics industry are for firm growth in orders
and sales, both in Japan and overseas.

16
Kurita Water Industries Ltd.

In general industries, we are assuming acontinuation in capital expenditure involving
the addition of new production capacity andrenewal of existing capacity in such basic
materials industries as steel, oil refining andpetrochemical. We also anticipate investment
targeting environmental impact reduction. In thesoil remediation business, we are forecasting
demand increases for projects stemming fromland sales and for projects involving plant sitesthat are currently in operation—leading tofurther expansion of this business. In the public
sector, we are projecting ongoing market
shrinkage. Against this background, in May 2006
Kurita Water Industries made the decision
to withdraw from all business involving theconstruction of human waste treatment facilities.
Consequently, we are anticipating a substantial
drop in orders for this category. With regard
to the operation and maintenance of existing
facilities, there is no change in our stance, as
these services will continue to be carried out by
our wholly owned subsidiary, Kuritaz Co., Ltd.
On the cost side of the equation, we will
implement a range of cost-reduction strategies,
including a drive for more streamlined facilities aswell as design efficiency. On the production side,
we will endeavor to strengthen our domestic
production cost competitiveness through suchmeasures as reinforcement of cost control foroutside contractors, which allow us to meetdemand during our busiest periods, and improvement of capacity at the Yamaguchi Plant, which
commenced operations in August 2005.
Through such strategies, we are aiming tobolster sales and operating income as well as
the operating income ratio for the entire Water
Treatment Facilities Business.

Research and Development

Kurita’s R&D activities are conducted principally

facilities in the semiconductor industry and environ-by the parent company’s Research andmental protection technologies, in anticipation of

Development Division and the technical develop-

future changes in environmental regulations. At thement departments of each operating division.

same time, we conducted R&D for a sustainable

Approximately 200 employees are involved in R&D,

society, including development of technologies foraccounting for around 5.5% of overall Group

wastewater reclamation and reusability and sludge

personnel. Total R&D expenses for the year ended

elimination. We also modified our water treatment

March 31, 2006, amounted to ¥4,213 million,

units, making them more compact, and redesigned

equivalent to 2.4% of net sales.

our water treatment systems from a custom-madeconfiguration to a standardized system. Key achieve-

Water Treatment Chemicals Businessments in this segment during the year under review

In this segment, we not only develop chemicals that

include the development of:meet customers’ needs in terms of conserving➤ Cleaning and conditioning technologies for ultra-

energy and resources, cutting costs and bolsteringpure water production systems that thoroughly

productivity, but also focus on reducing the environ-suppress the leaching of impurities from systemmental impact of water treatment by developing

components, such as a demineralizer, and the

new environment-friendly materials and non-chemical

world’s most advanced technology for detecting

water treatment processes. We also develop solution-

and analyzing trace amounts of heavy metals in

based technologies to support customized services

ultrapure water;in the Water Treatment Chemicals Business, as part

➤ An oil-containing wastewater treatment systemof our comprehensive water treatment managementthat uses bacterial waste degraders to digest

offerings.

grease and reduce waste; andMajor achievements in this segment during the➤ A flocculant control system for drinking water

year under review include the development of:treatment plants using a membrane system that

➤ An extremely effective non-zinc/non-phosphorus

automatically adjusts the flocculant solution

corrosion and scale inhibitor for cooling water

feed rate, thereby preventing contamination

systems in oil refineries and petrochemical plants,

caused by high concentrations of organic matter

which has a very low environmental impact;

in raw water.

➤ A scale inhibitor, a stickies control agent and a

Research and development expenses in theyield enhancer to raise the productivity of pulp

Water Treatment Facilities Business amounted toand paper manufacturing processes;¥2,194 million.

➤ A continuous quality monitoring system forsteam generation facilities; and➤ Pelletizing additives for the sintering process anda bulk density enhancer to raise the productivityof steel manufacturing processes.
Research and development expenses in the Water
Treatment Chemicals Business totaled ¥2,019 million.
Water Treatment Facilities Business
Kurita pursued ongoing R&D in such areas as ultrapure water production technologies for cutting-edge

17
Kurita Water Industries Ltd.

Promoting Environmental Sustainability

In March 2004, Kurita Water Industries formulated a Basic Policy regarding the promotionof environmental sustainability. In April 2004, we
further developed a three-pronged approach topromote environmental sustainability, which
comprises (1) responding to customer needs;(2) changing Kurita; and (3) changing society.
The first approach, responding to customer
needs, focuses on contributing to our customers’
efforts to promote environmental sustainability
through our business operations. Examples of ourachievements using this approach include:➤ A 100% recycle rate for ultrapure water usedin the LCD manufacturing process through awastewater reclamation system that reduces
municipal water usage volume on a factorywide basis;➤ The use of a sludge drying system that reduces
waste volume and converts waste to compost.
We have defined the unique environmental
benefits obtained through customers’ use of ourtechnologies and systems as “customer environ-

18
Kurita Water Industries Ltd.

mental improvements.” By quantifying andmanaging these improvements, we can devise
and implement strategies to further increase theenvironmental benefits.
The second approach focuses on changing
Kurita, which involves our own internal efforts
to improve environmental sustainability. Under
the slogans of “all business units” and“all employee participation,” we focus
on optimizing our manufacturing and logistics
systems for water treatment chemicals and water
treatment facilities to reduce CO2 emissions andwaste output as well as safely manage chemical
substances. Each year, we use the quantified
results of our efforts as the basis for revising oursystems, as we work to progressively expand thescope of our targets.
The third approach focuses on changing society
by contributing to fundamental solutions tosociety’s environmental issues. We aim to achieve
this by developing innovative new technologies
and businesses. In the year ended March 31,
2006, products and systems developed in linewith this approach include the following:➤ The development of a non-zinc/nonphosphorus water treatment chemical that will
reduce environmental impact;➤ An oil-containing wastewater treatment
system that uses bacterial waste degraders todigest grease and reduce waste.
From April 2006, we have applied our philosophyof promoting environmental sustainability throughthese three approaches to the entire Kurita
Group. Consequently, the measures previously
undertaken by individual Group companies
will now be carried out under a consistentGroupwide set of policies. Detailed results of ourenvironmental sustainability activities during theyear ended March 31, 2006, will be presented inour 2006 Environmental Report, which is due tobe published in October 2006.

Financial Section

Contents
Selected Financial Data

20

Management Discussion and Analysis (Consolidated)

21

Consolidated Balance Sheets

26

Consolidated Statements of Income

28

Consolidated Statements of Shareholders’ Equity

29

Consolidated Statements of Cash Flows30

Notes to Consolidated Financial Statements

31

Report of Independent Certified Public Accountants

44

19
Kurita Water Industries Ltd.

Selected Financial Data
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31

Millions of yen

2006

2005

2004

2003

2002

2001

For the year:
Net sales
Cost of sales
Selling, general and administrative expenses
Operating income
Income before income taxes
Net income
Capital expenditures
Research and development (R&D) expenses
Depreciation and amortization¥173,683
122,630
33,741
17,311
18,20010,51916,5374,213
4,906¥160,896
112,077
32,867
15,951
16,376
9,383
6,706
4,228
4,361

¥146,819
101,433
31,895
13,49014,918
8,444
9,718
4,289
3,872

¥141,628
97,846
31,474
12,307
10,263
5,476
6,198
4,484
3,307

¥142,678
99,03932,848
10,790
9,121
5,670
4,760
5,071
3,487

¥153,435
105,587
32,03015,817
14,727
8,366
3,079
4,743
3,268

At year-end:
Total current assets
Total current liabilities
Total shareholders’ equity
Total assets

125,23154,877
145,366
212,774

116,400
44,465
136,366
192,428

118,923
42,954
128,676
183,620

107,180
38,643
120,969
173,689

103,490
36,585
122,590
172,145

115,263
51,625
119,209
183,175

Amounts per share of common stock (yen):
Net income
Shareholders’ equity
Cash dividends applicable to the year

81.8
1,129.7
22.0

71.8
1,058.9
18.0

64.6
999.7
16.0

40.7
939.8
16.0

42.9
926.5
16.0

63.2
900.8
16.0

5.2
6.1
0.9
68.3
7.5

5.0
5.8
0.9
70.9
7.1

4.7
5.8
0.8
70.1
6.8

3.2
3.9
0.8
69.6
4.5

3.2
4.0
0.8
71.2
4.7

4.8
5.5
0.9
65.1
7.2

Ratios:Return on assets (ROA) (%)
Return on sales (%)
Total assets turnover (times)
Shareholders’ equity ratio (%)
Return on equity (ROE) (%)

20
Kurita Water Industries Ltd.

Management Discussion and Analysis (Consolidated)

Operating Environment
In the Kurita Group’s operating environment during the year ended March 31, 2006, theprivate sector market was characterized by robust demand for water treatment-related
products, facilities and services in the electronics industry. In water treatment for generalindustries, capacity utilization and capital expenditures remained at high levels, particularly inbasic materials industries. Meanwhile, the public sector market saw a continuation of severe
conditions, as public works budgets were trimmed and competition further intensified.

Performance
Net Sales
Consolidated net sales for the year ended March 31, 2006, rose 7.9% compared with theprevious fiscal year, to ¥173,683 million. This increase reflects higher sales in both the Water
Treatment Chemicals Business and Water Treatment Facilities Business segments.
In the Water Treatment Chemicals Business, we focused on reinforcing our customerdriven operating structure and expanding sales of products that closely fit customer needs.
As a result, the segment achieved a 7.7% increase in sales, to ¥54,549 million.
In the Water Treatment Facilities Business, increased sales in the electronics industry andbasic materials industries as well as higher sales from our soil remediation business more thanoffset a decline in sales in the public sector. These factors bolstered segment sales 8.0%, to¥119,133 million.

For the years ended March 31

Net Sales(Millions of yen) 142,678 141,628

160,000

120,000

80,00040,0002002

Gross Profit
Gross profit rose 4.6%, to ¥51,052 million, however, the gross profit margin edged down 0.9
percentage point, to 29.4%. This was mainly attributable to rising prices for water treatment
chemical raw materials and higher external contracting costs in the Water Treatment Facilities
Business accompanying an increase in production volume. Although we made improvements
to our purchasing practices and bolstered manufacturing and logistics efficiency, these costreduction measures were insufficient to offset the cost increases mentioned above.

146,819 160,896 173,683

200,000

2003

2004

2005

2006

For the years ended March 31

Operating Income(Millions of yen)

10,79012,307

13,49015,951

17,311

2002

2003

2004

2005

2006

20,00016,00012,000Operating Income
Operating income climbed 8.5%, to ¥17,311 million. Selling, general and administrative(SG&A) expenses grew 2.7%, to ¥33,741 million, primarily owing to a rise in personnel
expenses (salaries, provision for employees’ bonuses and retirement benefit expenses) accompanying higher gross profit. Thanks to the increase in net sales, the ratio of SG&A expenses to
net sales declined 1.0 percentage point, to 19.4%. This contributed to a 0.1 percentage point
improvement in the operating income margin, to 10.0%.

8,000

4,000

For the years ended March 31

Income before Income Taxes
Income before income taxes grew 11.1%, to ¥18,200 million. In addition to higher operating
income, other income grew ¥464 million, to ¥889 million. Significant items within this figure
included a ¥1,077 million increase in gain on sales of investments in securities and an
impairment loss amounting to ¥846 million.
Net Income
Mainly owing to the increase in income before income taxes, net income advanced 12.1%, to¥10,519 million. Net income per share rose from ¥71.76 to ¥81.76.

Net Income(Millions of yen)

5,670

5,476

8,444

9,383

10,519

2002

2003

2004

2005

2006

12,000

9,600

7,200

4,800

2,400

21
Kurita Water Industries Ltd.

Segment Information
For the years ended March 31(Millions of yen)

2006

2005

2004

2003

2002

Water Treatment Chemicals Business
Water Treatment Facilities Business
Total¥053,903
130,007¥183,910¥052,120
119,213¥171,334¥047,516
102,218¥149,735¥046,450
81,981¥128,431¥046,953
93,538¥140,492

Sales
Water Treatment Chemicals Business
Water Treatment Facilities Business
Total¥054,549
119,133¥173,683¥050,637
110,259¥160,896¥047,442
99,377¥146,819¥047,116
94,512¥141,628¥046,277
96,401¥142,678

Operating income
Water Treatment Chemicals Business
Water Treatment Facilities BusinessElimination or corporate
Total¥07,9619,349
0¥17,311¥07,4338,515
1¥15,951¥06,640
6,845
5¥13,490¥06,493
5,730
82¥12,307¥06,2444,537
8¥10,790

Orders (not included in the consolidated statements of income:shown for reference purposes only)

Water Treatment Chemicals Business
During the year under review, in the domestic market sales of our mainstay boiler water
treatment chemicals and cooling water treatment chemicals were flat, reflecting continued
customer efforts to rein in costs as well as escalating competition. In contrast, sales of process
treatment chemicals for a range of industries recorded growth, driven by high capacity utilization in such basic materials industries as steel, oil refining, petrochemicals, and pulp andpaper. We also focused on proposals for wastewater treatment solutions, which fully utilize
the Group’s comprehensive strengths. As a result, wastewater treatment chemicals, related
equipment and customized services all posted solid growth.
In our overseas operations, backed by strong economic growth in the Asia region, we
achieved a jump in sales of approximately 20%. The percentage of overseas net sales toconsolidated net sales reached 12.5%.
On the cost side, raw materials costs were pushed up by rising crude oil prices. In response,
Kurita implemented a variety of cost-reduction measures to secure profit margins, including
manufacturing efficiency improvements and optimization of logistics.
As a result, orders received in this segment increased 3.4%, to ¥53,903 million, and salesrose 7.7%, to ¥54,549 million. Segment operating income climbed 7.1%, to ¥7,961 million.
Water Treatment Facilities BusinessIn this segment, against a backdrop of strong capital expenditures in the electronics industry andthe basic materials sector, we focused on expanding our outsourcing businesses and providing
solutions in such areas as productivity enhancement and environmental impact reduction.
On the cost side, in the first half of the fiscal year, in response to an increasing backlog oforders and shorter delivery times, we increased our use of outside contractors, leading to atemporary jump in costs. In the second half of the fiscal year, however, through the move tofull operations at the Yamaguchi Plant and strengthened project cost management, production recovered to a steady level. In addition, we focused on a range of cost-cutting measures,

22
Kurita Water Industries Ltd.

including the production of more streamlined systems, an assessment of materials purchasing
and the use of more standardized designs.
As a result, orders received grew 9.1%, to ¥130,007 million, and sales rose 8.0%, to¥119,133 million. Segment operating income increased 9.8%, to ¥9,349 million.
Electronics Industry
In the domestic market, backed by aggressive capital investment among FPD manufacturers,
orders and sales of water treatment facilities—including ultrapure water production systems—
recorded growth. In overseas markets, orders for water treatment facilities increased in South
Korea and Taiwan, however, owing to the level of orders received in the previous period andthe lead times required to fulfill orders, sales declined. The Ultrapure Water Supply Business—an outsourcing business—steadily expanded as customer needs in this area grew. Although
our domestic maintenance business faced downward pricing pressure, the category achieved
sales growth. Sales by the tool cleaning business rose at a faster pace than our initial projections
thanks to efforts aimed at expanding our customer base.
As a result, orders received from the electronics industry jumped 20.3%, to ¥67.8 billion,
and sales climbed 13.2%, to ¥62.1 billion.
General Industries
In the fiscal year under review, driven by robust capital investment in basic materials industries
and our customer proposals in the area of wastewater solutions, orders grew from suchindustries as steel, oil refining, petrochemicals and food processing. In the soil remediation
business, in addition to projects related to land sales, operations expanded as projects
increased from large corporations undertaking reorganization of their production facilities.
Sales from such services as maintenance and chemical cleaning were also steady.
In the public sector, as public works budgets continued to be trimmed—leading to market
shrinkage—competition for projects related to new facilities further intensified. Consequently,
orders and sales declined and profitability deteriorated. In the area of maintenance and operations services, although we faced pricing pressure, sales remained relatively stable.
As a result, orders received from general industries edged down 1.0%, to ¥62.2 billion,
and sales increased 3.0%, to ¥57.0 billion.

Liquidity and Capital Resources
Financial Position
At fiscal year-end, total current assets amounted to ¥125,231 million, up ¥8,831 million compared with the previous fiscal year-end. Significant factors contributing to this rise included a¥5,956 million increase in notes and accounts receivable, trade, and a ¥3,368 million increasein marketable securities. The rise in notes and accounts receivable, trade, was primarily attributable to an increase in sales of water treatment facilities, while the increase in marketablesecurities was mainly the result of a transfer from investments in securities.
Total noncurrent assets—comprising total investments and long-term receivables; property,
plant and equipment, net; and other assets—amounted to ¥87,542 million, up ¥11,514 million. This was largely attributable to a ¥10,136 million rise in property, plant and equipment,
net, which mainly comprised investment in facilities for the Ultrapure Water Supply Business;
and a ¥2,550 million increase in investments in securities.
Total current liabilities stood at ¥54,877 million, up ¥10,412 million, stemming principallyfrom a ¥2,248 million rise in notes and accounts payable, trade; a ¥5,939 million increase in

As of March 31

Total Assets(Millions of yen) 172,145

173,689 183,620 192,428 212,774

250,000

200,000

150,000

100,000

50,000
2002

2003

2004

2005

2006

23
Kurita Water Industries Ltd.

As of March 31

Total Shareholders’ Equity andShareholders’ Equity Ratio(Millions of yen) 122,590 120,969 128,676 136,366 145,366 (%)

80

150,000
71.2

70.9

70.1

69.6

68.3

120,000

64

90,00048

60,00032

30,000

16
2002

2003

2004

2005

2006

Equity ratio

For the years ended March 31

Capital Expenditures andDepreciationand Amortization(Millions of yen)

16,53720,0009,718

16,000

2004

4,906

6,706

2003

Capital expenditures
Depreciation and amortization

4,361

2002

4,000

3,872

3,307

6,198
3,487

8,000

4,760

12,0002005

2006

accounts payable, other; and a ¥1,113 million rise in advances received. The increase in notes
and accounts payable, trade, was primarily a result of higher materials, outsourcing and othercosts associated with the increase in net sales. Although accounts payable, other, is presented
as a separate item in the consolidated balance sheets for the first time in the fiscal year underreview, at the previous fiscal year-end it was included within other current liabilities andamounted to ¥5,712 million. Accounts payable, other, stood at ¥11,651 million as of March 31,
2006, with the increase being mainly associated with purchases of plant and equipment for
use in the Ultrapure Water Supply Business.
Total long-term liabilities were up ¥748 million, to ¥11,233 million. Although accrued
employees’ retirement benefits decreased, deferred tax payable on revaluation of land rose
¥1,526 million, which was due to a change in the method of presentation for this item fromthe period under review. Previously, deferred tax liabilities on land revaluation had beenpresented on a net basis, offset by deferred tax assets on land revaluation. However, from thefiscal year under review, deferred tax payable on revaluation of land is presented separately ona gross basis, and deferred tax assets on revaluation of land has been transferred to unrealized gains on revaluation of land.
Total shareholders’ equity at fiscal year-end amounted to ¥145,366 million, up ¥9,000
million compared with the previous fiscal year-end. This was mainly attributable to a ¥7,032
million rise in retained earnings stemming from the ¥10,519 million in net income, and a¥1,806 million increase in unrealized gains on available-for-sale securities.
At March 31, 2006, total assets amounted to ¥212,774 million, up ¥20,346 million compared with the end of the previous fiscal year. Shareholders’ equity per share increased to¥1,129.74, from ¥1,058.90. Shareholders’ equity ratio declined 2.6 percentage points, from
70.9% to 68.3%.
Capital Expenditures
The Kurita Group enjoys a healthy financial position and is capable of generating ample cash
flows from its operating activities. Therefore, the Group believes that it has sufficient funds
to meet its own future working capital and capital investment needs and to maintain Group
growth. Consequently, in principle, external fund-raising in not necessary.
In the fiscal year under review, the Group carried out capital expenditures totaling ¥16,537
million, up ¥9,831 million. This mainly comprised capital investment related to operations andthe construction of an additional research building at the Kurita Global Technology Centeraccompanying the integration of our R&D facilities. The Group invested ¥2,018 million in its
Water Treatment Chemicals Business, mainly comprising capital investment in its boilerbuild–own–operate (BOO) business and investment relating to the reorganization of its water
treatment chemical production plant. The Group invested ¥14,519 million in its Water
Treatment Facilities Business, principally relating to facilities for its Ultrapure Water Supply
Business and for expansion of its tool cleaning facilities.

Cash FlowsNet cash provided by operating activities amounted to ¥13,856 million, an increase of ¥5,559
million compared with the previous period. Factors bolstering operating cash flows included
income before income taxes of ¥18,200 million, depreciation and amortization totaling ¥4,906
million and increase in trade payables amounting to ¥2,314 million. Factors constraining
operating cash flows included increase in trade receivables amounting to ¥4,182 million
accompanying the increase in net sales, as well as income taxes paid totaling ¥6,981 million.

24
Kurita Water Industries Ltd.

Net cash used in investing activities totaled ¥12,318 million, an increase of ¥1,649 million
compared with the previous fiscal year. This rise stemmed mainly from payments for purchaseof marketable securities and investments in securities exceeding proceeds from sales andredemption of marketable securities and investments in securities by ¥1,697 million, andpayments for purchase of property, plant and equipment amounting to ¥10,962 million.
Net cash used in financing activities amounted to ¥2,516 million, up ¥94 million comparedwith the previous fiscal year. This was primarily owing to cash dividends paid totaling ¥2,572
million.
As a result, cash and cash equivalents at end of year stood at ¥29,871 million, a decline of¥494 million compared with a year earlier.

Risk Factors
There are a number of major risk factors that can potentially affect the Kurita Group’s financial performance. These include economic trends, the status and capacity utilization rates ofcustomers’ water treatment facilities, public sector investment budgets, raw materials prices
and competition from other companies in the same industry. Specific factors that can affectour performance, by segment, are described below.
In the Water Treatment Chemicals Business, our operations are affected by demand fluctuations determined by the plant capacity utilization rates of our customers in the steel, oil
refining, petrochemicals, and pulp and paper industries. In the Water Treatment Facilities
Business, our operations are influenced mainly by demand fluctuations resulting from capital
expenditures in electronics industries, a major source of demand.
In addition, sales and earnings in the Water Treatment Facilities Business are generally
concentrated in the second half of the fiscal year. This reflects revenue accounting based on
work-in-progress standards and the completion of large-scale projects, which are weighted
disproportionately toward the end of the fiscal year, causing operating income from suchprojects to be concentrated in the second half of the fiscal year.

Sales and Operating Income by Segment
For the years ended March 31(Millions of yen)

2006

2005

2004

1st Half

2nd Half

Total

1st Half

2nd Half

Total

1st Half

2nd Half

Total

Water Treatment Chemicals
Business
Sales
Operating income

26,521
4,008

28,0283,953

54,5497,961

24,7603,951

25,877
3,482

50,637
7,433

23,645
3,273

23,7973,367

47,442
6,640

Water Treatment Facilities
Business
Sales
Operating income

45,978800

73,155
8,549

119,133
9,349

46,4092,493

63,8506,022

110,259
8,515

40,936843

58,441
6,002

99,377
6,845

Foreign exchange risk
For the Kurita Group, overseas sales represent a relatively small portion of net sales.
Consequently, we believe the potential impact of foreign exchange risk on Group operating
results is low.

25
Kurita Water Industries Ltd.

Consolidated Balance Sheets
Kurita Water Industries Ltd. and Consolidated Subsidiaries
As of March 31, 2006 and 2005

Millions of yen

AssetsThousands of
U.S. dollars (Note 1)

2006

2005

2006

¥030,107
77,072
(125)
6,162
8,070
2,170
1,773
125,231¥030,679
71,116
(156)
2,794
8,075
2,038
1,852
116,400$0,256,295
656,099(1,064)52,456
68,69818,47315,093
1,066,068

Investments and long-term receivables:
Investments in securities (Note 9)
Investments in nonconsolidated subsidiaries and affiliates
Deferred tax assets (Note 13)
Deferred tax assets on revaluation of land
Other investments
Allowance for doubtful accounts
Total investments and long-term receivables

23,179
2,582
886
—
4,151
(111)
30,687

20,629
2,352
1,775
176
4,194
(133)
28,993

197,318
21,9807,542—
35,337(945)
261,233

Property, plant and equipment, at cost:
Land (Note 5)
Buildings and structures
Machinery and equipment
Construction in progress
Other facilities
Total
Accumulated depreciation
Property, plant and equipment, net

13,74536,05925,005
2,115
10,231
87,155(33,163)
53,991

14,48331,658
17,110
1,734
10,04775,032(31,178)
43,855

117,009306,963
212,863
18,00587,095
741,934(282,310)
459,615

2,863¥212,774

3,180¥192,428

24,372$1,811,305

Current assets:
Cash and time deposits (Note 8)
Notes and accounts receivable, trade
Allowance for doubtful accounts
Marketable securities (Note 9)Inventories (Note 10)
Deferred tax assets (Note 13)
Other current assets
Total current assets

Other assets
Total assets
The accompanying notes are an integral part of these statements.

26
Kurita Water Industries Ltd.

Thousands of
U.S. dollars (Note 1)

Millions of yen

Liabilities and Shareholders’ Equity
Current liabilities:
Current portion of long-term borrowings (Note 12)
Notes and accounts payable, trade
Accounts payable, other (Note 7)
Income taxes payable
Advances received
Accrued employees’ bonuses
Allowance for product warranty
Other current liabilities (Note 7)
Total current liabilities
Long-term liabilities:
Long-term borrowings (Note 12)
Accrued employees’ retirement benefits (Note 14)
Accrued retirement benefits for directors and corporate auditors
Deferred tax payable on revaluation of land
Other long-term liabilities
Total long-term liabilities
Total liabilities
Minority interests in consolidated subsidiaries
Contingent liabilities (Note 17)
Shareholders’ equity:
Common stock, 2006 and 2005
Authorized: 531,000,000 shares
Issued: 2006—132,800,256 shares
2005—132,800,256 shares
Additional paid-in capital
Retained earnings (Notes 4 and 18)
Unrealized gains on revaluation of land (Note 5)
Unrealized gains on available-for-sale securities
Foreign currency translation adjustment
Treasury stock, at cost:
2006—4,127,639 shares, 2005—4,163,793 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity

2006

2005

2006

¥000,320
30,411
11,651
4,376
2,055
2,362
739
2,960
54,877¥000,085
28,163
—
3,924
942
2,060
992
8,297
44,465$0,002,724
258,883
99,18337,252
17,494
20,107
6,291
25,198467,158

180
8,261
488
1,526
777
11,233
66,111

270
8,689
704
—
821
10,48554,951

1,532
70,324
4,154
12,991
6,614
95,624
562,790

1,295

1,110

11,024

13,45011,426
122,350
(740)
3,873
(200)
150,159

13,45011,409115,318
(257)
2,067
(790)
141,197

114,497
97,267
1,041,543(6,299)32,970(1,703)
1,278,275(4,793)
145,366¥212,774(4,830)136,366¥192,428(40,802)
1,237,473$1,811,305

27
Kurita Water Industries Ltd.

Consolidated Statements of Income
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004

œThousands of
U.S. dollars (Note 1)

Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 6)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Impairment loss
Gain on sales of investments in securities
Equity in earnings of nonconsolidated subsidiaries
and affiliates
Loss on sales of properties
Loss on write-down of properties
Loss on write-down of inventories
Foreign exchange losses
Other, net

Income before income taxes
Income taxes:
Current
Deferred

Minority interests in earnings of consolidated subsidiaries
Net income

2006

2005

2004

2006

¥173,683
122,630
51,052
33,741
17,311¥160,896
112,077
48,81932,867
15,951¥146,819
101,433
45,38631,895
13,490$1,478,531
1,043,926
434,596287,231
147,365

451
(41)
(846)
1,205

356
(38)
—
128

409
(27)
—
1,414

3,839
(349)
(7,202)
10,258

266
(150)
(279)
(23)
—
306
889

244
—
(477)
(90)
—
301
425

208
—
(499)
—
(151)
74
1,428

2,264
(1,277)(2,375)
(196)
—
2,605
7,568

18,20016,376

14,918

154,933

7,395
100
7,496

6,603
234
6,838

6,089
257
6,347

62,952851
63,812

184¥010,519

154¥009,383

126¥008,444

1,566$0,089,546

2006

2005

2004

¥81.7622.00¥71.7618.00¥64.5716.00

Yen

Per share of common stock:
Net income
Cash dividends applicable to the year
The accompanying notes are an integral part of these statements.

28
Kurita Water Industries Ltd.

U.S. dollars (Note 1)

2006

$0.70
0.19

Consolidated Statements of Shareholders’ Equity
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004

Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2004

2006

Common stock:
Beginning of year
End of year

¥013,450
13,450¥013,450
13,450¥013,450
13,450$0,114,497
114,497

Additional paid-in capital:
Beginning of year
End of year

¥011,409
11,426¥011,398
11,409¥011,398
11,398$0,097,123
97,267¥115,318
10,519¥108,180
9,383¥101,637
8,444$0,981,680
89,546

—

93

—

—

(724)
(2,572)(164)—(2,185)(148)

278(2,058)(118)(6,163)(21,895)(1,396)(14)(11)¥122,350—(4)¥115,318—(3)¥108,180

(119)
(94)
$1,041,543

Retained earnings:
Beginning of year
Net income for the year
Increase of nonconsolidated subsidiaries and relatedcompanies applying the equity method
Reversal of unrealized (losses) gains on revaluationof land (Note 5)
Cash dividends paid
Bonuses to directors and corporate auditors
Decrease due to change in scope of consolidation (net ofinclusion and exclusion of consolidated subsidiaries)
Other
End of year
The accompanying notes are an integral part of these statements.

29
Kurita Water Industries Ltd.

Consolidated Statements of Cash Flows
Kurita Water Industries Ltd. and Consolidated Subsidiaries
For the years ended March 31, 2006, 2005 and 2004

Thousands of
U.S. dollars (Note 1)

Millions of yen

I. Cash flows from operating activities:
Income before income taxes
Depreciation and amortization
Impairment loss
Decrease in allowance for employees’ retirement benefits
Gain on sales of investments in securities
Equity in earnings of nonconsolidated subsidiaries and affiliates
Interest and dividend income
Interest expenses
Payments of bonuses to directors and corporate auditors
Increase in accrued employees’ bonus (Note 7)(Decrease) increase in other allowances, accrual andnon-cash items, net (Note 7)
Change in assets and liabilities:
Increase in trade receivables
Decrease (increase) in inventories
Increase in trade payables
Others, net
Interest and dividends received
Interest paid
Income taxes paid
Others, net
Net cash provided by operating activities
II. Cash flows from investing activities:
Decrease (increase) in time deposits, net
Payments for purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchase of marketable securities and investments
in securities
Proceeds from sales and redemption of marketable securities
and investments in securities
Others, net
Net cash used in investing activities
III. Cash flows from financing activities:
Increase (decrease) in short-term debt, net(Decrease) increase in long-term debt, net
Cash dividends paid
Cash dividends paid to minority interests in consolidated subsidiaries
Contributions from minority interests in consolidated subsidiaries
Payments for purchase of treasury stock, net
Others, net
Net cash used in financing activities
IV. Effect of exchange rate changes on cash and cash equivalents
V. Net (decrease) increase in cash and cash equivalents
VI. Cash and cash equivalents at beginning of year (Note 8)VII. Cash and cash equivalents of newly consolidated subsidiaries,
net of excluded subsidiaries from consolidation
VIII. Cash and cash equivalents at end of year (Note 8)
The accompanying notes are an integral part of these statements.

30
Kurita Water Industries Ltd.

2006

2005

2004

2006

¥18,200
4,906
846
(447)
(1,205)
(266)
(452)
41
(180)
238

¥16,376
4,361
—
(463)
(128)
(244)
(356)
38
(138)
—

¥14,918
3,872—(2,317)(1,414)
(208)
(409)
27
(118)
—

$154,933
41,764
7,202(3,805)(10,258)(2,264)(3,848)349(1,532)
2,026

(196)

235

510

(1,669)(4,182)
156
2,314
325
20,096589(43)(6,981)
195
13,856(4,494)(1,375)848(334)
14,323424(36)(6,479)65
8,297(6,793)
(442)
2,995
308
10,927482(27)(5,829)20
5,574(35,601)
1,328
19,6992,767
171,073
5,014(366)(59,428)
1,660
117,9549(10,962)817(1,924)(5,905)100(76)(8,364)
1,183

77(93,317)
6,955(14,721)(13,134)(2,412)(125,317)

13,024(486)(12,318)

10,554(361)(10,669)

10,687(1,166)(146)

110,871(4,137)(104,861)

220(84)(2,572)
(106)
38
(11)
—
(2,516)(60)(125)(2,185)
(42)
—
(10)
—
(2,422)—346(2,057)
(32)
—
(4)
28
(1,720)

1,873
(715)
(21,895)
(902)
323
(94)
—
(21,418)173(804)
30,36522(4,772)35,137(127)
3,580
31,507

1,473(6,844)258,492310¥29,871—¥30,36550¥35,137

2,639$254,286

Notes to Consolidated Financial Statements
Kurita Water Industries Ltd. and Consolidated Subsidiaries

1. Basis of presenting consolidated financial statements
Kurita Water Industries Ltd. (the“Company”) and its domestic subsidiaries maintain their books of account and prepare theirfinancial statements in accordance with accounting principles and practices generally accepted in Japan, while its foreignsubsidiaries maintain their books of account and prepare their financial statements in conformity with those of the countriesof their domicile. Certain accounting principles and practices generally accepted in Japan are different from International
Financial Reporting Standards and standards in other countries in certain respects as to application and disclosure requirements. Accordingly, the accompanying consolidated financial statements are intended for use by those who are informed
about Japanese accounting principles and practices.
The accompanying consolidated financial statements, prepared in accordance with accounting principles and practices
generally accepted in Japan, were filed with the Japanese Ministry of Treasury and the Tokyo Stock Exchange as required by
the Securities and Exchange Law of Japan.
Certain reclassifications of accounts and modifications have been made in the accompanying consolidated financial
statements to facilitate understanding by readers outside Japan. These reclassifications and modifications have no effecton net income or shareholders’ equity.
All figures in the consolidated financial statements and notes are stated in millions of Japanese yen by discarding fractionalamounts of less than ¥1 million. As a result, the totals shown in the consolidated financial statements and notes in yen do
not necessarily agree with the sum of the individual amounts.
The translation of yen amounts into U.S. dollar amounts is included solely for the convenience of readers and has been
made for 2006, as a matter of arithmetical computation only, at the rate of ¥117.47 to US$1, the prevailing rate on theTokyo Foreign Exchange Market on March 31, 2006. The translation should not be construed as a representation that yen
have been, could have been or could in the future be converted into U.S. dollars at the above or any other rate.
2. Consolidation policies(1) Scope of consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.
Number of consolidated subsidiaries: 34 (31 for 2005)
Names of principal consolidated subsidiaries: Kurita Engineering Co., Ltd., Kuritaz Co., Ltd., and Kuritec Service Co. Ltd.
In the year ended March 31, 2006, 4 companies (Kurita Water Industries (Suzhou) Ltd., Aoi Industries Co., Ltd.,
Nippon Fine Co., Ltd., and San Kako Co., Ltd., which were accounted for by the equity method) were newly consolidated because the companies have become material to the consolidated financial statements of the Company.
Name of principal nonconsolidated subsidiary: Kurita Sogo Service Co., Ltd.
All the nonconsolidated subsidiaries are those subsidiaries whose combined assets, net sales, net income andretained earnings in the aggregate are not significant in terms of the consolidated financial statements.
(2) Revaluation of assets and liabilities of the consolidated subsidiaries in the consolidation process
In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to the minority shareholders, are evaluated using the fair value at the time the Company acquired control of therespective subsidiaries.
(3) Application of equity methoda) The nonconsolidated subsidiaries and related companies applying the equity method and the name of the principal
company are as follows:
Number of nonconsolidated subsidiaries applying equity method: 2
Number of related companies applying equity method: 5Name of principal company: Kurita Sogo Service Co., Ltd.

31
Kurita Water Industries Ltd.

b) The nonconsolidated subsidiaries and related companies not applying the equity method (Kurita Chemicals Tokai Ltd.)
were excluded from the scope of the equity method, due to the minimal impact to net income (equity share) andretained earnings (equity share) of the consolidated financial statements, and are considered immaterial as a whole.
c) Adjustments were made to the financial statements of the companies applying the equity method whose fiscal yearends were not identical to the Company.
(4) Fiscal year of consolidated subsidiaries
The fiscal year of Kurita (Singapore) Pte. Ltd., Kurita do Brasil LTDA., Kurita America Inc., Kuritec Europe GmbH, Kurita
Europe GmbH, Kurita Water (Malaysia) Sdn. Bhd., Kurita (Taiwan) Co., Ltd., Kurita-GK Chemical Co., Ltd., Kurita Water
Industries (Dalian) Co., Ltd., P.T. Kurita Indonesia, Kurita Water Industires (Suzhou) Ltd., Hansu Technical Service Ltd.,
Kuritec Singapore Pte. Ltd. and Kuritec (Shanghai) Co., Ltd., ended December 31, 2005. Those financial statements
were used for consolidation purposes. However, material transactions that have occurred during the period from January 1,
2006 to March 31, 2006, have been adjusted for consolidation purposes.
3. Significant accounting policies(1) Valuation basis and method
Available-for-sale securities
Items that have market price: Evaluated at fair value at the balance sheet date, with resulting unrealized holding
gains and losses reported as a separate component of shareholders’ equity (cost of sold securities is computed by
the moving-average method)
Items that have no market price: Cost computed by the moving-average method
Inventories
The moving-average method (except for work in process whose costs are determined by the specific identification
method)(2) Depreciation method of property, plant and equipment
The declining-balance method for the Company and its domestic consolidated subsidiaries (except for buildings, notincluding auxiliary facilities, acquired on and after April 1, 1998, for which the straight-line method is applied) andstraight-line method for foreign consolidated subsidiaries:
The estimated useful lives of these assets are as follows:
Buildings and structures
2–65 years
Machinery and equipment
2–13 years(3) Impairment of long-lived assets
On August 9, 2002, the Business Accounting Council of Japan issued a new accounting standard entitled “Statementof Opinion on the Establishment of Accounting Standards for Impairment of Fixed Assets.” Further, on October 31,
2003, the Accounting Standards Board of Japan issued Financial Accounting Standards Implementation Guidance No.
6, “Application Guidance on Accounting Standards for Impairment of Fixed Assets.” Effective as of March 31, 2006,
the Company adopted these new accounting standards for impairment of fixed assets.
As a result of adopting the new accounting standards, income before income taxes decreased by ¥846 million($7,202 thousand) for the year ended March 31, 2006, compared with what would have been recorded under theprevious accounting method. Accumulated impairment losses are directly deducted from the values of the relevant
assets in accordance with the revised consolidated financial statement rules.
(4) Allowances and accruals
Accrued employees’ bonuses:
The Company and its domestic subsidiaries accrue the amount based on the anticipated bonus payments to employees.

32
Kurita Water Industries Ltd.

Accrued employees’ retirement benefits:
Accrued employees’ retirement benefits are recorded based on the estimated projected benefit obligation and fairvalue of the pension assets at the balance sheet date. Mathematical variances are subject to amortization over a
period of 1–2 years from the year when they are incurred.
(5) Basis used for translating material assets and liabilities in foreign currency into Japanese yen
Monetary assets and liabilities shown in foreign currency are translated using the spot exchange rate shown at the endof the fiscal year, and the differences are recorded as foreign exchange gains or losses. Also, foreign subsidiaries’ assets
and liabilities are translated using the spot exchange rate at year-end; income and expenses are translated using the
average exchange rate; and are a separate component of shareholders’ equity.
(6) Leases
Finance leases other than those that are deemed to transfer the ownership of the leased assets to lessees are accounted
for by the same method as that of operating leases.
(7) Earnings per share
Earnings per share are computed using the weighted-average number of common shares and dilutive potential commonshares outstanding.
(8) Consumption taxes
Consumption taxes are accounted for separately from transaction prices and are not reflected in the consolidated
statements of income.
(9) Amortization of goodwill
The consolidation adjustment is amortized using the three-years straight-line method. However, if the amount isimmaterial, it is expensed in the period that it is incurred.
(10) Derivatives transactions
When necessary, the Company enters into forward currency contracts to hedge the risk of future foreign exchange rate
fluctuations related to monetary obligations denominated in foreign currencies. These are basically conducted within therange of ordinary business transactions denominated in foreign currencies. The Company believes that the risk of counterparty default is negligible because its forward currency contracts are conducted with highly creditworthy Japanesebanks. In addition, transactions in forward currency contracts are executed and managed by the finance and accounting
department on a contract-by-contract basis after they have been approved by prescribed internal procedures.
(11) Cash and cash equivalents
Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits
withdrawable on demand and short-term investments with an original maturity of three months or less and subject toa minor risk of fluctuations in value.
4. Appropriation of retained earnings
The accompanying consolidated statements of shareholders’ equity reflect the appropriations of retained earnings of theCompany in the year in which the annual shareholders meet and approve the appropriations.
5. Unrealized gains on revaluation of land
The Company carried out a revaluation of land for business use in accordance with the Land Revaluation Law (enacted on
March 31, 1998). The revaluation difference is stated as “Unrealized gains on revaluation of land” in the shareholders’equity account, net of taxes. The tax equivalent is stated as deferred tax assets or liabilities in long-term liabilities.
When any revalued land is sold, the related unrealized gain or loss on revaluation of land is transferred to retained earnings.

33
Kurita Water Industries Ltd.

Revaluation method: The revaluation of land was computed in accordance with Article Two, Item One of the Land
Revaluation Law Enforcement Order.
Revaluation date: March 31, 2002
Difference between fair market value of the land at fiscal year-end and the carrying value after land revaluation: ¥673 million(US$5,729 thousand)
6. Research and development expenses
Research and development expenses included in selling, general and administrative expenses are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

2004

2006

¥4,213¥4,228¥4,289$35,864

7. Changes in disclosure(1) Due to the fact that “Accounts payable, other” had exceeded 5/100 of “Total liabilities and shareholders’ equity,” it
was classified separately from “Other current liabilities” in the year ended March 31, 2006. “Accounts payable, other”
amounted to ¥5,712 million in the previous fiscal year.
(2) Due to their growing importance, “Increase in accrued employees’ bonus” was classified separately from “Increase(decrease) in other allowances, accrual and non-cash items, net” in the year ended March 31, 2006. “Increase in accrued
employees’ bonus” amounted to (¥112) million in the previous fiscal year.
8. Reconciliation between cash and cash equivalents
Reconciliation between the cash and cash equivalents in the consolidated statements of cash flows and the consolidatedbalance sheet items is as follows:
Thousands of
U.S. dollars

Millions of yen

Cash and time deposits
Time deposits having original maturity ofmore than three months
Cash and cash equivalents

34
Kurita Water Industries Ltd.

2006

2005

2004

2006

¥30,107¥30,679¥35,512$256,295(236)¥29,871(313)¥30,365(374)¥35,137(2,009)$254,286

9. Marketable securities and investment securities(1) Available-for-sale securities with fair value at March 31, 2006 and 2005, are summarized as follows:
Millions of yen
At March 31, 2006

Book value exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Book value not exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Total

Acquisition cost

Book value

Difference¥08,869¥15,434¥6,564

799
300
2,999
12,969

800
301
2,999
19,535

0
1
0
6,566

17

15

(1)

3,200
4,579
—
7,797
¥20,766

3,192
4,514
—
7,723
¥27,259

(7)
(64)
—
(73)
¥6,492Millions of yen
At March 31, 2005

Book value exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Book value not exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Total

Acquisition cost

Book value

Difference¥05,445¥08,922¥3,476

2,399
1,641
1,999
11,487

2,401
1,645
1,999
14,968

1
4
0
3,481

1,348

1,321

(26)

—
4,055
—
5,403
¥16,891

—
4,049
—
5,371
¥20,340

—
(5)
—
(32)
¥3,44935
Kurita Water Industries Ltd.

Thousands of U.S. dollars
At March 31, 2006

Acquisition cost

Book value

Difference$075,500$131,387$55,878

6,802
2,554
25,530110,403

6,810
2,562
25,530166,29809
055,895

145

128

(9)

27,241
38,980—66,374$176,777

27,17338,427—65,744$232,051

(60)
(545)
—
(621)
$55,265

Book value exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Book value not exceeding acquisition cost:
StocksBonds:
National and local government bonds
Corporate bonds
Other
Subtotal
Total(2) Available-for-sale securities sold during the years ended March 31, 2006, 2005 and 2004, are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Sales amount
Total gains on sales
Total losses on sales

2005¥2,460
1,205
—

¥210
148
—

2004

2006

¥2,222
1,414—$20,942
10,258—(3) The schedule of redemption for available-for-sale securities with maturity at March 31, 2006 and 2005, is summarized
as follows:
Millions of yen
March 31, 2006

Bonds:
National and local government bonds
Corporate bonds
Other
Total

36
Kurita Water Industries Ltd.

Within1 year1 to 5 years¥2,398763
2,999¥6,162¥1,594
4,052—¥5,647

Thousands of U.S. dollars
March 31, 2005

Within1 year

¥

—
768
1,999
¥2,768March 31, 2006

1 to 5 years

Within1 year1 to 5 years¥2,401
4,927—¥7,328$ 20,414
6,495
25,530$52,456$13,569
34,494—$48,072

(4) Available-for-sale securities with no market priceThousands of
U.S. dollars

Millions of yen

Available-for-sale securities:
Non-public company(excluding over-the-counter bulletin board)

2006

2005

2004

2006

¥2,082¥3,082¥3,075$17,724

10. Inventories
Inventories at March 31, 2006 and 2005, consist of the following:Thousands of
U.S. dollars

Millions of yen

Finished products
Raw materials
Work in process
Total

2006

2005

2006

¥1,5081,090
5,471¥8,070¥1,438972
5,664¥8,075$12,837
9,279
46,574$68,698

11. Impairment loss
Place

Atsugi-shi, Kanagawa

PurposeCategory

Idle assets

Buildings and land

The Company categorizes business assets by type of business structures, and assets used for the purpose of leases and idle
assets without a specific future use are categorized by individual property type. Assets for business and leasing assets are notsubject to impairment loss for the year ended March 31, 2006. However, due to a restructure of the research and development divisions, Kurita Technology Center, the previous Corporate Research & Development Center (Atsugi-shi, Kanagawa)
was taken over and integrated into Kurita Global Technology Center (Shimotsuga-gun, Tochigi). As a result, Kurita
Technology Center in Atsugi-shi, Kanagawa became an idle asset. Due to substantial declines in the fair market value ofland and buildings, book values are written down to the recoverable amount, and such write-downs are recorded as an
impairment loss of ¥846 million ($7,202 thousand), of which buildings and structures accounted for ¥522 million ($4,444
thousand), land for ¥297 million ($2,528 thousand) and other for ¥27 million ($230 thousand). Recoverable amounts forrelevant assets are measured at their net selling price and evaluated in accordance with real estate appraisal standards.
12. Long-term borrowings
Long-term borrowings at March 31, 2006 and 2005, are summarized as follows:
Thousands of
U.S. dollars

Millions of yen

2006

Loan from banks at interest rates from 4.5% to 4.6%
Less current portion
Total

¥264
(84)
¥180

2005

¥355
(85)
¥270

2006

$2,247(715)$1,53237
Kurita Water Industries Ltd.

13. Income taxes
Significant components of the deferred tax assets and liabilities are as follows:
Thousands of
U.S. dollars

Millions of yen

Deferred tax assets:
Excess provision for accrued employees’ retirement benefits
Excess provision for accrued bonuses to employees
Accrued enterprise taxes not deductible
Accrued retirement benefits for directors and corporate auditors
Excess provision of allowance for product warranty
Excess portion of design expenses
Unrealized gains on sales of property, plant and equipment
Excess depreciation of property, plant and equipment
Devaluation loss on property, plant and equipment
Impairment loss
Loss on write-down of golf club membership
Other
Subtotal
Valuation allowances
Total deferred tax assets
Deferred tax liabilities:
Capital gain on properties deferred for tax purposes
Valuation gain on available-for-sale securities
Estimated income taxes pertaining to retained earningsof overseas consolidated subsidiaries
Other
Total deferred tax liabilities
Deferred tax assets, net

2006

2005

2006

¥3,304
901
289
189
286
291
423
592
—
343
129
611
7,363
(366)
6,996

¥3,080
827
325
280
395
196
433
282
287
—
139
535
6,785
(310)
6,474

$28,126
7,670
2,460
1,609
2,435
2,477
3,601
5,040
—
2,920
1,098
5,201
62,680(3,116)59,556(757)(2,634)(867)(1,409)(6,444)(22,423)(546)—(3,939)¥3,057(379)(4)(2,660)¥3,813(4,648)—(33,532)$26,024

14. Retirement benefits and pension plans(1) The Company and 23 consolidated subsidiaries provide lump-sum retirement benefits or qualified pension plans as
defined benefit pension plans; moreover, the Company and 3 domestic consolidated subsidiaries have both plans, and7 domestic consolidated subsidiaries have only qualified pension plans.
(2) Benefit obligation:
Millions of yen

Retirement benefit obligation
Fair value of pension plan assets
Unfunded retirement benefit obligation
Unrecognized actuarial (gain) loss
Accrued employees’ retirement benefits

38
Kurita Water Industries Ltd.

Thousands of
U.S. dollars

2006

2005

2006

¥(23,195)
15,059(8,135)(125)¥0(8,261)¥(22,967)
14,264(8,703)13¥0(8,689)$(197,455)
128,194(69,252)(1,064)$0(70,324)

(3) Benefit cost:Thousands of
U.S. dollars

Millions of yen

Service cost
Interest cost
Expected return on plan assets
Actuarial gain
Additional retirement payments
Net periodic benefit cost

2006

2005

2004

2006

¥1,163
537
(85)
(115)
13
¥1,514¥1,109
532
—
(39)
52
¥1,654¥1,239
540
—
(679)
35
¥1,136$09,900
4,571
(724)
(979)
111
$12,888(4) Assumptions to determine above obligation and cost:

Periodic allocation of projected benefit obligation
Discount rate
Expected rate of return on plan assets
Amortization period of actuarial loss

2006

2005

Equal amount over each period
2.5%
0.8%
1–2 years

Equal amount over each period
2.5%
0.0%
1–2 years

15. Leases(1) The following pro forma amounts describe the finance leases which would have been reflected in the consolidated
financial statements if leased assets had been capitalized to the finance lease transactions currently accounted for as
operating leases:a) Leased assets (lessee)
Thousands of
U.S. dollars

Millions of yen

Acquisition costs
Accumulated depreciation
Net book value

2006

2005

2004

2006

¥1,537(924)¥0,612¥1,572(777)¥0,794¥(1,705(1,024)¥(0,681$13,084(7,866)$05,210b) Lease obligations (net book value)
Thousands of
U.S. dollars

Millions of yen

2006

Due within one year or lessDue within more than one year
Total

¥224
388
¥612

2005

¥303
490
¥794

2004

¥287
394
¥681

2006

$1,907
3,303$5,21039
Kurita Water Industries Ltd.

c) Lease payments relating to finance lease transactions accounted for as operating leases
Thousands of
U.S. dollars

Millions of yen

2006

Lease payments
Depreciation

¥270
270

2005

2004

¥338
338

¥340
340

2006

$2,2982,298

Depreciation of the leased assets is computed by the straight-line method over the lease terms (with zero residual
value).
(2) Accrued lease payments relating to operating lease transactions:Thousands of
U.S. dollars

Millions of yen

2006

Due within one year or lessDue within more than one year
Total

¥146
208
¥355

2005

2004

¥078
101
¥180

¥120
124
¥245

2006

$1,243
1,771$3,022

16. Segment information
The business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2006,
2005 and 2004, is outlined as follows:
Millions of yen
Year ended March 31, 2006

I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating costs and expenses
Operating income
II. Assets, depreciation, impairment loss andcapital expenditures
AssetsDepreciation and amortization
Impairment loss
Capital expenditures

40
Kurita Water Industries Ltd.

Water Treatment
Chemicals Business

Water Treatment
Facilities Business

Total

Eliminationor corporate¥54,549322
54,872
46,910¥07,961¥119,133
573
119,706
110,357¥009,349¥173,683
895
174,578
157,268¥017,310

¥

—
(895)
(895)
(895)
¥00,000¥173,683—
173,683
156,372¥017,311¥46,191
1,608
—
2,018

¥124,280
3,298—
14,519¥170,471
4,906—
16,537¥42,302—846—¥212,774
4,906
846
16,537

Consolidated

Millions of yen
Year ended March 31, 2005

I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating costs and expenses
Operating income
II. Assets, depreciation and capital expenditures
AssetsDepreciation and amortization
Capital expenditures

Water Treatment
Chemicals Business

Water Treatment
Facilities Business

Total

Eliminationor corporate¥50,637
199
50,83743,403¥07,433¥110,259
681
110,941
102,425¥008,515¥160,896
881
161,778
145,829¥015,949

¥

—
(881)
(881)
(883)
¥00,001¥160,896—
160,896
144,945¥015,951¥43,433
1,465
1,322

¥108,025
2,895
5,383

¥151,459
4,361
6,706

¥40,969——¥192,428
4,361
6,706

Water Treatment
Chemicals Business

Water Treatment
Facilities Business

Total

Eliminationor corporate

Consolidated¥47,442161
47,60440,964¥06,640¥99,377
298
99,67592,830¥06,845¥146,819460
147,280
133,794¥013,485

¥

—
(460)
(460)
(466)
¥00,005¥146,819—
146,819
133,328¥013,490¥39,391
1,548
1,895

¥94,402
2,323
7,822

¥133,794
3,872
9,718

¥49,825——¥183,620
3,872
9,718

Water Treatment
Chemicals Business

Water Treatment
Facilities Business

Total

Eliminationor corporate

Consolidated$464,365
2,741
467,115399,336$067,770$1,014,157
4,878
1,019,035
939,448$0,079,586$1,478,531
7,619
1,486,150
1,338,793$0,147,357$—(7,619)(7,619)(7,619)$000,000$1,478,531—
1,478,531
1,331,165$0,147,365$393,215
13,689—17,179$1,057,972
28,075—
123,598$1,451,188
41,764—
140,776$360,109—
7,202—$1,811,305
41,7647,202
140,776

Consolidated

Millions of yen
Year ended March 31, 2004

I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating costs and expenses
Operating income
II. Assets, depreciation and capital expenditures
AssetsDepreciation and amortization
Capital expenditures

Thousands of U.S. dollars
Year ended March 31, 2006

I. Sales and operating income
Sales1) Sales to outside customers
2) Intersegment sales
Total
Operating costs and expenses
Operating income
II. Assets, depreciation, impairment loss andcapital expenditures
AssetsDepreciation and amortization
Impairment loss
Capital expenditures

41
Kurita Water Industries Ltd.

Principal products and services of each segment:
Water Treatment Chemicals Business
Boiler water treatment chemicals, cooling water treatment chemicals, wastewater treatment chemicals, process treatment
chemicals, incinerator chemicals, equipment and systems for water treatment chemicals, and customized services, including
a steam supply contract and blanket contracts for factories
Water Treatment Facilities Business
For the electronics industry:
Ultrapure water production systems, wastewater reclaim systems, wastewater treatment systems, tool cleaning, operationand maintenance services, and Ultrapure Water Supply BusinessFor general industries:
Pure water production systems, wastewater treatment systems, soil remediation, chemical cleaning, and maintenanceservices
For the public sector:
Sewage treatment facilities, human waste treatment facilities, waterworks facilities, landfill leachate treatment facilities,
and operation and maintenance services
The total assets that were offset during the consolidation procedure for the years ended March 31, 2006 and 2005,
were ¥42,362 million ($360,627 thousand) and ¥40,983 million, respectively, which primarily included abundant capitaland long-term investment capital.
Overseas net sales:
Thousands of
U.S. dollars

Millions of yen
For the year ended March 31, 2006

Overseas net sales
Consolidated net sales
Percentage of overseas net sales toconsolidated net sales

Asia

North
America

Europe

Other

Total

Total

¥16,602—¥2,340—¥1,121—¥1,724—¥021,788
173,683$0,185,477
1,478,531

9.6%

1.3%

0.6%

1.0%

12.5%

12.5%

¥18,966—¥979—¥1,015—¥1,440—¥022,402
160,896

11.8%

0.6%

0.6%

0.9%

13.9%

For the year ended March 31, 2005

Overseas net sales
Consolidated net sales
Percentage of overseas net sales toconsolidated net sales

Notes: 1. Countries and regions are classified into segments according to geography and proximity.
2. The major countries or regions classified in each geographic segment are as follows:
Asia:
South Korea, China, Taiwan, Singapore, Indonesia, Thailand
North America:
United States of America
Europe:Germany
Other:
Brazil3. Overseas net sales refers to sales outside Japan generated by the Company and its consolidated subsidiaries.

42
Kurita Water Industries Ltd.

17. Contingent liabilities
Guarantees for employees’ indebtedness from bank housing loans at March 31, 2006 and 2005, are as follows:
Thousands of
U.S. dollars

Millions of yen

2006

2005

¥10

¥19

2006

$85

18. Subsequent event
Appropriation of unappropriated retained earnings
The following appropriations of unappropriated retained earnings for the year ended March 31, 2006, were approved at thegeneral meeting of shareholders of the Company held on June 29, 2006.

Cash dividends
Bonuses to directors and corporate auditors

Millions of yen

Thousands of
U.S. dollars¥1,415—$12,046—

19. Per share information
Yen

2006

2005

2004

U.S. dollars

2006

Net assets per share
Earnings per share (EPS)¥1,129.74
81.76¥1,058.90
71.76¥999.63
64.57

$9.62
0.70

Calculation for EPS is as follows:
Millions of yen

Net income
Net income relating to common stock
Average number of shares

2006

2005

2004

¥10,519
10,519128,654,537¥9,383
9,229
128,615,153¥8,444
8,302
128,584,628

Thousands of
U.S. dollars

2006$89,546
89,546
128,654,537

43
Kurita Water Industries Ltd.

Report of Independent Certified Public Accountants

GRANT THORNTON TAIYO ASGAKASAKA OJI BLDG., 8F
1-22, AKASAKA 8-chome, MINATO-KU, TOKYO 107-0052, JAPAN
Tel.: 03-5474-0111 Fax: 03-5474-0112

To the Board of Directors ofKurita Water Industries Ltd.

We have audited the accompanying consolidated balance sheets of Kurita Water Industries Ltd. and subsidiaries as ofMarch 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity and cash flows for eachof the three years in period ended March 31, 2006, expressed in Japanese yen. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in Japan. These standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis forour opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kurita Water Industries Ltd. and subsidiaries as of March 31, 2006 and 2005, and the consolidated
results of their operations and their cash flows for each of the three years in the period ended March 31, 2006, in conformity
with accounting principles and practices generally accepted in Japan as described in Note 1 to the consolidated statements.
As described in Note 3, effective the year ended March 31, 2006, the Company has adopted new accounting standards
for impairment of fixed assets in the preparation of its consolidated financial statements.
The consolidated financial statements as of and for the year ended March 31, 2006, have been translated into U.S.
dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated
financial statements expressed in Japanese yen have been translated into U.S. dollars on the basis set forth in Note 1 to theconsolidated financial statements.

Tokyo, Japan
June 29, 2006

44
Kurita Water Industries Ltd.

Nonconsolidated Summary

Nonconsolidated Balance Sheets, at March 31, 2006 and 2005
Millions of yen

Thousands of
U.S. dollars (Note 1)

2006

2005

2006

AssetsCurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets¥100,714
45,247
2,051
36,276¥184,290¥097,053
35,531
2,327
34,442¥169,355$0,857,362
385,186
17,467
308,813$1,568,828

Liabilities
Current liabilities
Long-term liabilities
Total liabilities¥046,320
9,439
55,760¥038,390
8,373
46,764$0,394,320
80,361
474,681

Shareholders’ equity
Common stock
Additional paid-in capital
Retained earnings
Unrealized gains on revaluation of land
Unrealized gains on available-for-sale securities
Treasury stock, at cost
Total shareholders’ equity
Total liabilities and shareholders’ equity

13,45011,426105,391(740)
3,795(4,793)
128,529¥184,290

13,45011,409100,778(257)
2,040(4,830)122,590¥169,355

114,504
97,274
897,177(6,306)32,308(40,810)
1,094,147$1,568,828

Nonconsolidated Statements of Income, for the Years Ended March 31, 2006, 2005 and 2004
Thousands of
U.S. dollars (Note 1)

Millions of yen

2006

2005

2004

2006

¥123,403
90,191
33,212¥119,175
85,251
33,924¥112,206
79,76132,444$1,050,510
767,779
282,731

Selling, general and administrative expenses
Operating income

23,255
9,956

23,904
10,02023,3909,053

197,971
84,760

Other income
Other expenses
Income before income taxes

4,319
1,508
12,7672,704
723
12,002

3,438
974
11,51736,767
12,841
108,686

4,771¥007,995

4,633¥007,369

4,748¥006,768

40,620$0,068,066

Net sales
Cost of sales
Gross profit

Income taxes
Net income

45
Kurita Water Industries Ltd.

Corporate Data
As of March 31, 2006

Company NameDOMESTIC OFFICES

Kurita Water Industries Ltd.

Head Office:4-7, Nishi-Shinjuku 3-chome, Shinjuku-ku, Tokyo 160-8383
Tel.: 81 (3) 3347-3111

Osaka Branch:

2-22, Kitahama 2-chome, Chuo-ku, Osaka 541-0041
Tel.: 81 (6) 6228-4800

Kurita Global Technology
Center:1-1, Gochoyama, Kawada, Nogi-machi, Shimotsuga-gun,Tochigi 329-0105
Tel.: 81 (280) 54-1511

Branches:

Sapporo, Tohoku, Nagoya, Hiroshima, Shikoku and Kyushu

Address
4-7, Nishi-Shinjuku 3-chome,
Shinjuku-ku, Tokyo 160-8383, Japan

Paid-in Capital¥13,450,751,434

Date of Establishment
July 13, 1949

OVERSEAS OFFICES

Number of Employees

Singapore Branch:

1,566 (parent company)
3,668 (on a consolidated basis)

30 Joo Koon Road, Singapore 628984
Tel.: 65 (6861) 2622

Taiwan Branch:

5F-3, No. 295, Section 2, Kuang-Fu Road,(Empire Commercial Bldg.) Hsinchu, Taiwan, R.O.C.
Tel.: 886 (3) 575-1157

Major Consolidated Subsidiaries and Affiliates
Company Name

Paid-in
Capital (Millions)

EquityOwnership (%)

Main Business

100.0
100.0
45.0

Manufacture & sale of water treatment chemicals
Sale of water treatment facilities, facility operation and maintenance services
Manufacture & sale of water treatment chemicals

OVERSEAS
North America • South America
Kurita do Brasil LTDA.
R$6.986
Kurita America Inc.
US$3.0
Kurita de Mexico S.A. de C.V.
M.N. PESO8.120
EuropeKurita Europe GmbH
EUR2.301
Kuritec Europe GmbH
EUR0.959
Asia
Kurita (Singapore) Pte. Ltd.
S$4.0
Kuritec Singapore Pte. Ltd.
S$1.49Kurita Water (Malaysia) Sdn. Bhd.
RM$0.6
Kurita Water Industries (Dalian) Co., Ltd.
¥550
Kuritec (Shanghai) Co., Ltd.
¥30
Kurita Water Industries (Suzhou) Ltd.
¥100
Kurita (Taiwan) Co., Ltd.
NT$20
P.T. Kurita Indonesia
US$2.0
Kurita-GK Chemical Co., Ltd.
BAHT92
Hansu Ltd.
W2,500Hansu Technical Service Ltd.
W400

85.0
100.0

Manufacture & sale of water treatment chemicals
Sale of water treatment facilities, facility operation and maintenance services

100.0
100.0
83.3
85.1
100.0
100.0
95.0
90.0
60.0
33.2
59.4

Manufacture & sale of water treatment chemicals and water treatment facilities
Ultrapure water supply for specified customers
Sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals
Maintenance services and sale of small water treatment facilities
Manufacture & sale of water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals and water treatment facilities
Manufacture & sale of water treatment chemicals
Manufacture & sale of water treatment chemicals
Sale of water treatment facilities and maintenance services

DOMESTIC
Kurita Engineering Co., Ltd.
Kurita Creation Co., Ltd.
Kuritaz Co., Ltd.

¥160
¥160
¥220

100.0
100.0
100.0

Land Solution Inc.

¥450

51.0

Kuritec Service Co. Ltd.

¥50

100.0

Chemical cleaning
Manufacture & sale of household and industrial water purifiers
Operation & maintenance of water treatment facilities, soil andgroundwater assessment and remediation
Soil and groundwater contamination assessment and consulting,contamination risk-hedging support and post-remediation land usage support
Tool cleaning

46
Kurita Water Industries Ltd.

Investor Information
As of March 31, 2006

Stock Exchange Listings

First Section of the Tokyo Stock ExchangeFirst Section of the Osaka Securities Exchange

Common Stock

Authorized: 531,000,000 shares
Issued: 132,800,256 shares(Stock trading unit: 100 shares)

Number of Shareholders

14,586

Independent Auditor

Grant Thornton Taiyo ASG
Akasaka Oji Bldg., 8F, 1-22, Akasaka 8-chome, Minato-ku, Tokyo 107-0052, Japan

Transfer Agent

The Chuo Mitsui Trust and Banking Co., Ltd.
33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan
Distribution of Shares

Main Shareholders
Shareholdings
Percentage of(Shares)
total shares issued (%)

Itochu Corporation
Japan Trustee Services Bank, Ltd. (Trust Account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd. (Trust Account)Northern Trust Company (AVFC) Sub-account American Client
Tokio Marine & Nichido Fire Insurance Co., Ltd.
Kurita Water Industries Ltd.
State Street Bank and Trust Company 505202
UBS AG London–IPB Client Account
The Bank of Tokyo–Mitsubishi UFJ, Ltd.

10,268,000
8,258,700
7,284,283
5,472,800
4,476,600
4,311,526
4,127,639
4,016,900
3,303,000
2,936,131

7.73
6.21
5.48
4.12
3.37
3.24
3.10
3.02
2.48
2.21

Treasury Stock
4,127,639

Individuals
13,070,559

3.1%
9.8%
34.3%
37.4%

Financial
Institutions
45,553,920

1.5%
13.9%

Foreigners
49,608,298
Other
Domestic Firms
18,513,343

Securities
Firms
1,926,497

Stock price
(Yen)

TOPIX
(Points)

3,000

2,500

Stock Price Range (Tokyo Stock Exchange)
2,400

2,000
Kurita stock prices

1,800

1,500

1,200

1,000
Tokyo stock price indexes and average (TOPIX)

500

600

0

Trading volume(Hundreds of shares)

0
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June
2004
2005
2006

Trading Volume (Tokyo Stock Exchange)

120,000

60,0000Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. Mar. Apr. May June
2004
2005
2006

47
Kurita Water Industries Ltd.

URL: http://www.kurita.co.jp/english/

Kurita Water Industries Ltd.
4-7, Nishi-Shinjuku 3-chome, Shinjuku-ku, Tokyo 160-8383, Japan
Tel: 81 (3) 3347-3111

This annual report is printed on recycled paper using soy ink.
Printed in Japan