ebara corporation annual report 2012 · ebara corporation annual report 2012 for the year ended...

EBARA CORPORATIONAnnual Report 2012For the Year Ended March 31, 2012

EBARA pioneered in the Founded in 1912, EBARA CORPORATION has grown to become one of the world’s principal

manufacturers of industrial machinery, based especially on its fluid machinery and systems

business, with particularly strong positions in pumps and compressors as well as other related

products. With its origins in the fluid machinery and systems business, the Company expanded

into the environmental engineering business centered around incinerators and gasification

technology as well as into the precision machinery business, which produces semiconductor

manufacturing equipment and other equipment.

The EBARA Group is constantly thinking of what will be required in the future and is seeking

to accurately grasp the current and future needs of its customers, while it continues to pursue

the development of superior technologies and products in all its businesses. In the years to

come, as in the past, the EBARA Group will continue to achieve further development and con-

tribute to society by excelling in the development of technologies as well as the manufacturing

and marketing of products and by providing high-quality support and services.

� Issey Hatakeyama, EBARA’s founder, poses together

with an Inokuty Type pump made in 1913.

manufacturing of pumpsContents

2 A Retrospective on EBARA’s First Century

4 Financial Highlights

5 Message from the Management

6 An Interview with the Management

8 At a Glance

10 Special Feature

14 Review and Outlook

22 Governance Structure and Management Systems

26 Corporate Social Responsibility (CSR)

28 EBARA Global Network

30 Financial Section

70 EBARA Group History

71 Corporate Data

Cautionary Statement with Regard to Forward-Looking StatementsCertain of the statements made in this annual report are forward- looking statements, which involve certain risks and uncertainties that could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements, which are valid only as of the date thereof. EBARA undertakes no obligation to republish revised forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unantici-pated events.

EBARA CORPORATION ANNUAL REPORT 2012 1

Fluid Machinery & Systems Company

Environmental Engineering Company

Precision Machinery Company

A Retrospective on EBAR

1931 Developed the first rapid filter for city water in Japan

Pumps Business

Compressors and Turbines Business

Water Treatment Business

Components Business

Waste Treatment Business

CMP System Business

Chillers Business

1910 Elliott Corporation (a company in the U.S.A., manufacturing com-pressors and turbines) established

1912 Inokuty Type Machinery Office was founded

Issey HatakeyamaFounder

�1912

�1922

�1932

�1942

�1952

1930 Produced its first centrifugal chiller in Japan

2 EBARA CORPORATION ANNUAL REPORT 2012

A’s First Century

1961 Sold its first mechanical stoker- type incinerator

1956 Completed a standard pump

1968 Sold the first super-critical pres-sure feed water pump produced in Japan

1986 Sold its first roots-type dry vacuum pump

1990 Shipped its first plating systems

1992 Sold its first CMP (chemi-cal mechanical polishing) system

2010 A former major consolidated subsidiary is jointly owned by EBARA, MC,* and JGC (accounted for by the equity method of consolidation)* MC: Mitsubishi Corporation

1968 EBARA entered into technical cooperation with Elliott Group

2000 Elliott became a wholly owned subsidiary of EBARA

�1962

�1972

�1982

�1992

�2002

�2012

View our special centennial website:

http://www.ebara.co.jp/en/100th/

1963 Received order for the first absorption chiller equipment

1982 Began to install cryo-genic pumps, designed and manufactured by EBARA, to LNG bases in Japan

1989 Concluded a cross-licensing agreement with Elliott Group

2011 Integrated its compressor businesses in Japan and U.S.A.

1987 Began to market gas abatement systems equipment

1984 Sold its first twin interchanging fluidized bed incinerator


Financial Highlights

EBARA CORPORATION and Consolidated Subsidiaries Thousands of Millions of yen U.S. dollars*

Years ended March 31 2012 2011 2012

Net sales ¥412,077 ¥401,676 $5,013,711Operating income 23,267 31,542 283,088Net income 2,890 28,192 35,162Depreciation and amortization 12,765 13,524 155,311Capital expenditures 12,316 8,189 149,848Shareholders’ equity and accumulated other comprehensive income 151,063 151,951 1,837,973Total net assets 154,656 154,938 1,881,689Total assets 488,964 507,898 5,949,191

Interest-bearing debt ¥143,617 ¥160,413 $1,747,378Shareholders’ equity and accumulated other comprehensive income to total assets (%) 30.9 29.9 Ratio of dividends to shareholders’ equity (%) 73.0 7.5 Free cash flow 3,751 37,601 45,638

Per share data: Net income (yen and U.S. dollars) ¥ 6.85 ¥ 66.78 $ 0.083 Cash dividends (yen and U.S. dollars) 5.00 5.00 0.061 Shareholders’ equity and accumulated other comprehensive income (yen and U.S. dollars) 357.79 360.01 4.353ROIC (%)** 1.0 9.1 ROE (%)*** 1.9 20.0 Debt/equity ratio 0.95 1.06

* The U.S. dollar amounts are included solely for convenience and have been translated as a matter of arithmetical computation only at the rate of ¥82.19=US$1, the rate of exchange prevailing on March 31, 2012.** ROIC: Net income/Interest-bearing debt (Average between beginning and end of period) + Shareholders’ equity (Average between beginning and end of period)

*** ROE: Net income/Average shareholders’ equity and accumulated other comprehensive income of the beginning and end of the fiscal yearShareholders’ equity and accumulated other comprehensive income for total net assets in the calculation

Net Sales(Millions of yen)

600,000

0

200,000

300,000

400,000

100,000

500,000

’12’11’10’09’08

Shareholders’ Equity and Accumulated Other Comprehensive Income, ROIC(Millions of yen, %)

180,000

0

60,000

30,000

90,000

120,000

150,000

’12’11’10’09’08

12

-6

-3

0

3

6

9

Shareholders’ Equity and Accumulated Other Comprehensive Income ROIC (right scale)

Net Income (Loss)(Millions of yen)

30,000

-15,000

0

15,000

’12’11’10’09’08

Free Cash Flow(Millions of yen)

40,000

0

10,000

20,000

30,000

’12’11’10’09’08

Net Income (Loss) per Share(Yen)

80

-40

-20

0

20

40

60

’12’11’10’09’08

Shareholders’ Equity and Accumulated Other Comprehensive Income per Share(Yen)

400

0

200

300

100

’12’11’10’09’08


Message from the Management

“Looking to the next 100

years, EBARA will continue to

make extensive contributions

to society as a manufacturer of

industrial equipment by provid-

ing superior technologies and

the best possible service.”Natsunosuke Yago

President and Representative Director

During the fiscal year under review, ended March 31, 2012, the business environment showed improvement in some areas.

Overseas, in the United States, despite continued high levels of unemployment and declines in housing prices, the economy

remained on a moderate recovery trend. In Europe, however, the persistence of fiscal and monetary uncertainty resulted in a decel-

eration of growth in the region. In Asia, growth in the economies of China and India, which had been firm because of the support

provided by domestic demand, showed signs of slowing. In Japan, public-sector investment, which had been delayed by the

effects of the Great East Japan Earthquake, began to recover during the year because of the positive impact of the government’s

supplementary budgets. In addition, private-sector capital investment, which dropped temporarily following the earthquake

disaster, began to bottom out, and the Japanese economy as a whole experienced moderate improvement.

Amid these developments in the economic environment, the EBARA Group embarked on the first year of its new three-year

medium-term management plan E-Plan2013 (covering the period from the fiscal year ended March 31, 2012, to the fiscal year

ending March 31, 2014). Under this plan, EBARA has begun its drive to establish a more-solid, stabler business structure.

As a result of these activities, consolidated net sales rose because of increased sales in the Fluid Machinery & Systems (FMS)

Company and the Precision Machinery (PM) Company. However, operating income declined in all business segments. Net sales

for the fiscal year amounted to ¥412.0 billion, operating income was ¥23.2 billion, and ordinary income totaled ¥21.0 billion.

Consolidated net income amounted to ¥2.8 billion.

In November 2012, we will mark the 100th anniversary of the commencement of EBARA’s business activities as a manufacturer

of pumps. We would like to take this opportunity to express our deepest thanks to our shareholders and other stakeholders whose

warm and continuing support has made our success possible over the years.

The EBARA Group’s products—including pumps, which it has manufactured since its establishment, as well as compressors,

chillers, waste treatment facilities, and semiconductor manufacturing equipment—contribute to making people’s lives more afflu-

ent, safer, and more secure. Looking to the next 100 years, EBARA will continue to make “extensive contributions to society as

a manufacturer of industrial equipment by providing superior technologies and the best possible service.”

We will appreciate your continuing support and understanding.


An Interview with the Management

Q1 What are your views on the business environment this year?

World economic conditions in the industrialized and emerging economies present a

“mixed pattern” of favorable and unfavorable performance. What the EBARA Group

must do in this business environment is to focus its resources in regions where eco-

nomic growth is continuing and will enable us to secure solid expansion in our busi-

ness activities. We must also respond appropriately to the major changes in energy

demand that have emerged with the Great East Japan Earthquake as a watershed.

Nuclear power generation is under review around the world, and demand for LNG

for thermal electric power generation is rising rapidly. In the United States, extraction

technology for shale gas, which formerly could not be mined and produced profit-

ably, has advanced, and activities to develop shale gas as a new source of natural

gas have picked up substantially. The EBARA Group boasts leading market shares in

global markets in compressors and pumps used in LNG production. In addition, to

ensure stability in Japan’s energy supply, we must provide the necessary energy-

related products.

Q2 What are the key points you are emphasizing under the E-Plan2013 Medium-Term Management Plan?

Among our basic policies under E-Plan2013, I believe, in particular, we must move

forward to “implement a productivity innovation movement” and “strengthen our ser-

vice and support business.”

To improve productivity, we will take the production technology that we have

developed to a high level in Japan and apply it, one by one, at our overseas produc-

tion bases. We want to set off a major wave of activities that will raise the level of

production technologies for the Group as a whole.

In our service and support business, in the area of after-sales services, which we

have not been able to cover fully, we have given very thorough consideration to what


we can do to take this business back. We now want to implement measures that

will enable us to make this a source of earnings for the EBARA Group. The basics

for success are to keep in touch with our customers’ needs and to offer services

that can meet every aspect of such needs. If we can do this, then I believe we can

expand our service and support business quickly. Our accomplishments last fiscal

year included the establishment of service and support bases for compressors in

China and Saudi Arabia as well as a base for pumps in South Korea. Going forward,

we will be adding service and support bases in other parts of the world.

Q3 Lastly, please tell us your shareholder return policy.

We consider it to be very important to maintain a stable, long-term return on invest-

ment for our shareholders. To achieve a fair return for them, we will strive to make

steady growth based on the E-Plan2013.

Natsunosuke YagoPresident and Representative Director


At a Glance

Compressors and Turbines

Chillers

Others

CMP

Components� Components � Vacuum pumps � Gas abatement systems

Sales by Region Sales by Industry

� Chemical Mechanical Polishing (CMP)

� CMP systems


� Others � Plating systems

� Environmental Plants � Municipal waste incineration facilities � Industrial waste incineration facilities � Energy-related plants


Environmental Engineering 12%

Precision Machinery 17%

Environmental Plants Semiconductor

Semiconductor

Japan

Japan

Overseas

Overseas

Overseas

Public WorksJapan

Other

Other


Composition of Net SalesFiscal year ended March 31, 2012

Net Sales: ¥412.0 Billion

Pumps � Pumps � Custom pumps, standard pumps, fluid-

related plants


� Compressors and Turbines � Compressors� Turbines


� Chillers � Refrigeration equipment and systems


� Others� Fans

Others

Non-Core 2%

Fluid Machinery & Systems 69%

Japan

Japan

Japan

Overseas

Overseas

Overseas

Other

Oil and Gas

Oil and Gas

Building Equipment

Electric Power

Other

Other

Building Equipment

PublicWorks


Rising Worldwide Demand for Oil and Gas

As economic growth continues, especially in the emerging

countries, the global demand for energy is expanding steadily.

Also, recent fast-moving progress in the development of the

North American shale gas industry and other factors are

contributing to the expansion of the oil and gas market.

According to the “World Oil Outlook 2011,” published by

the Organization of the Petroleum Exporting Countries

(OPEC), from 2010 to 2035, an accumulated total of US$1.2

trillion is likely to be invested in oil refining plants. It is

assumed that investments in refining capacity will become

especially large in the Asia-Pacific region.

Compressors and Turbines Employed

in the Oil and Gas Market

The petroleum industry refines crude oil, which is extracted

from beneath the earth’s surface, and manufactures many

products, such as gasoline and ethylene, that are essential

for our daily lives. Similarly, natural gas is also obtained from

underground, and, after processes to separate and eliminate

impurities, it is also turned into products for many uses. When

gas is exported from its source, it is cooled to extremely low

temperatures and becomes liquefied natural gas (LNG) that is

then transported in oceangoing LNG carriers. The compres-

sors that are used in the gas refining and liquefaction pro-

cesses as well as the turbines that provide their motive power

are indispensable for running the plants involved in these pro-

duction processes. Therefore, if the capital investments in oil

refining plants rise at the rates that are forecast, the demand

for EBARA’s compressors, turbines, and pumps is expected

to increase steadily.

Typical Orders Received by the Elliott Group

EBARA’s compressors and turbines business is conducted

by the Elliott Group, which has an outstanding record of

successful deliveries of its products to many oil refining

and ethylene plants throughout the world.

Special Feature

Elliott Products Supporting the Oil and Gas Market


Forecasts for Global Refining Investments: 2010–2035

Europe

US$120 billion

Africa

US$50 billion

Asia-Pacific

US$480 billion

Central America and South America

US$125 billion

Former Soviet Union (FSU)

US$100 billion

North America

US$195 billion

Middle East

US$125 billion

Figures are approximates. Reference: OPEC “World Oil Outlook 2011”


Let us introduce two examples of typical orders received by

the Elliott Group. The first was for processing equipment for a

large-scale gas processing plant in the Middle East. This was

a major project requiring Elliott to supply 16 compressors and

8 turbines. Since the equipment had to be manufactured to

the most-exacting specifications, the production and delivery

schedule was very tight. As a result of close teamwork

throughout the EBARA Group, Elliott was highly honored for

its work at the completion of the project through the receipt

of a special certificate of thanks from the customer.

The second project we would like to introduce is the deliv-

ery of an ethylene plant to the Middle East. Since the plant

had to be constructed to work in tandem with a world-class

oil refinery, the capacity of the plant had to be more than one

million tons of ethylene annually. Downstream from the main

ethylene plant, the project also involved the construction of

units for the production of propylene, benzene, and other

petroleum derivatives. As a result, this massive project

became the largest petrochemical complex in the world. In

implementing this project, the Elliott Group worked closely

Quench system

Steam turbine

Cracking furnace

Naphtha

Cracking gas compressor

Ethylene compressor

Propylene compressor

Ethylene

Ethane

Propylene

LPG

750˚C~950˚C 40˚C

-100˚C

-40˚C

as a team, with marketing and interfacing with the customer

conducted through Elliott’s offices in the United States and

manufacturing and trial runs carried out by Elliott’s facility

in Japan.

Elliott Group Continuing Its Global Development

To serve the oil and gas market that are spread out across

the globe, the Elliott Group has two facilities, one in Japan

and the other in the United States, as well as a global service

and support network. The manufacturing facilities in Japan

and the United States mutually complement each other’s

activities by concentrating the production of certain items and

dividing up the production load when appropriate as well as

by conducting global procurement and joint purchasing activi-

ties. In addition, service and support bases have been newly

established in China and Latin America to strengthen capabili-

ties for grasping customer needs. The Elliott Group aims to

further expand its operations as a member of the top group

of the world’s compressor manufacturers.

How Compressors and Turbines Are Used in Ethylene Plants


1

2

4

3

1213

1110

56

79

8

Manufacturing Facilities and Service & Support Network

Asia–Pacific11 Elliott Turbomachinery Services (Tianjin) Co., Ltd. (China)

22 Ebara-Elliott Service (Taiwan) Co., Ltd. (Taiwan)

33 Elliott Ebara Turbomachinery India Pvt. Ltd. (India)

44 Elliott Ebara Singapore Pte. Ltd. (Singapore)

Europe and Middle East00 Elliott Turbomachinery Limited (U.K.)

AA Elliott Turbomachinery S.A. (Switzerland)

BB Elliott Ebara Middle East Maintenance WLL (Bahrain)

CC ELLIOTT GAS Services Saudi Arabia Limited (Saudi Arabia)

Manufacturing facility

Local subsidiary

Repair plant and customer service plant

Central America and South America77 Elliott Turbocharger Guatemala, S.A. (Guatemala)

88 Elliott Ebara Servicos para Equipamentos Rotativos Ltda. (Brazil)

99 Elliott Turbomachinery S.A. de C.V. (Mexico)

North America55 Elliott Turbomachinery Canada, Inc. (Canada)

66 Elliott MVP Services, LLC. (U.S.A.)

Elliott Company (U.S.A.)

Elliott Ebara Turbomachinery Corporation (Japan)


Review and Outlook

Net Sales

141312111009

350Billions of Yen

Year ended/ending March 31Target for 2014: Net sales of ¥350 billion

� Actual � Plan

Operating Income/Operating Income Ratio

141312111009

8.3%

29Billions of Yen

Year ended/ending March 31Target for 2014: Operating income

ratio of 8.3%

� Actual � Plan

Fluid Machinery & Sys Overview

In the Fluid Machinery & System (FMS)

Company, in the pumps business,

demand expanded in overseas markets

and led to an increase in the number of

projects in the oil and gas as well as

water infrastructure equipment industries,

mainly in the Middle East. However,

tough price competition continued due to

the appreciation of the yen. In Japan,

budgets in the public sector for pumps

and other related equipment are on a

declining trend, but the market for equip-

ment for buildings in the private sector

improved as the number of building starts

continued above the level of the previous

year.

Amid these conditions, the FMS

Company identified customer needs

through its marketing activities by region

and strengthened its systems, including

its network of service and support bases.

In the compressors and turbines busi-

ness, as crude oil prices remained at a

high level, the number of projects in the

oil and gas market increased, but tough

competition with European and U.S.

companies for large projects continued.

Amid these conditions, measures were

taken to upgrade and expand the FMS

Company’s global sales and service net-

works. In the chillers business, although

demand for high-efficiency electric-pow-

ered chillers increased in the domestic

market, growth in the market as a whole

was weak, while, on the other hand,

sales performance continued to be favor-

able in the expanding Chinese market.

Sales in the FMS Company for the fis-

cal year amounted to ¥286,090 million

(an increase of 6.4% year on year). The

segment income amounted to ¥15,579

million (a decrease of 27.9% year on

year).

Toichi MaedaCompany President

HP carbamate pump for urea plant


tems CompanyMarket Trends

and Basic Strategies

In overseas markets, the increasing

worldwide demand for energy, combined

with the resulting rising prices of crude oil

and gas, is expected to bring expansion

in the oil and gas market as well as the

electric power market. In the building

equipment market, although there are

signs of a slowdown in China and certain

other regions, on the other hand, condi-

tions are expected to recover in the Mid-

dle East and elsewhere. In the Japa nese

market, while the competitive environment

in the market for public works projects is

likely to remain severe, in the private sec-

tor, the outlook is for investments for

maintenance and repair and promoting

energy conservation to remain firm.

In the compressors and turbines

business, the oil and gas market, which

are the principal markets, are forecast to

expand in the medium-to-long term.

In the chillers business, demand is

expected to show continued expansion,

mainly in the Chinese market.

Amid these operating conditions, in

overseas markets, the FMS Company

will work to further develop its business

operations based on clear regional and

product strategies and take further steps

to upgrade its after-sales service and

support network. In Japan, the FMS

Company will take aggressive initiatives

to expand its after-sales service and sup-

port activities, reduce its procurement

costs, and increase the competitiveness

of its principal products through further

improvements in design.

Issues to Be Addressed

In the pumps business, the FMS

Company is implementing systematic

and strategic marketing under the leader-

ship of the Head Office and further devel-

oping its business activities based on

clear regional and product strategies.

With China, Southeast Asia, the Middle

East, and North America as priority areas,

the FMS Company is reviewing the func-

tions, products, and output capacity of

the Group’s production bases, with the

aim of creating manufacturing systems

that can deliver to the world’s markets

Topic

Orders for Process Pumps for Evaporation Method Seawater Desalination Plants

Demand for seawater desalination equipment is expanding on a global scale. Along with

this development, the FMS Company has received orders from Saudi Arabia for a total of

119 process pumps to be used in one of the world’s largest seawater desalination plants

using the evaporation method. One of the major contributing factors in winning these

orders was the improved competitiveness of EBARA’s vertical-type, all-super duplex stain-

less steel fabricated pumps that are used to circulate concentrated seawater. These pumps

rely on cutting-edge design technology and attain the highest levels of efficiency in the

world. Also, by combining IT and cutting-edge technology, the FMS Company has been

able to make these pumps lighter in weight than previous models. Going forward, the out-

look for orders for these pumps for use in seawater desalination plants is quite promising.

those products that satisfy customer

needs. The FMS Company is also review-

ing marketing methods in each region

and working to strengthen marketing sys-

tems for each of its business locations. In

the after-sales service and support busi-

ness, the FMS Company is implementing

measures to expand the scope of the

activities of its business locations from

emphasis on sales of parts and compo-

nents to providing more in-depth service

and support. Initiatives are also being

taken to strengthen global strategic

products, such as those for use in light

Steam (from the boiler)

Water intake pump

Concentrated water (to the boiler)

Condensate pump

Evaporator (vaporizer)

Cooled water

Fresh water

Transport pumpBrine drainage

Brine circulation pump

Mechanism for Seawater Desalination (Evaporation Method)


industries, and improve the efficiency

of mainstay products.

In customer industries where stable

growth is expected in the years ahead,

such as oil and gas, electric power, and

water infrastructure, the FMS Company

is working to increase competitiveness

(from the perspective of cost versus

performance and functionality), with the

objective of expanding business activi-

ties, especially in the emerging markets,

such as China, the Middle East, India,

and elsewhere. For mainstay products,

the FMS Company will strive not only to

upgrade and improve existing products

but also launch new product groups that

reflect enhanced procurement and pro-

duction conditions as well as the results

of reviews of product strategy that

respond to customer requests and the

competitive needs of the market.

In the domestic market for public

works projects, since future growth

is expected to be moderate, the FMS

Company is working aggressively to

expand its after-sales service and sup-

port work through proposal-based sales

tailored to specific customer needs and


requirements, with the goal of gaining

market share and improving profit ratios.

The FMS Company is also strengthening

its activities related to comprehensive

assessment projects, with the aim of

securing increased market share. In the

private-sector building equipment indus-

try, the FMS Company is strengthening

its marketing systems through increased

emphasis on customer service, while also

working to increase the attractiveness of

key products through reducing procure-

ment costs and making improvements in

design. Through these various activities,

as well as the launching of products for

the global market and the energy-saving

product series, the FMS Company is

striving to increase its market share and

improve profitability.

In the compressors and turbines busi-

ness, the FMS Company is proceeding

Model RGDA absorption chiller-heater

Centrifugal compressors

with steps toward the management inte-

gration of the Elliott Group. To increase

awareness among customers of the

Elliott brand, measures are being imple-

mented to strengthen both products and

after-sales service in China, India, South

Korea, the Middle East, and other areas.

In China and India in particular, the FMS

Company is proceeding with the devel-

opment of new procurement sources

through its network of business locations.

In South America, steps are being taken

to upgrade sales and after-sales service

locations. In addition, the FMS Company

is expanding its lineup of products for the

petrochemical and oil refining industries

as well as enhancing its technological

capabilities related to high-pressure com-

pressors for the oil and gas industries.

Similarly, to expand the repair

and remodeling business, the FMS

Company is implementing measures to

strengthen the capabilities of its corps of

marketing and technical specialists.

In the chillers business, the FMS

Company is conducting the joint man-

agement of its business locations in

China and Japan, with the objective of

attaining further growth and improvement

in profitability. Measures are also being

implemented in the chillers business to

improve competitiveness by shortening

lead times, reducing procurement costs,

and lowering design costs, as well as

redesigning the business model for the

after-sales service and support business.

In the cooling towers business, the FMS

Company is implementing measures to

expand sales to private-sector compa-

nies, further expand its solutions busi-

ness, and develop overseas business

aggressively while, at the same time,

developing cooling tower products for

the Chinese market.

Within the FMS Company as a whole,

activities are under way to accelerate

innovation in production processes while

strengthening key overseas production

bases, such as those in China and else-

where, as well as bolstering the global

production network with Japan as

the focal point. In addition, the FMS

Company will strive to expand its after-

sales service and support business

globally and strengthen its system by

upgrading its plants that are dedicated

to providing superior quality service.


Net Sales

141312111009

52Billions of Yen


� Actual � Plan


141312111009

8.7%

4Billions of Yen


ratio of 8.7%

� Actual � Plan

Environmental EngineOverview

In the Environmental Engineering (EE)

Company, construction and related activi-

ties rose to a scale above the average

level in previous years as public-sector

investments related to operation and

maintenance (O&M) of waste processing

facilities rose along with construction

work connected with recovery from the

Great East Japan Earthquake. Although

some new engineering, procurement,

and construction (EPC) investments by

the public sector were delayed by the

earthquake, signs of gradual recovery

appeared. In the midst of these condi-

tions, the EE Company is further

strengthening its capabilities to respond

accurately to changes in the market envi-

ronment and customer needs by integrat-

ing its capabilities for providing new plant

construction (EPC) based on its techno-

logical capabilities, and the capabilities of

its domestic network for providing O&M

services on a nationwide basis.

Sales in the EE Company for the fiscal

year amounted to ¥50,129 million (a

decrease of 3.0% year on year), but the

segment secured income of ¥322 million

(a decrease of 65.8% year on year)

despite additional losses on construction

that were incurred in an overseas waste

incineration plant project (the InfraServ

project in Germany).

Market Trends


In the Japanese waste incineration facili-

ties market, EPC projects that had been

delayed are being restarted, and projects,

especially those including construction as

well as O&M, are increasing. Also, among

O&M projects, work on projects for

expanding the scope of corporate opera-

tions, renewal of existing facilities, and

upgrading of core equipment is expected

to increase.

In view of this market outlook, to

ensure profit stability, the EE Company

is working to develop business with new

customers and making sure it receives

orders for O&M projects related to facili-

ties it has delivered. Activities are also in

progress for expanding orders for busi-

ness projects by strengthening technical

capabilities as well as capabilities of the

EE Company for providing comprehen-

sive proposals that include reducing

costs over the life cycle of the facilities.


In the field of managing the existing stock

of facilities effectively, demand is expand-

ing for construction work to lengthen the

lifetimes of facilities as well as construc-

tion related to reforms in core plant func-

tions to reduce CO2 emissions. Also,

in response to the difficulties that local

governments and other entities are ex -

periencing in securing personnel with

technical training and backgrounds

as well as the rising expectations for

increasing the efficiency of operations

through working jointly with the private

sector, a trend is expected to emerge

toward shifting “from government

bureaucracy to private-sector manage-

ment.” Also, the shortage of electric

power that has followed the 2011 Great

Akihiro UshitoraCompany President


ering Company

Topic

Order Received for Long-Term Comprehensive Management of Waste Treatment

Plant of Urayasu City

The EE Company has received an order from Urayasu City of Chiba Prefecture for the com-

prehensive management of that city’s waste treatment plant. This project will involve the

integrated management over a period of 10 years of a municipal waste incinerator (with a

capacity of 270 tons/day), bulky waste treatment equipment (70 tons/five-hour period), a

material recycling system (42.5 tons/five-hour period), night soil treatment facilities (35 kilo-

liters/day), and other facilities in the premises. The EE Company will draw on its many

years of operating experience and facilities management know-how to operate these facili-

ties safely and securely, and, through the use of improved operation management, such as

optimization of electric power consumption, is

working to reduce CO2 emissions. The EE

Company has received contracts for nine such

projects and will strive to contribute to efficient

waste management with its experience and

expertise in these fields.

East Japan Earthquake has increased

expectations regarding power generation

using waste materials as an energy

source.

In this market environment, issues

within the O&M business include stabiliz-

ing income by promoting facilities-related

services that include both management

and repair services as well as mainte-

nance and supervision on comprehensive

long-term contract bases. Also, the EE

Company is aiming to create new

demand in the O&M business through

making proposals for renewal work

based on plans for the efficient use of

existing facilities by lengthening their

useful lifetimes. The EE Company is

also working to generate new demand in

its O&M business by making proposals

for improvements in core plant functions

to substantially reduce CO2 emissions

through the application of the latest EPC

technology.

In the EPC business, the EE Company

will share its plans for lengthening the

useful lifetimes of facilities of its O&M

business throughout the EBARA Group.

Also, in those cases where the replace-

ment of facilities is expected, the EE

Company will provide proposals on the

latest EPC technology when customers

request them, with the aim of capturing

demand for the replacement of facilities.

In addition, the EE Company is working

to strengthen the integrated operation of

the EPC and O&M businesses. This will

involve providing the EPC business with

information held by the O&M business

related to facilities maintenance and

management, which is based on its

extensive record of successful deliveries

and its nationwide after-sales service net-

work. The EE Company will, therefore,

make possible the establishment of new

technologies for improving heat recovery

and heat usage and, thereby, reduce

greenhouse gas emissions (CO2) at the

same time as well as enable major reduc-

tions in life-cycle costs of facilities, from

the construction stage to operation and

business management. Strengthening

these technologies will enable the EE

Company to differentiate itself from

competitors and win orders.

External view of the Urayasu Waste Treatment Plant


Net Sales

141312111009

85Billions of Yen


� Actual � Plan


141312111009

14.1%

12Billions of Yen


ratio of 14.1%

� Actual � Plan

Precision Machinery Overview

In the Precision Machinery (PM)

Company, in the semiconductor market

demand for flash memories for use in

high-performance cell phones and tablet-

type mobile terminals increased over the

course of the fiscal year, but investment

plans of semiconductor manufacturers

were postponed, thus leading to stag-

nation in demand for semiconductor

manufacturing equipment. In the PM

Company’s customer markets other than

semiconductor manufacturers, capital

investment in flat panel displays, photo-

voltaic batteries, and LEDs remained

stagnant. Amid these conditions, the PM

Company continued its production inno-

vation campaign in its manufacturing divi-

sions, implementing measures to reduce

lead times, increase productivity, and

lower manufacturing costs. Through its

service and support business global

network, the PM Company worked to

increase customer satisfaction by main-

taining the stable operation of client

equipment, offering proposals for making

improvements in equipment to upgrade

productivity, and providing other services.

Sales in the PM Company for the fiscal

year amounted to ¥68,373 million (an

increase of 0.7% year on year). The seg-

ment income amounted to ¥6,594 million

(a decrease of 17.7% year on year).

Market Trends


In the PM Company’s core user market

of semiconductor manufacturers,

aggressive investments are expected

to continue as trends in the “foundry” and

flash memory segments of the industry

are bolstered by rising demand for high-

function mobile units, including tablet-

type devices. Other favorable trends will

be the further miniaturization of semicon-

ductor devices, the introduction of larger

diameter silicon wafers to increase pro-

ductivity, and progress toward introduc-

ing three-dimensional ICs.

Among non-semiconductor users, the

revival of demand among LED users will

require additional time, but recovery is

expected among companies in the flat

panel display and solar battery industries.

Although the PM Company’s markets

are subject to major fluctuations, latent

demand is forecast to be substantial

going forward. To secure and expand its

position, the PM Company is working to

strengthen its service and support func-

tions, build even closer ties with custom-

ers, and contribute to stabilizing EBARA

Group profitability.


It will be essential for the semiconductor

industry to continue steady innovation in

the production and development of new

technology without being influenced by

major fluctuations in the market. The PM

Company will work to maintain its market

share and profitability while continuing

the production innovation and technology

development that its users desire as it

also helps to support the stable operation

of its customers. In the non-semiconduc-

tor industries it serves, the PM Company

will closely monitor trends to detect when

Manabu TsujimuraCompany President


Company

Topic

EBARA’s Accumulated Shipments of Dry Vacuum Pumps Reach 100,000 Units

In May 2011, the accumulated total of dry vacuum pumps shipped from the PM Company’s

Fujisawa Plant climbed to 100,000. Since commencement of shipments in 1986, EBARA’s

dry vacuum pumps have been supplied not only to companies throughout the world in the

semiconductor manufacturing industry but also for use in a wide range of electronic parts

manufacturing companies, including those in the solar cell, LED, and other industries.

In addition, the PM Company began to develop dry vacuum pumps with low electric power

consumption early on, and, by providing products that

respond to a wide range of user needs, has built a position

as one of the leading companies in the power-saving dry

pump business. Looking ahead, to continue to supply

products that meet the requirements of its customers, the

PM Company and all its staff members will come together

to further increase quality and improve customer service,

and play a key role in building a more-affluent society.

customers will move into their investment

cycle and then work to capture additional

market share.

In the components business, the PM

Company will maintain its base among

the major suppliers to companies in its

core industry of semiconductors. It will

also work to expand sales to companies

in new markets, including solar battery

and LED manufacturers, as it also enters

into the wider market for vacuum pumps.

Additionally, the PM Company is planning

to take further steps to structure a global

production network as it continues to

aggressively increase its overseas pro-

duction and procurement.

In the chemical mechanical polishing

(CMP) systems business, the PM

Company will continue to work with its

customers to introduce and expand the

range of applications of new processes

along with the trends toward greater min-

iaturization and large wafer diameters as

well as the increasingly active moves

toward the introduction of 3D ICs and

new semiconductor materials. With pro-

duction centers in the geographically

widely separated areas of Kumamoto

and Fujisawa in Japan, the PM Company

is well-positioned to deal with various

risks. Looking ahead, with the establish-

ment of a global supply chain and inno-

vations in production to shorten lead

times and lower costs, the PM Company

is looking to expand its market share and

increase profitability.

In new product development, work

is proceeding smoothly on a number

of developments, including process

equipment for 3D ICs and equipment for

increasing yields. The PM Company will

nurture these new products into busi-

nesses that will take their place as major

supports for its activities along with the

component and CMP businesses.

In the after-sales service and support

businesses, the PM Company will draw

on the capabilities of its global network to

maximum advantage in its marketing and

after-sales service activities. This will

include responding accurately to the

wide range of needs for increasing pro-

ductivity among its customers who have

operations around the globe as well as

increasing the PM Company’s own sales

and earnings power.

The PM Company, which comprises

EBARA’s precision machinery and elec-

tronics operations, will strive to optimize

its inventories to achieve increased effi-

ciency in the allocation of its assets. Also,

by moving ahead with the recruitment,

training, and assignment of necessary

personnel to implement its global strate-

gy, the PM Company will endeavor to

strengthen its management base to

achieve stable expansion in profitability.

EV-S Series of new-type dry vacuum pumps


Governance Structure and Management Systems

Support forManagementand Execution

Reporting Selection/Dismissal

Supplementary Assistance

Reporting

Auditing

Auditing/Reporting

Auditing

Exchange of Opinions

Advice,Directions forImprovement

Exchange of Informationand Opinions

Selection/Dismissal

Exchange of Informationand Opinions

Corporate Auditor’s Department

Independent Auditor

Outline of EBARA’s Corporate Governance Framework

General Meeting of Shareholders

Subsidiaries and Affiliated Companies

Executive Officer Meeting

ReportingInternal Audits

Compensation Committee

Nominations Committee

Management Meeting

Management Planning Committee

CSR Committee

Risk Management Panel

President and Representative Director

Reporting

Reporting

Reporting

Selection/Dismissal

Board of Directors

Guidance/Transmission of Information

Company/Corporate

Guidance

Selection/Dismissal/Surveillance

Corporate Audit Department

Board of Corporate Auditors

Disclosure Committee

EBARA’s corporate philosophy is “Extensive contribution to society by providing superior technologies and services related to

water, air, and the environment.” Under this corporate philosophy, EBARA positions enhancing its corporate value through the

attainment of sustainable growth of its business activities as one of its highest priority management issues. For the purpose

of addressing these issues effectively, EBARA believes that it is important to further develop management systems, which

increase the transparency and objectivity of management activities. Accordingly, EBARA is working to strengthen its corporate

governance.

Additionally, EBARA has established in-house rules that include the “EBARA Group Code of Conduct” to provide guidelines

for all related parties, such as directors, officers, and employees, when they engage in their jobs with the Company.

Corporate Governance

Based on the Companies Act established by the Japanese govern-

ment, EBARA’s organization comprises the Board of Directors, the

Board of Corporate Auditors, and the Independent Auditor.

The Board of Directors is composed of 12 members, and 4 of

these are Outside Directors who have no special interest in EBARA.

Under the rules for the activities of the Board of Directors established

by the Company, it is ensured that the execution of the duties by the

Directors complies with laws and regulations and the Company’s

Articles of Incorporation. The Board of Directors holds regular month-

ly meetings and special sessions when necessary.

The Board of Corporate Auditors comprises five members, three

of whom are Outside Auditors who have no special interest in

EBARA. Based on auditing plans and auditing principles drawn up

by the Board of Corporate Auditors, it audits the conduct of man-

agement duties by the Directors. At the same time, it exchanges

information and opinions with the Representative Director and with

the Independent Auditor to ensure the effectiveness of auditing

activities.

The Company has appointed Ernst & Young ShinNihon LLC as its

Independent Auditor, as required under the Companies Act and

Japan’s Financial Instruments and Exchange Act.

In addition to the organizational units required by law, EBARA has

formed some organizational units on its own initiative. For example,

the Management Meeting is convened monthly to provide manage-

ment members with the chance to discuss various issues concerning

management policy and strategy. Also, to ensure the transparency

and objectivity in the selection of Directors and Executive Officers as

well as in the determination of their compensation, the Company has

established the Nominations Committee and the Compensation

Committee, both of which have a majority of Outside Directors.

Moreover, EBARA has established the Corporate Ethics

Committee. The key organizational units of the Company’s corporate

governance system, such as Outside Directors, Corporate Auditors,

the Corporate Audit Depart ment, and departments in charge of inter-

nal auditing/internal control, play their own role in cooperation with

each other under the Com mittee to realize the Company’s effective

corporate governance systems.


Internal Controls

Internal Control Systems

In 2006, EBARA’s Board of Directors established the “Basic Internal

Control Policy.” Based on this policy, EBARA is working to improve

its internal controls and assess their effectiveness.

Activities related to the improvement of internal controls include

the establishment of systems and/or rules for directors and employ-

ees to work in compliance with laws and ordinances, a risk manage-

ment system, and the internal control systems for Group companies.

As for the risk management system, the Company has organized its

Risk Management Panel, which consists of all full-time Directors and

is chaired by the President. This panel is in charge of the risks that

may affect the Group as a whole.

Business Continuity Plan

To deal with the effects of major natural disasters, the Company

created its Business Continuity Management System (BCMS) in

the fiscal year ended March 31, 2012 under the assumption of hav-

ing to deal with the effects of a major earthquake. The Company’s

Initial Management Plan (IMP), Business Recovery Plan (BRP), and

Business Continuity Plan (BCP), which constitute the Company’s

BCMS, are being fully revised to take account of the Company’s

experience after the Great East Japan Earthquake of 2011. The next

steps will include increasing the effectiveness of disaster prevention

and business continuity measures through education and training

programs as well as other activities.

Activities to Ensure the Reliability of Financial Reporting

Regarding internal controls required under Japan’s Financial

Instruments and Exchange Act, to ensure the reliability of financial

reporting, the Company is working to increase the efficiency of its

assessment activities while also striving to raise the quality of busi-

ness processes; for example, the Company has instituted education

and training programs for finance and accounting.

Internal Auditing Systems

In its internal auditing systems, the Company has organized the

Corporate Audit Department (CAD) as an independent unit reporting

to the President. Based on the Company’s internal audit rules, the

CAD selects important matters and themes and conducts audits

related to the status of compliance, risk management, and other

issues in the Company and other Group companies. The CAD is also

in charge of internal control assessments (including financial report-

ing risk), from an independent perspective, under the Financial

Instruments and Exchange Act. These auditing and monitoring activi-

ties make it possible to provide advice and recommendations for

improvements to the business units through the auditing process,

and its results are reported to the President of the Company. In addi-

tion, as deemed necessary, the CAD exchanges information and

opinions with the Corporate Auditors and related departments.

Compliance System

The Company is fully aware that unethical behavior due to the lack of

compliance may damage its management foundations. Accordingly,

its approach to securing thorough compliance includes five

approaches. These are the preparation of the Board of Directors’

Compliance Action Plan, the formation of a CSR Committee, the

establishment of a Group Compliance Network, the creation of

a Compliance Liaison System, and the offering of consultation

functions, or a “whistle-blower” system.

The Board of Directors’ Compliance Action Plan for taking specific

action to promote compliance is prepared each year by the Board of

Directors. The content of this plan is announced to employees to

clarify what Directors should be doing to secure compliance. The

results of the activities of Directors are assessed at the end of the

year, and used as a basis for a “plan-do-check-action” (PDCA) cycle

aimed at improving the effectiveness of these activities year by year.

The CSR Committee was formed to further advance the roles of

the previous Corporate Ethics Committee, and it commenced its

activities in September 2011. The CSR Committee is chaired by the

President, and outside legal counsel participates to offer its advice.

This committee considers and conducts deliberations concerning

how the Company should perform its social responsibilities, including

the day-to-day practice of compliance. In addition, this committee

invites the presidents and representatives of Group companies to

confirm the status of compliance in each of these companies, and,

by conducting periodic checks on the status of compliance through-

out the Group, verifies the proper conduct of business activities and

promotes improvements in Group activities.

The Group Compliance Network is composed of the officers in

charge of corporate ethics in each of the Group companies, and, to

ensure that the various measures decided by the CSR Committee

are properly implemented in the Group, this committee serves as

a forum for introducing the related training activities and initiatives

being taken by Group companies.

The Compliance Liaison System provides for the stationing of

liaison personnel at the workplace level. Its objectives include pro-

moting the development of a compliance culture in the workplace as

well as discovering and correcting compliance risks that may exist.

Training courses for liaison personnel are conducted twice a year

to sharpen their awareness of the objectives of liaison activities

and enhance their skills.

As part of compliance-related consultation functions, the Company

offers access to advisory services provided by outside legal counsel as

well as the Harassment Consultation Service, offered by the Human

Rights and Compliance Department. Together, these consultation

functions deal with between 20 and 30 compliance-related cases each

year. In addition, the Human Rights and Compliance Department con-

ducts a questionnaire survey each year to gain input for assessing and

implementing improvements in the Company’s compliance system.


From left: Atsuo Ohi, Akira Ogata, Masao Namiki, Akihiro Ushitora, Akio Mikuni, Toichi Maeda, Manabu Tsujimura, Natsunosuke Yago, Tetsuji Fujimoto, Sakon Uda, Masaru Shibuya, Shiro Kuniya

Board of Directors(As of June 28, 2012)

Directors of the Board

Natsunosuke YagoPresident and Representative Director

Tetsuji Fujimoto*Director of the Board

Akihiro Ushitora*Director of the Board

Manabu Tsujimura*Director of the Board

Toichi Maeda*Director of the Board

Akira Ogata*Director of the Board

Atsuo Ohi*Director of the Board

Masaru Shibuya*Director of the Board

Akio MikuniOutside Director

Sakon UdaOutside Director

Masao NamikiOutside Director

Shiro KuniyaOutside Director

Directors of the Board marked with * hold the post of Executive Officer concurrently.


Corporate Auditors and Executive Officers(As of June 28, 2012)

Corporate Auditors

Full-Time Corporate Auditors

Toshihiro YamashitaAkira Hashimoto

Corporate Auditors

Yoshihiro Machida*Fumio Takahashi*Tadashi Urabe*

Individuals marked with * are Outside Corporate Auditors.

Executive Officers

Senior Managing Executive Officer

Tetsuji FujimotoResponsible for Group Management, Finance & Accounting, Internal Control

Managing Executive Officers

Akihiro UshitoraPresident, Environmental Engineering Company

Manabu TsujimuraPresident, Precision Machinery Company, Responsible for Technologies, R&D, Intellectual Property

Toichi MaedaPresident, Fluid Machinery & Systems Company

Akira OgataVice President, Fluid Machinery & Systems Company, Operations of Technology and Production, Responsible for Production Process Innovation, Information & Communication System, Division Executive, Production Process Innovation Division

Atsuo OhiVice President, Fluid Machinery & Systems Company, Head of Business Unit, Global Pump Business Unit

Masaru ShibuyaResponsible for Human Resources, Legal, Public Relations & General Affairs, Division Executive, Human Resources, Legal & Public Relations Division

Akira ItohDivision Executive, Enterprise Risk Control Division

Shotaro KuryuVice President, Fluid Machinery & Systems Company, Domestic Sales, Head of Business Unit, Marketing & Service Business Unit

Nobuharu NojiDivision Executive, Components Division, Precision Machinery Company

Senior Executive Officer

Masakatsu OhyaDivision Executive, Intellectual Property Division, General Manager, IP Administration, Trademark Department

Executive Officers

Koji OtaDivision Executive, Sales and Marketing Division, Precision Machinery Company

Kiyoshi HironoDivision Executive, Southeast Asia Marketing & Sales Division, Executive General Manager, Southeast Asia Regional Office, Fluid Machinery & Systems Company

Takao InoueDivision Executive, Marketing & Sales Division, Fluid Machinery & Systems Company

Akio TeragakiExecutive General Manager, Futtsu Plant, Operations of Technology and Production, Fluid Machinery & Systems Company, Executive General Manager, Futtsu District

Seiji KatsuokaDivision Executive, CMP Division, Precision Machinery Company

Norio KimuraDivision Executive, New Business Drive Division, Precision Machinery Company

Susumu ShigaFluid Machinery & Systems Company

Masao AsamiDivision Executive, Sales and Marketing Division, General Manager, Semiconductor Equipment Sales and Marketing Department, Precision Machinery Company

Minoru TakanoDivision Executive, General Affairs Division, Executive General Manager, Haneda Office

Kazuhiro OgawaraHead of Unit, Planning & Administration Unit, Division Executive, Planning & Administration Division, Fluid Machinery & Systems Company

Kengo ChokiDivision Executive, Finance & Accounting Division

Akihiro KidaDeputy Head of Business Unit, Domestic Sales, Marketing & Service Business Unit, Fluid Machinery & Systems Company

Yoshiaki OkiyamaDivision Executive, China & East Asia Division, Division Executive, Business Planning & Administration Division, Executive General Manager, China & East Asia Regional Office, Precision Machinery Company

Mitsuhiko ShirakashiDivision Executive, Production & Assurance Division, Precision Machinery Company, Executive General Manager, Fujisawa District

Kenichi NambuDeputy Head of Business Unit, Domestic Sales, Marketing & Service Business Unit, Fluid Machinery & Systems Company

Hisao MatsumotoDivision Executive, Standard Pump Business Division, Fluid Machinery & Systems Company

Takafumi MaeharaDivision Executive, Middle East Division, Executive General Manager, Middle East Regional Office, Fluid Machinery & Systems Company


Corporate Social Responsibility (CSR)

CSR Activities Backed by External Assessments

EBARA continues to be selected each year for inclusion in inter-

national SRI* Indexes: the Dow Jones Sustainability Asia Pacific

Index and the FTSE4Good Index Series. In addition, in 2011,

EBARA was selected for inclusion in the “Morningstar Socially

Responsible Investment Index.” EBARA’s inclusion in these index-

es is evidence that the Company is recognized as an enterprise

that is contributing to the sustainable development of society

through active initiatives in the fields of the natural environment,

human rights, responsiveness to customers, contributing to the

community, and other areas.* SRI: Socially Responsible Investing

The EBARA Group Code of Conduct

To attain the objectives of its corporate philosophy, EBARA has

established its EBARA Group Code of Conduct to provide guide-

lines for the proper conduct of its Directors and each and every

one of its other employees. Members of EBARA Group compa-

nies in Japan act in accordance with this code of conduct, and

staff members of Group companies elsewhere around the world

follow codes of conduct, based on the EBARA Group Code of

Conduct in Japanese, which takes account of laws and practices

in their respective countries.

Corporate Philosophy

Extensive contribution to society by providing superior technology and

the best possible service related to water, air, and the environment

• We will contribute to society through business by providing excellent

products and services globally.

• We will be fully aware of corporate ethics, comply with laws and

ordinances, and respect the principles of society.

• We will strive to conserve the global environment when proceeding

with business activities.

• We will maintain fair and amicable relationships with stakeholders.

• Top management and employees will fulfill the responsibilities of their

respective work.

Note: Overseas Group companies have set up their own codes of conduct, taking local laws, social norms, and customs into account.

The EBARA Group fulfills its corporate social responsibilities by having its Directors and all of its employees

abide by the “EBARA Group Code of Conduct.” The EBARA Group will continue to maintain good relation-

ships with all its shareholders and earn the trust of its customers by offering products and services that

benefit society, industry, and the people’s livelihood, while giving consideration to the natural environment.

In addition, the EBARA Group supports the United Nations (UN) Global Compact and puts into practice the

10 principles of the Global Compact, which are grouped into four areas: human rights, labor, the environ-

ment, and anti-corruption. To acquaint stakeholders with its CSR activities, the EBARA Group prepares

an annual EBARA Group CSR Report.


Respect for Human Rights

With the UN International Labour Organization (ILO) Standards

as a basis, we will protect and respect the human rights of all our

stakeholders, including customers, business partners, citizens,

and employees. At EBARA’s CSR training programs held in 2011,

a definition of human rights was explained to EBARA Group

employees, and they gained a deeper understanding of the

prevention and proper responses to violations of human rights

in the workplace.

Observance of Labor Practices

EBARA is implementing activities to realize an appropriate

work-life balance, which is being championed by Japan’s Cabinet

Office. EBARA has declared each Wednesday as a “no overtime”

day, and stepped up its enforcement of this rule beginning in

September 2010. Also, in the fiscal year ended March 31, 2012,

EBARA revised its systems for providing support for the bearing

and raising of children. Specifically, under the revised systems,

EBARA decided to provide for an increase in the number of days

off and an extension of the term. The aim of this revision was to

enable male employees to have additional time off to participate

more actively in the child-rearing process.

Preservation of the Natural Environment

EBARA is implementing its environmental preservation activities

under the EBARA Group Environmental Vision (2020), which cites

two principal objectives: “The EBARA Group is striving to create

a society in which nature and technology are in harmony” and

“The EBARA Group endeavors to conserve the global environ-

ment through supplying its technology, products, and services.”

EBARA conducts periodic environmental audits and environmen-

tal assessments with the objective of avoiding and minimizing

environmental risk accompanying the conduct of construction

work within the Group. Also, EBARA endeavors to offer eco-

friendly products, such as high-efficiency standard pumps,

chillers, and dry vacuum pumps.

Opposition to Corrupt Practices

Both in Japan and overseas, the EBARA Group Code of Conduct

absolutely forbids the payment of bribes to national and local

government officials as a matter of course as well as the giving

or receiving of bribes for the purpose of gaining profit in business

activities improperly or in payment for favors received, etc.

These rules are observed at all times.

Activities Contributing to Society

For more than 20 years, the EBARA Hatakeyama Memorial Fund

(EHMF) has held international seminars, drawing on EBARA’s

accumulated technology, for engineers and university students,

mainly in the countries of Southeast Asia. During the fiscal year

ended March 31, 2012, these seminars were held in six loca-

tions, including the Asia Institute of Technology in Thailand and

Hanoi University of Science and Technology in Vietnam, with a

total of 348 participants in attendance. In Japan, EBARA also

invites primary-school and middle-school students and adult

citizens living in areas close to its plants as well as university

students to tour its facilities.


EBARA Global Network

Principal Subsidiaries and Affiliated Companies (As of June 30, 2012) � Consolidated subsidiary � Production Sales � Service and support

Fluid Machinery & Systems (FMS) Company

<Pumps>Asia–Pacific

� Ebara-Byron Jackson, Ltd. (Japan)Custom pumps (for nuclear power plants) �

� Ebara Great Pumps Co., Ltd. (China)Custom pumps, small turbines � �

� Ebara Machinery (China) Co., Ltd. (China)Standard pumps � �

� Ebara Boshan Pumps Co., Ltd. (China)Custom pumps � �

� Ebara Densan (Kunshan) Mfg. Co., Ltd. (China)Standard pumps � �

� Ebara Engineering Singapore Pte. Ltd. (Singapore)Standard pumps, custom pumps, chillers, vacuum pumps, equipment for the semiconductor industry �

� Ebara-Densan Taiwan Manufacturing Co., Ltd. (Taiwan)Standard pumps � �

Pacific Machinery and Engineering Co., Ltd. (Japan)Special-purpose pumps, including slurry pumps, facilities for transportation of liquid, and powder processing equipment � �

Kirloskar Ebara Pumps Limited (India)Standard pumps, custom pumps, small turbines � �

P.T. Ebara Indonesia (Indonesia)Standard pumps � �

Ebara Pumps Malaysia Sdn. Bhd. (Malaysia)Standard pumps �

Ebara (Thailand) Limited (Thailand)Standard pumps, custom pumps, engineering �

Ebara Vietnam Pump Company Limited (Vietnam)Custom pumps, engineering � �

Ebara Pumps Australia Pty. Ltd. (Australia)Standard pumps �

Ebara Fluid Machinery Korea Co., Ltd. (Republic of Korea)Custom pumps, standard pumps �

Americas

� Ebara International Corporation (U.S.A.)Custom pumps, standard pumps � �

� Ebara Indústrias Mecánicas e Comércio Ltda. (Brazil)Standard pumps � �

EMEA

� Ebara Pumps Europe S.p.A. (Italy)Standard pumps � �

� Sumoto S.r.l. (Italy)Deep well motors, standard pumps � �

Ebara España Bombas S.A. (Spain)Standard pumps � �

Ebara Pompy Polska sp. z o.o. (Poland)Standard pumps �

<Compressors & Turbines>Asia–Pacific

� Elliott Group Holdings, Inc. (Japan)Holding Company

� Elliott Ebara Turbomachinery Corporation (Japan)Compressors, turbines � �

� Ebara-Elliot Service (Taiwan) Co., Ltd. (Taiwan)Compressors, turbines �

� Elliott Ebara Singapore Pte. Ltd. (Singapore)Compressors, turbines �

� Elliott Ebara Turbomachinery India Pvt. Ltd. (India)Compressors, turbines �

� Elliott Turbomachinery Services (Tianjin) Co., Ltd. (China)Compressors, turbines �

Americas

� Elliott Company (U.S.A.)Compressors, turbines � �

etwEBARA Global Network

Asia-PacificEurope & Middle East, Africa (EMEA)


� Elliott MVP Services, LLC. (U.S.A.)Compressors, turbines �

� Elliott Turbomachinery S.A. de C.V. (Mexico)Compressors, turbines �

� Elliott Turbomachinery Canada, Inc. (Canada)Compressors, turbines �

� Elliott Turbocharger Guatemala, S.A. (Guatemala)Compressors, turbines �

� Elliott Ebara Servicos para Equipamentos Rotativos Ltda. (Brazil)Compressors, turbines �

EMEA

� Elliott Turbomachinery S.A. (Switzerland)Compressors, turbines �

� Elliott Turbomachinery Limited (U.K.)Compressors, turbines �

� Elliott Ebara Middle East Maintenance WLL (Bahrain)Compressors, turbines �

� ELLIOTT GAS Services Saudi Arabia Limited (Saudi Arabia)Compressors, turbines �

<Chillers>Asia–Pacific

� Ebara Refrigeration Equipment & Systems Co., Ltd. (Japan)Chillers, cooling towers, heat-exchange systems � �

� Yantai Ebara Air Conditioning Equipment Co., Ltd. (China)Chillers, cooling towers, heat-exchange systems � �

<Others>Asia–Pacific

� EBARA DENSAN LTD. (Japan)Electrical and electronic equipment � �

� EBARA HAMADA BLOWER CO., LTD. (Japan)Industrial fans � �

Environmental Engineering (EE) Company

Asia–Pacific

� Ebara Environmental Plant Co., Ltd. (Japan)EPC and O&M for the waste treatment business �

� Ebara Qingdao Co., Ltd. (China)Boilers for waste incineration plants, packaged boilers �

Swing Corporation (Japan)EPC and O&M for the water treatment business �

Precision Machinery (PM) Company

Asia–Pacific

� Ebara Field Tech. Corporation (Japan)Vacuum pumps, products for the semiconduc-tor industry �

� Ebara Precision Machinery Taiwan Incorporated (Taiwan)Vacuum pumps, products for the semiconduc-tor industry �

� Ebara Precision Machinery Korea Incorporated (Republic of Korea)Vacuum pumps, products for the semiconduc-tor industry �

� Shanghai Ebara Precision Machinery Co., Ltd. (China)Vacuum pumps, products for the semiconduc-tor industry �

Americas

� Ebara Technologies Incorporated (U.S.A.)Vacuum pumps, products for the semiconduc-tor industry �

EMEA

� Ebara Precision Machinery Europe GmbH(Germany)Vacuum pumps, products for the semiconduc-tor industry �

FMS PumpsFMS Compressors & TurbinesFMS ChillersEEPM

Americas



EBARA CORPORATION and Consolidated Subsidiaries Years ended March 31

2012 2011 2010

Net sales ¥412,077 ¥401,676 ¥485,889

Cost of sales 318,937 301,658 389,437

Gross profit 93,140 100,018 96,452

Operating income (loss) 23,267 31,542 18,953

Net income (loss) 2,890 28,192 5,442

Capital expenditures 12,316 8,189 19,484

R&D expenses 3,827 4,067 4,977

Shareholders’ equity and

accumulated other comprehensive

income** 151,063 151,951 129,806

Total net assets 154,656 154,938 132,665

Total assets 488,964 507,898 522,540

Net income (loss) per share

(yen and U.S. dollars) ¥ 6.85 ¥ 66.78 ¥ 12.89

ROIC (%)*** 1.0 9.1 1.8

ROE (%)**** 1.9 20.0 4.3

* The U.S. dollar amounts are included solely for convenience and have been translated as a matter of arithmeti-cal computation only at the rate of ¥82.19=US$1, the rate of exchange prevailing on March 31, 2012.

** The EBARA Group has applied “Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Statement No. 5, issued on December 9, 2005) and “Guidance on Accounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ Guidance No. 8, issued on December 9, 2005) from the fiscal year ended March 31, 2007. The amount corresponding to Shareholders’ Equity, according to the previous method of presentation, is ¥151,063 million for the fiscal year 2012, ¥151,951 million for fiscal year 2011, ¥129,806 million for fiscal year 2010, ¥121,411 million for fiscal year 2009, and ¥151,237 million for fiscal year 2008.

*** ROIC: Net income/Interest-bearing debt (Average between beginning and end of period) + Shareholders’ equity (Average between beginning and end of period)

**** ROE: Net income/Average shareholders’ equity and accumulated other comprehensive income of the begin-ning and end of the fiscal yearFrom the fiscal year 2007, shareholders’ equity and accumulated other comprehensive income for total net assets in the calculation

Eleven-Year Summary

Financial Section

Contents

Eleven-Year Summary 30

Financial Review 32

Consolidated Balance Sheets 38

Consolidated Statements

of Income40

Consolidated Statements of

Comprehensive Income41


Changes in Net Assets42


Cash Flows45

Notes to the Consolidated

Financial Statements46

Independent Auditor’s Report 69

Thousands ofMillions of yen U.S. dollars*

2009 2008 2007 2006 2005 2004 2003 2002 2012

¥501,149 ¥567,191 ¥538,098 ¥514,957 ¥478,397 ¥507,767 ¥517,981 ¥562,592 $5,013,711

415,827 469,865 434,934 418,414 384,168 405,760 420,079 454,853 3,880,483

85,322 97,326 103,164 96,543 94,229 102,007 97,902 107,739 1,133,228

638 6,017 13,249 10,902 7,581 10,446 (1,424) 3,522 283,088

(13,113) 7,609 5,446 3,350 (19,649) 2,586 (28,538) (17,936) 35,162

23,560 22,381 17,917 14,838 12,706 13,690 19,600 25,698 149,848

8,829 10,812 11,357 10,883 9,994 10,965 14,116 17,287 46,563

121,411 151,237 151,242 153,695 102,952 112,578 106,782 140,107 1,837,973

124,264 155,263 154,970 — — — — — 1,881,689

562,456 607,007 625,033 592,631 558,265 576,412 613,759 642,605 5,949,191

¥ (31.04) ¥ 18.01 ¥ 12.89 ¥ 9.11 ¥ (64.43) ¥ 8.34 ¥ (95.49) ¥ (59.99) $ 0.083

(4.1) 2.2 1.5 1.0 (6.2) 0.8 (8.5) (5.2)

(9.6) 5.0 3.6 2.6 (18.2) 2.3 (23.1) (12.1)


Financial Review

Overview

During the fiscal year ended March 31, 2012, the business environment overseas was charac-terized by gradual improvement in economic conditions despite the persistence of high unem-ployment rates in the United States, declines in housing prices, and other factors. However, in Europe, economic growth decelerated because of the continuation of unsettled fiscal and mone-tary conditions there. In Asia, the economies of China and India, which had shown robust perfor-mance supported mainly by domestic demand, began to weaken. In Japan, investment by the public sector, which had been delayed by the effects of the Great East Japan Earthquake, began to show a recovery trend due to the positive effects of supplementary budgets, and private-sec-tor capital investment, which moved into a slump following the Great East Japan Earthquake, is also bottoming out, and the economy is showing moderate improvement. Amid these adverse economic conditions, the EBARA Group (the Group) launched a new three-year, medium-term management plan entitled “E-Plan2013” covering the period through the year ending March 31, 2014. This plan is based on four policies: (1) Promoting “regional pro-duction for regional supply” in priority areas and establishing an optimally located production and supply system from a global perspective, (2) working to enter new markets by expanding core business domains, (3) aiming to optimize “monozukuri” (manufacturing) processes through sci-entific approaches, and (4) expanding the functions of the corporate headquarters in keeping with the globalization of business domains. The beginning of E-Plan2013 marks the start of EBARA’s movement toward establishing a stronger and stabler business structure. As a consequence, consolidated net sales for the fiscal year amounted to ¥412,077 million (an increase of 2.6% year on year) and operating income amounted to ¥23,267 million (a decrease of 26.2% year on year). Sales in the Fluid Machinery & Systems (FMS) Company and the Precision Machinery (PM) Company increased, but operating income decreased in all business segments. Other income (expense), net, amounted to expenses of ¥12,402 million, as a result of the reporting of an extraordinary loss of ¥10,295 million in connection with the withdrawal from a business accompanying the concluding of an agreement to make a final transfer of a plant to the client in the InfraServ project in Germany. Consequently, income before income taxes and minority interests amounted to ¥10,865 mil-lion. Net income amounted to ¥2,890 million (a decrease of 89.7% year on year), as a result of the reversal of deferred tax assets by ¥2,453 million with tax reform in the fiscal year ended March 31, 2012.

Financial Position

AssetsAs a result of a decrease from the end of the previous year in current assets of ¥26,173 million and an increase in fixed assets of ¥7,239 million, total assets decreased ¥18,934 million, to ¥488,964 million. The principal reasons for these movements in assets were as follows. The decline in current assets was due to decreases of ¥16,191 million in cash and cash equivalents and ¥13,408 million in deferred tax assets, although inventories increased ¥2,836 million. The decline in property, plant and equipment was due to a ¥4,628 million increase in accumu-lated depreciation. The increase in investments and other assets was due primarily to an increase in deferred tax assets.

Years ended March 31

Sales Cost of sales SG&A expenses Operating margin (%) (right scale)

Operating Margin(Millions of yen, %)

0

600,000

400,000

500,000

300,000

200,000

100,000

0

9.0

7.5

4.5

6.0

3.0

1.5

2008

2009

2010

2011

2012


LiabilitiesCompared with the previous fiscal year-end, current liabilities decreased ¥9,739 million, and long-term liabilities decreased ¥8,913 million; thus, total liabilities decreased ¥18,652 million, to ¥334,308 million. The principal causes of these decreases were as follows. Current liabilities decreased ¥9,739 million as a result of a decrease in the reserve for con-struction losses of ¥8,220 million. Long-term liabilities decreased ¥8,913 million as a result of a decrease of ¥8,015 million in long-term bank loans.

Net AssetsNet assets at the end of the fiscal year amounted to ¥154,656 million, ¥282 million lower than at the end of the previous fiscal year. Principal changes affecting net asset items were cash divi-dends paid of ¥2,110 million, a decrease of ¥2,007 million in foreign currency translation adjust-ments, and a net income of ¥2,890 million.

Cash Flows

Net cash flow provided by operating activities decreased from the previous year and amounted to a net inflow of ¥12,589 million due to a decrease of ¥17,684 million in income before income taxes and minority interests. Among investing activities, the Group reported a cash inflow from proceeds from sales of fixed assets that was decreased ¥17,272 million compared with the previous year, collection of loans receivable decreased ¥5,622 million, and cash used in investing activities amounted to a net outflow of ¥8,838 million. Net cash used for financing activities amounted to an overall net outflow of ¥19,998 million, mainly because repayment of interest-bearing debt amounted to ¥16,862 million and other fac-tors. As a consequence, consolidated cash and cash equivalents at the end of the period were ¥87,296 million, ¥16,707 million lower than at the end of the previous fiscal year.

Capital Expenditures

Regarding investments, during the fiscal year, the Group implemented capital investments amounting to ¥12,316 million. These were primarily for expansion of production capacity and the introduction of equipment to enhance productivity. This figure for investment includes expendi-tures for the acquisition of intangible fixed assets and long-term prepaid expenses. Principal capital investments by business segment were as follows. Please note that these investment figures include inter-segment transactions.

Fluid Machinery & Systems CompanyInvestments were made primarily in the expansion of production capacity and the amount of capital investment during the fiscal year was ¥7,273 million.

Environmental Engineering CompanyThis segment invested in equipment intended for the development of environment-related products. Investments by this segment totaled ¥440 million.

Precision Machinery CompanyInvestments were made principally for equipment intended for development. Investments by this segment totaled ¥2,932 million.

Net Cash Provided by (Used in) Operating Activities(Millions of yen)

Interest-Bearing Debt/ Equity Ratio(Millions of yen, %)


Shareholders’ equity and accumulated other comprehensive income Liabilities, except interest-bearing debt Interest-bearing debt Equity ratio (%) (right scale)



Fluid Machinery & Systems Environmental Engineering Precision Machinery

Capital Expenditures(Millions of yen)

0

700,000

600,000

400,000

500,000

300,000

200,000

100,000

0

35

30

20

25

15

10

5

2008

2009

2010

2011

2012

-10,000

30,000

10,000

20,000

0

2008

2009

2010

2011

2012

0

25,000

15,000

20,000

10,000

5,000

2008

2009

2010

2011

2012


Liquidity and Capital Resources

(1) Capital ResourcesAt the end of the fiscal year under review, on a consolidated basis, the Group had total interest-bearing debt of ¥143,617 million, comprising ¥80,026 million in short-term interest-bearing liabil-ities and ¥63,591 million in long-term interest-bearing liabilities. Although this balance decreased ¥16,796 million from the total balance at the end of the previous fiscal year of ¥160,413 million, the Group’s dependence on interest-bearing debt remains at a high level, and management believes that reducing this dependence is an important issue. We believe that increasing profit-ability and the efficiency of capital are basic to strengthening the Group’s financial base. During the fiscal year under review, the Group’s free cash flow, defined as net cash from oper-ating activities plus net cash from investing activities, amounted to a net inflow of ¥3,751 million, and the amount of net outflow increased ¥33,850 million from the previous fiscal year. While net cash flow provided by operating activities amounted to ¥12,589 million, a ¥14,015 million decrease from ¥26,604 million of net cash provided by operating activities in the previous year, the increase in net outflow reflected a ¥19,835 million increase in net cash used in investing activities, to ¥8,838 million, compared with ¥10,997 million of net cash used in investing activi-ties in the previous fiscal year.

(2) Management of LiquidityThe Group takes the position that reducing cash and cash equivalents is a basic requirement for increasing asset efficiency. To manage liquidity risk, the Company has concluded commitment line contracts with its principal banks that provide an adequate amount of financial liquidity for its operations. In addition, to increase the efficiency of cash within the Group, the Company has instituted a system whereby idle cash is concentrated in the parent company and then allocated to Group companies with cash requirements. The consolidated balance of cash and cash equivalents at the end of the fiscal year was ¥87,295 million. In addition, the available balance of commitment lines was ¥45,000 million, and available overdrafts amounted to ¥5,000 million. While the total funding limit from overdrafts and commitment lines was ¥50,000 million, the Company had no borrowings from these sources at the end of the fiscal year.

R&D Expenses

R&D expenditures of the Group can be divided into three major categories:1. Basic research aimed at discovering and establishing seed technologies for the medium-to-long term,2. Development research focused on the application of technologies and the creation of new products, and3. R&D to provide the development research of existing businesses and improvement of existing products. The Company implemented R&D activities that are directly linked to its businesses and the commercialization of products by integrating these activities directly into the respective compa-nies and subsidiaries. Regarding point 1. above, the corporate headquarters takes the leadership in this area, and, by working closely with the operating companies, research is focused on technological “seeds” and the search for new markets. With regard to points 2. and 3. above, the individual business divisions and Group companies take the leadership in implementing these two categories of R&D. R&D expenses amounted to ¥3,827 million during the year under review.

R&D Expenses(Millions of yen)


0

12,000

10,000

6,000

4,000

2,000

8,000

2008

2009

2010

2011

2012


Activities by business segment are as follows:Fluid Machinery & Systems CompanyThe FMS Company worked to strengthen its lineup of products for global markets and develop products suited to the individual regions where they are sold in the fields of water, energy, and the natural environment, where sustained growth is expected in the medium-to-long term. For example, the FMS Company launched new customized pumps for seawater desalination and high-pressure pumps for combined-cycle electric power generators, and advanced the develop-ment of new process pumps for oil and gas market, energy-saving high-efficiency standard pumps and motors, submersible pumps for use globally in sewage treatment applications, and other types of equipment. It also completed the development of a series of turbochillers equipped with a new, high-performance compressor and featuring low impact on the natural environment. In addition, the FMS Company continued to proceed with activities to increase the efficiency of its chillers and develop further applications. Amid an increasingly competitive envi-ronment, initiatives were also taken to enhance cost-competitiveness and reliability through the application of basic technologies, including advanced numerical simulation technology and materials engineering technology, as well as strengthen R&D for service and support businesses. The FMS Company made expenditures on R&D amounting to ¥2,793 million during the year under review.

Environmental Engineering CompanyIn the environmental engineering field, since the focus of operations is shifting from the construc-tion of new plants to after-sales service, in today’s market, more so than in the past, the EE Company is being required to provide services related to the renewal of existing facilities and strengthen its capabilities for offering proposals for operation and maintenance (O&M) services as well as improve its cost-competitiveness. In view of these circumstances, the EE Company is working to strengthen its capabilities for the renewal of facilities, develop new technologies and products that will make possible reductions in the life-cycle cost of facilities, and promote repair, maintenance, and operating technologies that will improve the performance of existing products. The EE Company made expenditures on R&D amounting to ¥69 million during the year under review.

Precision Machinery CompanyIn the precision machinery field, in the semiconductor wafer production equipment field, the PM Company worked to refine and improve its existing products and develop new equipment with the aims of responding to the requirements for larger-diameter wafers as well as greater minia-turization and three-dimensional integration. Among component products, in addition to equip-ment for the semiconductor industry, the PM Company worked to ready and expand its lineup of products for the liquid crystal display (LCD) and solar battery industries, while also striving to develop products that can contribute to energy conservation as well as reduce the burden on the natural environment. Also, by pursuing collaborative R&D with customers and universities, and participating in consortia for the development of cutting-edge technologies, the PM Company is continuing its research into next-generation semiconductor process technologies. The PM Company made expenditures on R&D amounting to ¥965 million during the year under review.

Business Risks

The Group confronts a number of business risks that may have an influence on the judgment of investors. These are described as follows. In addition to being aware of the possibility of the emergence of these risks, the Group implements measures to prevent their occurrence and deal with them when they emerge.


This section includes forward-looking statements that are based on judgments made at the time of the preparation of this report on the Group’s performance.

1. Market RiskPublic works projects account for a high percentage of the sales of the fluid-related plant engi-neering division and the EE Company. Accordingly, there is a possibility that there will be cut-backs in public works by the national government, regional governments, and related entities. In addition, the business of the PM Company is influenced by the silicon cycle. Accordingly, fluctu-ations in the market for semiconductors may have a detrimental impact on the Group’s business activities, performance, and financial position.

2. Large-Scale Projects and Overseas Business ActivitiesThe Group manufactures and constructs machinery and plants in big projects both in Japan and foreign countries. Certain of these projects involve technical issues with a high degree of difficul-ty. There is a possibility that additional costs may be incurred due to failure to function properly, prolongation of the time required to achieve the specified capabilities, and other factors. Also, big projects in foreign countries involve risks related to business environments that differ from those of Japan. The Group takes possible measures to control these risks and provides for construction losses by setting aside an amount based on its estimate of such costs; however, if actual additional costs exceed the reserves, this may have a detrimental impact on the Group’s performance.

3. The InfraServ Project in Germany in View of ProgressRegarding the InfraServ project, agreement was reached with the client to make a final handover of the plant in its present form, but, because the client is making use of project finance arrange-ments to finance this plant, the final handover will require the approval of the banks providing the financing. The client is currently in the process of conducting procedures to secure the approval of the members of the project finance bank syndicate. In the event that approval of the banks cannot be secured, there is a possibility that this could have an adverse effect on the Group’s performance.

4. Business Realignments, etc.The EBARA Group is allocating resources to its businesses with selectivity and focus and, in realigning its business activities, may withdraw from certain unprofitable businesses and liquidate or take other appropriate action with regard to associated companies. Such realignments may have an impact on the Group’s performance and financial position.

5. Exchange RiskTransactions denominated in foreign currencies that are conducted as part of business activities overseas are converted to yen in the course of preparing the consolidated financial statements. As a result of changes in foreign exchange conversion rates at the time of conversion, there is a possibility that this may have an effect on the Group’s performance.

6. Interest-Rate RiskThe Group’s interest-bearing debt includes fixed- and floating-rate liabilities. For that portion of interest-bearing debt borrowed at floating rates, the Group has arranged for interest-rate swaps to fix the interest liability and loans with floating rates to lessen the risk of interest-rate fluctua-tions; however, if interest payments on the unhedged portion rise due to higher interest rates, this may have an adverse impact on the Group’s performance.

7. Risks Related to the Impact of Natural Disasters and Impairment of the Social InfrastructureIf a Group place of business is struck by a major typhoon, earthquake, or other natural disaster that adversely affects its ability to conduct business activities, this may have a detrimental impact on the Group’s performance. In addition, in the event of a major accident affecting the labor


force or an accident involving equipment that leads to a stoppage, or impairment, of business activities, this may have an adverse impact on the Group’s performance.

8. Deferred Tax AssetsThe Group determines the possibility of recoveries from future taxable income. Regarding the portion of deferred tax assets for which the Group believes there is doubt about making recover-ies, the Group has provided the valuation allowance for such doubtful amounts. However, the estimate of future taxable income may vary depending on performance at that time. In the event that factors influencing the estimate of taxable income occur, it may be necessary to make changes in the valuation allowance amounts. In such cases, the Group will make adjustments in the doubtful portion of deferred tax assets, and, since an equivalent amount will be reflected in the deferred tax benefit on the Consolidated Statements of Income, there is a possibility that net income may decline as a result.

9. Material ProcurementThe Group procures parts and materials for its manufacturing and construction activities and is influenced by fluctuations in market conditions for these materials. Increases in prices of materi-als result in higher material costs for the Group and may have an adverse impact on the Group’s performance.

10. Legal RestrictionsThe Group conducts operations in Japan and foreign countries and is subject to the laws of the countries where its operations take place. In some instances, the passage of laws and changes in existing legislation may result in an alteration of assumptions for operating and business plans. Such changes in assumptions may have an adverse impact on the Group’s performance.

11. Litigation RiskIn conducting its business operations, the Group may be the object of lawsuits or bring lawsuits against other parties with regard to such matters as product liability, intellectual property, envi-ronmental protection, labor issues, and other matters. Depending on the outcome of such law-suits, litigation of this kind may have an impact on the Group’s performance and financial position as well as on the trust placed in the Group by society.

12. Risk of Increased Costs of Land SalesAs provided for in the sales contract for the land where EBARA’s former headquarters and its Haneda Plant were located, the area was handed over to Yamato Transport Co., Ltd. Subsequently, during the course of the construction of a logistics terminal by this company, slate fragments containing asbestos were discovered. This company has brought a lawsuit for com-pensation of damages due to defects as provided for under the contract for sale of the property. After investigating this matter, the Company has drawn the conclusion that the said slate frag-ments do not constitute defects under the contract. The Company has obtained a written legal opinion from a law office substantiating this view and will use this to assert the correctness of its position in this matter. Nevertheless, depending on the subsequent course of events, this matter may have an adverse effect on the Group’s performance.

13. Risk of Collection of Export ReceivablesThe Group exports its products to the Middle East. There is concern that export receivables out-standing from customers in this region may not be collectible because of international coopera-tion measures, changes in regional political conditions, and other factors. In the event that it is impossible to make collections, this may have a detrimental impact on the Group’s business activities, performance, and financial position.


Consolidated Balance Sheets

EBARA CORPORATION and Consolidated Subsidiaries Thousands ofAs of March 31, 2012 and 2011 U.S. dollars Millions of yen (Note 5)

ASSETS 2012 2011 2012

Current assets: Cash and cash equivalents ¥ 87,812 ¥104,003 $1,068,402 Trade receivables 160,996 161,512 1,958,827 Allowance for doubtful receivables (1,107) (1,448) (13,469) Inventories (Note 7) 69,711 66,875 848,169 Deferred tax assets (Note 12) 11,514 24,922 140,090 Others 17,323 16,558 210,768

Total current assets 346,249 372,422 4,212,787

Property, plant and equipment (Note 15): Land 21,669 21,002 263,645 Buildings 93,208 92,677 1,134,055 Machinery and equipment 129,879 129,182 1,580,229 Leased assets 3,185 3,192 38,752 Construction in progress 4,642 2,522 56,479

252,583 248,575 3,073,160 Accumulated depreciation (163,479) (158,851) (1,989,038)

Property, plant and equipment, net 89,104 89,724 1,084,122

Investments and other assets: Investment securities (Note 6) 15,881 16,405 193,223 Investments in and advances to subsidiaries and affiliates 7,415 7,345 90,218 Long-term loans receivable 554 298 6,740 Deferred tax assets (Note 12) 19,115 8,475 232,571 Other investments 15,956 9,028 194,136 Other assets 5,766 7,435 70,155 Allowance for doubtful receivables (11,076) (3,234) (134,761)

Total investments and other assets 53,611 45,752 652,282

Total assets ¥488,964 ¥507,898 $5,949,191

The accompanying notes are an integral part of these statements.


Thousands of U.S. dollars Millions of yen (Note 5)

LIABILITIES AND NET ASSETS 2012 2011 2012

Current liabilities: Bank loans (Note 9) ¥ 54,798 ¥ 53,524 $ 666,723 Current portion of long-term debt (Note 9) 24,579 34,859 299,051 Trade payables 105,639 98,923 1,285,302 Accrued income taxes 3,324 4,760 40,443 Deferred tax liabilities 19 30 231 Lease obligations 649 469 7,896 Reserve for losses on construction completion guarantees 5,359 7,073 65,203 Reserve for product warranties 1,713 1,795 20,842 Reserve for construction losses 8,758 16,978 106,558 Reserve for expenses related to the sale of land 1,850 2,871 22,509 Accrued expenses and other current liabilities 43,653 38,798 531,123

Total current liabilities 250,341 260,080 3,045,881

Long-term liabilities: Long-term debt (Note 9) 62,641 70,656 762,149 Lease obligations 950 905 11,559 Accrued severance and pension costs (Note 10) 15,250 16,041 185,546 Deferred tax liabilities 260 39 3,163 Asset retirement obligations 1,800 1,769 21,900 Other long-term liabilities 3,066 3,470 37,304

Total long-term liabilities 83,967 92,880 1,021,621

Net assets (Note 11): Shareholders’ equity: Common stock: Authorized: 1,000,000,000 shares Issued: 422,899,658 shares in 2012 and 459,245,678 shares in 2011 61,314 61,284 746,003 Capital surplus 65,243 65,213 793,807 Retained earnings 41,752 40,760 507,994 Treasury stock, at cost 689,200 shares in 2012 and 37,168,870 shares in 2011 (278) (266) (3,382)

Total shareholders’ equity 168,031 166,991 2,044,422

Accumulated other comprehensive income (loss): Net unrealized gain on investment securities 1,116 1,053 13,578 Unrealized gain (loss) from hedging instruments 6 (10) 73 Translation adjustments (18,090) (16,083) (220,100)

Total accumulated other comprehensive income (loss) (16,968) (15,040) (206,449)

Subscription rights to shares 439 362 5,341

Minority interests in consolidated subsidiaries 3,154 2,625 38,375

Total net assets 154,656 154,938 1,881,689

Total liabilities and net assets ¥488,964 ¥507,898 $5,949,191


Consolidated Statements of Income

EBARA CORPORATION and Consolidated Subsidiaries Thousands ofFor the years ended March 31, 2012 and 2011 U.S. dollars Millions of yen (Note 5)

2012 2011 2012

Net sales ¥412,077 ¥401,676 $5,013,711Cost of sales 318,937 301,658 3,880,483

Gross profit 93,140 100,018 1,133,228Selling, general and administrative expenses 69,873 68,476 850,140

Operating income 23,267 31,542 283,088

Other income (expenses): Interest and dividend income 812 858 9,880 Interest expenses (2,515) (3,028) (30,600) Gain on sales of securities 42 79 511 Write-down of securities and other investments (161) (640) (1,959) Gain (loss) on sales and disposal of fixed assets, net (126) 135 (1,533) Gain on sales of investments in subsidiaries and affiliates 462 1,167 5,621 Impairment losses (Note 8) (128) (74) (1,557) Loss on adjustment for changes of accounting standard for asset retirement obligations — (907) — Loss on liquidation of subsidiaries and affiliates (168) — (2,044) Loss on business withdrawal (Note 20) (10,295) — (125,259) Gain on transfer among severance payment plans — 38 — Other, net (325) (621) (3,954)

(12,402) (2,993) (150,894)

Income before income taxes and minority interests 10,865 28,549 132,194

Income taxes (Note 12): Current taxes 3,336 9,019 40,589 Deferred tax expenses (benefits) 3,596 (9,344) 43,753

6,932 (325) 84,342

Income before minority interests 3,933 28,874 47,852Minority interests in consolidated subsidiaries 1,043 682 12,690

Net income ¥ 2,890 ¥ 28,192 $ 35,162

Yen U.S. dollars

Per share of common stock: Net income ¥6.85 ¥66.78 $0.083 Fully diluted net income 6.72 59.11 0.082 Cash dividends (Note 21) 5.00 5.00 0.061



Consolidated Statements of Comprehensive Income


2012 2011 2012

Income before minority interests ¥3,933 ¥28,874 $47,852

Other comprehensive income Net unrealized gain (loss) on investment securities 51 (523) 621 Unrealized gain (loss) from hedging instruments 16 (10) 195 Translation adjustments (2,014) (5,540) (24,504) Share of other comprehensive loss of associates accounted for using equity method (7) (63) (85)

Total other comprehensive income (loss) (1,954) (6,136) (23,773)

Comprehensive income 1,979 22,738 24,079

Comprehensive income attributable to shareholders of EBARA CORPORATION 962 22,191 11,705Comprehensive income attributable to minority interests 1,017 547 12,374



Consolidated Statements of Changes in Net Assets

EBARA CORPORATION and Consolidated Subsidiaries Millions of yen

For the year ended March 31, 2012 Shareholders’ equity

Number of Common Capital Retained Treasury Total shareholders’ shares issued stock surplus earnings stock, at cost equity

Balance at April 1, 2011 459,245,678 ¥61,284 ¥65,213 ¥40,760 ¥(266) ¥166,991

Changes during the year Net income 2,890 2,890 Cash dividends (2,110) (2,110) Issuance of new shares (exercise of subscription rights to shares) 174,000 30 30 60 Change of increase in scope of consolidation 212 212 Net unrealized gains on investment securities Change in translation adjustments Purchase of treasury stock (13) (13) Retirement of treasury stock (36,520,020) Loss on disposal of treasury stock 0 1 1 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the year 30 30 992 (12) 1,040

Balance at March 31, 2012 422,899,658 ¥61,314 ¥65,243 ¥41,752 ¥(278) ¥168,031

Millions of yen

Accumulated other comprehensive income (loss)

Net unrealized Total accumulated Minority gain (loss) on Unrealized loss other Subscription interests in investment from hedging Translation comprehensive rights to consolidated Total net securities instruments adjustments income (loss) shares subsidiaries assets

Balance at April 1, 2011 ¥1,053 ¥(10) ¥(16,083) ¥(15,040) ¥362 ¥2,625 ¥154,938

Changes during the year Net income 2,890 Cash dividends (2,110) Issuance of new shares (exercise of subscription rights to shares) (58) 2 Change of increase in scope of consolidation 212 Net unrealized gains on investment securities 63 63 63 Change in translation adjustments (2,007) (2,007) (2,007) Purchase of treasury stock (13) Retirement of treasury stock Loss on disposal of treasury stock 1 Changes in profit/loss deferral hedge accounting 16 16 16 Changes in subscription rights to shares 135 135 Changes in minority interests 529 529Total changes during the year 63 16 (2,007) (1,928) 77 529 (282)

Balance at March 31, 2012 ¥1,116 ¥ 6 ¥(18,090) ¥(16,968) ¥439 ¥3,154 ¥154,656


EBARA CORPORATION and Consolidated Subsidiaries Thousands of U.S. dollars (Note 5)


Common Capital Retained Treasury stock Total shareholders’ stock surplus earnings at cost equity

Balance at April 1, 2011 $745,638 $793,442 $495,925 $(3,236) $2,031,769

Changes during the year Net income 35,162 35,162 Cash dividends (25,672) (25,672) Issuance of new shares (exercise of subscription rights to shares) 365 365 730 Change of increase in scope of consolidation 2,579 2,579 Net unrealized gains on investment securities Change in translation adjustments Purchase of treasury stock (158) (158) Retirement of treasury stock Loss on disposal of treasury stock 0 12 12 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the year 365 365 12,069 (146) 12,653

Balance at March 31, 2012 $746,003 $793,807 $507,994 $(3,382) $2,044,422

Thousands of U.S. dollars (Note 5)



Balance at April 1, 2011 $12,812 $(122) $(195,681) $(182,991) $4,404 $31,938 $1,885,120

Changes during the year Net income 35,162 Cash dividends (25,672) Issuance of new shares (exercise of subscription rights to shares) (706) 24 Change of increase in scope of consolidation 2,579 Net unrealized gains on investment securities 766 766 766 Change in translation adjustments (24,419) (24,419) (24,419) Purchase of treasury stock (158) Retirement of treasury stock Loss on disposal of treasury stock 12 Changes in profit/loss deferral hedge accounting 195 195 195 Changes in subscription rights to shares 1,643 1,643 Changes in minority interests 6,437 6,437Total changes during the year 766 195 (24,419) (23,458) 937 6,437 (3,431)

Balance at March 31, 2012 $13,578 $ 73 $(220,100) $(206,449) $5,341 $38,375 $1,881,689


EBARA CORPORATION and Consolidated Subsidiaries Millions of yen


Number of Common Capital Retained Treasury Total shareholders’ shares issued stock surplus earnings stock, at cost equity

Balance at April 1, 2010 422,725,658 ¥61,284 ¥65,212 ¥12,568 ¥(219) ¥138,845

Changes during the year Net income 28,192 28,192 Shares issued on exchange of shares with a subsidiary 36,520,020 Net unrealized losses on investment securities Change in translation adjustments Purchase of treasury stock (48) (48) Loss on disposal of treasury stock 1 1 2 Changes in profit/loss deferral hedge accounting Changes in subscription rights to shares Changes in minority interests Total changes during the year 1 28,192 (47) 28,146

Balance at March 31, 2011 459,245,678 ¥61,284 ¥65,213 ¥40,760 ¥(266) ¥166,991

Millions of yen



Balance at April 1, 2010 ¥1,576 ¥ — ¥(10,615) ¥ (9,039) ¥104 ¥2,755 ¥132,665

Changes during the year Net income 28,192 Shares issued on exchange of shares with a subsidiary — Net unrealized losses on investment securities (523) (523) (523) Change in translation adjustments (5,468) (5,468) (5,468) Purchase of treasury stock (48) Loss on disposal of treasury stock 2 Changes in profit/loss deferral hedge accounting (10) (10) (10) Changes in subscription rights to shares 258 258 Changes in minority interests (130) (130)Total changes during the year (523) (10) (5,468) (6,001) 258 (130) 22,273

Balance at March 31, 2011 ¥1,053 ¥(10) ¥(16,083) ¥(15,040) ¥362 ¥2,625 ¥154,938



Consolidated Statements of Cash Flows


2012 2011 2012

Cash flows from operating activities: Income before income taxes and minority interests ¥ 10,865 ¥ 28,549 $ 132,194 Depreciation and amortization 12,765 13,524 155,311 Impairment losses 128 74 1,557 Gain on sales of securities and investment securities (504) (1,246) (6,132) Loss on adjustment for changes of accounting standard for asset retirement obligations — 907 — Decrease in provision (3,712) (10,146) (45,164) Gain on sales of fixed assets (18) (657) (219) Other noncash expenses (income), net (190) 240 (2,312) Interest and dividend income (812) (858) (9,880) Interest expenses 2,515 3,028 30,600 Increase in trade receivables (2,839) (242) (34,542) (Increase) decrease in inventories (3,387) 1,234 (41,209) Increase in trade payables 8,613 1,257 104,794 Other (2,647) 583 (32,205) Sub-total 20,777 36,247 252,793 Interest and dividends received 823 727 10,013 Interest expenses paid (2,550) (3,075) (31,026) Income taxes paid (6,461) (7,295) (78,611) Net cash provided by operating activities 12,589 26,604 153,169Cash flows from investing activities: Sales of fixed assets 244 17,516 2,969 Purchases of fixed assets (10,133) (14,647) (123,288) Sales and redemption of investment securities 3,826 1,988 46,551 Purchases of investment securities (3,392) (543) (41,270) Decrease in time deposits (516) — (6,278) Sales or purchases of other investments, net 722 172 8,785 Purchase of investments in subsidiaries — (29) — Collection of loans receivable 2,618 8,240 31,853 Disbursement of loans receivable (3,077) (1,700) (37,438) Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation 870 — 10,585 Net cash provided by (used in) investing activities (8,838) 10,997 (107,531)Cash flows from financing activities: Redemption of bonds (20,000) — (243,339) Net increase (decrease) in short-term loans and commercial paper 1,337 (925) 16,267 Proceeds from long-term bank loans 16,267 4,901 197,919 Repayment of long-term bank loans (14,466) (18,384) (176,007) Proceeds from stock issuance to minority shareholders 241 — 2,932 Dividends paid (2,110) — (25,672) Dividends paid to minority shareholders in consolidated company (692) (438) (8,420) Purchase and sales of treasury stock (13) (46) (158) Others (562) 796 (6,836) Net cash used in financing activities (19,998) (14,096) (243,314)Translation adjustments (771) (1,214) (9,381)Increase in cash and cash equivalents (17,018) 22,291 (207,057)Cash and cash equivalents: At beginning of period: Balance brought forward 104,003 81,712 1,265,385 Increase in cash and cash equivalents resulting from change of scope of consolidation 311 — 3,784 At end of period ¥ 87,296 ¥104,003 $1,062,112The accompanying notes are an integral part of these statements.


Notes to the Consolidated Financial StatementsEBARA CORPORATION and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial Statements

EBARA CORPORATION (the “Company”) and its subsidiaries (hereinafter, collectively referred to as the “Group”) maintain their records and prepare their statutory fi nancial statements in accor-dance with accounting principles generally accepted in Japan, and its foreign subsidiaries in conformity with those of the countries of their domicile. The accompanying consolidated fi nan-cial statements were also prepared in accordance with accounting principles generally accepted in Japan.

2. Summary of Significant Accounting Policies

Basis of consolidation The consolidated fi nancial statements include the accounts of the Company and those of certain

of its subsidiaries. All signifi cant intercompany transactions and accounts are eliminated in con-solidation.

As of March 31, 2012, the numbers of consolidated subsidiaries, non-consolidated subsidiar-ies that applied the equity method, and affi liated companies that applied the equity method were 53, 1 and 2 (48, 1 and 2 in 2011), respectively.

The fi nancial statements of foreign subsidiaries are consolidated by using their fi nancial state-ments as of the fi scal year-end, and necessary adjustments are made to their fi nancial state-ments to refl ect any signifi cant transactions from January 1 to March 31.

Previously, the date for closing the accounts of Elliott Group Holdings Inc. (the name of which was changed from Elliott Ebara Turbomachinery Corporation, effective July 1, 2011) was December 31. As a result of the change in the date for closing the accounts of this company to March 31, the fi nancial statements consolidated with EBARA’s accounts for the fi scal year under review cover the 15-month period from January 1, 2011, through March 31, 2012.

The differences, at the time of acquisition or consolidation newly made, between the cost and underlying net equity of investments in consolidated subsidiaries are included in other assets and are amortized on a straight-line basis over a reasonable estimated period of time within a 20-year period in respect of each particular difference.

Foreign currency translation Foreign currency denominated trade receivables and payables are translated into yen at the

balance sheet date. Investments are translated into yen at the exchange rates current when the trans actions occur.

Assets and liabilities of foreign consolidated subsidiaries are translated into yen at appropriate year-end rates. Revenue, expenses and net income of these companies are also translated into yen at the appropriate year-end rates. Contributed capital to those companies by the parent company is translated at the rates at which the transactions were made. Receivables and pay-ables with the parent company are translated at the same rates used by the parent company, and the resultant translation adjustments are stated in the net assets section.

Cash and cash equivalents Cash and cash equivalents include cash on hand, demand deposits, time deposits with maturi-

ties of three months or less, and highly liquid investments.

Investment securities and other fi nancial instruments Investment securities and other fi nancial instruments are valued using the following methods: (a) Securities having market value are stated at market value, and the unrealized gain or loss,

net of tax, is credited or debited to net assets as shown in the balance sheets. Cost of securities sold is determined by the gross average.

(b) Securities not having market value are recorded at the gross average cost. (c) Bonds held to maturity are stated at cost less accumulated amortization. (d) Other fi nancial assets (or instruments), including golf memberships, are valued at market

value, if available.


Inventories Finished products and raw materials are stated at the gross average cost (computed by lower-

ing the value on the balance sheets from book value to account for any decline in earnings- generation capacity of such assets), except for in the Precision Machinery Group, which employs the moving average method (computed by lowering the value on the balance sheets from book value to account for any decline in earnings-generation capacity of such assets), and work in process is valued at specifi c identifi cation cost (computed by lowering the value on the balance sheets from book value to account for any decline in earnings-generation capacity of such assets). Real estate for sale represents the specifi c identifi cation cost for each parcel of land and each structure.

Property, plant and equipment and related depreciation (except leased assets) The declining balance method, applied according to the criteria specifi ed in the corporate

income tax laws, is used as the primary method for computing depreciation. However, deprecia-tion of buildings (excluding fi xtures installed in such buildings) that were acquired on or after April 1, 1998 is computed using the straight-line method. Consolidated foreign subsidiaries employ the straight-line method. Note that the method for depreciating minor assets valued from ¥100,000 to less than ¥200,000 is the lump-sum method specifi ed in the corporate income tax laws, and these assets are depreciated in equal amounts over a three-year period.

Leases Leased assets under fi nance lease transactions that do not transfer ownership of the asset to

the lessee are depreciated by the straight-line method over the lease term as the useful life and a residual value of zero.

For fi nancial leases that do not transfer ownership to the lessee commencing on or prior to March 31, 2008, the Group adopts accounting standards normally applicable to ordinary operat-ing lease transactions.

Income taxes Deferred tax assets and liabilities are determined based on the differences between fi nancial

reporting and the tax bases of the assets and liabilities and are measured by applying currently enacted tax rates and laws.

Severance and pension plans The cost of the severance and pension plans, based on actuarial computations of current and

future employee benefi ts, including the unfunded severance indemnities plan, is charged to income. Retirement benefi ts to directors and corporate auditors are also accrued at the amounts of the

future liability in relation to the length of service at the balance sheet date and included in accrued severance and pension costs.

The Company, its domestic consolidated subsidiaries, and some foreign consolidated subsid-iaries have termination allowance plans and retirement pension plans as severance and defi ned benefi t pension plans.

Revenue recognition Standard for cost of completed work and construction revenue The percentage-of-completion method has been applied for the completion of a portion of

the construction work that is deemed to be certain by the end of the current fi scal year. (The percentage of completion is estimated based on the percentage of cost incurred compared with the estimated total cost). For other construction work, the completed-contract method has been applied.

Stock and bond issue costs Stock and bond issue costs are charged to income as incurred.

Research and development costs Costs relating to research and development activities are charged to income as incurred.

Research and development costs charged to income were ¥3,827 million ($46,563 thousand) and ¥4,067 million for the years ended March 31, 2012 and 2011, respectively.


Allowance for doubtful receivables Allowance for doubtful receivables is provided based on past experience for normal receivables

and on an estimate of the collectability of receivables from companies in fi nancial diffi culty.

Reserve for losses on construction completion guarantees To provide for possible expenses arising from guarantees against defects, the Company makes

reasonable estimates of the ratio of such expenses and uses this ratio to derive provisions for such losses.

Reserve for product warranties To provide for expenses related to defect guarantees related to buying and selling contracts, the

amount of such warranties is estimated by multiplying a reasonable percentage of defects by the value of product sales.

Reserve for construction losses To prepare for possible losses on construction projects contracted to the Company, the

Company makes estimates of such losses for those uncompleted projects deemed to have a strong possibility of incurring losses and for which such construction losses can be reasonably estimated.

Inventories related to construction contracts on which losses are expected and the reserve for construction losses are both presented on the balance sheets without offsetting. The value of inventories related to construction contracts on which losses are expected that are contained within the reserve for construction losses is ¥3,289 million ($40,017 thousand) (Including work in process of ¥3,289 million).

The provision to the reserve for construction losses contained in cost of sales was ¥8,152 million ($99,185 thousand) for the year ended March 31, 2012.

Reserve for expenses related to the sale of land Accompanying the sale of the land formerly occupied by the Group’s Haneda Plant, this reserve

has been created to provide for expenses related to restoring the land to its original condition.

Hedging accounting methods Hedging transactions Gains or losses and evaluation differences related to hedging transactions accounted for at

fair market value are deferred as assets or liabilities until recognized. Evaluation gains and losses on foreign exchange contracts are allocated to settlement periods throughout the peri-od of the contract. Interest-rate swaps are treated as a special method under the Accounting Standard for Financial Instruments.

Hedging instruments and hedged items Hedging instruments Foreign exchange forward contracts, foreign currency option contracts, and interest-rate swap

agreements were used. Hedged items Currency exchange rate risk on existing assets and liabilities in foreign currencies and interest-

rate risk. Hedging policy The Company and its consolidated subsidiaries use derivatives only for the purpose of hedg-

ing related to exports, imports, funding, and others in accordance with internal fund manage-ment policy.

Assessing the effectiveness of hedging Interest risk The effectiveness of hedging is assessed by comparing the accumulated cash fl ows between

hedging instruments and hedging items. However, with regard to the interest-rate swaps that agree with hedge criteria, the assessments are omitted.

Currency exchange rate risk As long as one hedging instrument and one hedging object correspond, the hedge is consid-

ered effective.


Net income (loss) and dividends per share Primary net income (loss) per share of common stock is based on the average number of shares

of common stock outstanding during each period. Common stock equivalents on warrants and convertible bonds are not taken into consider-

ation for the above computation. Fully diluted net income per share of common stock is com-puted assuming outstanding convertible bonds at that date are all converted to common shares after adjustment of after-tax debt servicing costs, unless antidilutive effect results.

3. Change in Accounting Policies

Application of the Accounting Standard for Asset Retirement Obligations From the beginning of the fi rst quarter of the fi scal year ended March 31, 2011, the Accounting

Standard for Asset Retirement Obligations (Accounting Standards Bureau of Japan (ASBJ) Statement No. 18, issued on March 31, 2008) and the Implementation Guidance on Accounting Standard for Asset Retirement Obligations (ASBJ Guidance No. 21, issued on March 31, 2008) have been adopted.

As a consequence, for accumulated consolidated results through the third quarter, the operat-ing income and ordinary income were decreased by ¥163 million, and income before income taxes was decreased by ¥1,070 million compared to the previous method for the recognition of calculation.

Application of the Accounting Standard for Business Combinations and Related Matters

From the beginning of the fi scal year ended March 31, 2011, the Accounting Standard for Business Combinations (ASBJ Guidance No. 21, issued on December 26, 2008), Accounting Standard for Consolidated Financial Statements (ASBJ Guidance No. 22, issued on December 26, 2008), Partial Amendments to Accounting Standard for Research and Development Costs (ASBJ Guidance No. 23, issued on December 26, 2008), Revised Accounting Standard for Business Divestitures (ASBJ Guidance No. 7, issued on December 26, 2008), Revised Accounting Standard for Equity Method of Accounting for Investments (ASBJ Guidance No. 16, issued on December 26, 2008) and Revised Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No. 10, issued on December 26, 2008) have been adopted.

Application of the Accounting Standard for Earnings Per Share From the fi scal year ended March 31, 2012, we have applied the “Accounting Standard for

Earnings Per Share” (Accounting Standards Board of Japan [ASBJ] Statement No. 2 of June 30, 2010), the “Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4 of June 30, 2010), and the “Practical Solution on Accounting for Earnings Per Share” (ASBJ PITF No. 9 of June 30, 2010). To calculate diluted net income per share of the quarter, we have changed the method to include potential services offered by the employees in the fair valuation of stock options of pay-ment when exercising the right regarding stock options whose rights are secured after a certain period of employment. This change in accounting policy has been applied retroactively, and the fi gures for the previ-ous fi scal year are shown after taking account of the dilutive effect of latent shares retroactively. As a result, compared with the fi nancial statements prior to these retroactive adjustments, the net income per share after adjustments for latent shares and retroactive adjustments was ¥0.02 higher.

4. Additional Information Adoption of Accounting Standard for Accounting Changes and Error Corrections For accounting changes and corrections of prior period errors made on and after the beginning

of the fi scal year under review, we adopted the “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No. 24, December 4, 2009) and the “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, December 4, 2009).


5. U.S. Dollar Amounts The U.S. dollar amounts are included solely for convenience and have been translated as a mat-ter of arithmetical computation only at the rate of ¥82.19=US$1, the rate of exchange prevailing on March 31, 2012. This translation should not be construed as a representation that yen amounts actually represent or could be converted into U.S. dollars.

6. Marketable and Investment Securities

Marketable and investment securities comprise securities which have fair value. The book value, gross unrealized gains and losses, and fair value for such securities at March 31, 2012 and 2011 are as follows:Other securities:

Millions of yen

Historical Unrealized Unrealized BookAs of March 31, 2012 value gains losses value

Book value over historical cost: Equity securities ¥4,139 ¥2,907 ¥ — ¥7,046Historical cost over book value: Equity securities 5,134 — 1,161 3,973 Others 2,855 — — 2,855

Millions of yen


Book value over historical cost: Equity securities ¥2,939 ¥3,291 ¥ — ¥6,230Historical cost over book value: Equity securities 6,899 — 1,674 5,225 Others 3,326 — — 3,326

Thousands of U.S. dollars


Book value over historical cost: Equity securities $50,359 $35,369 $ — $85,728Historical cost over book value: Equity securities 62,465 — 14,126 48,339 Others 34,737 — — 34,737

Proceeds from sales of marketable and investment securities and realized gains and losses at March 31, 2012 and 2011 are as follows:Other securities:

Millions of yen

As of March 31, 2012 Proceeds of sales Realized gains Realized losses

Equity securities ¥3,826 ¥83 ¥41

Millions of yen


Equity securities ¥1,987 ¥79 ¥—



Equity securities $46,551 $1,010 $499


Impairment losses on securities:

Thousands of Millions of yen U.S. dollars

As of March 31 2012 2011 2012

Valuation losses on investment securities ¥139 ¥574 $1,691Loss on valuation of membership 22 66 268

Total ¥161 ¥640 $1,959

7. Inventories Inventories comprise the following:


As of March 31 2012 2011 2012

Finished products ¥10,622 ¥ 7,989 $129,237Materials 18,977 18,473 230,892Work in process 40,112 40,413 488,040

Total ¥69,711 ¥66,875 $848,169

8. Impairment Losses on Long-Lived Assets

Fiscal year ended March 31, 2012 The EBARA Group reported impairment losses of long-lived assets amounting to ¥128 million

($1,557 thousand) in the fi scal year ended March 31, 2012. These impairment losses were rec-ognized in the following asset groups: Idle assets.

Outline of asset grouping: The Group groups its assets according to its business segments, but idle assets are grouped individually.

Recognition of impairment losses: Regarding machinery and equipment, patent and others that are no longer expected to contribute to future income, the value of such assets has been derogated to the memorandum value. Regarding land and buildings, since the market value has decreased signifi cantly compared with the book value, the book value has been reduced to the recoverable value. Computation of recoverable value: The Company employs the net sale value as the recover-able amounts of idle assets. The net sale value is estimated by reasonable methods, taking offi -cially announced land prices along railways and other information as a base.

Fiscal year ended March 31, 2011 The EBARA Group reported impairment losses of long-lived assets amounting to ¥74 million in

the fi scal year ended March 31, 2011. These impairment losses were recognized in the following asset groups: Idle assets.


Recognition of impairment losses: Regarding land, buildings, and structures, since the market value has decreased signifi cantly compared with the book value, the book value has been reduced to the recoverable value. Computation of recoverable value: Recoverable value is calculated based on the net selling price. The net selling price is estimated from data on land prices issued by Japan’s Ministry of Land, Infrastructure, Transport and Tourism using reasonable methods.

Fiscal year ended March 31, 2010 The EBARA Group reported impairment losses of long-lived assets amounting to ¥221 million in

the fi scal year ended March 31, 2010. These impairment losses were recognized in the following asset groups: Wind power generation facilities and idle assets.


Recognition of impairment losses: The book value of wind power generation facilities has been reduced to their recoverable value based on a review of the future cash fl ows owing to transfer of shares of Eco Power Co., Ltd. to be generated by these facilities.


Regarding land, buildings, and structures, since the market value has decreased signifi cantly compared with the book value, the book value has been reduced to the recoverable value.

Regarding value of telephone rights, since the market value has decreased signifi cantly com-pared with the book value, the book value has been reduced to the recoverable value in the case of land for which the future use has not been determined.

Computation of recoverable value: Recoverable value is calculated based on the value in use of the asset or the net sales value of the asset. For wind power generation equipment, recoverable value is computed based on the difference from the future cash fl ow of the facilities. For land, buildings, and structures, recoverable value is estimated based on the appraised real estate value of the assets. Recoverable value of telephone rights is assessed based on the expected disposal value of these rights. When recoverable value is estimated based on value in use, the discount rates for future cash fl ows are assumed to be 4.0–6.6%.

9. Bank Loans and Long-Term Debt

As of March 31, 2012 and 2011, bank loans amounted to ¥54,798 million ($666,723 thousand) and ¥53,524 million, respectively, and generally represent short-term notes (having a life of less than 365 days), of which ¥1,446 million ($17,593 thousand) and ¥1,992 million are secured.

As of March 31, 2012 and 2011, ¥8,208 million ($99,866 thousand) and ¥9,289 million of bank loans and long-term loans were collateralized by assets amounting to ¥4,406 million ($53,607 thousand) and ¥4,802 million, respectively.

The weighted-average interest rates for short-term loans and current portion of long-term loans as of March 31, 2012 and 2011 were 1.188% and 1.319%, respectively.

Long-term debt comprised:


As of March 31 2012 2011 2012

Loans from banks, insurance companies, and other, due 2012 to 2021 with interest rate of 0.7% to 12.0% at March 31, 2012 and with interest rate of 1.05% to 14.4% at March 31, 2011 Secured ¥ 6,762 ¥ 7,297 $ 82,273 Unsecured 60,458 58,218 735,5880.70% unsecured bonds with stock acquisition rights due 2011 issued in the overseas market — 20,000 —1.30% unsecured bonds with stock acquisition rights due 2013 issued in the overseas market 20,000 20,000 243,339

87,220 105,515 1,061,200Less current portion due within one year (24,579) (34,859) (299,051)

Total ¥62,641 ¥ 70,656 $ 762,149

The aggregate annual maturities of long-term debt during the succeeding fi ve years are as follows:

Thousands ofAs of March 31 Millions of yen U.S. dollars

2013 ¥24,579 $299,0512014 13,692 166,5902015 8,098 98,5282016 3,311 40,2852017 17,470 212,556


10. Severance and Pension Plans

The Company, its domestic consolidated subsidiaries, and some foreign consolidated subsidiar-ies have severance and defi ned benefi t pension plans as follows:


As of March 31 2012 2011 2010 2012

Benefi t obligation: Benefi t obligation ¥54,567 ¥55,835 ¥62,810 $663,913 Fair value of plan assets (35,692) (35,738) (38,379) (434,262) Unrecognized actuarial loss (3,215) (3,794) (3,232) (39,117) Unrecognized prior service cost (612) (622) (495) (7,446)Net amount recognized ¥15,048 ¥15,681 ¥20,704 $183,088

Accrued severance and pension costs as of March 31, 2012, 2011 and 2010 include the directors’ retirement allowance reserve of ¥202 million ($2,458 thousand), ¥360 million and ¥363 million, respectively.


Years ended March 31 2012 2011 2010 2012

Benefit cost: Service cost ¥2,840 ¥2,918 ¥2,889 $34,554 Interest cost 1,736 1,889 2,204 21,122 Expected return on plan assets (1,020) (876) (235) (12,410) Recognized prior service cost 72 34 43 876 Recognized actuarial loss 773 493 1,424 9,405 Special retirement benefits 23 18 136 280 Others 727 752 467 8,845

Net periodic benefit cost ¥5,151 ¥5,228 ¥6,928 $62,672

Years ended March 31 2012 2011 2010

Assumptions to determine above obligation and cost: Discount rate 2.0% 2.0% 2.0% Discount rate (Subsidiaries outside Japan) 4.4% 5.4% 5.8% Expected return rate on plan assets 2.7% 2.7% 2.7% Expected return rate on plan assets (Subsidiaries outside of Japan) 8.0% 8.0% 8.0% Amortization period of actuarial loss 10 years 10 years 10 years Amortization period of prior service cost 10 years 10 years 10 years

11. Net Assets The Corporation Law of Japan provides that an amount equal to 10% of the amount to be dis-bursed as distributions of capital surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respec-tively, until the total of the capital reserve and the legal reserve equals 25% of the common stock account.

Such distribution can be made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.


12. Income Taxes Signifi cant components of the deferred tax assets and liabilities are as follows:


As of March 31 2012 2011 2012

Deferred tax assets: Excess provision of accrued bonuses to employees ¥ 2,087 ¥ 2,326 $ 25,392 Loss recognized on a percentage-of-completion basis 642 16,219 7,811 Accrued enterprise tax 117 497 1,424 Unrealized gain on fixed assets 887 790 10,792 Accrued severance and pension costs 5,545 6,563 67,466 Tax loss carried forward 21,268 5,684 258,766 Write-down of other investments 2,232 3,173 27,157 Loss from liquidation of investments in subsidiaries and affiliates 46 31 560 Loss on write-down of real estate for sale — 2 — Loss on write-down of inventories 3,794 3,625 46,161 Research and development expenses 334 343 4,064 Reserve for losses on construction completion guarantees 5,027 7,041 61,163 Allowance for doubtful receivables 4,033 1,492 49,069 Others based on overseas tax codes outside Japan 4,241 3,982 51,600 Others 5,604 6,659 68,183

55,857 58,427 679,608

Valuation allowance (20,798) (20,338) (253,048)

Total deferred tax assets 35,059 38,089 426,560Deferred tax liabilities: Reserve for advanced depreciation of fixed assets (1,415) (1,656) (17,216) Net unrealized gain on investment securities (617) (649) (7,507) Others (2,677) (2,456) (32,571)

Total deferred tax liabilities (4,709) (4,761) (57,294)

Net deferred tax assets ¥30,350 ¥33,328 $369,266

A summary of the major differences between the Japanese statutory tax rate and the Company’s effective tax rate is as follows:

As of March 31 2012 2011

Statutory tax rate, giving tax effect on enterprise tax payable 40.7% 40.7%Entertainment expenses and other expenses not deductible 3.4 1.9Per capital equalization inhabitants’ taxes 2.8 1.2Dividends received not taxable (62.7) (18.4)Dividends received effected by the exclusion from consolidation 69.7 20.0Valuation allowance 25.7 (41.6)Tax rate differences with overseas consolidated subsidiaries (21.5) (7.4)Reduction in deferred tax assets at the end of the period due to changes in tax rate 21.8 —Others (16.2) (2.5)Effective tax rate as shown in statements of income 63.8 (1.1)

Correction of deferred tax assets and liabilities due to change in effective corporation tax rates

December 2, 2011 of the “Act for Partial Revision of the Income Tax Act, etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social Structures” (Act No. 114 of 2011) and the “Act on Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117 of 2011), corporation tax rates will be reduced, and the special reconstruction corporation tax, a surtax for reconstruction funding after the Great East Japan Earthquake, will be imposed, for the fi scal years beginning on or after April 1, 2012.


Accompanying these revisions, the statutory tax rate used in the calculation of deferred tax assets and deferred tax liabilities will be changed from the previous 40.7% to 38.0% for consoli-dated accounts covering the fi scal year beginning April 1, 2012, through the fi scal year begin-ning April 1, 2014, and then to 35.6% for the fi scal years beginning April 1, 2015, and subsequent fi scal years. As a result of this change, deferred tax assets (net of deferred tax assets and liabilities) decreased by ¥2,453 million ($29,845 thousand). Moreover, deferred income taxes increased by ¥2,366 million ($28,787 thousand).

13. Other Comprehensive Income

The following table presents reclassifi cation adjustments and tax effects allocated to each com-ponent of other comprehensive income for the fi scal year ended March 31, 2012:

Thousands ofFor the year ended March 31, 2012 Millions of yen U.S. dollars

Unrealized holding gain on securities: Amount arising during the year ¥ 86 $ 1,046 Reclassification adjustments for gains or losses realized in net income (72) (876)

The amount of unrealized holding gain on securities before tax effect 14 170 Tax effect 37 451

Unrealized holding gain on securities 51 621Unrealized gain from hedging instruments: Amount arising during the year 11 134 Reclassification adjustments for gains or losses realized in net income 16 195

The amount of unrealized holding gain (loss) on securities before tax effect 27 329 Tax effect (11) (134)

Unrealized gain from hedging instruments 16 195Translation adjustment: Amount arising during the year (2,015) (24,515)

Share of other comprehensive income (loss) of associates accounted for using equity method: Amount arising during the year (6) (74)

Total other comprehensive income (loss) ¥(1,954) $(23,773)

14. Commitments and Contingent Liabilities

The Company and its consolidated subsidiaries had the following commitments and contingent liabilities:


As of March 31 2012 2011 2012

Loans guaranteed: Unconsolidated subsidiaries and affiliates ¥736 ¥1,551 $8,955 Others 359 3,084 4,368


15. Leases For fi nance lease transactions that do not transfer ownership to the lessee commencing on or prior to March 31, 2008, the Group adopts accounting treatment normally applicable to ordinary operating lease transactions.

The following pro forma amounts concern the fi nance leases, which would have been refl ect-ed in the fi nancial statements if fi nance lease accounting had been applied to the fi nance lease transactions currently accounted for as operating leases: (As lessee)


As of March 31 2012 2011 2012

Acquisition costs: Machinery and equipment ¥3,144 ¥3,758 $38,253 Accumulated depreciation: Machinery and equipment 1,824 1,901 22,192 Net book value: Machinery and equipment 1,320 1,857 16,061

Future lease payments: Due within one year 492 594 5,986 Due after one year 397 861 4,830

Total ¥ 889 ¥1,455 $10,816

Amounts equivalent to lease payments, depreciation expenses and interest expense: Lease payments ¥ 512 ¥ 583 $ 6,229 Depreciation expense 486 549 5,913 Interest expense 18 30 219

The depreciation expense is computed by the straight-line method over the lease terms. Interest is computed as the difference between the total lease payments and the value of

leased assets and is allocated to each period using the interest method. Information concerning operating leases is as follows:

(As lessee)


As of March 31 2012 2011 2012

Future lease payments for operating lease transactions: Due within one year ¥ 502 ¥ 676 $ 6,108 Due after one year 2,103 2,134 25,587

Total ¥2,605 ¥2,810 $31,695

16. Financial Instruments 1. Status of fi nancial instruments

(1) Policies regarding fi nancial instruments The Company raises the necessary long-term funds for its capital investment and other require-

ments principally from bank borrowings, the issuance of bonds, and other means. Short-term working capital is raised through bank borrowings and others. Available short-term funds are invested in highly secure fi nancial assets. In addition, as noted below, derivatives are used to avoid risk, and the Company’s policy is not to use derivatives for speculative purposes.

(2) Types and risk for fi nancial instruments Notes and accounts receivable, which are operating assets, are exposed to customer credit risk.

In addition, since the Company conducts its business activities globally, its operating assets denominated in foreign currencies are exposed to foreign currency risk. To manage foreign cur-rency risk, the Company hedges its net foreign currency assets and liabilities position through the use of foreign currency borrowings and deposits. The Company’s con solidated subsidiaries use foreign currency forward contracts to hedge foreign currency exposure. Securities and invest-ment securities are principally money market funds (MMFs) and stocks in other companies that are held for business relationship purposes and are, therefore, exposed to market price fl uctuations.


Notes and accounts payable, which are operating liabilities, come due for payment, for the most part, within one year. In addition, a portion of these, which arise in connection with imports of raw materials and other items, are denominated in foreign currencies and are exposed to for-eign currency risk; however, in general, the balance of these liabilities is within the amounts of accounts and notes payable denominated in foreign currencies. Among these, a portion of bor-rowings have fl oating interest rates and are subject to interest-rate risk. These are hedged through the use of derivatives (interest-rate swaps). The Company also makes use of other derivatives: namely, foreign currency forward contracts that are employed to hedge the foreign currency risk of operating assets and liabilities denominated in foreign currencies as well as inter-est-rate swaps that are arranged to hedge the foreign currency risk of interest paid on borrow-ings. Please note that further information on hedge accounting, including hedging instruments, hedging items, hedging policy, and assessing the effectiveness of hedging, may be found in a previous section entitled “Hedging accounting methods” contained in the section “2. Summary of Signifi cant Accounting Policies”. (3) Risk management systems for fi nancial instruments

a. Management of credit risk (risk related to nonperformance of contractual obligations by trans-action counterparties)

Regarding operating assets, the Company’s fi nance and business departments, based on the Company regulations related to invoices and the receipt of payments, monitor the condition of principal business customers, and supervise the payment dates and balances by customer with the aims of identifying possible deterioration in the fi nancial condition of customers and other issues related to the recovery of exposure at an early date and taking steps to minimize credit risk.

For securities held to maturity, under the Company’s regulations, investments are made only in securities with high credit ratings, and the credit risk of these investments is minimal.

The maximum value of credit risk, as of the date of the closing of accounts, is shown by the value on the balance sheets of fi nancial assets subject to credit risk.

b. Management of market risk (risk of fl uctuations in foreign currency rates, interest rates, and other indicators)

To manage foreign currency risk, assets and liabilities denominated in foreign currencies are classifi ed by currency, and risk is hedged through the use of foreign currency borrowings and deposits. Also, for foreign currency assets and liabilities, the Company makes use of foreign currency forward contracts to hedge its exposure. Please note that, depending on conditions in foreign currency markets, for confi rmed and scheduled foreign currency assets and obligations that are certain to take place, the Company makes arrangements for foreign currency forward contracts. To hedge against interest-rate fl uctuations, the Company makes use of interest-rate swaps.

For securities and investment securities, the Company confi rms the market prices and the fi nancial condition of the issuers (transactions counterparties). In addition, for securities other than those held to maturity, the Company reviews its holdings on a continuing basis, taking account of the relationship with the issuer (counterparty).

For derivatives, the Company and its consolidated subsidiaries manage such exposure based on Company regulations for accounting for fi nancial instruments.

c. Management of liquidity risk related to fund-raising (risk of being unable to meet payment obligations on the scheduled date)

The Company’s Finance Department prepares and revises cash fl ow plans based on reports of the Company departments, and manages liquidity risk by maintaining a volume of liquidity appropriate for business conditions. Also, as an alternative to liquid assets, the Company manages its liquidity by arranging for commitment lines in a specifi ed amount.

(4) Supplementary information on the fair value of fi nancial instruments The fair value of fi nancial instruments, in addition to values based on market prices, also includes

the value of instruments that do not have market prices that have been calculated based on rea-sonable methods. Since factors that may fl uctuate are taken into account in these calculations, the respective values may change when different assumptions are adopted.

In addition, the contract value of derivatives, as contained in “Information of the fair value of fi nancial instruments”, does not indicate the value of the market risk of these derivative transac-tions.


2. Information on the fair value of fi nancial instruments The amounts shown on the consolidated balance sheets as of March 31, 2012 and 2011 (the

date of settlement of the consolidated accounts), the corresponding fair values, and differences between book and fair value are as follows.

Please note that the values of securities and investment securities for which ascertaining the fair value is recognized to be extremely diffi cult have not been included (Refer to Note 2.).

Millions of yen

On consolidatedAs of March 31, 2012 balance sheets Fair value Difference

Cash and time deposits ¥ 84,956 ¥ 84,956 ¥ —Trade receivables 160,996 Allowance for doubtful receivables (1,107)

159,889 159,750 (139)Securities and investment securities 13,876 13,876 —

Total ¥258,721 ¥258,582 ¥(139)

Trade payables ¥105,639 ¥105,639 ¥ —Short-term loans 79,377 79,377 —Bonds with subscription rights to shares 20,000 19,830 (170)Long-term loans 42,641 41,916 (725)

Total ¥247,657 ¥246,762 ¥(895)

Derivative transactions* ¥ 10 ¥ 10 ¥ —

Millions of yen


Cash and time deposits ¥100,676 ¥100,676 ¥ —Trade receivables 161,512 Allowance for doubtful receivables (1,448)

160,064 159,314 (750)Securities and investment securities 14,783 14,783 —

Total ¥275,523 ¥274,773 ¥(750)

Trade payables ¥ 98,923 ¥ 98,923 ¥ —Short-term loans 68,383 68,383 —Current portion of bonds with subscription rights to shares 20,000 20,000 —Bonds with subscription rights to shares 20,000 19,343 (657)Long-term loans 50,656 50,510 (146)

Total ¥257,962 ¥257,159 ¥(803)

Derivative transactions* ¥ (16) ¥ (16) ¥ —



Cash and time deposits $1,033,648 $1,033,648 $ —Trade receivables 1,958,827 Allowance for doubtful receivables (13,469)

1,945,358 1,943,667 (1,691)Securities and investment securities 168,828 168,828 —

Total $3,147,834 $3,146,143 $ (1,691)

Trade payables $1,285,302 $1,285,302 $ —Short-term loans 965,783 965,783 —Bonds with subscription rights to shares 243,339 241,270 (2,069)Long-term loans 518,809 509,988 (8,821)

Total $3,013,233 $3,002,343 $(10,890)

Derivative transactions* $ 122 $ 122 $ —

* The net amount of the assets and liabilities is shown. If the net amount is a liability, it is written in parentheses ( ).


Note 1: Methods of calculating the fair value of fi nancial instruments and matters related to securities and derivatives

(1) Assets a. Cash and time deposits These items are settled within short periods and are shown at their respective book value, which

is almost equivalent to their settlement values. b. Trade receivables The fair value of these fi nancial instruments is calculated, by specifi ed period and type of securi-

ty, as the present value by discounting the cash fl ow to maturity using a discount rate that takes account of credit risk.

c. Securities and investment securitiesThese fair values for stocks are based on quoted market prices. Also, for the note related to securities to be held to maturity, please refer to the “Marketable and Investment Securities” section of these notes.

(2) Liabilities a. Trade payables and Short-term loans and Current portion of bonds with subscription rights to

shares Since these items are settled within short periods of time and the book value is close to fair

value, they are presented at book value. b. Bonds with subscription rights to shares and Long-term loans These fair values are calculated using the discount rate that would apply if the full amount of the

principal were newly borrowed. Long-term borrowings at fl oating rates are subject to special treatment as interest-rate swaps, with the total amount of principal being treated together with the related interest-rate swap, and the value is calculated as the present value, of the same kind of borrowing, using a discount rate determined by reasonable estimation methods.

(3) Derivative transactions Please refer to “18. Derivative Financial Instruments.”

Note 2: Financial instruments for which ascertaining the fair value is recognized to be extremely diffi cult

On consolidated balance sheets


As of March 31 2012 2011 2012

Stocks of associated companies ¥ 6,356 ¥ 5,795 $ 77,333Unlisted stocks 4,863 4,950 59,168

Total ¥11,219 ¥10,745 $136,501

Note: Market values are not available for these stocks, and, since ascertaining their fair value is recognized to be extremely diffi cult, the values of these stocks have not been included in “Securities and investment securities.”

Note 3: Monetary claims and securities with maturity dates that are scheduled to be amortized after the closing date of the consolidated accounts

Millions of yen

Over 1 year and Over 5 years and As of March 31, 2012 Within 1 year within 5 years within 10 years Over 10 years

Cash and time deposits ¥ 84,956 ¥ — ¥— ¥—Trade receivables 157,872 3,104 20 —Investment securities and other securities: Claims to be held to maturity: Other 1 354 1 — Other securities with maturity: Other 2,855 — — —

Total ¥245,684 ¥3,458 ¥21 ¥—


Millions of yen


Cash and time deposits ¥100,676 ¥ — ¥ — ¥—Trade receivables 146,271 15,241 — —Investment securities and other securities: Claims to be held to maturity: Other 1 4 352 — Other securities with maturity: Other 3,326 — — —

Total ¥250,274 ¥15,245 ¥352 ¥—



Cash and time deposits $1,033,648 $ — $ — $—Trade receivables 1,920,818 37,766 243 —Investment securities and other securities: Claims to be held to maturity: Other 12 4,307 13 — Other securities with maturity: Other 34,737 — — —

Total $2,989,215 $42,073 $256 $—

Note 4: Bonds with subscription rights to shares and the amount of long-term loans that are scheduled to be repaid after the closing date of the consolidated accounts

Millions of yen

Over 1 year and Over 2 years and Over 3 years and Over 4 years andAs of March 31, 2012 Within 1 year within 2 years within 3 years within 4 years within 5 years

Long-term loans ¥24,579 ¥13,692 ¥8,098 ¥3,311 ¥17,470Bonds with subscription rights to shares — 20,000 — — —

Total ¥24,579 ¥33,692 ¥8,098 ¥3,311 ¥17,470

Millions of yen


Long-term loans ¥14,859 ¥24,351 ¥13,377 ¥7,538 ¥3,060Bonds with subscription rights to shares 20,000 — 20,000 — —

Total ¥34,859 ¥24,351 ¥33,377 ¥7,538 ¥3,060



Long-term loans $299,051 $166,590 $98,528 $40,285 $212,556Bonds with subscription rights to shares — 243,339 — — —

Total $299,051 $409,929 $98,528 $40,285 $212,556


17. Stock Options Fiscal year ended March 31, 2011 1. Items and amounts of related expenses presented in the consolidated accounts

for the fi scal year 2012 and 2011 are as follows:


As of March 31 2012 2011 2012

Cost of sales ¥ 31 ¥ 57 $ 377Selling, general and administrative expenses 103 202 1,253

2. Description and Movement of Stock Options (1) Description of stock options awarded during the consolidated fi scal year under review

1st subscription rights to shares

Scope and number of people eligible 1. Directors excluding outside directors: 9 persons for the award of stock options 2. Executive officers: 23 personsNumber of stock options awarded by type of stock Common stock: 1,223,000 shares (Note 1)Granted date November 5, 2009Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2011 to November 5, 2024

Notes: 1. Options are presented after conversion to the number of shares.2. Those awarded share options may exercise those options only while serving as directors or executive offi cers of the Company

and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on equity (ROE; the “attained performance”) is less than 8.0% (the “target perfor-

mance”) as of the fi nal fi scal year-end within a two-year period (the “fi nal fi scal year”), those awarded share options may only exercise share option rights for a number of shares calculated by multiplying the number of share options rights by the vesting ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).

4. When those awarded share options are those newly appointed as directors or executive offi cers after July 1, 2009, or when those awarded share options retire from their positions as directors or executive offi cers before the fi nal day of the fi nal fi scal year, the number of share option rights they may exercise is calculated by multiplying the adjusted fi gure described in Note 2 above by a tenure period ratio (a fi gure representing the ratio of days of tenure to the number of days in the period from April 1, 2009, through March 31, 2011).

5. When the calculations described in notes 3 and 4 above result in numbers of exercisable share options rights including a frac-tion of a right (a fi gure less than one), this fractional right is to be discarded.

6. When those who were awarded share options are recognized to have executed their offi cial duties in an illegal or improper man-ner during their tenure, it is possible for the Company to restrict the number of share option rights that the people in question may exercise based on a decision by the Board of Directors. In such cases, the people awarded share options in question may not exercise a number of share options in excess of the restricted number.

7. When those awarded share options die, the heirs of those people may exercise the share options until a date three months after the day following the date of death or until a date six months after the last day of the fi nal fi scal year, whichever is later.

8. In addition to the provisos described in each of the previous notes, the exercise of share options is to be undertaken in accor-dance with the conditions stipulated in “share option award contracts” concluded between the Company and those awarded share options.


2nd subscription rights to shares

Scope and number of people eligible Executive officers: 4 persons for the award of stock options Number of stock options awarded by type of stock Common stock: 36,000 shares (Note 1)Granted date September 28, 2010Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2011 to November 5, 2024


and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on equity (ROE; the “attained performance”) is less than 8.0% (the “target perfor-

mance”) as of the fi nal fi scal year-end within a three-year period (the “fi nal fi scal year”), those awarded share options may only exercise share option rights for a number of shares calculated by multiplying the number of share options rights by the vesting ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).






3rd subscription rights to shares

Scope and number of people eligible 1. Directors excluding outside directors: 8 persons for the award of stock options 2. Executive officers: 23 personsNumber of stock options awarded by type of stock Common stock: 1,615,000 shares (Note 1)Granted date September 27, 2011Vesting conditions (Note 3)Vesting period No relevant service period has been established.Exercise period From July 1, 2014 to June 30, 2026


and during a period of fi ve years after retiring from those positions. 3. When the Company’s consolidated return on invested capital (ROIC; the “attained performance”) is less than 8.0% (the “target

performance”) as of the fi nal fi scal year-end within a three-year period (the “fi nal fi scal year”), those awarded share options may only exercise share option rights for a number of shares calculated by multiplying the number of share options rights by the vest-ing ratio (a fi gure with a lower limit of 0.5 calculated by dividing the attained performance by the target performance).







(2) Movement of stock options and status of related changes With respect to stock options existing during the consolidated fi scal year ended March 31,

2012, the relevant numbers of stock options and numbers of shares issuable on the conversion of stock options are as follows.

a. Number of Stock Options

1st subscription 2nd subscription 3rd subscription rights to shares rights to shares rights to shares

Share subscription rights which are not yet vested Outstanding as of March 31, 2011 1,223,000 36,000 — Granted — — 1,615,000 Forfeited 39,000 — — Vested 1,184,000 36,000 — Undetermined balance — — 1,615,000Share subscription rights which have already been vested Outstanding as of March 31, 2011 — — — Vested 1,184,000 36,000 — Exercised 174,000 — — Forfeited — — —Unexercised balance 1,010,000 36,000 —

b. Price Information

1st subscription 2nd subscription 3rd subscription rights to shares rights to shares rights to shares

Exercise price (yen) ¥ 1 ¥ 1 ¥ 1Weighted average exercise price (yen) 419 — —Weighted average fair value per stock at the granted date (yen) 341 343 245

3. Method of Estimating the Fair Value of Stock Options Regarding 3rd subscription rights to shares issued during the consolidated fi scal year under

review, the method of estimating the fair value of the share options is as follows.

a. Evaluation Method Used: Black-Scholes Method

b. Main Basic Parameters and Evaluation Methods

3rd subscription rights to shares

Expected volatility (Note 1) 38.62%Expected holding period (Note 2) 9.0 yearsExpected dividend (Note 3) ¥5.55 per shareRisk-free rate (Note 4) 0.8410%

Notes: 1. Expected volatility is calculated based on actual stock prices during the preceding seven years (from September 27, 2002, through September 26, 2011).

2. Because suffi cient data has not yet been accumulated and a rational estimate is diffi cult, estimates were performed based on an assumption that share options are exercised at the midpoint of the period in which the options may be exercised.

3. The expected dividend is a simple average value calculated based on actual dividends during the most recent seven fi scal years.

4. The risk-free rate corresponds to the interest rate (compounded) on Japanese government bonds with remaining periods to maturity of approximately seven years as of September 26, 2011.

4. Method of Estimating the Number of Vested Stock Option Rights Fundamentally, because rationally estimating the number of rights invalidated in the future

is diffi cult, the method used is to refl ect only the number of rights that are actually invalidated.


18. Derivative Financial Instruments

Fiscal year ended March 31, 2012 1. Derivatives not subject to hedge accounting No items reported 2. Derivatives subject to hedge accounting (1) Currency related

Millions of yen

Contractual Hedging Contractual value over FairClassification Transaction instruments value 1 year value

Deferred Forward exchange Trade hedge contract receivables accounting To sell: and Trade CAD payables ¥ 40 — ¥ 2 EUR 259 — 10 JPY 233 — (1) To buy: EUR 86 — (1) JPY 56 — 0

Total ¥674 — ¥10



Deferred Forward exchange Trade hedge contract receivables accounting To sell: and Trade CAD payables $ 488 — $ 25 EUR 3,151 — 122 JPY 2,836 — (11) To buy: EUR 1,046 — (11) JPY 681 — 0

Total $8,202 — $122

Note: Fair value is computed based on quotes from fi nancial institutions, among other sources.

(2) Interest-rate related

Millions of yen


Special Interest-rate swap Long-term ¥42,563 ¥27,038 (See notetreatment of contract loans below)interest-rate Receipts floating, swaps payments fixed



Special Interest-rate swap Long-term $517,861 $328,969 (See notetreatment of contract loans below)interest-rate Receipts floating,swaps payments fixed

Note: Items subject to special treatment of interest-rate swaps are handled together with long-term loans that are subject to hedging. The fair value is presented in the section entitled, “2. Information on the fair value of fi nancial instruments” contained in the section “16. Financial Instruments.”


Fiscal year ended March 31, 2011 1. Derivatives not subject to hedge accounting No items reported 2. Derivatives subject to hedge accounting (1) Currency related

Millions of yen


Deferred Forward exchange Trade hedge contract receivables accounting To sell: and Trade CAD payables ¥ 13 — ¥ 0 EUR 392 — 27 JPY 145 — (13) To buy: USD 120 — (1) CAD 81 — 1 EUR 580 — (30)

Total ¥1,331 — ¥(16)

Note: Fair value is computed based on quotes from fi nancial institutions, among other sources.

(2) Interest-rate related

Millions of yen


Special Interest-rate swap Long-term ¥35,588 ¥27,563 (See notetreatment of contract loans below)interest-rate Receipts floating,swaps payments fixed

Note: Items subject to special treatment of interest-rate swaps are handled together with long-term loans that are subject to hedging. The fair value is presented in the section entitled, “2. Information on the fair value of fi nancial instruments” contained in the section “16. Financial Instruments.”

19. Segment Information For the years ended March 31, 2012 and 20111. Overview of reportable segments

The reportable segments are constituent units of the EBARA Group for which separate fi nancial information is available. The Board of Directors periodically examines these segments for the pur-pose of deciding the allocation of management resources and evaluating operating performance. The Group operates in three business segments as follows:

Segments Principal Products Contents

Fluid Machinery & Systems

Pumps, blowers, turbo-compressors, turbines, freezer chillers, and others

Manufacture, sale, operation and main-tenance (O&M) services, and others

Environmental Engineering

Municipal waste processing plants, indus-trial waste incineration plants, and others

Engineering, construction, O&M services, and others

Precision Machinery

Dry vacuum pumps, CMP equipment, planting systems, and other machinery and equipment used in the semiconduc-tor manufacturing industry

Manufacture, sale, and maintenance

2. Calculation method used for sales, profi ts and losses, assets and liabilities, and other items for each reportable segment

The accounting method used for reportable business segments is the same as the method stated in “NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.” Profi ts from reportable segments are fi gures based on operating income. Intersegment sales are recorded at the same prices used in transactions with third parties.


3. Information about sales, profi ts and losses, assets and liabilities, and other items for each reportable segment under new segmentation for the years ended March 31, 2012 and 2011, is as follows:

Millions of yen

Reportable segments

Fluid Machinery Environmental Precision Others Adjustments ConsolidatedYear ended March 31, 2012 & Systems Engineering Machinery Total (Note 1) Total (Note 2) (Note 3)

Sales to third parties ¥286,090 ¥50,129 ¥68,373 ¥404,592 ¥ 7,485 ¥412,077 ¥ — ¥412,077Intersegment sales and transfers 954 0 7 961 3,593 4,554 (4,554) —

Total ¥287,044 ¥50,129 ¥68,380 ¥405,553 ¥11,078 ¥416,631 ¥ (4,554) ¥412,077

Segment income ¥ 15,579 ¥ 322 ¥ 6,594 ¥ 22,495 ¥ 617 ¥ 23,112 ¥ 155 ¥ 23,267

Segment assets ¥268,430 ¥47,974 ¥67,591 ¥383,995 ¥18,061 ¥402,056 ¥86,908 ¥488,964

Others: Depreciation expense ¥ 8,569 ¥ 355 ¥ 3,264 ¥ 12,188 ¥ 697 ¥ 12,885 ¥ (120) ¥ 12,765 Amortization of goodwill 235 — — 235 — 235 — 235 Investments for companies applying equity method 1,187 3,966 — 5,153 — 5,153 — 5,153 Increase in tangible and intangible assets 7,273 440 2,932 10,645 1,685 12,330 (14) 12,316


Reportable segments


Sales to third parties $3,480,837 $609,916 $831,890 $4,922,643 $ 91,068 $5,013,711 $ — $5,013,711Intersegment sales and transfers 11,607 0 85 11,692 43,716 55,408 (55,408) —

Total $3,492,444 $609,916 $831,975 $4,934,335 $134,784 $5,069,119 $ (55,408) $5,013,711

Segment income $ 189,548 $ 3,918 $ 80,229 $ 273,695 $ 7,506 $ 281,201 $ 1,887 $ 283,088

Segment assets $3,265,969 $583,696 $822,375 $4,672,040 $219,747 $4,891,787 $1,057,404 $5,949,191

Others: Depreciation expense $ 104,259 $ 4,319 $ 39,713 $ 148,291 $ 8,480 $ 156,771 $ (1,460) $ 155,311 Amortization of goodwill 2,859 — — 2,859 — 2,859 — 2,859 Investments for companies applying equity method 14,442 48,254 — 62,696 — 62,696 — 62,696 Increase in tangible and intangible assets 88,490 5,354 35,673 129,517 20,501 150,018 (170) 149,848

Notes: 1. The “Others” item in the table above is the business segment for operations that are not included among reporting segments. It contains business support services and other activities.

2. The “Adjustments” item is as follows: (1) Segment income shows eliminations among intersegment sales and transfers. (2) Segment assets consisted of ¥90,091 million for corporate assets and ¥(3,183) million for eliminations among intersegment sales and transfers. The corporate assets

primarily consisted of cash and cash equivalents, some investment securities, and deferred tax assets of the Group. 3. Segment income (loss) has been adjusted within operating income in the consolidated statements of income.


Millions of yen

Reportable segments


Sales to third parties ¥268,943 ¥51,661 ¥67,902 ¥388,506 ¥13,170 ¥401,676 ¥ — ¥401,676 Intersegment sales and transfers 1,165 176 0 1,341 4,697 6,038 (6,038) —

Total ¥270,108 ¥51,837 ¥67,902 ¥389,847 ¥17,867 ¥407,714 ¥ (6,038) ¥401,676

Segment income ¥ 21,597 ¥ 943 ¥ 8,016 ¥ 30,556 ¥ 779 ¥ 31,335 ¥ 207 ¥ 31,542

Segment assets ¥256,912 ¥55,639 ¥70,977 ¥383,528 ¥23,605 ¥407,133 ¥100,765 ¥507,898

Others: Depreciation expense ¥ 8,687 ¥ 338 ¥ 3,931 ¥ 12,956 ¥ 690 ¥ 13,646 ¥ (122) ¥ 13,524 Amortization of goodwill 263 — — 263 — 263 — 263 Investments for companies applying equity method 1,055 3,333 — 4,388 — 4,388 — 4,388 Increase in tangible and intangible assets 5,770 669 1,249 7,688 501 8,189 — 8,189

Notes: 1. The “Others” item in the table above is the business segment for operations that are not included among reporting segments. It contains business support services and other activities.

2. The “Adjustments” item is as follows: (1) Segment income (loss) shows eliminations among intersegment sales and transfers. (2) Segment assets consisted of ¥105,099 million for corporate assets and ¥(4,334) million for eliminations among intersegment sales and transfers. The corporate assets

primarily consisted of cash and cash equivalents, some investment securities, and deferred tax assets of the Group. (3) An increase in tangible and intangible assets shows eliminations among intersegment sales and transfers. 3. Segment income (loss) has been adjusted within operating income in the consolidated statements of income.

Reference information 1. Geographical segment information for the year ended March 31, 2012 is as follows: a. Net sales

Thousands ofYear ended March 31, 2012 Millions of yen U.S. dollars

Japan ¥230,863 $2,808,894Asia 99,408 1,209,490North America 36,085 439,044Others 45,721 556,283

Total ¥412,077 $5,013,711

Note: Net sales information above is based on the location of the customer.

b. Property, plant and equipment

Thousands ofAs of March 31, 2012 Millions of yen U.S. dollars

Japan ¥68,734 $ 836,282North America 10,303 125,356Others 10,067 122,484

Total ¥89,104 $1,084,122

Information about impairment losses on fi xed assets by reportable segments for the years ended March 31, 2012 and 2011 is as follows:

Millions of yen

Reportable segments

Fluid Machinery Environmental Precision Year ended March 31, 2012 & Systems Engineering Machinery Total Others Adjustments Consolidated

Impairment losses ¥— ¥— ¥— ¥— ¥128 ¥— ¥128

Millions of yen

Reportable segments


Impairment losses ¥33 ¥19 ¥22 ¥74 ¥— ¥— ¥74



Reportable segments


Impairment losses $— $— $— $— $1,557 $— $1,557

Information about amortization and balances as of year ended to goodwill by report-able segments for the years ended March 31, 2012 and 2011 is as follows:

Millions of yen

Reportable segments


Amortization of goodwill ¥235 ¥— ¥— ¥235 ¥— ¥— ¥235Balances as of March 31 859 — — 859 — — 859

Millions of yen

Reportable segments


Amortization of goodwill ¥ 263 ¥— ¥— ¥ 263 ¥— ¥— ¥ 263Balances as of March 31 1,187 — — 1,187 — — 1,187


Reportable segments


Amortization of goodwill $ 2,859 $— $— $ 2,859 $— $— $ 2,859Balances as of March 31 10,451 — — 10,451 — — 10,451

20. Loss on Business Withdrawal

The loss on business withdrawal is the estimate of loss to be incurred in connection with the withdrawal from the InfraServ project in Germany. The breakdown of this loss is as follows:


As of March 31 2012 2011 2012

Provision of allowance for doubtful accounts accompanying the aging of accounts receivable (accompanying the payment of certain accounts receivable on a long-term basis) ¥ 7,000 ¥— $ 85,169Portion of cost incurred related to additional construction for improvements 3,295 — 40,090

Total ¥10,295 ¥— $125,259

21. Subsequent Events Appropriation of unappropriated retained earnings The following appropriation of unappropriated retained earnings for the year ended March 31, 2012,

was approved at the general meeting of shareholders of the Company held on June 28, 2012:


Cash dividends: Cash dividends per share ¥5.0 ($0.06) ¥2,111 $25,684


Independent Auditor’s Report

The Board of Directors

EBARA CORPORATION

We have audited the accompanying consolidated fi nancial statements of EBARA CORPORATION and its consolidated subsid-

iaries, which comprise the consolidated balance sheet as at March 31, 2012, and the consolidated statements of income, com-

prehensive income, changes in net assets, and cash fl ows for the year then ended and a summary of signifi cant accounting

policies and other explanatory information, all expressed in Japanese yen.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated fi nancial statements in accordance

with accounting principles generally accepted in Japan, and for designing and operating such internal control as management

determines is necessary to enable the preparation and fair presentation of the consolidated fi nancial statements that are free

from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated fi nancial statements based on our audit. We conducted our

audit in accordance with auditing standards generally accepted in Japan. Those standards require that we plan and perform the

audit to obtain reasonable assurance about whether the consolidated fi nancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated

fi nancial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of

material misstatement of the consolidated fi nancial statements, whether due to fraud or error. The purpose of an audit of the

consolidated fi nancial statements is not to express an opinion on the effectiveness of the entity’s internal control, but in making

these risk assessments the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the

consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances. An audit also

includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by

management, as well as evaluating the overall presentation of the consolidated fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated fi nancial statements referred to above present fairly, in all material respects, the consolidated

fi nancial position of EBARA CORPORATION and consolidated subsidiaries as at March 31, 2012, and their consolidated fi nan-

cial performance and cash fl ows for the year then ended in conformity with accounting principles generally accepted in Japan.

Convenience Translation

We have reviewed the translation of these consolidated fi nancial statements into U.S. dollars, presented for the convenience of

readers, and, in our opinion, the accompanying consolidated fi nancial statements have been properly translated on the basis

described in Note 5.

Ernst & Young ShinNihon LLC

June 28, 2012

Tokyo, Japan


EBARA Group History

1912 (Nov.)

Inokuty Type Machinery Office founded. Issey Hatakeyama was appointed general manager, under the supervision of Ariya Inokuty, a professor of Tokyo Imperial University.

1920 (May)

EBARA CORPORATION establishedA plant was constructed at Minami-Shinagawa, Shinagawa-cho, Ebara-gun, Tokyo, marking the estab-lishment of the Company, which assumed the responsi-bilities of the Inokuty Type Machinery Office and began the manufacturing of centrifugal pumps.

1938 (Apr.)

New plant built in Haneda, Kamata-ku, TokyoThe Head Office and manufacturing operations shifted from Shinagawa to the new facility in Haneda.

1941 (Dec.)

New plant built in KawasakiThe new plant began manufacturing machine tools in accordance with the Machine Tool Manufacturing Law.

1945 (Apr.)

Haneda Plant damaged in war. All operations, except for a pump testing facility, fabrication and welding shop, and main building, deemed no longer functional. As a result, production was transferred to the Kawasaki Plant.

1955 (Jan.)

The Haneda Plant was reopened to spearhead the Company’s manufacturing operations.

1956 (Jan.)

Ebara-Infilco was set up to manufacture and sell water treatment equipment.

1964 (Apr.)

EBARA’s first post-World War II overseas sales office was opened in Bangkok.

1964 (June)

Ebara Service Co., Ltd., was established to provide for after-sales service for EBARA’s products.

1965 (Apr.)

The Fujisawa Plant was opened as the first facility in Japan to mass-produce standard pumps, and it took over the production of chillers from the Haneda Plant.

1975 (Jan.)

EBARA’s first overseas production facility, Ebara Indústrias Mecánicas e Comércio Ltda., was established in Brazil.

1975 (Nov.)

The Sodegaura Plant was opened to manufacture main-ly compressors and turbines.

1979 (Dec.)

P.T. Ebara Indonesia was established in Indonesia to manufacture standard pumps in Southeast Asia.

1981 (Jan.)

Ebara International Corporation was established in the United States to provide a North American base for the pumps business.

1985 (Jan.)

EBARA realigned its production systems by integrating the Kawasaki Plant into the Fujisawa Plant.

1987 (July)

A precision machining facility was opened at the Fujisawa Plant dedicated to production of vacuum equipment for the semiconductor industry.

1989 (Jan.)

Ebara Italia S.p.A. (currently, Ebara Pumps Europe S.p.A.) was established to manufacture stainless steel standard pumps.

1992 (Aug.)

Ebara Qingdao Co., Ltd., was founded in China as a center for pump production.

1994 (Oct.)

Ebara-Infilco was merged into the Company.

2000 (Apr.)

Ebara Techno-serve Co., Ltd., was formed to combine sales and maintenance services for the standard pumps business.

2000 (Apr.)

New Elliott Corporation, a leading company in the compressors and turbines business, became a wholly owned subsidiary.

2001 (June)

Ebara Kyushu Co., Ltd., established in Kumamoto Prefecture for producing CMP and other equipment, went into full operation.

2002 (Apr.)

The compressors and turbines business was split off into a separate company, Elliott Ebara Turbomachinery Corporation, located in Chiba Prefecture.

2002 (June)

The Executive Officer System was introduced.

2002 (Sept.)

The chillers business was split off into a separate company, Ebara Refrigeration Equipment & Systems Co., Ltd.

2003 (May)

Ebara Great Pumps Co., Ltd., was established in China to manufacture and sell pumps in China for the oil and gas industries.

2005 (Apr.)

An in-house company system was introduced with a corporate structure comprising a Corporate Sector for headquarters functions and three core companies: Fluid Machinery & Systems, Environmental Engineering, and Precision Machinery.

2005 (Aug.)

Ebara Boshan Pumps Co., Ltd., was established in China to manufacture and sell large-scale, high- pressure pumps in China.

2006 (May)

Ebara Machinery (China) Co., Ltd., was formed to serve as the manufacturing, sales, and service center for stan-dard pumps in China.

2009 (Apr.)

EBARA integrated its water treatment plant businesses into Ebara Engineering Service Co., Ltd.

2009 (Oct.)

EBARA integrated its environmental plant businesses into Ebara Environmental Plant Co., Ltd.

2010 (Jan.)

The Futtsu Plant (Chiba, Japan) was newly established, and the functions of the former Haneda Plant were transferred there.

2010 (Mar.)

EBARA, Mitsubishi Corp., and JGC Corp. started a joint venture in the water business, Ebara Engineering Service Co., Ltd. (renamed Swing Corporation).

2010 (Oct.)

Ebara Kyushu Co., Ltd., was merged into the Company.

2012 (Apr.)

In a realignment of the pumps business, Ebara Techno-serve Co., Ltd., Ebara Yoshikura Hydro-Tech Co., Ltd., and Ebara Environmental Technologies Hokkaido Co., Ltd., were merged.

2012 (Nov.)

100th anniversary of the commencement of Ebara oper-ations



Corporate Data (As of March 31, 2012)

Corporate ProfileEBARA CORPORATION

Head Office11-1, Haneda Asahi-cho, Ohta-ku, Tokyo 144-8510, Japan Phone: 81-3-3743-6111 Fax: 81-3-5736-3100URL: http://www.ebara.co.jp/en

Stock Information

Securities Code6361 (Japan)

Common Stock Issued and outstanding: 422,899,658 shares

Number of Shareholders46,236

Securities TradedTokyo Stock Exchange and Sapporo Securities Exchange

Major Shareholders (% of total)

The Master Trust Bank of Japan, Ltd. (Trust Account) 7.3Japan Trustee Services Bank, Ltd. (Trust Account) 6.8Mizuho Corporate Bank, Ltd. 2.4Japan Trustee Services Bank, Ltd. (Trust Account 9) 2.1PICTET AND CIE (EUROPE) S.A. 1.7The Bank of Tokyo-Mitsubishi UFJ, Ltd. 1.7EBARA CORPORATION Employee Shareholders 1.2Nippon Life Insurance Company 1.2Aioi Nissay Dowa Insurance Co., Ltd. 1.2Mizuho Securities Co., Ltd. 1.2Note: Treasury stock is eliminated from the total number of shares issued in calculating

the percentage.

Stock Price Range and Turnover

0

250

500

750

1,000

0

3,000

6,000

9,000

12,000

4/11 6/11 8/11 10/11 12/11 2/12

EBARA Stock Price (Yen) Nikkei Average (Yen)

Nikkei AverageEBARA Stock PriceEBARA Stock Turnover (Thousand shares per month)

150,000

100,000

200,000

10/10 12/10 2/114/10 6/10 8/1012/09 2/1010/09

Date of FoundationNovember 1912

Number of Employees (Consolidated)14,695

Paid-in Capital ¥61,314 million

Transfer Agent and RegistrarSumitomo Mitsui Trust Bank, Limited4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8233, Japan

Number of Shares Constituting One Unit1,000

Accounting AuditorErnst & Young ShinNihon LLC

Composition of Shareholders

Foreign Corporations and Individuals22.2%

Securities Companies4.9%

Treasury Stock0.2%

Other Domestic Corporations6.6%

Individualsand Others

32.2%

Financial Institutions33.9%

For more investor relations information, please access http://www.ebara.co.jp/en/ir/

Printed in Japan on recycled paper using non-VOC ink

On the cover: This horizontal shaft type mixed flow pump serves in many

heavy-duty applications, including sewage intake and output, supplying and

draining agricultural water, and pumping water to and from rivers.

EBARA CORPORATIONHead Office

11-1, Haneda Asahi-cho, Ohta-ku,

Tokyo 144-8510, Japan

Phone: 81-3-3743-6111

URL: http://www.ebara.co.jp/en

E-mail: [email protected]

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