REPORT 2006

To Shareholders and Investors
Interim Business Report for the 74th Term
April 1, 2006 to September 30, 2006

Securities Code：6455

TOPICS

Morita Topics
Miracle CAFS :Extinguishing fires using one 17 th the amount of water
Morita has developed an entirely new fire fighting system known as
Miracle CAFS which uses a new fire extinguishing agent with bothsuperior fire fighting capabilities and environmental characteristics.
Miracle CAFS, a revolutionary new product with the tremendous
potential to radically change conventional fire fighting operations,enables efficient fire fighting in situations where securing water
resources for fighting fires is difficult such as during the aftermath ofearthquakes, and helps minimise secondary damage caused by water
when extinguishing fires such as those that occur in blocks of flats.
With Miracle CAFS the following have been achieved via fire fighting
activities using foam emissions containing water mixed with a new fire
extinguishing agent and compressed air.
1. Prevention of water damage and the efficient use of water forfighting fires have been made possible by enabling fires to beextinguished using one 17th the amount of water that wouldnormally be required to put out a fire.
2. Fires can be extinguished quickly and efficiently.
3. Rooms on fire can be cooled using large quantities of air(compressed air) and the safety of fire fighters is ensured.
4. Reaction force by water discharge is small compared to when
discharging water alone and fire fighting hoses are light. Loss ofpressure is minimal and water can be supplied to high anddistant locations.
5. The fire fighting agent uses a diluted concentrated solution
the main ingredient of which is natural soap, and it isenvironmentally friendly, not to mention fire fighter-friendly.
6. Defoaming after extinguishing fires is fast and cleaning up issimple.

Miracle CAFS was exhibited at the 11th International Fire Protection
Equipment, Technology Conference Exposition (China Fire 2006) heldin Beijing from 26 to 29 October, 2006 and we are actively expanding
sales throughout China, a country suffering from severe watershortages.

01  TOPICS

Using the catch copy two determining factors forthe safety of your family we commenced the sale ofresidential fire alarm detectors and fire fighting flowers
According to the Fire and Disaster Management Agency a record
number of more than 1,200 people died in house fires throughout Japan
in 2005 of which approximately 60% of deaths were due to failing toescape in time. Most of the victims were elderly.
At Morita we believe that the early discovery of fires and fire fighting in
the early stages of a fire are essential to reduce damages caused byfires. Using the catch copy two determining factors for the safety ofyour family we have instigated a mass PR campaign targeting 54
million households throughout the country.
1. Residential fire alarm detectors for the early discovering of fires
In accordance with revisions to the Fire Defence
Law, from June 1, 2006 the installation of residential
fire alarm detectors has become mandatory
throughout Japan and Morita started to sell alarms
in earnest. We expect the requirement to install
alarms in existing households, which must befulfilled by the end of May 2011, to contribute greatly to future sales
since residential fire alarm detectors must be installed in kitchens, onstaircases and in bedrooms.
2. Fire fighting flower for extinguishing fires before they get out of control
The most common cause of house fires is arson,
followed in second place by cigarettes and in third placeby oil for deep frying catching fire.
Most victims of house fires are elderly people, and ourfire fighting flower is the outcome of studies into
something that, when necessary, can be used to put out
fires without panicking.
A fire extinguishing agent has been inserted into themiddle of the flower and acts as a fire fighting device when a fire
breaks out, enabling the fire fighting flower to function as a kitchen
accessory. A magnet allows the flower to beeasily affixed onto refrigerators and ensures
the flower is easily accessible when needed.

At Morita our mission is to save the lives ofas many people as possible and we aspire tocontribute to the creation of a secure,comfortable and prosperous society .

  02

TOPICS

Waste fire extinguisher collection system− the start of Circle Morita Eco
Morita received certification for our extensive recognition systemfrom the Minister for the Environment on September 1, 2006. In theautumn we initiated Circle Morita Eco , a waste fire extinguishercollection system which utilises this certification.
In the past have been a number of cases in which we were unable tocollect waste fire extinguishers as certification was required from each
distribution channel local authority to transport and recycle suchextinguishers due to the dangerous nature of such high pressure
containers and the fact that the constructural elements contain both
domestic waste and industrial waste.
Under this new waste fire extinguisher collection system Morita will
operate a network of Circle Morita Eco Registered Outlets, made up ofroughly 1,000 certified companies throughout Japan. Up until now wehave collected only extinguishers from businesses such as factories,offices and commercial establishments but in the future we will work oncollecting fire extinguishers from general households from whichcollection had previously been somewhat complicated. Having
dismantled and sorted collected waste fire extinguishers we shall work
to 100% recycle the extinguishers by such means as recycling the maincontainer, reusing fire extinguishing powder as the new fire fighting
device Eco Venus and recycling such powder as the fertiliser product
Morita 1 Gou .

Waste operators

Users
General householdsand companies

Sales outlets
Branch andsales offices
EcoVenus
SaleShipping

Factory

Collection

Circle Morita EcoCollection

Sales outlets
Branch andsales offices

Reprocessing
recycled
agents into
raw materials

Recycling centres

Production

Reprocessing
fertiliser into
raw materials

MORITA 1 GOU
Patent : No. 3772181

Sort, dismantle, segregate
Sale

Disposal

Materials andraw materials manufacturers

Intermediate processors(subcontracting after processing)
Final disposal companies

03

REPORT 2006

TO OUR SHAREHOLDERS

To our shareholders
We at Morita are pleased to provide you with this InterimBusiness Report for the 74th Term and a report on the state ofour business.
Overview of Operations
1. Overview of Interim Period
During the interim period, corporate earnings improved,
capital investment increased, the employment environment
improved and the Japanese economy slowly expanded.
However, the financial situation of local authorities, our majorclients, remained severe and the prices of crude oil and raw
materials have continued to escalate.
Amidst such conditions, the various divisions within theMorita Group resolutely expanded operations and endeavoured
to improve the collective strength of the group and tostrengthen earning capacities by reducing costs and cutting
operating expenses.
Sales during the interim period decreased 1,270 million yen(7.7%) year-on-year to 15,246 million yen. In terms of profits,
operating profits decreased 467 million yen (86.7%) year-onyear to 71 million yen, largely due to the fall in sales of the FireFighting Vehicle Division's high performance vehicles.
Ordinary profits decreased 405 million yen (68.9%) year-on-year
to 183 million yen and interim net profits decreased 249 millionyen (65.9%) year-on-year to 128 million yen.
2. Overview of Interim Period by Segment
蚪Disaster Prevention Business
Disaster Prevention Business's sales decreased 1,123
million yen (11.7%) year-on-year to 8,497 million yen
largely due to the decrease in the Fire Fighting Vehicle
Division's sale of ladder trucks and water towers.
Operating profits decreased 633 million yen from theprevious interim period of 454 million yen resulting inoperating losses of 179 million yen being recorded.

蚪Environmental Business
Environmental Business's sales decreased 484 million
yen (6.5%) year-on-year to 6,992 million yen. However,Morita Econos Corporation, a subsidiary company,
continued to perform well and recorded operating profits
of 247 million yen, a 164 million yen increase year-on-year.
REPORT 200604

TO OUR SHAREHOLDERS

Future Outlook
As can be seen from above, the business results for the Morita
Group during the interim period were extremely severe.
However, in the future we shall work to secure earnings byimproving our market share, by further reducing costs, curbing
sales and administrative expenses, and through theintroduction onto the market of various new products such as
the Compressed Air Foam System outlined in the Topics
section, which we developed and which is capable ofextinguishing fires with one 17th the amount of water currently
required, a high performance ladder truck, and the new firefighting ambulance , which has the combined capabilities of afire engine and an ambulance.
Further, in the Fire Fighting Vehicle Division we are not only
focusing our attention on the levelling out domestic Japanesemarket but are also actively expanding operations in SE Asiaand the Middle East where the market is three times the size of
the Japanese market, working to expand our agency networkand to secure production bases (China, Vietnam). In the
Disaster Prevention Equipment Division we are working
towards improving business results by expanding the market
following the mandatory installation of residential fire alarm
detectors, and by promoting the recycling of waste fire
extinguishers through the running of a waste fire extinguisher
collection system known as Circle Morita Eco .
I would like to take this opportunity to ask shareholders
for your continuing support and encouragement.

November 2006

Masahiro NakajimaPresident

05

REPORT 2006

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Summary
Consolidated Balance Sheets
Morita Corporation and Consolidated Subsidiaries
Millions of yenAssets
Current assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets

Liabilities
Current liabilities
Long-term liabilities
Total liabilities
Minority interests in consolidated subsidiaries
Shareholders’ equity
Common stock
Additional paid-in capital
Retained earnings
Unrealized gains(losses) on revaluation of land
Unrealized gains on available-for-sale securities

Treasury stock, at cost
Total shareholders' equity
Total liabilities and shareholders' equity

Net assets
Shareholders' equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Valuation and translation adjustments
Unrealized gains on available-for-sale securities
Deferred gains(losses) on hedges
Unrealized gains(losses) on revaluation of land
Foreign currency translation adjustments
Total Valuation and translation adjustments
Minority interests in consolidated subsidiaries
Total net assets
Total liabilities and net assets

FY2005
FY2006First half First half

FY2005Full Year¥ 23,344
26,830251
7,205
57,631¥ 21,981
26,642
169
8,433
57,226¥ 22,384
26,887
185
9,131
58,59017,061
9,574
26,636

20,550
6,832
27,382

18,884
8,765
27,650

268

−

280

4,746
4,346
19,3181,463
1,964
31,839

−
−
−−
−
−

4,746
4,346
20,336(4)
2,845
32,269(1,112)30,726¥ 57,631−−−(1,610)30,659¥ 58,590

4,746
4,359
20,135(1,982)
27,2582,331(12)
(4)
(3)
2,311
274
29,844¥ 57,226

REPORT 200606

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Income
Morita Corporation and Consolidated Subsidiaries
Millions of yen

FY2006
FY2005First half First half

FY2005Full Year¥ 16,516¥ 15,246¥ 45,413

Cost of sales
Gross profit

11,931
4,585

11,0794,167

33,691
11,722

Selling , general and administrative expenses
Operating income

4,046
538

4,095
71

8,472
3,249

Other income

251

319

640

Other expenses

130

167

318

Income before income taxes

659

223

3,571

294−29496−
96

1,062
408
1,470(12)¥ 377(1)¥ 128(0)¥ 2,101Net sales

Income taxes
Current
Deferred

Minority interests in earnings of consolidated subsidiaries
Net income

Consolidated Statements of Cash Flows
Morita Corporation and Consolidated Subsidiaries
Millions of yen

FY2005
FY2006First half First half

Cash Flows from operating activities(¥ 654)(¥ 493)¥ 4,676

Cash Flows from investing activities(1,169)(506)(2,250)Cash Flows from financing activities(3,045)

1,935

1,813

Net increase(decrease) in cash and cash equivalents

112814(619)

Cash and cash equivalents at beginning of term

2,947

2,366

2,947

Cash and cash equivalents of newly consolidated subsidiaries,
net excluded subsidiaries from consolidation
Cash and cash equivalents at end of term

07

FY2005Full YearREPORT 2006

39−39

¥ 3,098¥ 3,181¥ 2,366

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statements of Changes in Net Assets (in millions of yen)
Morita Corporation and Consolidated Subsidiaries
Shareholders' equity

Balance at March 31, 2006

Commonstock

Additional
paid-in
capitalRetainedearnings

Treasury stock,at costTotal
shareholders'equity¥ 4,746¥ 4,346¥ 20,336(¥ 1,610)¥ 27,818

Amount of change ininterim period
Cash dividends

(240)

(240)

Bonuses to directors

(85)

(85)

Net income

128

128

Acquisition of treasury stock
Disposal of treasury stock

13

Decrease due to changes
in scope of consolidation
Net changes other thanshareholders' equity

(427)

(427)

55

68

(3)

(3)

Total change in interim period−13(200)

(372)

(559)

Balance at September 30, 2006

¥ 4,746¥ 4,359¥ 20,135(¥ 1,982)¥ 27,258

Valuation and translation adjustments
Minority
Unrealized
Unrealized
Foreign
Total
Deferred gains(losses) currency interests ingains onconsolidated net assets
available-for-sale gains(losses) on revaluation translation subsidiaries
onhedgessecuritiesof landadjustments

Balance at March 31, 2006

¥ 2,845−(¥ 4)−¥ 280 ¥ 30,939

Amount of change ininterim period
Cash dividends(240)

Bonuses to directors(85)

Net income

128

Acquisition of treasury stock(427)

Disposal of treasury stock

68

Decrease due to changes
in scope of consolidation
Net changes other thanshareholders' equity

(3)
(514)

(12)

−

(3)

(5)

(535)

Total change in interim period

(514)

(12)

−

(3)(5)(1,095)

Balance at September 30, 2006

¥ 2,331(¥ 12)

(¥ 4)

(¥ 3)

¥ 274 ¥ 29,844

REPORT 2006

08

NON-CONSOLIDATED FINANCIAL STATEMENTS

Nonconsolidated Summary
Nonconsolidated Balance Sheets
Millions of yen

FY2005First half

FY2006First half

FY2005Full Year

AssetsCurrent assets
Property, plant and equipment
Intangible assets
Investments and other assets
Total assets¥ 16,668
25,629205
8,615¥ 51,118¥ 14,349
25,218144
10,210¥ 49,922¥ 15,630
25,449162
10,928¥ 52,172

Liabilities
Current liabilities
Long-term liabilities
Total liabilities¥ 12,457
8,799
21,257¥ 15,925
6,101
22,027¥ 14,866
8,015
22,882

4,746
4,346
18,5171,463
1,900(1,112)
29,861

−
−
−
−
−
−
−

4,746
4,346
19,026(4)
2,785(1,610)29,289¥ 51,118−¥ 52,172

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
Net assetsShareholders' equity
Common stock
Additional paid-in capital
Retained earnings
Treasury stock, at cost
Total shareholders' equity

4,746
4,359
18,508(1,982)
25,632

Valuation and translation adjustments
Unrealized gains on available-for-sale securities
Deferred gains(losses) on hedges
Unrealized gains(losses) on revaluation of land
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

2,280
(12)
(4)
2,263
27,895¥ 49,922

Nonconsolidated Statements of Income
Millions of yen

FY2005First half
¥ 9,228

FY2006First half
¥ 7,531

FY2005Full Year¥ 30,065

Cost of sales
Gross profit

6,936
2,291

5,790
1,741

23,1506,914

Selling, general and administrative expenses
Operating income

2,296(4)2,354(613)

5,032
1,881

Other income

483

512

1,024

Other expenses
Income before income taxes

214
264

251(352)

464
2,442

122
−(134)−(¥ 217)

¥ 1,357

Net sales

Income taxes
Current
Deferred
Net income

09

REPORT 2006

¥ 142640
444

CORPORATE DATACORPORATE DATA
(current as of September 30, 2006)

Overview
Founded : April 23, 1907Established : July 23, 1932
Representative : President Masahiro Nakajima
Paid-in capital : JPY4,746mil
Osaka Head Office : 5-20, 5-Chome, Shojihigashi, Ikuno-ku,
Osaka City, Osaka, 544-8585
Tokyo Head Office : 25-31, 3-Chome, Nishishinbashi, Minato-ku,
Tokyo, 105-0003
Primary Products
Pump Division
Manufacture and sale of fire engines with ladders, chemicaltrucks, ordinary fire engines, other fire fighting vehicles andspecialty vehicles.
Disaster Prevention Division
Manufacture and sale of disaster prevention equipment
including dry chemical fire extinguishers and design,conservation and inspection of disaster prevention facilities.
Environment Business Division
Design of waste recycling facilities and other waste
disposal facilities and manufacture and sale of large
hydraulic equipment.

Group Companies
Morita Econos Corporation

Morita Technos Corporation

Morita Sogo Service Ltd

Morita Toukai Corporation

Ueno Morita Ltd.

Morita UG Ltd.

Morita Engineering Corporation

ALUVO.CO.,LTD.

Hokkaido Morita Corporation

Kagoshima Morita Pump Ltd.

Morita Toyo Corporation
Sichuan Morita Fire Safety Appliances Limited Company
Nanjing Chenguang Morita Environment Protection Science &Technology Co.,Ltd.

REPORT 2006

10

Shareholder's Memo
Operating Year : April 1st to March 31stAnnual General Meeting of Shareholders : June
Schedule : Ordinary General Meeting of Shareholders−March 31stYear-end Dividend − March 31st
Interim Dividend − September 30th
Other dates publicised in advance as necessary
Method of Publicity : Posted on company website.
http://www.morita119.com/kohkoku/index.html
Shareholder Register Administrator :The Sumitomo Trust & Banking Co.,Ltd.
5-33, 4-Chome, Kitahama, Chuo-ku, Osaka
Administrator's Office : The Sumitomo Trust & Banking Co.,Ltd.
Stock Transfer Agency Department
5-33, 4-Chome, Kitahama, Chuo-ku, Osaka(Postal Address)

The Sumitomo Trust & Banking Co.,Ltd.
Stock Transfer Agency Department
1-10 Nikko-cho, Fuchu City, Tokyo 183-8701(Telephone Enquiries)(Requests for change of address forms) +81-120-175-417(Other enquiries) +81-120-176-417(Internet Website URL)
http://www.sumitomotrust.co.jp/STA/retail/service/daiko/index.html
Agent : The Sumitomo Trust & Banking Co.,Ltd.
all branches throughout Japan
Stock Listing：Tokyo Stock Exchange, Osaka Securities Exchange

Please visit our website
for the latest investor relations information.

http://www.morita119.com

Osaka Head Office : 5-20, 5-Chome, Shojihigashi, Ikuno-ku, Osaka City,
Osaka, 544-8585
蕁 +81-6-6756-0100
Tokyo Head Office : 25-31, 3-Chome, Nishishinbashi, Minato-ku,
Tokyo, 105-0003
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from recycled paper.

http://www.morita119.com

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