always growing stronger. always evolving

Always Growing Stronger.

Always Evolving.

E B A R A C O R P O R A T I O N

A n n u a l R e p o r t 2 0 0 8F o r t h e Y e a r E n d e d M a r c h 3 1 , 2 0 0 8

Outline

Founded in 1912, EBARA CORPORATION is one of the world’s princi-

pal manufacturers of transfer machinery for fluids and gaseous sub-

stances, with particularly strong positions in pumps, compressors,

fans, and chillers. The Company is also a prominent contractor for

environmental engineering and equipment, including water treatment

systems and solid waste processing and utilization plants.

EBARA is a leading supplier of precision machinery to the semi-

conductor device manufacturing industry. Key products in this sector

include chemical mechanical polishing systems, dry vacuum pumps,

and other equipment, such as wafer plating systems that assist the

industry in meeting the demands of manufacturing the next genera-

tion of semiconductor devices.

The EBARA Group, in the fiscal year ended March 31, 2008, in its

Fluid Machinery & Systems business segment, moved forward with

initiatives to strengthen its sales network in global markets for cus-

tom pumps, compressors and fans, and standard pumps, and contin-

ued to strengthen its manufacturing systems. In the Environmental

Engineering business segment, EBARA focused especially on improv-

ing profitability. These activities included reallocating its manage-

ment resources, including personnel, and taking steps to lower fixed

costs through the implementation of a preferential early retirement

program, in response to conditions in the matured market for domes-

tic public works construction. In the Precision Machinery business

segment, EBARA endeavored to improve profitability by lowering pro-

curement costs and substantially tightening manufacturing manage-

ment and controls in order to make further improvements in the

profit margins of core products, including dry pumps and chemical

mechanical polishing systems.

To grow together with all its stakeholders, the Company will

remain true to its traditions of offering products and services of the

high quality expected of the EBARA brand, backed by a long and dis-

tinguished accumulation of technology and experience.

CorporateCorporate

Fluid Machinery Fluid Machinery & Systems Company& Systems Company

EnvironmentalEnvironmental Engineering Company Engineering Company

Precision Machinery Precision Machinery Company Company

Corporate

Fluid Machinery & Systems Company

Environmental Engineering Company

Precision Machinery Company

Operating Highlights .....................................................................................................................................................1

Financial Highlights.......................................................................................................................................................2

Message from the Management ....................................................................................................................................4

Dialogue with Investors .................................................................................................................................................8

At a Glance ................................................................................................................................................................13

Review and Outlook

Fluid Machinery & Systems Company ....................................................................................................................14

Environmental Engineering Company .....................................................................................................................16

Precision Machinery Company...............................................................................................................................18

Governance Structure and Management Systems .........................................................................................................20

Corporate Social Responsibility ....................................................................................................................................24

Financial Section ........................................................................................................................................................26

EBARA Global Network................................................................................................................................................50

EBARA History—Resolute Commitment to Research and Development ..........................................................................52

Corporate Data ...........................................................................................................................................................53

Cautionary Statement with Regard to Forward-

Looking Statements

Certain 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 state-

ments, 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 unanticipated events.

Contents

Outline of the EBARA Group

www.global-reports.com

EBARA CORPORATION ANNUAL REPORT 2008 1

Operating Highlights

Additional Capacity Comes Online at the Sodegaura Plant

The Elliott Group has expanded capacity and

installed large-scale machining centers at the

Sodegaura Plant in response to recent strong

demand for compressors and turbines in the

booming oil and gas markets. All these new

facilities were in operation at the end of

March 2008, resulting in an increase of

about 30% in manufacturing capacity.

EBARA Decided to Relocate the Haneda Plant to the New Futtsu PlantEBARA has decided to relocate the Haneda Plant—which thus far has been

the principal manufacturing center for engineered pumps—to a new facility

located in Futtsu City, Chiba Prefecture, by September 2010. The new plant

to be built in Futtsu will have world-class product development, design, and

manufacturing capabilities and will be positioned as the mother factory in

EBARA’s global production network. Now,

EBARA is designing the new factory that will

specialize in producing internationally compet-

itive, high-value-added products, while con-

sidering reducing the effects on the

environment. EBARA is also aiming to position

the new Futtsu Plant as a center of its infor-

mation network that will lead and support the

activities of the EBARA Group’s production

sites in Japan and overseas.

EBARA Receives an Order for a Filtration MembraneSystem Utilizing a Reverse Osmosis Process for a Water Purification PlantEBARA received an order from Toyooka City for a membrane water filtration

system that will make use of the largest size osmosis process currently

available. One of the key features of EBARA’s osmosis

filtration system is that it can supply high-quality drink-

ing water even from water taken from rivers that have

been muddied because of special conditions in Japan,

including the heavy seasonal rainfall in early summer

and during the times of typhoons. In addition, EBARA’s

osmosis systems can be installed in existing concrete

structures. These systems are well suited to the

upgrading of water purification systems in medium-

sized to large cities as they make it unnecessary

to purchase new sites for purification facilities, shorten the time needed

for installation, and lower costs over the life cycle of the equipment.

EBARA’s Receives Order for Providing Long-Term Operatingand Management Services on a Subcontract BasisThe EBARA Group has been focusing on expanding its after-installation

services for various types of facilities. One successful example was the

receipt of an order from Kashiwa City for pro-

viding long-term operating and management

services for that city’s municipal waste pro-

cessing facilities. This is a major order, val-

ued at approximately ¥10 billion, that will

involve the provision of operating services

over a 14-year period for an existing munici-

pal waste processing facility.

EBARA Began Volume Production of a Unique Gas Abatement System for Reducing PFC EmissionsIn the Component Division of the Precision Machinery Company, EBARA

has completed the development and field testing of an “F (fluoride) gas

captured abatement system (FDS) series” to efficiently treat PFC gases*

used in the semiconductor manufacturing process.

Because the FDS series does not generate waste-

water and captured materials in this system can be

reused for several purposes, this system contributes

to minimizing the environmental burden.

EBARA started sales of this system this year as a

second volume production system followed by the

combustion-type scrubber, such as the GDC and the

G5.

* CF4, SF6, etc.

EBARA Announces New Medium-Term Management Plan

Beginning in April 2008, EBARA has launched a new three-year management

plan. EBARA has defined this three-year period as a time for “restructuring

the Group’s management foundation.” During the period of the plan, EBARA

will focus on preparing for the implementation of subsequent medium-term

plans that will usher in a “period for taking up the challenge of business

expansion.” Under the current plan, EBARA will aim to attain consolidated

net sales of ¥590 billion, operating income of ¥35 billion, and net income of

¥14 billion by the final year of the plan, which will end on March 31, 2011.

(For further details, please refer to the section Dialogue with Investors.)

Expansion and strengthening offacilities at the Sodegaura Plant

An architect’s drawing ofEBARA’s new manufacturingcenter to be located in Futtsu,Chiba Prefecture, which will bepositioned as the mother facilityin EBARA’s global productionnetwork.

Reverse osmosismembrane filtrationsystem for waterpurification plants

EBARA will provide operatingservices on a subcontractingbasis for this waste processingfacility in Kashiwa City, ChibaPrefecture.

EBARA’s FDS serieswill contribute to thereduction of PFC emis-sions and wastewatertreatment loads in thesemiconductor manu-facturing factories.

EBARA CORPORATION ANNUAL REPORT 20082

Financial Highlights

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

Years ended March 31 2008 2007 2006 2008

Net sales ¥567,191 ¥538,098 ¥514,957 $5,661,153

Operating income 6,017 13,249 10,902 60,056

Net income 7,609 5,446 3,350 75,946

Depreciation and amortization 15,316 12,842 12,450 152,870

Capital expenditures 22,381 17,917 14,838 223,386

Total shareholders’ equity** 151,237 151,242 153,695 1,509,502

Total net assets 155,263 154,970 — 1,549,686

Total assets 607,007 625,033 592,631 6,058,559

Interest-bearing debt ¥184,459 ¥213,349 ¥192,140 $1,841,092

Ratio of shareholders’ equity and net assets to

total assets (%) 24.9 24.2 25.9

Ratio of dividends to shareholders’ equity (%) 41.6 58.2 82.3

Free cash flow 25,454 (1,006) (13,872) 254,057

Per share data:

Net income (yen and U.S. dollars) ¥ 18.01 ¥ 12.89 ¥ 9.11 $0.180

Cash dividends (yen and U.S. dollars) 7.50 7.50 7.50 0.075

Net assets and shareholders’ equity (yen and U.S. dollars) 358.01 357.97 363.68 3.573

Debt/equity ratio 1.22 1.41 1.25

ROE (%)*** 5.0 3.6 2.6

ROA (%) 1.2 0.9 0.6

* 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 ¥100.19=US$1,the rate of exchange prevailing on March 31, 2008.

** 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 fiscalyear ended March 31, 2007. The amount corresponding to total shareholders’ equity, according to the previous method of presentation, is ¥151,237 million for thefiscal year 2008 and ¥151,242 million for the fiscal year 2007.

*** ROE: Net income/Average total shareholders’ equity of the beginning and end of the fiscal year. From fiscal year 2007, total shareholders’ equity substitutes for total net assets in the calculation.



180 10

-20

-15

-10

-5

0

5

0

90

60

30

120

150

’08’07’06’05’04

Total Shareholders’ EquityROA (right scale)ROE (right scale)

Total Shareholders’ EquityROE/ROA(Billions of yen, %)

30

-20

-10

10

20

0

’08’07’06’05’04

Free Cash Flow(Billions of yen)

400

0

100

200

300

’08’07’06’05’04

Net Assets and Shareholders’ Equityper Share(Yen)

600

0

100

200

300

400

500

’08’07’06’05’04

Net Sales(Billions of yen)

10

-20

-15

-10

-5

0

5

’08’07’06’05’04

Net Income (Loss)(Billions of yen)

20

-80

-60

-40

-20

0

’08’07’06’05’04

Net Income (Loss) per Share(Yen)

1) Review of the Fiscal YearDuring the consolidated fiscal year under

review, the world economy as a whole contin-

ued to experience steady growth conditions, but

during the latter half of the fiscal year, signs of

an economic slowdown began to appear as a

result of increases in prices of energy resources

and raw materials and spreading credit uncer-

tainty in international financial markets. In the

U.S. economy, as a result of turmoil in financial

markets resulting from the emergence of the

subprime housing loan issue, the decline in

housing construction activity, and other factors,

the economy slowed. In the European econ-

omies also, growth slowed as a consequence

of instability in financial markets. On the other

hand, in the newly emerging economies, cen-

tered around South America, East Europe,

Asia, and the Middle East, economic

expansion generally continued.

In the Japanese economy,

signs of a recovery trend were

in evidence as a result of

increases in private capital

investment and other develop-

ments following the improve-

ment in corporate profitability;

however, during the latter half of

the fiscal year, stronger signs of

a slowdown in private-sector

demand appeared as a result of

the impact of rising energy and raw material

prices as well as a decline in construction

starts. On the other hand, conditions in the

public sector remained lackluster throughout

the fiscal year.

Amid this operating environment, the EBARA

Group (the Group), in its Fluid Machinery &

Systems (FMS) business, moved forward with

initiatives to strengthen its sales network in

global markets for custom pumps, compressors

and fans, and standard pumps, and continued

to strengthen its manufacturing systems. In

addition, the Group made the decision to move

its Haneda Plant to a newly constructed facility

located in Futtsu City in Chiba Prefecture, with

the objectives of improving production efficiency

and reducing the emissions load on the environ-

ment. In the Environmental Engineering (EE)

business, EBARA focused especially on improv-

ing profitability. These activities included reallo-

cating its management resources, including

personnel, and taking steps to lower fixed costs

through the implementation of a preferential

early retirement program, in response to condi-

tions in the matured market for domestic public

works construction. EBARA also adopted mea-

sures that included strengthening its capabilities

for making proposal-based sales and providing

operation and maintenance (O&M) services,

which are areas where demand is expected to

grow. In the Precision Machinery (PM) business,


Message from the Management

“Re-generating OurPreparing to Enter



EBARA endeavored to improve profitability by

lowering procurement costs and substantially

tightening manufacturing management and con-

trols in order to make further improvements in

the profit margins of core products, including

dry pumps and chemical mechanical polishing

(CMP) systems.

The Group continued activities to restructure

its business portfolio and organization. These

included the sale of shares held in former con-

solidated subsidiaries Matsubo Company, Ltd.,

and Elliott Energy Systems, Inc.; the liquidation

of Ebara Environmental International Co., Ltd.;

and measures to reorganize other associated

companies in the environment business.

As the previously mentioned measures were

implemented, the Group reported an increase in

sales of the FMS business, supported mainly by

robust capital investment activities in overseas

markets; a decline in sales of the EE business

because of increased competition for projects in

the domestic public sector; and a decline in

sales of the PM business owing to lackluster

market conditions in the second half of the fiscal

year. As a result of these trends by segment,

total consolidated net sales increased over the

previous fiscal year. Operating income posted a

substantial decline from the previous year. The

principal factors accounting for this follow. In

the FMS business, performance was adversely

affected by sudden fluctuations in foreign

currency exchange rates and a decline in sales

of standard pumps and blowers owing to a drop

in the number of construction starts resulting

from the implementation of a revision of Japan’s

building code. In the EE business, additional

costs were reported in connection with the

Group’s decision to withdraw from the overseas

market for new orders for solid waste process-

ing facilities, and the profitability of work for the

domestic public sector declined as a result of

more-intense price competition. In the PM busi-

ness, sales declined as a result of requests from

customers for delays of equipment deliveries in

the face of stagnant conditions in the semicon-

ductor market.

As a result of these various developments,

the Group reported consolidated net sales of

¥567.1 billion, 5.4% higher than for the previ-

ous fiscal year; operating income of ¥6.0 billion,

54.6% below that of the prior year; and recur-

ring income of ¥2.7 billion, 73.5% lower than

for the previous fiscal year. Among extraordinary

items, the Group reported extraordinary gains

totaling ¥74.5 billion, including a ¥72.4 billion

gain on the sale of tangible fixed assets.

Extraordinary losses amounted to ¥43.7 billion,

including a loss of ¥9.8 billion on the suspension

of specific projects, ¥13.6 billion in provisions to

the reserve for losses on specific construction

projects, and ¥5.2 billion in provisions to the

reserve for losses on construction completion

guarantees. Due to the registering of such

extraordinary items and the valuation reserve for

deferred tax assets, consolidated net income

amounted to ¥7.6 billion, representing an

increase of 39.7% over the previous fiscal year.

2) Outlook and Strategies for theFiscal Year Ending March 31,2009

The outlook for the overall market environment

is for the world economy to show a decelerating

trend, as the United States and Europe continue

to experience declining growth because of the

influence of uncertainties in financial markets.

The economies of Asia outside Japan, which

have reported high economic growth in recent

years, are forecast to show slower rates of

expansion as a consequence of the influence of

deceleration in the economies of the advanced

countries. For the Group, conditions in the oil

and gas industries as well as the electric power

industry in the Middle East and Asia outside

Japan are expected to continue to be robust,

while public-sector demand in the wind power

generation equipment business is also expected

to remain strong. On the other hand, a challeng-

ing market environment is forecast to continue

in the engineering business in Japan as condi-

tions in the public sector remain difficult. In the

precision machinery and electronics businesses,

concern remains regarding the trend among

Business Platform,Our Second Century”


customers toward restraining capital investment

because of the weakness in the semiconductor

product market.

In the FMS business, although there is con-

cern regarding foreign currency exchange risk in

overseas transactions, demand for compressors

and various types of process pumps in the oil

and gas industries in East Asia, the Middle East,

and elsewhere is forecast to remain at a high

level. In addition, the market for infrastructure

improvement projects, including electric power

generation and seawater desalination, is expect-

ed to expand, while demand for standard

pumps, principally in China, the Middle East,

and Southeast Asia, is likely to continue to be

robust. In the domestic private-sector market,

even though there are some concerns, including

possible delays in recovery of the construction

market owing to the impact of revisions in

Japan’s building code, demand is expected to

continue for services to maintain and renew

facilities in the steel, petrochemical, and other

industries. Moreover, demand linked to the

movement of domestic customers into overseas

markets is also expected to continue to be firm.

On the other hand, demand in the public sector

is expected to remain low. Amid these condi-

tions, in overseas markets the Group will work

to expand its business activities in the electric

power generation and infrastructure sectors,

and, working with its overseas subsidiaries,

implement various policies to capture demand

of Japan-affiliated companies. In the domestic

public sector, the Group will further strengthen

its marketing activities, drawing on its techno-

logical capabilities and, in the domestic private

sector, will substantially improve its after-sales

service systems and capabilities to bolster its

earnings base.

In the EE business, challenging conditions

are forecast to continue in the domestic public-

sector market, which is the principal market

for the EE business’s services. However, within

this market, demand for services to renew and

extend the useful lifetimes of environmental

facilities is expected to expand. In addition,

there is a trend among public-sector entities to

subcontract facilities maintenance, manage-

ment, and operating services to private-sector

companies, and steady growth is expected in

the after-sales services business for such public

facilities. In response to these trends in the

business environment, the EE business is offer-

ing proposals for solutions to meet public-sector

customer needs, building on its strengths,

which include an extensive record of accom-

plishments in constructing and installing public-

sector facilities as well as its capabilities for

offering O&M services through its nationwide

network. In addition, in response to customer

needs related to the sharp rise in oil prices and

global warming, the EE business is strengthen-

ing its proposals for supplying methanol fermen-

tation facilities using biomass as a basic

material, biomass boilers, and facilities combin-

ing methanol production facilities and boilers.

To enhance its efficiency and price competitive-

ness, the EE business is also working to stan-

dardize its technology and designs, develop and

promote packages of services, and promote

cost reduction both in manufacturing and con-

struction. As a result of these measures, the EE

business is working to restructure its earnings

base by simultaneously achieving recoveries in

orders and sales as well as reducing fixed costs,

with the goal of achieving the breakeven point in

operating profit.

In the PM business, the outlook for the semi-

conductor manufacturing equipment market in

the fiscal year ending March 31, 2009, is for

cutting-edge customers to continue strategic

capital investments, mainly in equipment for

NAND-type flash memories and microproces-

sors, but, if the current weakness in semicon-

ductor prices prevails for some time, memory

manufacturing plants, mainly in Asia, will con-

tinue to restrain their capital investment. Amid

these conditions, the PM business will aggres-

sively introduce CMP equipment, for the most-

advanced 45nm plants, which feature superior

productivity, while adopting the key phrases of

“energy conservation” and “reducing the load

on the environment” and working to expand

sales of emission-control systems, focusing

especially on dry vacuum pumps and emission-

processing equipment. In addition, the PM busi-

ness will work to strengthen its product support

systems and improve efficiency to achieve high-

er levels of customer satisfaction.

Based on the previously mentioned policies

and initiatives, the Group has set the objective

of reaching consolidated net sales of ¥560 bil-

lion and ¥13.0 billion in operating income in the

fiscal year ending March 31, 2009.

3) Management PoliciesGoing Forward

For the Group to attain the goals of its New

Medium-Term Management Plan, which began

in fiscal 2008 (ending March 31, 2009),

strengthening the Group’s management founda-

tion has been positioned as a priority issue. The

Group is, therefore, exercising selectivity and

concentration in the allocation of resources by

withdrawing from unprofitable businesses and

investing resources in businesses that have the

potential of attaining high levels of profitability.

In the EE business especially, the Group is

focusing on profitability and is making changes

in organizations and systems as well as reduc-

ing personnel to lower fixed costs.

In addition, to achieve improved financial

soundness, the Group is implementing initiatives


to reduce interest-bearing debt, increase share-

holders’ equity, and secure sufficient liquidity,

as well as taking other measures to address

financial issues.

Regarding the compensation that the Group

is seeking because of the notice of cancellation

of a gasification incinerator construction project

received from the Malaysian Housing and

Autonomy Ministry, negotiations are in progress

to recover the Group’s claim for compensation.

In addition, the Group is working to reduce addi-

tional costs that may arise in connection with

the InfraServe Hoechst project in Germany and

projects for which provisions have been made to

the reserve for construction losses.

We regret that, regarding the Group’s viola-

tion of Japan’s Antimonopoly Act in fiscal 2006

in connection with bidding for sludge-reprocess-

ing facilities, the Group was cited in September

2007 by the Ministry of Land, Infrastructure and

Transport for violation of Japan’s Construction

Law and received an order to cease certain

operations. In addition, judicial proceedings

were still ongoing regarding the Group’s viola-

tions of the Antimonopoly Act in connection with

sewage pump construction work for the Sewage

Commission of the City of Tokyo, which led to

the Group’s exclusion from certain activities in

2003, and, in April 2008, the Group received a

decision requesting exclusion from certain activ-

ities. In view of these circumstances, the Group

made the decision not to engage in activities in

violation of the Antimonopoly Act. Moreover, the

Group has created a checking system for day-

to-day activities and is monitoring activities on a

continuing basis.

Regarding the improper use of Group funds

by former members of management, the Group

is investigating factual information and confirm-

ing the amount of damages involved. In addi-

tion, the Group has received recommendations

from an independent evaluation committee

composed of knowledgeable persons and is

determining legal responsibilities while also

working to recover damages. Although a consid-

erable portion of damages has been recovered,

the Group is taking legal measures to recover

the remainder. In parallel with these activities, to

prevent a recurrence of such issues, the Group

has formed an independent committee of

knowledgeable persons and is making prepara-

tions to implement the preventive policies that

will be decided. To ensure that such unethical

behavior does not recur, the Group will

strengthen its corporate governance and

endeavor to create a corporate culture that

emphasizes compliance.

We want to express our deepest regret to the

many people who have been adversely affected

by these issues and to call on our shareholders

for their increased support and cooperation.

July 2008

Natsunosuke Yago

President and Representative Director


Message from the Management


Dialogue with Investors

Q1 How have you positioned your medium-term

management plan E-Plan2010?

A We prepared and issued our E-Plan2010 three-year medium-term

management plan in November 2007 and began to implement it at

the beginning of fiscal 2008. Over the past 15 years, the EBARA Group has

taken on the challenge of aggressively entering new business fields, but,

as a consequence, has strained its financial position. That is why we have

defined the period covered by E-Plan2010, which goes through the end of

fiscal 2010, as a time for aggressively restructuring our management foun-

dation. By that, we mean that this will be a time for reviewing our business

portfolio, strengthening our financial position, and addressing other man-

agement issues. In addition, we have defined the period of the next busi-

ness plan that will begin in fiscal 2011 as a time of “preparation for

business expansion.” For this reason, under the current medium-term plan,

we plan to maintain the following three basic postures as regards our busi-

ness portfolio. First, in our existing businesses, where we have strengths,

we will work to increase profitability, but in those businesses where we

cannot increase profitability, we plan to withdraw at an early date. Second,

we will allocate our limited human resources to give priority to increasing

profitability. Third, we will use our management resources effectively and

allocate them on a priority basis to businesses that are profitable. At the

same time, we will also use our resources as necessary to withdraw from

unprofitable businesses.

Q2 When you formulated your medium-term plan you

emphasized certain “concerns.” Could you explain

what your concerns are?

A That is correct, when we formulated E-Plan2010 and, now, as

we are implementing it, we have four concerns that I would like to

explain to you. The first of these is our “concern as a manufacturing enter-

prise.” We believe that manufacturing and marketing superior “hardware”

and providing top-quality support for our products is the core that drives

the business development of the EBARA Group. Therefore, we are going

to work to further polish our capabilities in areas where we are strong and

aim to be a top-level, international manufacturer of industrial machinery.

The second of these is our “concern for improving the environment.” We

plan to continue to provide products and services that conserve energy and

help to preserve the natural environment. By doing this, we want to lend a

hand in contributing to improvement in the earth’s environment and hand-

ing it over in good condition to the next generation. At the same time, we

also want to improve our own workplace environment, which is where we

can experience self-fulfillment.

The third is “concern for internal control systems and operating efficien-

cy.” The EBARA Group is working to enhance its internal control systems

with the goal of creating a corporate culture that emphasizes compliance.

This will not only increase the transparency of management but also, at

the same time, enable us to continue to improve operating efficiency.

Our fourth concern is expressed in our motto “EBARA walking with its

customers.” By having concern for our customers, we have been able to

grow as a company and as individuals. The EBARA Group will continue to

strive to have an accurate and future-oriented grasp of the needs of its

customers, which are changing with the times. By responding to customer

needs, we will aim to enhance customer satisfaction and, at the same time,

work toward the further development of the Group.

Of these four concerns, I would like to emphasize especially “concern

as a manufacturing enterprise” and “EBARA walking with its customers.”

In 2012, we will mark the 100th anniversary of our founding as a company.

Over the century-long history of EBARA, the driver of our growth, I feel cer-

tain, has been “quickly providing our customers with the industrial machin-

ery they want.” However, somewhere along the way, we may have strayed

Chief Concerns in Implementing This Plan

1. The Groupí s Concern as a Manufacturing Enterprise

2. Concern for Improving the Environment

3. Concern for Internal Control Systems and Operating Efficiency

4. Concern for Our Motto, “EBARA Walking with Its Customers”



from this path, and our awareness, including that of our employees, is that

we have put primary emphasis on developing products that are aimed at

achieving growth in the scale of our operations. We will return to the phi-

losophy at the time of the establishment of business. And we carry out the

philosophy which “we deliver the machinery that provides our customers

with maximum productivity when they need it.”

Q3 What are your goals under the medium-term plan?

A We have three goals under the plan. First, from the point of view of

the income statement and balance sheets, in fiscal 2010 we are

aiming to reach consolidated net sales of ¥600 billion annually and a ratio

of operating income to net sales of 5% or more. At the same time, we want

to reduce interest-bearing debt to ¥150 billion or less.

Second, we want to develop new businesses. Specifically, we are aiming

to nurture two or more products that, by fiscal 2010, will have annual sales

of ¥10 billion or more and also have the possibility of reaching annual sales

of ¥30 billion or more under our next medium-term management plan.

Third, from the perspective of financial indicators, in fiscal 2010 we

want to clear two hurdles. The first of these is reporting ROE of 8% or high-

er. The second is reducing our debt-to-equity ratio to 0.9 or less or

increasing our equity ratio to 30% or more, also by fiscal 2010.

Q4 Could you please tell us what your basic policies

are to attain these goals?

A As we look to the future, we have three policies that we will imple-

ment to strengthen our management base and that will address

priority issues and make our sustainable growth possible. These are

“selectivity and concentration in the allocation of our resources,” “estab-

lishing a business foundation that takes full account of global markets,”

and “improving cash flow.”

To implement our selectivity and concentration policy, we will withdraw

from those businesses where there are no prospects for improvement in

profitability or where recovering our investment will be too time-consuming.

This holds for businesses in the parent company and in subsidiaries. On

the other hand, in those businesses where sales have exceeded ¥100 bil-

lion annually and where there is a possibility that the ratio of operating

income to sales will exceed 7%, we will make investments on a priority

basis to increase sales and improve product profitability. Such businesses

include standard pumps, engineered pumps, compressors and fans, as

well as our precision machinery business.

Our second business policy, “establishing a business foundation that

takes full account of global markets,” applies to those of our products that

can be sold internationally, and it means making further improvements in

our global systems to enable us to market and provide customer support

efficiently. On the other hand, for those products that cannot be sold across

a broad range of countries, to survive, we will withdraw from those busi-

nesses and projects in overseas markets and concentrate on domestic

business operations. We will select those businesses where we will pursue

an international strategy and those where we will focus on the domestic

market by considering a number of factors. These will include not only

whether the technology embodied in the products meets world standards

and requirements but also our capabilities for marketing, providing support,

manufacturing, and implementation. We will position standard pumps,

engineered pumps, compressors, and precision machinery as world market

businesses and work to strengthen their manufacturing and support sys-

tems. Since there are limits to our project execution capabilities in the engi-

neering business, in overseas markets, we will focus on water processing

and on projects where the scale is limited and we can implement them

successfully.

Regarding our third policy, “improving cash flow,” with the exception of

the continuation of development investments aimed at the period beginning

in fiscal 2011, which will be covered by our next medium-term plan, we

will aim for positive free cash flow in all our companies within two years.

Even in those businesses where we will be making investments on a priori-

ty basis, we will not make investments and other financial commitments

Objectives of This Plan

1. By the end of the final year of the plan, we will work to attain a ratio of operating income to net sales of 5% or more and reduce interest-bearing debt to ¥150 billion or less.

2. We will nurture two or more products to support new businesses.� In preparation for the coming period of expansion, we will nurture two or

more products that have the potential for attaining annual sales of •10 billion or more by the final year of the current plan and then ¥30 billion or more annually under the next management plan.

3. By the final year of this plan, we will work to attain the following targets:

� ROE of 8.0% or higher� Debt/equity ratio of 0.9 or less or a shareholders’ equity ratio of 30% or more

Numerical Targets

Numerical Targets (Consolidated)

Years ended March 31

(¥ billion)

Net sales

Net income

Operating income

563.0

20.0

7.0

575.0

27.0

11.0

590.0

35.0

14.0

2009 2010 2011


that will lead to overly rapid

expansion in those areas. In

addition, we will work to expand

sales to avoid any sudden dete-

rioration in operating cash

flows. By maintaining appropri-

ate control over investments

and the size of sales, our goal,

as I mentioned, will be to show positive free cash flow in all our operating

groups within two years.

Q5 What specific measures will you be taking

in each of your business segments?

A First, in the Fluid Machinery & Systems (FMS) business, to grow

steadily in the fast-changing environment, our goals will be “to

achieve sustained growth of FMS activities in global markets and increase

profitability.” We will aim to realize more synergies among the locations in

our global network and create a solid and strong position as a global, top-

class manufacturer of fluid machinery and systems. To strengthen our

management bases, which will be essential to reach our objectives, we

will implement such policies as “selectivity and concentration” to improve

our cash flow. Also, in those business domains where continuing growth

is expected, we will concentrate our investments. At the same time, to

improve the quality of management, we will establish internal control

systems and place thoroughgoing emphasis on compliance. Through the

implementation of these policies, we will aim to reach a ratio of operating

income to net sales of 6% or more by fiscal 2010.

Next, in our Environmental Engineering (EE) business, we will withdraw

from the market for new waste processing facilities in overseas locations.

We will also implement drastic restructuring and realignment measures in

the engineering group as a whole. Specifically, we will rejuvenate our water

treatment and waste processing operations by splitting off their respective

EPC and O&M functions into two separate companies with autonomous

business bases. On the other hand, we will manage these operations

with a flexible stance toward industrial realignments in their respective

industries and alliances with other companies. And we will aim to clarify

the positioning of both these businesses within the EBARA Group within

two years. As a result of these measures, we will aim to show a ratio of

operating income to sales of 2.5% or more by fiscal 2010.

In our Precision Machinery (PM) business, we will conduct these activi-

ties as a development-led business that is even more responsive and fast-

moving than in the past and is capable of providing customers around the

world with high-performance, highly reliable products and services that

meet their requirements for securing maximum productivity. To attain these

objectives, we will work to create a stable earnings structure as an inde-

pendent business and maximize cash flow from these operations. On the

other hand, to reduce business risk to a minimum, we will establish internal

control systems and strengthen compliance frameworks. As a result of

implementing these policies, we will aim for a ratio of operating income

to sales of 11% or more by fiscal 2010.

Overall Policies under the Plan

1. Strengthening the Business Base for Sustained Growth

1-1. Selectivity and Concentration

1-2. Establish a Business Base from a Global Perspective

1-3. Improve Cash Flow

2. Implementing Corporate Activities That Emphasize Compliance Numerical Targets

Numerical Targets for the FMS business (Consolidated)


(¥ billion)

Net sales

Operating income

Ratio of operating income to net sales

315.0

13.0

4.1%

325.0

16.0

4.9%

330.0

20.0

6.1%

2009 2010 2011

Numerical Targets for the EE business (Consolidated)


(¥ billion)

Net sales

Operating income (loss)Ratio of operating income (loss) to net sales

150.0

-2.0

-1.3%

155.0

1.0

0.6%

162.0

4.0

2.5%

2009 2010 2011

Numerical Targets for the PM business (Consolidated)


(¥ billion)

Net sales

Operating income

Ratio of operating income to net sales

98.0

9.0

9.2%

95.0

10.0

10.5%

98.0

11.0

11.2%

2009 2010 2011

Q6 Could you please list some of the products you

are expecting to show growth in the FMS

Business?

A Policies for dealing with environmental issues, especially global

warming and water shortages, are subjects of discussion around

the world. Along with this, market requirements for industrial machinery are

undergoing major change. As a manufacturer of industrial machinery, look-

ing ahead, EBARA will position product groups where growth is anticipated



as strategic areas and work to strengthen its development and marketing

capabilities in these areas.

In recent years, as a result of the problem of global warming and rising

prices of crude oil, interest in nuclear power generation has revived in

Europe and the United States. Moreover, demand for electric power is

expanding in China, Russia, India, and elsewhere because of the impact

of economic growth, and plans have been drawn up for the construction

of a substantial number of nuclear power plants. These include plans for

nuclear power generation facilities in 17 countries, such as 33 nuclear

power generation facilities in the United States, 30 in China, 40 in Russia,

and 20 in India as well as other plants in Indonesia, Thailand, Vietnam and

elsewhere. Estimates indicate that the combined demand for new nuclear

plants and renovation of existing plants will mean demand for the equiva-

lent of about 200 plants between now and 2030. We anticipate this will

create a market for water pumps for use in turbines in nuclear power

plants amounting to an accumulated total of about ¥240 billion. EBARA

takes pride in its strong record of deliveries of pumps for nuclear power

plants. Ebara is also proud of its position as one of the few pump manufac-

turers that can deliver highly reliable pumps to meet the requirements of

both boiling water reactors (BWRs) and pressurized water reactors (PWRs).

At present, EBARA is making preparations to move its Haneda Plant, its

principal pump manufacturing facility, to Futtsu in Chiba Prefecture. The

new Futtsu Plant is scheduled to go into full-scale operation beginning in

2011. Looking to the future, EBARA is outfitting this new plant with produc-

tion equipment that can respond to the expected increase in demand for

pumps for use in nuclear power plants and will work to expand its sales in

this area.

It has been said that the 21st century will be the “water century.” With

water expected to be in short supply worldwide, the market for seawater

desalination plants is forecast to grow at a high rate of 10% annually, prin-

cipally in the Middle East and Australia. In addition, going forward, the mar-

ket for seawater desalination plants is expected to expand in North America

and China. At present, the market for desalination plants that use the

reverse osmosis (RO) method, which is becoming the principal desalination

process, is estimated to be approximately ¥390 billion annually. Of this

total, the market for fluid handling machinery where EBARA has strengths,

including pumps and energy recovery equipment, is estimated to be about

¥37 billion annually. The market for fluid handling equipment supplied to

desalination plants using the RO method is forecast to grow to about ¥100

billion annually in size by 2015. Converting seawater to desalinated water

requires extremely large amounts of energy. About one-third of the running

cost of seawater desalination plants using the RO process is accounted for

by electric power used to operate the pumps. Therefore, high-efficiency

pumps and fluid handling machinery that can recover energy will play

important roles in lowering the cost of water production. EBARA is making

use of its water pressure servo technology, which was developed at the

EBARA Research Laboratory in past years, in developing capacity-type

energy recovery equipment. Looking ahead, the capacity of seawater

desalination plants employing the RO method will become larger, and we

expect the capacity of fluid handling machinery will also expand to meet

the requirements of these larger facilities. Pumps used in seawater desali-

nation plants must also meet demanding technological requirements,

including having the capacity for handling fluids under high pressure,

resistance to corrosion, and high operating efficiency. When these require-

ments are combined with the need for fluid machinery to handle ever larger

volumes, there are only a few companies in the world in the same class as

EBARA that can satisfy all these requirements. We at EBARA intend to

become a leading company globally in this field.

Q7 In the Precision Machinery Business, what products

are likely to experience growth in the years ahead?

A The issue of preventing global warming has become a major one that

companies in the semiconductor manufacturing sector must address.

PFC gases (PFCs), which are widely used in the semiconductor manufacturing

process, have global warming coefficients that are several tens of thousands of

times higher than CO2. Therefore, the introduction of technology for breaking

down and processing PFCs will be essential. As a result, the market for waste

gas processing equipment that can handle PFCs that are given off by manufac-

turing processes or are unused is showing strong expansion. However, waste

gas processing equipment that has been available previously employs water to

remove the fluoride compounds in PFCs and therefore has the demerit of also

High pressure pumps for reverse osmosis desalination for Fukuoka District WaterworksAgency


Dialogue with Investors

requiring equipment to process the fluoride wastes. As a result of the rapid

introduction of waste gas processing equipment, the load on fluoride waste

processing equipment has increased and users are faced with a problem of

being unable to process these wastes in sufficient volume. To address this

issue, EBARA has begun to market fluoride-fixing waste gas processing equip-

ment that emits no effluent containing fluorides and fully processes greenhouse

gases. EBARA’s F-type gas processing equipment, which it will begin to market

in fiscal 2008, is a product designed to work in the etching process, which is

the portion of the semiconductor manufacturing process that uses the most

PFCs. Since this EBARA product does not use water in gas processing, it emits

no effluent containing fluoride compounds and, therefore, places no burden on

effluent facilities. In addition, compared with existing products, it is capable of

handling large volumes of process gases. From the perspective of performance,

since this product combines the properties of acidified special metals and cata-

lyst functions, it removes 99% or more of PFCs. In addition, calcium flouride,

which is produced by this equipment as a by-product, can be reused in the

steelmaking and other industrial processes and therefore can be recycled as an

industrial material.

Q8 What is the positioning of the environmental engi-

neering business and what are your strategies for

attaining growth in this area?

A Since EBARA’s establishment in 1912, we have supplied prod-

ucts and services related to “water.” EBARA has been growing

along with the improvement of Japan’s environment-related social

infrastructure—including water supply, sewage systems, and municipal

waste incinerators—all the while. The long history and major contributions

of EBARA’s environmental engineering business are a source of pride for

the EBARA Group as a whole. Therefore, as long as the continuation of its

operations can be guaranteed, we would like to continue the EE business.

However, we cannot continue in businesses that are running losses.

Under the E-Plan2010 medium-term plan, if the EE business cannot reach

breakeven by the year ending March 31, 2010, we will conduct a drastic

review of this business. Of course, we will steadily implement measures to

enable this business to reach breakeven by the end of the year ending in

March 2010. To create an organization that is matched to the market envi-

ronment, we will streamline the personnel composition of this business,

and an urgent task will be to respond to market needs, including offering

private finance initiative (PFI) arrangements and comprehensive service

contracts. To tackle business models not only for the construction of facili-

ties but also for subsequent operation and maintenance, we will realign

and integrate the plant construction organization and the operating and

maintenance services organization, which, thus far have been kept sepa-

rate to respond to industry realignments that might have occurred in some

form.

Other growth products we are anticipating in this field include plating

equipment for inter-layer silicon electrodes and other equipment for use in

3-D semiconductor mounting processes that are expected to go into full-

scale production in the years ahead. Our basic policy for the development

and commercialization of related products will be to gain a grasp of the

changing requirements of our existing customers, then rapidly develop and

commercialize products that will be extensions of our core technologies

to be sure we meet customer requirements without fail. Going forward,

we intend to follow this policy and expand our portfolio of products.

EBARA plating system: UFP series



At a Glance

Established as a manufacturer of centrifugal pumps in the early 20th century, EBARA has expanded the frontiers of technology for

systems that are essential for transporting fluid and gaseous substances. The Company’s activities are divided into three in-house

companies that work actively to anticipate customer needs and provide innovative solutions.

Main Products & Services

◆ Cooling and water supply systems for thermal and nuclear

power plants

◆ Engineered pumps

◆ Standard pumps

◆ Turbo-compressors, blowers, and fans

◆ Steam and gas turbines

◆ Fluid machinery system engineering

◆ Chillers

◆ Water treatment systems for nuclear power plants


◆ Waterworks systems

◆ Sewage systems

◆ Industrial water/wastewater treatment plants

◆ Solid waste processing/utilization systems

◆ Chemicals

◆ Groundwater and soil remediation services

◆ Flue gas treatment systems

◆ Plant operation & maintenance services

Fluid Machinery & Systems Company

Environmental Engineering Company

Precision Machinery Company


◆ CMP systems

◆ Plating systems

◆ Bevel polishing equipment

◆ Dry vacuum pumps

◆ Turbo-molecular pumps

◆ Gas abatement systems

◆ Ozonized water generators

The Fluid Machinery & Systems Company has long

provided pumps, fans, compressors, chillers, and other

machinery/engineering/services that serve as the infrastruc-

ture of daily life and industry.

Currently, the company is expanding overseas production

and sales bases to develop its business from a global per-

spective, and is making a significant contribution to the

industrial progress and infrastructural development of

nations around the world.

The Environmental Engineering Company is committed to

developing technologies that will establish the foundations

for the “sustainable society.” The company offers a com-

prehensive range of equipment and systems for supplying

water, processing wastes, and generating energy. One focus

of the company’s activities is making proposals to regional

communities for optimal social infrastructure systems.

The Precision Machinery Company is a global leader in

supplying leading-edge equipment for semiconductor manu-

facturing, including chemical mechanical polishing (CMP)

systems for 300mm silicon wafers. The company places

maximum priority on developing technologies and systems

for next-generation semiconductor products and has

received a uniformly high evaluation from its customers.

56.2%

24.9%

18.9%


Review and Outlook

EVM-type vertical multilayered pumpmanufactured by Ebara Pumps EuropeS.p.A. located in northern Italy

Horizontal dual intake spiral-typepump with an aperture diameter of1,200mmEight of these pumps have been suppliedfor a petrochemical plant in Saudi Arabia.

Newly developed HPA-type shallow-well pump

Steam turbine rotorRotor for use in turbines for drivingcharged gas compressors for use inethylene plants

Fluid Machinery &

Systems CompanyAtsuo Suzuki, President



OverviewAmong orders for the FMS Company, orders for custom pumps, compres-

sors, and fans showed strong expansion supported by continued active capi-

tal investments in the oil and gas industry as well as the electric power

industry, principally in the overseas markets of the Middle East and the Asian

region. In addition, orders for standard pumps continued to be firm, princi-

pally in overseas markets. In the Japanese market, the FMS Company was

able to record a gain in orders over those of the previous year from the pub-

lic sector, despite a difficult market environment, by conducting activities to

secure small to medium-sized projects, while large-scale projects also con-

tributed. In addition, the FMS Company expanded the volume of orders from

the private sector, where demand from the steel and other industries for the

maintenance, renewal, and expansion of existing equipment was firm,

through assiduous, customer-centric sales activities and improvement in

after-sales service.

Sales of the FMS Company for the fiscal year under review expanded as a

result of robust orders for custom pumps, compressors and fans, mainly

from the overseas oil and gas industry and electric power industry, as well

as strong demand for capital investment in the basic materials industries in

Japan and overseas. However, operating income declined because of sud-

den fluctuations in foreign currency exchange rates and the decline in the

number of construction starts resulting from the implementation of a revision

of Japan’s building code.

Market Trends and Basic StrategiesIn overseas markets, performance in the oil and gas industry is expected to

remain at the same level as in the previous fiscal year, but expansion is

anticipated in the electric power industry and in water-related infrastructure

projects. In the domestic market, conditions in the public sector are forecast

to continue to be severe, but demand for maintenance and replacement

investment is expected to remain strong in the private sector, including the

steel, petrochemical, and other industries.

Amid these market trends, to increase earning power, the FMS Company

will work steadily to meet demand in the overseas oil and gas industry as

well as expand its business related to the electric power and water-related

infrastructure fields. In Japan, the FMS Company will work to substantially

strengthen its business systems for providing after-sales services for equip-

ment and facilities.

Issues to Be AddressedTo attain steady growth in a business environment undergoing major

changes, the FMS Company will focus especially on expanding its operations

in global markets and increasing earning power. As concerns are foreseen

related to rising raw material prices, foreign exchange risk, and other devel-

opments, the FMS Company must redouble its efforts to realize synergies

among its business locations around the world through strengthening its

management from a Groupwide perspective, improve its cash flow to further

strengthen its business base, and move ahead with measures to focus its

investments in business domains where rapid growth is expected to continue.

In the custom pump business, the FMS Company will concentrate on

products for the oil and gas industry, electric power sector, and desalination

facilities as well as work to expand sales not only in areas where it has a

strong presence, such as the Middle East and China, but also in India and

other emerging markets.

Also, in China and other markets, the FMS Company will strengthen its

manufacturing centers, move ahead with the effective division of production

among production centers, and substantially strengthen its after-sales ser-

vice business operations. In the standard pump business, there is concern

that the adverse impact of the revision in Japan’s building code may be pro-

longed, but as the FMS Company works to structure business systems that

promote teamwork among manufacturing, marketing, and after-sales service

around the world, including Japan, it will make investments as necessary in

high-priority regions, such as China, Europe, and elsewhere, with the aim of

bolstering its business foundation as a global enterprise. In the compressor

and turbine field, the FMS Company will endeavor to make improvements

and implement further development for large-scale equipment types to

reduce costs and improve profitability, while working to expand sales and

income from after-sales service business activities.

In addition, in the domestic public sector business, a challenging operat-

ing environment is expected to continue. Accordingly, the FMS Company will

tighten its management of projects and implement thoroughgoing measures

to improve profitability, including the streamlining of its operations. In the

chillers business, the FMS Company will expand its offerings of energy-

saving turbo cooling equipment and expand its sales activities into global

markets in collaboration with its business operations in China.

The FMS Company will pass a major milestone in its development with the

relocation of its Haneda Plant, which has had a history of about 70 years.

Along with the implementation of measures for individual businesses, the

FMS Company is making preparations to begin operations at the new Futtsu

Plant, which will be the “mother” plant of a worldwide, optimal production

sharing manufacturing system that EBARA can point to with pride as one of

the most advanced in the world and will enable the FMS Company to contin-

ue to develop its activities as a global corporation.


The EE Company has received an order for aproject tentatively entitled “Recycle Park AsaoEnhancement Project: Construction of a WasteProcessing Facility” located in Kawasaki,Kanagawa Prefecture.

This submerged membrane filtra-tion facility, located in Toyooka,Hyogo Prefecture, is the largest ofits kind.

This biomass facility reduces CO2 emis-sions by about 300 tons annually, com-pared with conventional facilities(Located in Miyakojima City, OkinawaPrefecture).

The EE Company is providing long-termO&M services for this waste processingcenter located in Kashiwa, ChibaPrefecture.

Masayoshi Hirose, President

EnvironmentalEngineering

Company



OverviewIn the EE Company, challenging conditions persisted because of more-

intense competition for the domestic public-sector projects, which are the

principal target for the EE Company. As a result of efforts by the EE Company

to strengthen its capabilities for making proposal-based sales and its com-

petitiveness, the following important results were reported. In the water

treatment and sewage processing field, the EE Company won an order for a

submerged membrane filtration facility, which will be the largest of its kind.

In the solid waste processing facility field, the EE Company won an order for

a large-scale municipal garbage incineration facility in the Kanto metropoli-

tan area. In addition, the EE Company is continuing to strengthen its capabil-

ities for providing O&M services and was successful in winning long-term

contracts for the services for waste processing centers as well as multiyear

contracts for the services for water treatment facilities. On the other hand,

the EE Company made the decision to withdraw from accepting new con-

tracts for overseas solid waste processing projects and bioethanol facilities,

where it is difficult to avoid business risk. As a result of these various factors,

orders declined from the level of the previous fiscal year.

Restructuring the profit base of the EE Company is an urgent task. The EE

Company has concentrated resources on those businesses, mainly domestic

ones, that are expected to grow going forward, reduced the number of per-

sonnel, liquidated certain subsidiaries, and taken other measures to reduce

fixed costs. In addition, reserves for possible future construction and other

losses, principally related to overseas projects, have been set aside.

Sales of the EE Company for the fiscal year under review declined from

the previous fiscal year, reflecting difficulties in the operating environment

stemming from more-intense competition in the domestic public works mar-

ket. The operating loss of the EE Company increased from that of the previ-

ous fiscal year, owing to additional costs arising from the withdrawal from

overseas markets for new orders for solid waste disposal facilities, declining

profit margins because of more-intense price competition in the domestic

public works market, and other factors.

Market Trends and Basic StrategiesAlthough the domestic market for public works projects will continue to be

intensely competitive, steady expansion is anticipated in after-sales and

maintenance services for renewal and extending the useful lives of existing

facilities. In the private sector, although capital investment is likely to be

stagnant, a steady level of capital investment is expected for lowering costs

and reducing CO2 emissions. Amid these market conditions, the EE Company

will work to improve profitability in the public works project market, which

is its core activity, improve its earnings base by lowering fixed costs, and

steadily expand after-sales and maintenance services for private-sector

customers.

Issues to Be AddressedThe top priority for the EE Company is to rapidly create a streamlined organi-

zation suited to the smaller size of the market. Plans call for taking drastic

measures to address this issue during the current fiscal year. The first step

will be to continue measures begun in the previous fiscal year aimed at

reducing personnel. The next step will be to realign the EE Company’s envi-

ronmental businesses, which are now dispersed among four companies

under the EE Company, into two companies, one specializing in water-

related businesses (the “water company”) and the other in incineration

businesses (the “fire company”). As a result of this realignment, the two

newly formed companies will be positioned to provide integrated services

from engineering, procurement, and construction (EPC) through after-sales

services and conduct their operations more efficiently.

The most important strengths of the EE Company are its extensive record

of accomplishments in EPC and its nationwide network for O&M services.

The EE Company will draw fully on these strengths to offer products and

services that match customer needs.

In the EPC business, the EE Company will endeavor to increase profitabili-

ty by lowering both manufacturing and construction costs through standard-

izing its technology and designs, creating equipment modules, and offering

product and service packages. In addition, the EE Company will expand its

lineup of highly competitive original components and unit equipment as well

as increase profitability by enhancing the value added of its products. In the

O&M business, the market for O&M-related services is expected to show

firm expansion while also becoming substantially more competitive. To offer

the EE Company’s know-how, which has been accumulated through many

years of experience, more effectively, the EE Company will strive to promote

comprehensive, multiyear contracts for its O&M services. In addition, the EE

Company will use its nationwide network to the maximum extent to provide

maintenance and operating services and improve the efficiency of these

services. In its services for the private sector, the EE Company will endeavor

to increase profitability by focusing on its most-promising clients, and, while

strengthening its after-sales services made available through its nationwide

network, develop unit products comprising standard products and thereby

lower local construction costs. In addition, to expand its orders, the EE

Company will respond to the needs of the times, including providing solu-

tions for dealing with high oil prices and the CO2 emissions issue, by offering

biomass boilers, methane fermentation equipment, and multi-function prod-

ucts that draw on its comprehensive capabilities. In overseas markets, the

EE Company will work to complete projects on order successfully and take

initiatives to enhance project profitability.


CMP (chemical mechanical polishing)system: F★Rex300SII

Equipment incorporating dry vacuumpumps and waste gas emission proces-sors

Kozo Nakao, President

PrecisionMachinery

Company

Dry vacuum pumps: EST Series Fluorine (F)-fixation-type gas abatementsystem: FDS Series



Review and Outlook

OverviewIn the PM Company, sales of semiconductor manufacturing equipment,

which are the PM Company’s core products, held firm during the first half of

the fiscal year as memory manufacturers in Japan, Korea, and Taiwan, who

are the PM Company’s principal customers, continue their aggressive capital

investment. However, in the second half of the fiscal year, the weakening of

semiconductor prices, mainly for DRAMs, prompted one semiconductor

manufacturer after another to delay or suspend their investment plans. Amid

this operating environment, the PM Company focused its marketing activities

on high-throughput CMPs for technologically leading-edge copper intercon-

nection processes and processors for removing PFC (perfluorinated carbon)

gas, which is a greenhouse gas that places a heavy emissions load on the

environment. However, orders were below their level of the previous year.

In addition, in the fourth quarter, conditions in the semiconductor market

experienced a further marked deterioration, and shipments were delayed at

customers’ request. As a consequence, sales and operating income were

below their respective levels of the previous fiscal year.

Market Trends and Basic StrategiesDuring fiscal 2008, in the semiconductor manufacturing market, strategic

investments by cutting-edge companies are forecast to continue, centering

on equipment for NAND flash memory and microprocessor production.

However, if the current stagnation in semiconductor prices proves to be pro-

longed, investment by memory manufacturers, principally in Asia, is expect-

ed to continue to be weak. Amid this operating environment, the PM

Company will focus on aggressive marketing of its CMP equipment, which

offers highly superior productivity, to 45nm cutting-edge semiconductor

manufacturing plants. In addition, the PM Company will market products that

address the issues of energy conservation and reduction in the environmen-

tal load of semiconductor production, focusing especially on dry vacuum

pumps and emission gas processing equipment. In addition, the PM

Company will further upgrade and improve the efficiency of its product

support systems, with the aim of enhancing customer satisfaction.

Issues to Be AddressedThe semiconductor industry is expected to continue making active invest-

ments in the medium-to-long term, and the semiconductor manufacturing

equipment industry that the PM Company is serving is also expected to

grow. Under this situation, we recognize the most-important issue to be

addressed is not only to expand our business size but also to maintain the

continuity and stability of our profitability. For that purpose, we will catch

up with the timing of the market expansion and the changes in customers’

needs as well as will provide customers with new products and technology

through the support for their R&D and mass production activities under our

close relationships with customers by providing continuously the products

and support matched with customer needs through our global sales and

marketing network. Through such activities, we will endeavor to expand the

market share and accelerate efforts to strengthen cost-competitiveness for

stable profitability.

The medium-to-long term business strategy is to grow the business of

newly developed equipment as our strategic products, such as bump plating

equipment, and PFC gas treatment systems along with the dry vacuum

pump and CMP businesses.

Aimed at these activities, we will implement measures to steadily, but

speedily, address issues we are facing, while working to improve our finan-

cial position and being ready to respond quickly to market changes, and will

aim for close teamwork among our R&D, manufacturing, and sales and mar-

keting divisions, as well as will work to expand the scope of our business

operations.


Governance Structure and Management Systems

Corporate Governance

Based on the Corporation Law of Japan, the Company’s organization

for management decision making, execution of business operations, and

auditing comprises the Board of Directors, the Board of Corporate Auditors,

and an independent auditor. The Board of Directors is composed of 11

members, and 2 of these are independent, outside auditors who have no

special relationship interests with EBARA. Under the rules that have been

established for the activities of the Board of Directors, EBARA endeavors

to ensure that Board members will act in compliance with relevant laws

and the Company’s Articles of Incorporation in the conduct of their duties.

In addition to its regular monthly meetings, the Board meets in special

sessions when necessary.

The Board of Corporate Auditors comprises five corporate auditors, three

of whom are outside auditors who have no special interest relationships

with EBARA. In addition to establishing rules for the Board of Corporate

Auditors, each of the Corporate Auditors, in addition to conducting his

required auditing duties, meets every three months with the EBARA presi-

dent and representative director and with the independent auditor to

exchange opinions and ensure the effectiveness of auditing activities.

Under the Corporation Law of Japan and the Financial Instruments

and Exchange Law, the Company appoints an independent auditor under

contract to conduct audits of its accounts. Based on the annual audit plan

proposed by the independent auditor, the Company’s financial accounts

are audited efficiently by a team of certified public accountants and

other professionals.

In addition to the previously mentioned Board of Directors, the Company

has established rules for its monthly Management Meeting. The purpose

of this meeting is to conduct broad-ranging discussions of management

policy and management strategy.

Going forward, the Company is aware of the importance of corporate

governance and intends to continue to work to draw on the capabilities of

individuals inside and outside the Company, enhance the soundness of

management, and strengthen the Company’s operating and financial posi-

tions by drawing on its effective management supervisory organization.

ReportingSelection/Dismissal

Selection/Dismissal/Surveillance

Board of Directors

Guidance/Transmission of Information

Guidance

Internal Audits

President and Representative Director

Management Planning Committee

Support forManagementandExecution

Management Meeting

Risk Management Panel

ReportingSelection/Dismissal

Supplementary Assistance

ReportingAuditing

Auditing/Reporting

Auditing

Exchange of Opinions

Selection/Dismissal

Exchange of Informationand Opinions

Board of Corporate Auditors

Corporate Auditorí s Secretary’s Office

Independent Auditor

Outline of EBARA’s Corporate Governance Framework

General Meeting of Shareholders

Subsidiaries and Affiliated Companies

Executive Officer Meeting

ReportingInternal Audits

Corporate Audit Department

Internal Control Improvement & Enhancement Division

Compliance Department

EBARA’s corporate philosophy is “extensive contribution to society by providing superior technologies and services related to water, air, and the

environment.” Based on this corporate philosophy, EBARA has positioned working toward enhancing its corporate value through the sustained

expansion of its business activities and continuing to return a portion of the profits it earns to shareholders as its most important management

issues. To address these issues effectively, EBARA believes that enhancing the soundness and transparency of management is indispensable.

Accordingly, EBARA is working to strengthen its corporate governance and its internal control systems to ensure compliance with relevant rules

and regulations.

Accordingly, EBARA has prepared its Group Code of Conduct to provide guidelines for corporate operations that are in compliance with relevant

laws and regulations.



Internal Controls

The Company’s Board of Directors, based on the Corporation Law of

Japan, has decided on a policy for internal controls and made this policy an

integral part of the Company’s basic regulations. These basic regulations

cover a range of management issues and set forth a compliance system for

the conduct of duties by directors and employees, regulations and systems

for controlling risk, and systems for the supervision of the behavior of

Group companies and management as well as other systems. These regu-

lations have the objective of clarifying policy initiatives to create systems to

ensure the proper conduct of operations in each of these areas. With the

goal of improving and promoting specific policies related to internal con-

trols, the Company has created an organizational unit that takes initiatives

in these areas and reports directly to the president. Also, in the area of

financial reporting, to create improved internal control systems, the

Company has formed a specialized unit with the goal of implementing

improvements in the process for preparing financial reports properly to

enhance trust and confidence in the Company. With these initiatives as

a foundation, the Company is working to create systems for timely and

appropriate information disclosure to its wide range of stakeholders.

Regarding risk management, the Company has formed a Risk

Management Panel, which is responsible for the risk management of the

EBARA Group, including compliance risk. For strategic risks, the Risk

Management Panel is preparing a set of regulations and will decide on

Companywide risk management systems, while also working especially to

manage risks related to projects and other activities with high inherent risks.

In its internal control systems, the Company has established a Corporate

Audit Department as an independent unit reporting to the president. Based

on the Company’s internal audit regulations, this unit conducts internal

audits with the aim of evaluating the internal control methods of the com-

pliance, risk management, and other internal control functions in the

Company’s operating divisions. In addition to these auditing activities, the

Corporate Audit Department has formed an internal unit for auditing the

appropriateness of transactions. This unit audits and supervises the

Company’s participation in bidding activities for public works projects and

its transactions with subcontractors. Through this auditing and supervision

of operating divisions, this unit provides advice to the divisions it examines

and monitors, issues directives for making improvements in activities, and

reports the results of these activities to the president. In addition, as

deemed necessary, the Corporate Audit Department exchanges information

and opinions with the Corporate Auditors as well as participates in meet-

ings of the Board of Corporate Auditors with the representative directors

and attends meetings of the Group auditors to improve teamwork with

other units responsible for auditing activities.

Compliance System

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

adherence to high standards of compliance may damage its management

foundation. Accordingly, the Company positions full compliance with laws

and regulations as one of its most important internal control objectives.

In addition, to fulfill its many social responsibilities as well as conduct its

corporate activities in accordance with social mores, including ethical

and moral practices, the Company has formed the CSR Division, which

has internal units specializing in compliance, management of trade under

security and defense agreements, environmental preservation, promoting

understanding of human rights, making a contribution to society, and other

CSR-related initiatives. In addition, the Company has formed a Corporate

Ethics Committee, which is chaired by the president, and, in addition to

including outside legal counsel among its members, this committee is

responsible for discussing appropriate courses of action from an overall

perspective related to legal provisions for internal controls, appropriateness

of transactions, environmental preservation, human rights, the EBARA

Group Code of Conduct, and other similar matters. At the same time, by

performing periodic checks on the state of compliance promotion from a

Company perspective, this committee monitors the execution of business

activities and contributes to improvement in activities.

The Company’s Compliance Department acts as the focal point for these

various initiatives by providing advice and building the base for promoting

compliance and ethical behavior in the Company’s overall activities. The

activities of the department include conducting systematic training programs

for various levels of Company personnel to heighten their awareness of com-

pliance and other issues. In addition, to ensure that the various measures

decided by the Corporate Ethics Committee are applied and implemented

in Group companies, EBARA has formed the Group Compliance Network,

which includes personnel in charge of corporate ethics at related companies.

With the goal of ensuring that the awareness of the importance of compli-

ance is communicated to each and every employee, EBARA has also estab-

lished its Compliance Liaison System under which about one employee in

100 is assigned liaison functions. In addition, the Compliance Department

conducts a compliance survey once a year, and, by assessing how well the

spirit of compliance has permeated the organization from the survey results,

the office contributes to the improvement of related systems and policies.

Moreover, to address potential violations of legal provisions and other

ethical issues, the basic understanding is that personnel will receive advice

from their supervisors and others in the normal course of business opera-

tions. However, in addition, the Company provides for consultation with

qualified persons, including a compliance consultation function outside the

Company conducted by outside legal counsel. Under this “whistle blower”

system, measures have been adopted to preserve the confidentiality of per-

sonnel providing such compliance-related information and prevent them

from being disadvantaged. This system is designed to actively solicit compli-

ance-related information from internal sources and thereby prevent unethi-

cal behavior as well as discover improper behavior as quickly as possible.

Going forward, the Company will continue these activities to further

heighten the awareness of the importance of compliance and thereby

endeavor to create a corporate culture where compliance matters have

been fully internalized, and proper emphasis is placed on the observance

of relevant rules and regulations.


Board of Directors(As of June 27, 2008)

From left: (Back row) Tetsuji Fujimoto, Itaru Shirasawa, Kozo Nakao, Atsuo Suzuki, Akihiro Ushitora, Akira Itoh(Front row) Tetsuya Yamamoto, Masayoshi Hirose, Natsunosuke Yago, Hiroshi Kamiya, Seiichi Ochiai

Board of Directors

Natsunosuke YagoPresident and Representative Director Chairman of the Board

Masayoshi Hirose*Director

Hiroshi Kamiya*Director

Kozo Nakao*Director

Atsuo Suzuki*Director

Itaru Shirasawa*Director

Akihiro Ushitora*Director

Tetsuji Fujimoto*Director

Akira Itoh*Director

Tetsuya YamamotoOutside director

Seiichi OchiaiOutside director

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



Governance Structure and Management Systems

Executive Officers

Vice President Executive Officer

Masayoshi HirosePresident, Environmental Engineering Company, DivisionExecutive, Water Treatment & Waste Division, EnvironmentalEngineering Company

Senior Managing Executive Officer

Hiroshi KamiyaDivision Executive, CSR Division, Division Executive, GeneralAffairs Division, Executive General Manager, Haneda Office

Managing Executive Officers

Kozo NakaoPresident, Precision Machinery Company

Atsuo SuzukiPresident, Fluid Machinery & Systems Company

Itaru ShirasawaVice President, Fluid Machinery & Systems Company, DivisionExecutive, Marketing Sales Division, Fluid Machinery & SystemsCompany, Division Executive, Domestic Sales Office Division,Executive General Manager, Shinagawa Office

Akihiro UshitoraVice President, Environmental Engineering Company, Division Executive, Environmental Plant Division, Environmental Engineering Company

Tetsuji FujimotoDivision Executive, Finance & Corporate Accounting Division

Yasuo OgasawaraVice President, Fluid Machinery & Systems Company, DivisionExecutive, Custom Pump Division, Division Executive, FluidMachinery Development Division, Fluid Machinery & SystemsCompany

Manabu TsujimuraDivision Executive, Semiconductor Equipment Division, PrecisionMachinery Company

Shotaro KuryuDivision Executive, Standard Custom Pump Business Division, Fluid Machinery & Systems Company

Akira OgataDivision Executive, Production & Assurance Division, PrecisionMachinery Company

Yasuyuki UrumaFluid Machinery & Systems Company

Senior Executive Officers

Hitoshi HandaDeputy Division Executive, Environmental Plant Division,Environmental Engineering Company

Masakatsu OhyaDivision Executive, Fuel Cell Division

Executive Officers

Akira ItohDivision Executive, Technologies, Research & DevelopmentDivision, Deputy Division Executive, Internal Control Improvement& Enhancement Division

Masaru ArakiDivision Executive, Production Engineering Division, FluidMachinery & Systems Company

Minoru TakanoDeputy Division Executive, Environmental Plant Division,Environmental Engineering Company, Deputy Division Executive,Domestic Sales Office Division

Yasuji MoriDeputy Division Executive, Domestic Sales Office Division,Executive General Manager, Osaka Branch

Hisashi OikawaDeputy Division Executive, Standard Pump Business Division,Division Executive, Technology and Production Division, FluidMachinery & Systems Company

Koji OtaDivision Executive, Sales and Marketing Division, PrecisionMachinery Company, Deputy Division Executive, Domestic SalesOffice Division

Kiyoshi MiyagawaDeputy Division Executive, Marketing & Sales Division, DivisionExecutive, Electric Power Sector, Fluid Machinery & SystemsCompany

Hiroshi OtaniDeputy Division Executive, Standard Pump Business Division,Division Executive, Business Development Division, FluidMachinery & Systems Company

Teruo KawasakiDeputy Division Executive, Custom Pump Division, ExecutiveGeneral Manager, Custom Pump Fujisawa Plant, Fluid Machinery& Systems Company, Executive General Manager, Fujisawa District

Toichi MaedaDeputy Division Executive, Custom Pump Division, ExecutiveGeneral Manager, Haneda Plant, Fluid Machinery & SystemsCompany, Executive General Manager, Haneda District

Toshihiro YamashitaGeneral Manager, Corporate Audit Department

Masaru ShibuyaDivision Executive, Human Resource & Legal Division

Yoichi AmemiyaDivision Executive, Administration Division, EnvironmentalEngineering Company

Nobuharu NojiDivision Executive, Components Division, Precision MachineryCompany

Atsuo OhiGeneral Manager, Corporate Strategy Planning Department

Corporate Auditors

Full-Time Corporate Auditors

Michihisa HozumiYasuo Watarai

Corporate Auditors

Seigoh Hirayama*Yoshio Omori*Yoshihiro Machida* Individuals marked with * are Outside Corporate Auditors.

Corporate Auditors and Executive Officers(As of June 27, 2008)


Corporate Social Responsibility

EBARA’s overall objective is “to be a trusted corporate member of the global community.” This

means not only offering quality products and services that customers can rely on but also emphasiz-

ing compliance with laws and regulations, having respect for human rights, being concerned about

preserving the natural environment, and making contributions to social well-being and development.

EBARA’s initiatives to fulfill its corporate social responsibility (CSR) have been recognized interna-

tionally, and its stock continues to be selected for inclusion in FTSE4Good, the world’s leading

socially responsible investing (SRI) index. Logo of the FTSE4Good Index

CSR Structure and Missions

EBARA’s CSR system has seven organizational units, and each of these

is implementing initiatives to fulfill its mission.

1. Compliance Department: Responsible for planning and formulating mea-

sures to promote management that ensures compliance with laws and regu-

lations and for conducting compliance education and awareness programs

2. Human Rights Awareness Department: Responsible for informing EBARA

personnel and improving their awareness of human rights issues as well

as for providing counseling related to human rights

3. Corporate Environmental Management: Has Groupwide responsibility

for environmental conservation and takes the leadership in announcing

environmental goals and working toward meeting them

4. Social Contribution Department: Responsible for expanding and

improving the EBARA Group’s activities that contribute to society in five

areas: namely, encouraging the arts and technology, environmental con-

servation, communication with local communities, and promoting

sports activities as well as social welfare.

5. Security Trade Control Department: Collects information and conducts

internal programs to heighten awareness to ensure compliance with

regulations governing trade security

6. Integrated Procurement Department: Has overall responsibility for the

appropriateness of the procurement operations of the EBARA Group

7. Integrated Quality Assurance Department: Has overall responsibility

throughout the EBARA Group for ensuring that customers can use EBARA

products safely and with confidence

The CSR activities of the EBARA Group are described in detail in the

EBARA Group CSR Report, which is published annually in Japanese and

English.

http://www.ebara.co.jp/en/csr/

Environmental Protection Initiatives

EBARA confirms compliance with environmental laws and regulations at

its plants and other business locations through conducting environmental

audits. At the business establishment level, policies for preventing global

warming are focused mainly on reducing CO2 emissions released from

energy sources. EBARA is implementing specific policies to reduce CO2

emissions and meet its objective for fiscal 2010 (achieving a 10% reduc-

tion in comparison with the level in 2000).

In addition, since the Group’s materials recycling ratio reached 93.1% in

fiscal 2006, the target for fiscal 2010 has been increased to 95% or more.

Cover of the EBARA Group CSR Report 2008 (Available inJapanese and English and downloadable from the EBARAcorporate website)



Contributing to Society

Among activities to contribute to society, the EBARA Hatakeyama Memorial

Fund (EHMF), which was established in 1989, has been promoting inter-

national cooperation for 19 years, especially in the countries of Southeast

Asia. These activities aim to promote voluntary activities in neighboring

countries, especially in Southeast Asia, for technology transfers on a non-

commercial basis for the purpose of upgrading engineering capabilities

through assisting the cultivation of human resources as well as the devel-

opment of appropriate technologies. In fiscal 2007, activities included

cooperation with the Asian Institute of Technology (AIT) to hold an interna-

tional training course on “Planning and Design of Pumping Works,” which

was organized by the Association for Overseas Technical Scholarship

(AOTS). Thirty participants attended from 10 countries in Southeast and

South Asia, including Sri Lanka and India. In addition, training courses

entitled “Industrial Applications of Fluid Machinery—focused on Energy

Conservation”—were also organized by AOTS and implemented by EHMF

in Malaysia and Indonesia. EHMF held a total of 10 short courses/seminars

over the year in Mongolia, Cambodia, the Philippines, Indonesia, and

Thailand, including 3 training courses organized by AOTS. The number

of educational programs sponsored by the EHMF has reached 188 in

16 countries through the end of March 2008, and more than 8,744

participants have benefited from these programs.

Subjects for future short

courses/seminars, for which

many requests have been

received, include “Energy

Conservation in Industries” and

“Effective Technologies for Using

Waste Heat.” 10th international training course on “Planningand Design of Pumping Works” organized byAOTS, implemented by AIT and EBARA (August 20 to 31, 2007)

Seminar List Held in Fiscal 2007

(1)Rajamangala University of Technology Thanyaburi

ThailandTitle: Effective Energy Systems

(2)Mongolian Energy Association

MongoliaTitle: Effective Energy Systems - Focused on Renewable Energies -

(3)National Irrigation Administration

PhilippinesTitle: Pumps and Turbines in Agriculture

(4)AOTS/Asian Institute of Technology

ThailandTitle: Planning and Design of Pumping Works

(5)AOTS/Association of Consulting Engineers Malaysia

MalaysiaTitle: Industrial Applications of Fluid Machinery

(6)AOTS/Association of Consulting Engineers Malaysia, Sabah Branch

MalaysiaTitle: Industrial Applications of Fluid Machinery

(7)Khon Kaen University

ThailandTitle: Energy Issues and Hydraulic Machinery

(8)Royal University of Agriculture

CambodiaTitle: Effective Energy Systems - Focused on Applications of Hydraulic Machinery -

(9)AOTS/Institute of Technology Bandung

IndonesiaTitle: Industrial Applications of Fluid Machinery - Focused on Energy Conservation -

(10)PTEI/Institute of Technology Bandung

IndonesiaTitle: Effective Energy System - Focused on Renewable Energies -

(11)Burapha University

ThailandTitle: Applications of Turbo Type Fluid Machinery - Focused on Energy Saving -

AOTS is an expert training organization under the jurisdiction of the Japanese Ministry of Economy, Trade and Industry (METI) that promotes technical cooperation through training activities in Japan and abroad, focusing mainly on

managers and engineers from developing countries.


Financial Section

2008 2007 2006

Net sales ¥567,191 ¥538,098 ¥514,957

Cost of sales 469,865 434,934 418,414

Gross profit 97,326 103,164 96,543

Operating income (loss) 6,017 13,249 10,902

Net income (loss) 7,609 5,446 3,350

Capital expenditures 22,381 17,917 14,838

R&D expenses 10,812 11,357 10,883

Total shareholders’ equity** 151,237 151,242 153,695

Total net assets 155,263 154,970 —

Total assets 607,007 625,033 592,631

Net income (loss) per share

(yen and U.S. dollars) ¥18.01 ¥12.89 ¥9.11

ROE (%)*** 5.0 3.6 2.6

ROA (%) 1.2 0.9 0.6

* The U.S. dollar amounts are included solely for convenience and have been translated as a matterof arithmetical computation only at the rate of ¥100.19=US$1, the rate of exchange prevailing onMarch 31, 2008.

** The EBARA Group has applied “Accounting Standards for Presentation of Net Assets on theBalance Sheets” (ASBJ Statement No. 5, issued on December 9, 2005) and “Guidance onAccounting Standards for Presentation of Net Assets on the Balance Sheets” (ASBJ GuidanceNo. 8, issued on December 9, 2005” from the fiscal year ended March 31, 2007. The amountcorresponding to total shareholders’ equity, according to the previous method of presentation,is ¥151,237 million for the fiscal year 2008 and ¥151,242 million for the fiscal year 2007.

*** ROE: Net income/Average total shareholders’ equity of the beginning and end of the fiscal year.From the fiscal year 2007, total shareholders’ equity substitutes for total net assets in thecalculation.

EBARA CORPORATION and Consolidated SubsidiariesYears ended March 31

C o n t e n t sE l e v e n - Y e a r S u m m a r y

Eleven-Year Summary.........................26

Financial Review ..................................28

Consolidated Balance Sheets.............34

Consolidated Statements of Income............................................36

Consolidated Statements of Shareholders’ Equity/Net Assets .....37

Consolidated Statements of Cash Flows.....................................38

Notes to the Consolidated Financial Statements .........................39

Report of Independent Certified Public Accountants............................49



Thousands ofMillions of yen U.S. dollars*

2005 2004 2003 2002 2001 2000 1999 1998 2008

¥478,397 ¥507,767 ¥517,981 ¥562,592 ¥599,835 ¥566,383 ¥557,728 ¥568,553 $5,661,153

384,168 405,760 420,079 454,853 472,095 453,462 466,955 455,473 4,689,739

94,229 102,007 97,902 107,739 127,740 112,921 90,773 113,080 971,414

7,581 10,446 (1,424) 3,522 13,934 20,666 6,253 30,695 60,056

(19,649) 2,586 (28,538) (17,936) 2,562 8,673 (3,273) 10,389 75,946

12,706 13,690 19,600 25,698 18,420 16,098 25,103 23,700 223,386

9,994 10,965 14,116 17,287 19,997 16,576 24,671 22,544 107,915

102,952 112,578 106,782 140,107 155,844 161,668 134,520 141,504 1,509,502

— — — — — — — — 1,549,686

558,265 576,412 613,759 642,605 672,215 624,888 611,875 602,290 6,058,559

¥(64.43) ¥8.34 ¥(95.49) ¥(59.99) ¥8.57 ¥29.57 ¥(11.38) ¥36.12 $0.180

(18.2) 2.3 (23.1) (12.1) 1.6 5.9 (2.4) 7.5

(3.5) 0.4 (4.6) (2.7) 0.4 1.4 (0.5) 1.7


Financial Review

OverviewDuring the consolidated fiscal year under review, the world economy as a whole continued to experi-ence firm conditions, but during the latter half of the fiscal year, signs of an economic slowdownbegan to appear as a result of increases in prices of energy and raw materials and spreading credituncertainty in international financial markets. In the U.S. economy, as a result of turmoil in financialmarkets resulting from the emergence of the subprime housing loan issue, the decline in housing con-struction activity, and other factors, the economy slowed. In the European economies also, growthslowed as a consequence of instability in financial markets. On the other hand, in the newly emergingeconomies, centered around the BRIC nations, Asia, and the Middle East, economic expansiongenerally continued.

In the Japanese economy, signs of a recovery trend were in evidence as a result of increases in pri-vate capital investment and other developments following the improvement in corporate profitability;however, during the latter half of the fiscal year, stronger signs of a slowdown in private-sectordemand appeared as a result of the impact of rising energy and raw material prices as well as adecline in construction starts. On the other hand, conditions in the public sector remained lacklusterthroughout the fiscal year.

Amid this operating environment, the EBARA Group (the Group), in its Fluid Machinery & Systems(FMS) Group, moved forward with initiatives to strengthen its sales network in global markets forcustom pumps, compressors and fans, and standard pumps and continued to strengthen its manu-facturing systems. In addition, the Group made the decision to move its Haneda Plant to a newlyconstructed facility located in Futtsu City in Chiba Prefecture, with the objectives of improving produc-tion efficiency and reducing the emissions load on the environment. In the Environmental Engineering(EE) Group, the Group focused especially on improving profitability. These activities included reallocat-ing its management resources, including personnel, to respond to conditions in the market fordomestic public works construction, which has matured, and took steps to lower fixed costs throughthe implementation of a preferential early retirement program. The Group also adopted measures thatincluded strengthening its capabilities for making proposal-based sales and providing operation andmaintenance (O&M) services, which are areas where demand is expected to grow. In the PrecisionMachinery (PM) Group, the Group endeavored to improve profitability by making further improve-ments in profit margins of core products, including dry pumps and chemical mechanical polishing(CMP) systems, by lowering procurement costs and substantially tightening manufacturing manage-ment and controls.

The Group continued activities to restructure its business portfolio and organization. These includ-ed the sale of shares held in former consolidated subsidiaries Matsubo Company, Ltd. and ElliottEnergy Systems, Inc.; the liquidation of Ebara Environmental International Co., Ltd.; and measures toreorganize other associated companies in the environment business.

As the previously mentioned measures were implemented, the EBARA Group reported an increasein sales of the FMS Group, supported mainly by robust capital investment activities in overseas mar-kets; a decrease in sales of the EE Group because of increased competition for projects in thedomestic public sector; and a fractional decline in sales of the PM Group owing to lackluster marketconditions in the second half of the fiscal year. As a result of these trends by segment, total consoli-dated net sales increased over the previous fiscal year. Operating income posted a substantial declinefrom the previous year. The principal factors accounting for this were as follows. In the FMS Group,performance was adversely affected by sudden fluctuations in foreign currency exchange rates and adecline in sales of standard pumps and blowers owing to a drop in the number of construction startsresulting from the implementation of a revision of Japan’s building code. In the EE Group, additionalcosts were reported in connection with the Group’s decision to withdraw from the overseas marketfor new orders for solid waste processing facilities, and the profitability of work for the domestic publicsector declined as a result of more-intense price competition. In the PM Group, sales declined as aresult of requests from customers for delays of equipment deliveries in the face of stagnant conditionsin the semiconductor market.

As a result of these various developments, the Group reported consolidated net sales of ¥567.1billion, 5.4% higher than for the previous fiscal year; operating income of ¥6.0 billion, 54.6% belowthat of the prior year; and ordinary income of ¥2.7 billion, 73.5% lower than for the previous fiscalyear. Among extraordinary items, the Group reported extraordinary gains totaling ¥74.5 billion, includ-ing a ¥72.4 billion gain on the sale of tangible fixed assets. Extraordinary losses amounted to ¥43.7billion, including losses on the suspension of specific projects amounting to ¥9.8 billion, provisions tothe reserve for losses of specific construction work amounting to ¥13.6 billion, and losses on comple-tion guarantees for specific projects amounting to ¥5.2 billion. After a provision to the valuationreserve for deferred tax assets, consolidated net income amounted to ¥7.6 billion, representing anincrease of 39.7% over the previous fiscal year.

2004

2005

2006

2007

2008

Operating Margin(Billions of yen, %)


SalesCost of salesSG&A expensesOperating margin (%) (right scale)

0

100

200

300

400

500

600

0

0.5

1.0

1.5

2.0

2.5

3.0



Information by Business SegmentThe Group changed the segmentation of wind power generation business and cooling and watersupply systems for nuclear power plants from the EE Group to the FMS Group at the beginning of thefiscal year ended March 31, 2008, to optimize the Group from an overall perspective and restructureits organization. Comparisons with the same period of the previous year were prepared after reclassifi-cation under the new segmentation.Fluid Machinery & SystemsAmong orders for the FMS Group, orders for custom pumps as well as compressors and fansshowed strong expansion supported by continued active capital investments in the oil and gas indus-try as well as the electric power industry, principally in overseas markets in the Middle East and theAsian region outside Japan. In addition, orders for standard pumps continued to be firm, principally inoverseas markets. In the Japanese market, the FMS Group was able to record a gain in orders overthose of the previous year from the public sector, despite a difficult market environment by conduct-ing activities to secure small to medium-sized projects, while large-scale projects also contributed. Inaddition, the FMS Group expanded the volume of orders from the private sector, where demand fromthe steel and other industries for the maintenance, renewal, and expansion of existing equipment wasfirm, through assiduous, customer-centric sales activities and improvement in after-sales service.

Sales of the FMS Group for the fiscal year under review amounted to ¥318.4 billion, 9.8% higherthan for the previous fiscal year. These results reflected robust orders for gaseous and fluid transportequipment, mainly from the overseas oil and gas industries and the electric power industry, as wellas strong demand for capital investment in the basic materials industries in Japan and overseas.However, operating income amounted to ¥10.2 billion, 2.9% lower than for the previous fiscal year,owing to sudden fluctuations in foreign currency exchange rates and the decline in the number ofconstruction starts resulting from the implementation of a revision of Japan’s building code.Environmental EngineeringIn the EE Group, challenging market conditions persisted because of more-intense competition in thedomestic public-sector area, which is the principal market for the EE Group. As a result of efforts bythe EE Group to strengthen its capabilities for making proposal-based sales and its competitiveness,the following important results were reported. In the water treatment and sewage processing field,these included winning an order for a submerged membrane filtration facility, which will be the largestof its kind. In the solid waste processing facility field, the EE Group won an order for a large-scalemunicipal garbage incineration facility in the Kanto metropolitan area. In addition, the EE Group iscontinuing to strengthen its capabilities for providing O&M services and was successful in winninglong-term contracts for waste processing centers as well as multiyear contracts for water treatmentfacilities. On the other hand, the EE Group made the decision to withdraw from accepting new con-tracts for overseas solid waste processing projects and bioethanol facilities, where it is difficult toavoid business risk. As a result of these various factors, orders declined from the level of the previousfiscal year.

Restructuring the profit base of the EE Group is an urgent task. The EE Group has concentratedresources on those businesses, mainly domestic ones, that are expected to grow, reduced the num-ber of personnel, liquidated certain subsidiaries, and taken other measures to reduce fixed costs. Inaddition, reserves for possible future construction and other losses, principally related to overseasprojects, have been set aside.

Sales of the EE Group were ¥141.4 billion, 0.8% higher than for the previous fiscal year, reflectingthe difficult operating environment resulting from more-intense competition in the domestic publicworks project market. The EE Group’s operating loss increased to ¥12.1 billion, ¥4.7 billion more thanin the previous fiscal year. This was due to a number of factors, including the incurrence of additionalcosts in connection with the withdrawal from the overseas market for new orders in the solid wasteprocessing facilities field and the decline in profitability owing to more-intense price competition in thedomestic public works sector.Precision MachineryIn the PM Group, sales of semiconductor manufacturing equipment, which is the PM Group’s coreproduct, held firm during the first half of the fiscal year as memory manufacturers in Japan, Korea,and Taiwan, who are the PM Group’s principal customers, continue their aggressive capital invest-ment. However, in the second half of the fiscal year, the weakening of semiconductor prices, mainlyfor DRAMs, prompted one semiconductor manufacturer after another to delay or suspend theirinvestment plans. Amid this operating environment, the PM Group focused its marketing activities onhigh-throughput CMPs for technologically leading-edge copper interconnection processes andprocessors for removing PFC (perfluorinated carbon) gas, which is a greenhouse gas that places aheavy emissions load on the environment. However, orders were below the level of the previous year.In addition, in the fourth quarter, conditions in the semiconductor market experienced a further

2004

2005

2006

2007

2008

Net Sales by Business Segment (Billions of yen)


Fluid Machinery & SystemsEnvironmental EngineeringPrecision Machinery

0

100

300

200

400

500

600

Operating Income (Loss) by Business Segment (Billions of yen)



-15

-10

-5

0

5

10

15

25

20

2004

2005

2006

2007

2008


marked deterioration, and shipments were delayed at customers’ request. As a consequence, salesand operating income were below their respective levels of the previous fiscal year.

Sales of the PM Group amounted to ¥107.2 billion, 0.4% lower than for the previous fiscal year.Operating income stood at ¥7.9 billion, representing a decline of 20.8% from the prior year.

Information by Geographic SegmentJapanIn Japan, sales of products to the steel industry and the oil and gas sector were strong, reflecting thefirmness in private capital investment, but conditions in the market for public-works related productsand services were challenging. In addition, as a result of the weakness in the semiconductor marketin the latter half of the fiscal year under review, sales of products to the semiconductor industry werebelow the levels of the previous fiscal year. As a result of these factors, net sales in Japan rose 3.8%,to ¥457.4 billion, but, as a result of a deterioration in operating income of ¥12.7 billion from the previ-ous year, an operating loss of ¥4.0 billion was reported for the fiscal year.North AmericaSales of products to the oil and gas sector expanded in North America, and net sales rose 3.5%, to¥64.1 billion. Operating income rose a sharp 100.9%, to ¥5.2 billion.Other AreasIn other areas, as a result of robust capital investments in the oil and gas sector and the electricpower industry, sales of gaseous and fluid handling products of the FMS Group held firm. As a result,net sales rose 28.2% over the previous fiscal year, to ¥45.6 billion. In addition, as a result of increasedprofits from sales of the products of the FMS Group and sales of products of the PM Group to thesemiconductor industry, operating income rose 65.7%, to ¥5.0 billion.

Other Income (Expenses) and Net IncomeOther income (expense), net, improved ¥29.7 billion from the previous year and amounted to incomeof ¥27.6 billion. Other income included ¥72.4 billion in a gain on sales of fixed assets and ¥2.2 billionin interest and dividend income. On the other hand, expenses included ¥13.7 billion for the provisionto the reserve for losses on specific construction work, ¥9.9 billion for the losses on suspension ofspecific projects, ¥6.1 billion for the write-down of inventories, and ¥5.3 billion for the losses oncompletion guarantees for specific projects.

As a result, income before income taxes improved ¥22.5 billion from the previous year, to ¥33.6billion. Net income improved ¥2.2 billion and amounted to ¥7.6 billion.

Financial PositionAssetsAs a result of a decrease from the end of the previous year in current assets of ¥14.7 billion and adecrease in fixed assets of ¥3.3 billion, total assets declined ¥18.0 billion, to ¥607.0 billion. The princi-pal reasons for these movements in assets were as follows.

Among current assets, the principal item showing an increase was securities, but inventories andother current assets posted declines. Securities increased ¥18.9 billion, as the Group invested avail-able funds in negotiable certificates of deposit (NCDs). Inventories, however, decreased ¥15.4 billion,owing to the early application of the newly introduced “Standards for Evaluation of Inventories.” Othercurrent assets declined ¥11.9 billion because of the transfer of claims for compensation in connectionwith the cancellation of the gasification incinerator construction project by Malaysia’s Housing andAutonomy Ministry from other current assets to other investments.

Tangible and intangible fixed assets were approximately the same as at the end of the previous fis-cal year as a net result of capital expenditures of ¥22.3 billion, depreciation write-offs of ¥15.3 billion,the sale of certain assets, and other factors.

Investments and other assets declined ¥4.3 billion from the previous fiscal year-end, to ¥76.5 mil-lion, because of the decrease of marketable investment securities and other factors.LiabilitiesCompared with the previous fiscal year-end, current liabilities decreased ¥12.0 billion, and long-termliabilities decreased ¥6.3 billion; thus, total liabilities declined ¥18.3 billion, to ¥451.7 billion. The princi-pal causes of these decreases were as follows.

Current liabilities declined, primarily as a result of a rise in the settlement of notes and accountspayable of ¥17.1 billion and a decline in commercial paper (CP) due to a redemption of ¥15.0 billionin CP outstanding.The reserve for construction losses increased ¥16.5 billion in connection with theInfraserv project in Germany and other undertakings.

2004

2005

2006

2007

2008

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

As of March 31

Shareholdersí equityLiabilities, except interest-bearing debtInterest-bearing debtEquity ratio (%) (right scale)

0

100

200

300

400

500

600

700

0

4

8

12

16

20

24

28

2004

2005

2006

2007

2008

Net Sales by Geographic Area(Billions of yen)


JapanNorth AmericaOther

0

100

200

300

400

500

600



Long-term liabilities decreased ¥6.3 billion owing to a decline in the balance of bonds outstandingand other items of ¥10.3 billion, largely as a result of the transfer of bonds due within one year to thecurrent portion of long-term debt among current liabilities.Net AssetsAmong items in net assets, shareholders’ equity increased ¥4.8 billion, but total valuation and trans-lation adjustments and others decreased ¥4.8 billion, while minority interests in consolidated sub-sidiaries increased, moving up ¥0.3 billion. As a result, net assets were up ¥0.3 billion and amountedto ¥155.3 billion at the end of the period under review. The increase in shareholders’ equity was main-ly due to the reporting of net income of ¥7.6 billion and the payment of dividends from retained earn-ings of ¥3.2 billion.

Cash FlowsNet cash provided by operating activities before payments of interest and taxes was ¥14.1 billionlower than for the previous fiscal year and amounted to a net outflow of ¥6.3 billion, owing todecreases in interest and dividends received and higher payments of corporate income taxes.

Among investing activities, the Group reported a gain on the sale of fixed assets of ¥64.3 billion,including principally the sale of the land on which the Group’s Haneda Plant was located. In addition,the Group made expenditures of ¥16.7 billion on the acquisition of fixed assets. As a result of thepurchase of ¥20.0 billion in securities using available cash and other activities, the Group was ableto report net cash provided by investing activities of ¥31.8 billion for the fiscal year under review.

Net cash provided by financing activities amounted to a net outflow of ¥21.8 billion as the Groupmade a net decrease in refunding of ¥19.2 billion through the redemption of bonds and refunds toother types of interest-bearing debt, cash dividends paid of ¥3.2 billion, and other factors.

As a consequence, consolidated cash and cash equivalents at the end of the period were¥69.2 billion, ¥3.1 billion higher than at the end of the previous fiscal year.

Capital ExpendituresAs a result principally of expansion of the EBARA Group’s plant facilities in response to strong marketconditions, investments in production equipment, etc., with a view to commercializing new products,and investments in equipment to enhance productivity, total capital investments implemented duringthe fiscal year under review amounted to ¥22.4 billion. This figure includes investments in intangiblefixed assets and long-term prepaid expenses.

Principal investments by business segment were as follows. Please note that the amount of invest-ments includes intersegment transactions.Fluid Machinery & SystemsCapital expenditures in this segment, which amounted to ¥9.8 billion, were allocated mainly for theconstruction of a manufacturing facility for machinery for gaseous substances.Environmental EngineeringThis segment made investments in production facilities with a view to the commercialization offuel cells for household electric power generation. Total investments by the segment amountedto ¥4.2 billion.Precision Machinery GroupTotal investment of this segment amounted to ¥8.4 billion and was used for the construction ofa manufacturing facility for dry pumps.

Liquidity and Capital Resources(1) Capital ResourcesAt the end of the fiscal year under review, on a consolidated basis, the Company had total interest-bearing debt of ¥184.5 billion, comprising ¥77.1 billion in short-term interest-bearing liabilities and¥107.4 billion in long-term interest-bearing liabilities. Although this balance decreased ¥28.9 billionfrom a total balance at the end of the previous fiscal year of ¥213.3 billion, the Company’s depen-dence on interest-bearing debt remains at a high level, and management believes that reducing thisdependence is an important issue. We believe that increasing profitability and the efficiency of capitalare basic to strengthening the Company’s financial base.

During the fiscal year under review, the Company’s free cash flow, defined as net cash provided by(used in) operating activities plus net cash provided by (used in) investing activities amounted to a netinflow of ¥25.5 billion, and the amount of net inflow increased ¥26.5 billion from the previous fiscalyear, because investing cash inflows increased ¥42.3 billion from the previous fiscal year mainly forthe reasons mentioned above.

2004

2005

2006

2007

2008

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


-20

-10

0

10

20

30

2004

2005

2006

2007

2008

Capital Expenditures (Billions of yen)



0

5

10

15

25

20


(2) Management of LiquidityThe Company takes the position that reducing cash and cash equivalents is a basic requirement forincreasing asset efficiency. To manage liquidity risk, the Company has concluded commitment linecontracts with its principal banks that provide an adequate amount of financial liquidity for its opera-tions.

In addition, to increase the efficiency of cash within the EBARA Group, the Company has instituteda system whereby idle cash is concentrated in the parent company and then allocated to other Groupcompanies with cash requirements.

The consolidated balance of cash and cash equivalents at the end of the fiscal year was ¥69.2 bil-lion. In addition, the available balance of commitment lines was ¥36.6 billion, and available overdraftsamounted to ¥13.9 billion.

R&D ExpensesR&D expenditures of the EBARA Group can be divided into three major categories:1. Basic research aimed at discovering and establishing seed technologies for the long term,2. Development research focused on the application of technologies and the creation of new prod-

ucts, and3. R&D to provide support for the development of existing businesses.R&D in the first category above is implemented mainly by consolidated subsidiary Ebara ResearchCo., Ltd. R&D in the second and third categories is conducted through coordinated teamwork amongindividual business divisions, Group companies, and Ebara Research. Total R&D expenditures duringthe fiscal year under review amounted to ¥10.8 billion. Activities by business segment are as follows.Fluid Machinery & SystemsThe Fluid Machinery & Systems (FMS) Group is accelerating the development of products for theenergy, environmental, water treatment, and other fields that are globally competitive. The FMS Groupis working as a team, from marketing through its R&D activities, and is focusing on the developmentof equipment for desalination plants, high-efficiency turbo refrigeration equipment, eco-friendly stan-dard pumps for the global market, and other products. In addition, the FMS Group has beenstrengthening its numerical analysis environment technologies and bolstering its fundamental tech-nologies for analytical engineering and optimizing technologies. The FMS Group made expenditureson R&D amounting to ¥3.8 billion during the year under review.Environmental Engineering GroupThe Environmental Engineering (EE) Group positions water treatment and incineration systems asits core businesses and is placing priority on conducting research and developing products on thesecore and peripheral businesses. The EE Group is also working to improve its product groups thatcontribute to cost saving, energy saving, and laborsaving as well as reduction in CO

2emissions.

In addition, the EE Group is working to further promote its EPC + O&M business through focusingon the development of products that feature lower running costs and are easier to use in actualmaintenance and supervisory operations. The EE Group made expenditures on R&D amountingto ¥4.2 billion during the year under review.Precision Machinery GroupIn the Precision Machinery (PM) Group, activities are under way to secure an absolutely superior posi-tion in next-generation process technologies through improvements in process equipment, especiallyCMP and plating equipment, for semiconductor wafer manufacturing processes. In addition, in thecomponent products area, the PM Group is moving forward aggressively with the development ofemission gas treatment systems for dealing with greenhouse gas emissions to prevent global warm-ing. The PM Group made expenditures for R&D amounting to ¥2.8 billion during the year underreview.

Business RisksThe Group confronts a number of business risks that may have an influence on the judgment ofinvestors. These are described below. In addition to being aware of the possibility of the emergenceof these risks, the Group implements measures to prevent their occurrence and deal with them whenthey emerge.

This section includes forward-looking statements that are based on judgments made at the timeof 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 FMS Group and the EEGroup. Accordingly, there is a possibility that cutbacks in public works by the national government,regional governments, and related entities may increase fluctuations in the Group’s business activi-ties, performance, and financial position.

2004

2005

2006

2007

2008

R&D Expenses(Billions of yen)


0

5

10

15



In addition, the business of the PM Group is strongly influenced by the silicon cycle. Accordingly,fluctuations in the market for semiconductors may increase fluctuations in the Group’s businessactivities, 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 for-eign countries. Some of these projects involve a high level of technical difficulty. Also, major projectsin foreign countries involve risks related to business environments that differ from those of Japan.The Group takes every possible measure to control these risks and provides for construction lossesby setting aside an amount based on its estimate of such costs; however, if actual additional costsexceed the reserves, this may have a detrimental impact on the Group’s performance.

Foreign currency transactions, etc., related to overseas business activities are converted into yenwhen preparing the consolidated financial statements. The value of transactions may vary accordingto the foreign currency exchange rates prevailing at the time of conversion, but, if the yen appreciates,this may have an adverse impact on the business operations of the Group. Conversely, if the yendepreciates in value against foreign currencies, this may have positive impact on the Group’s busi-ness activities.3. Interest Rate RiskThe EBARA Group is working to reduce its interest-bearing debt, but, as of March 31, 2008, short-term interest-bearing debt amounted to ¥77.1 billion, and the balance of long-term interest-bearingdebt was ¥107.4 billion; thus, total interest-bearing debt reached a total of ¥184.5 billion. Interest-bearing debt includes fixed- and floating-rate liabilities. For that portion of interest-bearing debt bor-rowed at floating rates, the Group has arranged for interest rate swaps to fix the interest liability andloans with floating rates to lessen the risk of interest rate fluctuations; however, if interest paymentson the unhedged portion rise due to higher interest rates, this may have an impact on the Group’sperformance.4. Risks Related to the Impact of Natural Disasters

and Impairment of the Social InfrastructureIf an EBARA Group place of business is struck by a major typhoon, earthquake, or other naturaldisaster that adversely affects its ability to conduct business activities, this may have a detrimentalimpact on Group performance. In addition, in the event of a major accident affecting the labor forceor an accident involving equipment that leads to a stoppage, or impairment, of business activities,this may have an adverse impact on Group performance.5. Government Penalties, Etc.Regarding the order to cease certain operations that has been under consideration since 2004by Japan’s Fair Trade Commission relating to orders for sewage pump construction work for theSewage Commission of the City of Tokyo, in April 2008, the Company received the statement of aruling requesting that such an exclusion order be issued.

As a result of the circumstances described here, the Group may receive an order from the nationaland local governments or others that will exclude it from certain projects; this would result in a declinein orders and have an adverse impact on the Group’s performance.6. Deferred Tax AssetsThe Group believes that its deferred tax assets will make it possible to make recoveries from futuretaxable income. Regarding the portion of deferred tax assets for which the Group believes there isdoubt about making recoveries, the Group has provided the valuation allowance for such doubtfulamounts. However, the estimate of future taxable income may vary depending on performance at thattime. In the event that factors influencing the estimate of taxable income vary, it may be necessary tomake changes in the valuation allowance amounts. In such cases, the Group will make adjustmentsin the doubtful portion of deferred tax assets, and, since an equivalent amount will be reflected in thedeferred tax benefit on the Consolidated Statements of Income, there is a possibility that net incomemay decline as a result.7. Material ProcurementThe Group procures parts and materials for its manufacturing and construction activities and is influ-enced by fluctuations in market conditions for these materials. Increases in prices of materials resultin higher material costs for the Group and may have an adverse impact on the Group’s performance.8. Legal RestrictionsThe Group conducts operations in Japan and foreign countries and is subject to the laws of the coun-tries where its operations take place. In some instances, the passage of laws and changes in existinglegislation may result in an alteration of assumptions for operating and business plans. Such changesin assumptions may have an adverse impact on the Group’s performance.


Consolidated Balance Sheets

Thousands ofU.S. dollars

Millions of yen (Note 4)

ASSETS 2008 2007 2008

Current assets:Cash and cash equivalents ¥ 89,160 ¥ 66,086 $ 889,909Trade receivables 215,791 225,005 2,153,818Allowance for doubtful receivables (636) (2,004) (6,348)Inventories (Notes 3, 6) 81,177 96,590 810,231Deferred tax assets (Note 10) 12,075 14,765 120,521Others 19,368 31,227 193,313

Total current assets 416,935 431,669 4,161,444

Investments and long-term receivables:Investment securities (Note 5) 21,098 30,253 210,580Investments in and advances to subsidiaries and affiliates 17,478 17,003 174,448Reserve for revaluation of investments (111) (1,625) (1,108)Long-term loans receivable 423 461 4,222Deferred tax assets (Note 10) 13,223 25,128 131,979Other investments 34,030 8,657 339,655Allowance for doubtful receivables (11,693) (1,097) (116,708)

Total investments and long-term receivables 74,448 78,780 743,068

Property, plant and equipment (Notes 3, 11):Land 19,567 18,884 195,299Buildings 87,171 85,505 870,057Machinery and equipment 161,519 160,711 1,612,127Construction in progress 10,747 4,740 107,266

279,004 269,840 2,784,749Accumulated depreciation (176,136) (171,563) (1,758,020)

Property, plant and equipment, net 102,868 98,277 1,026,729

Other assets 12,756 16,307 127,318

¥607,007 ¥ 625,033 $6,058,559The accompanying notes are an integral part of these statements.

EBARA CORPORATION and Consolidated SubsidiariesAs of March 31, 2008 and 2007





LIABILITIES AND NET ASSETS 2008 2007 2008

Current liabilities:Bank loans (Note 8) ¥ 54,499 ¥ 58,501 $ 543,957Commercial paper — 15,000 —Current portion of long-term debt (Note 8) 22,585 24,535 225,422Trade payables 150,763 167,881 1,504,771Advance payments received 12,560 18,294 125,362Accrued income taxes 5,468 2,911 54,576Deferred tax liabilities 112 5 1,118Reserve for losses on construction completion guarantees 4,674 3,322 46,651Reserve for construction losses 17,130 670 170,975Reserve for losses arising from violation of Japan’s Antimonopoly Act 962 920 9,602Reserve for legal expenses 200 — 1,996Reserve for expenses related to the sale of land 2,774 — 27,687Accrued expenses and other current liabilities 38,334 29,997 382,613

Total current liabilities 310,061 322,036 3,094,730Long-term liabilities:

Long-term debt (Note 8) 107,375 115,313 1,071,714Accrued severance and pension costs (Note 9) 28,079 30,115 280,257Deferred tax liabilities 957 880 9,552Reserve for expenses related to the sale of land 2,800 — 27,947Other long-term liabilities 2,472 1,719 24,673

Total long-term liabilities 141,683 148,027 1,414,143Net Assets:

Shareholders’ equity:Common stock:

Authorized: 1,000,000,000 sharesIssued: 2008—422,725,658 shares 61,284 61,284 611,678

Additional paid-in capital 65,212 65,212 650,883Retained earnings (Note 15) 24,256 19,455 242,100Treasury stock, at cost

2008—267,250 shares (134) (93) (1,337)Total shareholders’ equity 150,618 145,858 1,503,324

Net unrealized gain:Net unrealized gain on investment securities 2,918 6,767 29,124Profit/Loss deferral hedge accounting 6 13 60Translation adjustments (2,299) (1,383) (22,946)

Total net unrealized gain 625 5,397 6,238Minority interests in consolidated subsidiaries 4,020 3,715 40,124

Total net assets 155,263 154,970 1,549,686¥607,007 ¥625,033 $6,058,559


Consolidated Statements of Income

Thousands of U.S. dollars


2008 2007 2006 2008

Net sales ¥567,191 ¥538,098 ¥514,957 $5,661,153Cost of sales 469,865 434,934 418,414 4,689,739

Gross profit 97,326 103,164 96,543 971,414Selling, general and administrative expenses 91,309 89,915 85,641 911,358

Operating income 6,017 13,249 10,902 60,056

Other income (expenses):Interest and dividend income 2,218 3,702 1,068 22,138Interest expenses (3,988) (3,739) (3,524) (39,804)Gain on sales of securities 1,243 7,246 5,055 12,406Write-down of investments in unconsolidated subsidiaries (1,999) (1,443) (51) (19,952)Write-down of securities and other investments (1,036) (44) (135) (10,340)Bond issue costs — (76) (8) —Gain on sales and disposal of fixed assets, net 69,992 217 3,613 698,593Impairment losses (Note 7) (903) (341) (459) (9,013)Write-down of inventories (6,096) — (1,081) (60,845)Reserve for revaluation of investments — (198) (346) —Legal expenses — (960) — —Reserve for legal expenses (200) — — (1,996)Losses arising from violation of Japan’s Antimonopoly Act (6) (1,927) — (60)Reserve for losses arising from violation of Japan’s

Antimonopoly Act (298) (920) — (2,974)Loss on equity method — (1,132) — —Loss on the prior year adjustment — (1,183) — —Loss on completion guarantees for specific projects (5,278) — — (52,680)Provision to the reserve for losses on specific construction work (13,659) — — (136,331)Losses on suspension of specific projects (9,864) — — (98,453)Special retirement benefits paid (1,500) — — (14,972)Other, net (1,057) (1,333) (1,349) (10,550)

27,569 (2,131) 2,783 275,167

Income before income taxes 33,586 11,118 13,685 335,223

Income taxes (Note 10):Current taxes 9,089 4,162 3,623 90,718Deferred tax benefits 17,436 2,536 6,670 174,029

26,525 6,698 10,293 264,747

Minority interests in consolidated subsidiaries (548) (1,026) 42 (5,470)

Net income ¥ 7,609 ¥ 5,446 ¥ 3,350 $ 75,946

U.S. dollarsYen (Note 4)

Per share of common stock:Net income ¥18.01 ¥12.89 ¥9.11 $0.180Fully diluted net income 16.34 12.31 8.89 0.163Cash dividends 7.50 7.50 7.50 0.075

The accompanying notes are an integral part of these statements.

EBARA CORPORATION and Consolidated SubsidiariesFor the years ended March 31, 2008, 2007 and 2006



Consolidated Statements of Shareholders’ Equity/Net Assets

Consolidated Statements of Shareholders’ EquityMillions of yen

Netunrealized

Number of Additional gain on Treasury Totalshares Common paid-in Retained investment Translation stock, shareholders’issued stock capital earnings securities adjustments at cost equity

Balance at March 31, 2005 334,562,245 ¥41,231 ¥45,265 ¥15,851 ¥6,236 ¥(5,613) ¥(18) ¥102,952Change in interest in newly consolidated or divested subsidiaries 273 273

Net income 3,350 3,350Cash dividends (2,509) (2,509)Shares issued on conversion of convertible bonds 88,162,505 20,053 19,947 40,000Net unrealized gain on investment securities 7,240 7,240Changes in translation adjustments 2,425 2,425Purchase of treasury stock (36) (36)Loss on disposal of treasury stock (0) (0)

Balance at March 31, 2006 422,724,750 ¥61,284 ¥65,212 ¥16,965 ¥13,476 ¥(3,188) ¥(54) ¥153,695

Consolidated Statements of Net AssetsMillions of yen

Net unrealized Profit/Loss Minority

Number of Additional gain on Treasury deferral interests inshares Common paid-in Retained investment Translation stock, hedge consolidated Totalissued stock capital earnings securities adjustments at cost accounting subsidiaries net assets

Balance at March 31, 2006 422,724,750 ¥61,284 ¥65,212 ¥16,965 ¥13,476 ¥(3,188) ¥ (54) ¥— ¥ — ¥153,695Change in interest in newlyconsolidated or divested subsidiaries 1,014 1,014

Change in interest in newly accounted for equity method (801) (801)

Net income 5,446 5,446Cash dividends (3,169) (3,169)Shares issued on conversion of convertible bonds 908 0 0 0

Net unrealized gain on investment securities (6,709) (6,709)

Changes in translation adjustments 1,805 1,805

Purchase of treasury stock (43) (43)Loss on disposal of treasury stock (0) 4 4Changes in profit/loss deferral hedge accounting 13 13

Changes in minority interest in consolidated subsidiaries 3,715 3,715

Balance at March 31, 2007 422,725,658 61,284 65,212 19,455 6,767 (1,383) (93) 13 3,715 154,970Change in interest in newly

consolidated or divested subsidiaries 363 363

Net income 7,609 7,609Cash dividends (3,169) (3,169)Net unrealized gain on

investment securities (3,849) (3,849)Changes in translation

adjustments (916) (916)Purchase of treasury stock (49) (49)Loss on disposal of treasury stock (2) 8 6Changes in profit/loss deferral

hedge accounting (7) (7)Changes in minority interest in consolidated subsidiaries 305 305

Balance at March 31, 2008 422,725,658 ¥61,284 ¥65,212 ¥24,256 ¥ 2,918 ¥(2,299) ¥(134) ¥ 6 ¥4,020 ¥155,263

Thousands of U.S. dollars (Note 4)Net

unrealized Profit/Loss MinorityAdditional gain on Treasury deferral interests in

Common paid-in Retained investment Translation stock, hedge consolidated Totalstock capital earnings securities adjustments at cost accounting subsidiaries net assets

Balance at March 31, 2007 $611,678 $650,883 $194,176 $67,542 $(13,804) $ (928) $130 $37,080 $1,546,757Change in interest in newly consolidatedor divested subsidiaries 3,626 3,626

Net income 75,946 75,946Cash dividends (31,629) (31,629)Net unrealized gain on investment securities (38,418) (38,418)

Changes in translation adjustments (9,142) (9,142)Purchase of treasury stock (19) (489) (508)Loss on disposal of treasury stock 80 80Changes in profit/loss deferral hedge accounting (70) (70)

Changes in minority interest in consolidated subsidiaries 3,044 3,044

Balance at March 31, 2008 $611,678 $650,883 $242,100 $29,124 $(22,946) $(1,337) $ 60 $40,124 $1,549,686The accompanying notes are an integral part of these statements.

EBARA CORPORATION andConsolidated SubsidiariesFor the year ended March 31, 2006

EBARA CORPORATION andConsolidated SubsidiariesFor the years ended March 31,2008 and 2007


Consolidated Statements of Cash Flows



2008 2007 2006 2008

Cash flows from operating activities:Income before income taxes ¥ 33,586 ¥11,118 ¥13,685 $ 335,223Income charges (credits) not affecting cash:

Depreciation and amortization 15,316 12,842 12,450 152,870Impairment losses 903 341 459 9,013Gain on sales of securities (1,243) (7,246) (5,055) (12,406)Loss on violation of Japan’s Antimonopoly Act 304 2,847 — 3,034Legal expenses 200 960 — 1,996Increase (decrease) in allowances 30,044 (2,567) (4,650) 299,870Gain on sales of fixed assets (77,930) (501) (4,664) (777,822)Other noncash expenses 5,738 3,754 3,299 57,271Interest and dividend income (2,218) (3,702) (1,068) (22,138)Interest expenses 3,988 3,739 3,524 39,804Decrease (increase) in accounts receivable (1,626) 2,068 (19,992) (16,229)Decrease (increase) in inventories 10,906 (11,867) 1,109 108,853Increase (decrease) in accounts payable (13,378) 6,783 10,485 (133,526)Other (3,169) (3,078) (9,335) (31,630)

Sub-total 1,421 15,491 247 14,183Interest and dividends received 2,278 3,817 823 22,737Interest expenses paid (4,138) (3,452) (3,704) (41,302)Loss on violation of Japan’s Antimonopoly Act and legal expenses (835) (1,998) — (8,334)Income taxes paid (5,043) (4,314) (7,139) (50,334)

Net cash provided by (used in) operating activities (6,317) 9,544 (9,773) (63,050)Cash flows from investing activities:

Sales of fixed assets 64,286 2,607 6,344 641,641Purchases of fixed assets (16,730) (17,489) (13,959) (166,983)Sales of investment securities 5,040 10,180 7,798 50,304Purchases of investment securities (1,113) (2,703) (2,794) (11,109)Purchases of securities (17,800) — — (177,662)Payments into time deposits (2,200) — — (21,958)Sales or purchases of other investments, net 934 764 321 9,322Collection of loans receivable 4,040 4,108 1,756 40,323Disbursement of loans receivable (5,568) (6,201) (3,565) (55,574)Sale (acquisition) of stock in subsidiaries with a change of basis of consolidation — (1,621) — —

Sales of stock in subsidiaries with a change of basis of consolidation 882 (195) — 8,803Net cash provided by (used in) investing activities 31,771 (10,550) (4,099) 317,107

Cash flows from financing activities:Issue of bonds — 39,924 39,992 —Redemption of bonds (14,100) (20,118) (16,000) (140,733)Proceeds from bank loans, commercial paper and long-term debt 149,308 59,159 49,744 1,490,249Repayment of bank loans, commercial paper and long-term debt (154,457) (59,357) (49,904) (1,541,641)Capital paid in from minority shareholders 1,007 920 649 10,051Dividends paid (3,169) (3,169) (2,509) (31,630)Dividends paid to minority shareholders in consolidated company (356) (153) (175) (3,553)Purchase and sales of treasury stock (40) (39) (36) (399)

Net cash provided by (used in) financing activities (21,807) 17,167 21,761 (217,656)Translation adjustments (748) 1,691 376 (7,466)Increase in cash and cash equivalents 2,899 17,852 8,265 28,935Cash and cash equivalents:

At beginning of period:Balance brought forward 66,086 47,511 38,960 659,607Net effect of deconsolidation and consolidation of subsidiaries 175 723 286 1,746

At end of period ¥ 69,160 ¥66,086 ¥47,511 $ 690,288The accompanying notes are an integral part of these statements.

EBARA CORPORATION and Consolidated SubsidiariesFor the years ended March 31, 2008, 2007 and 2006



Notes to the Consolidated Financial Statements

EBARA CORPORATION and Consolidated Subsidiaries

EBARA CORPORATION (the “Company”) and its subsidiaries (hereinafter, collectively referred toas the “Group”) maintain their records and prepare their statutory financial statements in accor-dance with accounting principles generally accepted in Japan, and its foreign subsidiaries inconformity with those of the countries of their domicile. The accompanying consolidated financialstatements were also prepared in accordance with accounting principles generally accepted inJapan.

Basis of consolidation The consolidated financial statements include the accounts of the Company and those of certainof its subsidiaries. All significant intercompany transactions and accounts are eliminated in con-solidation.

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

Foreign currency translationForeign currency denominated trade receivables and payables are translated into yen at thebalance sheet date. Investments are translated into yen at the exchange rates current whenthe transactions occur.

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

Cash and cash equivalentsCash 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 financing instrumentsInvestment securities and other financing instruments are valued using the following methods:

(a) Securities having market value are stated at market value, and unrealized gain or loss,net of tax, is credited or debited to shareholders’ equity as shown in the balance sheets.

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

value, if available.

InventoriesFinished products and raw materials are stated at the gross average cost (computed by loweringthe value on the balance sheets from book value to account for any decline in earnings-genera-tion capacity of such assets), except for in the Precision Machinery Group, which employs themoving average method (computed by lowering the value on the balance sheets from bookvalue to account for any decline in earnings-generation capacity of such assets), and work inprocess is valued at accumulated job cost (computed by lowering the value on the balancesheets from book value to account for any decline in earnings-generation capacity of suchassets). Real estate for sale represents the accumulated cost for each parcel of land and eachstructure.

Property, plant and equipment and related depreciationProperty, plant and equipment are stated at cost. Depreciation is computed on the declining-balance method at rates based on the estimated useful lives of the assets of the Company andits domestic subsidiaries, except for buildings placed in service after April 1, 1998, depreciationfor which is computed on the straight-line method. The straight-line method is used by the con-solidated foreign subsidiaries. Maintenance, repairs and minor renewals are charged to incomeas incurred.

2. Summary of SignificantAccounting Principles

1. Basis of PresentingConsolidated FinancialStatements


With respect to the Company and its domestic consolidated subsidiaries, the estimated use-ful lives of the assets used for computing depreciation, which are the same as the useful livesprovided for under the Japanese income tax regulations, are shown below:

Buildings 3 to 50 yearsMachinery and equipment 2 to 20 years

LeasesAll leases of the Company and its domestic subsidiaries are accounted for as operating leases.Under Japanese accounting standards for leases, finance leases that are deemed to transferownership of the leased property to the lessee are to be capitalized, while other finance leasesare permitted to be accounted for as operating lease transactions if certain “as if capitalized”information is disclosed in the notes to the lessee’s financial statements.

Income taxesDeferred tax assets and liabilities are determined based on the differences between financialreporting and the tax bases of the assets and liabilities and are measured by applying currentlyenacted tax rates and laws.

Severance and pension plans The cost of the severance and pension plans, based on actuarial computations of currentand future employee benefits, including the unfunded severance indemnities plan, is chargedto income.

Retirement benefits to directors and corporate auditors are also accrued at the amountsof the future liability in relation to the length of service at the balance sheet date and includedin accrued severance and pension costs.

Shareholders’ equity(a) Additional paid-in capitalUnder the Corporation Law of Japan (the “Law”), the entire amount of the issue price (or con-version price) is required to be accounted for in the common stock account, although a compa-ny may, by a resolution of its board of directors, account for an amount not exceeding one-halfof the issue price of the shares as additional paid-in capital. The Code provides that a “transferof distributable profit to the common stock account” must be approved at the general meetingof shareholders as an appropriation of unappropriated retained earnings. (b) DividendsDividends charged to retained earnings in the accompanying statements of shareholders’ equi-ty represent (i) dividends approved at the general meeting of shareholders held during the finan-cial period and paid during such period plus (ii) interim dividends paid.

Revenue recognitionSales are recorded when the units are accepted by the customers. However, sales of majorunits (¥100 million ($998 thousand) or more), installation of which requires more than 12months, are recorded on a percentage-of-completion basis.

Sales recorded on a percentage-of-completion basis were ¥134.6 billion.In the wind power generation business, for those long-term contracts that provide for future

reductions in the “unit price that can be charged,” EBARA recognizes revenues based on oneof two methods: the “adjusted unit price” or the “weighted average unit price over the period ofthe contract.”

The differences between consolidated net sales based on the “unit price that can becharged” and consolidated net sales based on one of the two methods are recognized in thefiscal year when the “unit price that can be charged” declines and is treated as a carryforward.The amount carried forward is presented under other long-term liabilities.

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

Research and development costsCosts relating to research and development activities are charged to income as incurred.Research and development costs charged to income were ¥10,812 million ($107,915 thousand)and ¥11,357 million for the years ended March 31, 2008 and 2007, respectively.

Allowance for doubtful receivablesAn allowance for doubtful receivables is provided on a statistical rate in accordance with theaccounting standards for financial instruments.



Reserve for revaluation of investmentsTo prepare for possible declines in the value of stocks of subsidiaries and affiliated companies,the Company makes provisions based on estimates of the effects of major fluctuations in foreignexchange rates and changes in the financial positions of these subsidiaries and affiliated companies.

Reserve for losses on construction completion guaranteesTo provide for possible expenses arising from guarantees against defects, the Company makes rea-sonable estimates of the ratio of such expenses and uses this ratio to derive provisions for such losses.

Reserve for construction lossesTo prepare for possible losses on construction projects contracted to the Company, the Companymakes estimates of such losses for those uncompleted projects deemed to have a strong possibili-ty of incurring losses and for which such construction losses can be reasonably estimated.

Reserve for losses arising from violation of Japan’s Antimonopoly ActTo provide for possible expenses arising from violation of Japan’s Antimonopoly Act, the Groupmakes reasonable estimates of the expenses.

Reserve for legal expensesTo provide for possible expenses arising from lawsuits, the Group makes reasonable estimates ofthe expenses.

Reserve for expenses related to the sale of land Accompanying the sale of the land formerly occupied by the Group’s Haneda Plant, this reservehas been created to provide for expenses related to restoring the land to its original condition andmoving to the new Futtsu Plant as well as other related costs.

Net income (loss) and dividends per sharePrimary net income (loss) per share of common stock is based on the average number of sharesof common stock outstanding during each period, appropriately adjusted for stock splits.

Common stock equivalents on warrants and convertible bonds are not taken into considerationfor the above computation. Fully diluted net income per share of common stock is computedassuming outstanding convertible bonds at that date are all converted to common shares afteradjustment of after-tax debt servicing costs, unless antidilutive effect results.

(Depreciation of tangible assets)Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulat-ed in the revised corporate tax regulations.

As a result of this accounting change, operating income, ordinary income and income beforeincome taxes was ¥414 million lower than this loss would have been under the previous methodof accounting.

(Valuation standards and method for inventories)Accompanying the granting of permission to apply the “Accounting Standards for Valuation ofInventories” (Corporate Accounting Standard No. 9; July 5, 2006) for consolidated financial state-ments for years commencing March 31, 2008, or earlier, the Group has applied this accountingstandard beginning with the fiscal year under review. As a consequence, income before incometaxes was ¥6,095 million lower than it would have been otherwise.

The U.S. dollar amounts are included solely for convenience and have been translated as amatter of arithmetical computation only at the rate of ¥100.19=US$1, the rate of exchangeprevailing on March 31, 2008. This translation should not be construed as a representation thatyen amounts actually represent or could be converted into U.S. dollars.

4. U.S. Dollar Amounts

3. Change in AccountingPolicies in FY2008


Marketable and investment securities comprise securities which have fair value. The book value,gross unrealized gains and losses, and fair value for such securities are as follows:1) Held-to-maturity:

Millions of yen

As of March 31, 2008 Book value Unrealized gains Unrealized losses Fair value

Fair value over book value:Japanese government bonds ¥— ¥— ¥— ¥—

2) Other securities:Millions of yen

As of March 31, 2008 Historical cost Unrealized gains Unrealized losses Fair value

Fair value over historical cost:Equity securities ¥6,054 ¥6,392 ¥ — ¥12,446

Historical cost over fair value:Equity securities 4,707 — 1,682 3,025

Proceeds from sales of marketable and investment securities and realized gains and lossesare as follows:Other securities:

Millions of yen

As of March 31, 2008 Proceeds from sales Realized gains Realized losses

Equity securities ¥4,156 ¥1,724 ¥481

The maturity schedule of held-to-maturity securities with due dates is as follows:Millions of yen

Maturity

Over 1 year and Over 5 years and

As of March 31, 2008 Within 1 year less than 5 years less than 10 years Over 10 years

Japanese government bonds ¥— ¥— ¥— ¥—Other government bonds 1 5 1 —

Inventories comprise the following:Thousands of

Millions of yen U.S. dollars

2008 2007 2008

Real estate for sale ¥ 644 ¥ 1,364 $ 6,428Finished products 12,996 12,411 129,714Materials 25,745 29,653 256,962Work in process 41,792 53,162 417,127

¥81,177 ¥96,590 $810,231

The EBARA Group reported impairment losses of long-lived assets amounting to ¥903 million($9,013 thousand) in the fiscal year ended March 31, 2008. These impairment losses were recog-nized in the following asset groups: rental housing, goodwill, parking lots, and 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 goodwill, impairment losses are recognized whenrevenues assumed in the original business plans prepared at the time of purchase of the sharesare deemed to be unattainable. For rental assets and idle assets, when the market price of suchassets falls substantially below book value, the book values are adjusted downward to theamount that is deemed to be recoverable.

Computation of recoverable value: Recoverable value is calculated based on the value in use ofthe asset or the net sale value of the asset. For land, buildings, and structures, recoverable valueis estimated based on the appraised real estate value of the assets. When recoverable value isestimated based on value in use, the discount rate for future cash flows is assumed to be 4%.

7. Impairment Losseson Long-Lived Assets

6. Inventories

5. Marketable andInvestment Securities



Bank loans (average interest rate—1.705%) as of March 31, 2008, of ¥54,499 million ($543,956thousand) are represented by short-term notes (having a life of less than 365 days) of which¥622 million ($6,208 thousand) is secured.

Long-term debt comprised:Thousands of

As of March 31, 2008 Millions of yen U.S. dollars

1.000% to 18.250% loans from banks, insurance companiesand other due 2009 to 2020:Secured ¥ 10,160 $ 101,407Unsecured 49,600 495,060

2.38% unsecured yen bonds due 2008 issued in the domestic market 10,000 99,8101.04% unsecured yen bonds due 2010 issued in the domestic market 20,000 199,6210.70% unsecured bonds with stock acquisition rights due 2011 issued in the overseas market 20,000 199,621

1.30% unsecured bonds with stock acquisition rights due 2013 issued in the overseas market 20,000 199,621

0.57%–1.06% bonds due 2008–2009 issued in the domestic market 200 1,996

129,960 1,297,136Less current portion due within one year 22,585 225,422

¥107,375 $1,071,714

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

Thousands ofYears ending March 31 Millions of yen U.S. dollars

2009 ¥22,585 $225,4222010 34,330 342,6492011 14,759 147,3102012 21,846 218,0462013 14,279 142,519

The Company and its domestic consolidated subsidiaries and some foreign consolidated sub-sidiaries have severance and defined benefit pension plans as follows:

Thousands ofAs of March 31, 2008 Millions of yen U.S. dollars

Benefit obligation:Benefit obligation ¥87,072 $869,069Fair value of plan assets (56,709) (566,015)Unrecognized actuarial loss (2,777) (27,717)Unrecognized prior service cost (91) (908)

Net amount recognized ¥27,495 $274,429

Accrued severance and pension costs as of March 31, 2008 include the directors’ retirementallowance reserve of ¥584 million ($5,829 thousand).

Thousands ofYear ended March 31, 2008 Millions of yen U.S. dollars

Benefit cost:Service cost ¥4,243 $42,349Interest cost 2,609 26,040Expected return on plan assets (2,360) (23,555)Recognized prior service cost 12 120Recognized actuarial loss 456 4,551Special retirement benefits 1,500 14,972

Net periodic benefit cost ¥6,460 $64,477

9. Severance andPension Plans

8. Interest-Bearing Debt


Year ended March 31, 2008

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

Significant components of the deferred tax assets and liabilities are as follows:Thousands of

As of March 31, 2008 Millions of yen U.S. dollars

Deferred tax assets:Excess provision of accrued bonuses to employees ¥ 2,804 $ 27,987Loss recognized on a percentage-of-completion basis 2,278 22,737Accrued enterprise tax 412 4,112Intercompany profit on ending inventories 637 6,358Intercompany profit on fixed assets 1,746 17,427Accrued severance and pension costs 10,426 104,062Tax loss carried forward 4,240 42,320Write-down of other investments 249 2,485Loss from liquidation of subsidiaries and affiliates 1,996 19,922Loss on write-down of real estate for sale 973 9,711Loss on write-down of inventories 5,104 50,943Research and development expenses 544 5,430Reserve for losses on construction completion guarantees 8,014 79,988Allowance for doubtful receivables 3,792 37,848Others based on tax codes outside Japan 6,332 63,200Others 7,338 73,241

56,885 567,771

Valuation allowance (23,272) (232,279)

Total deferred tax assets 33,613 335,492Deferred tax liabilities:

Reserve for deferral of capital gains on sales of property (1,260) (12,576)Reserve for compressed entry (4,859) (48,498)Net unrealized gain on marketable equity securities (2,600) (25,951)Others (665) (6,637)

Total deferred tax liabilities (9,384) (93,662)

Net deferred tax assets ¥24,229 $241,830

Summary of the major differences between the Japanese statutory tax rate and the Company’seffective tax rate:Year ended March 31, 2008

Statutory tax rate, giving tax effect on enterprise tax payable 40.5%Entertainment expenses and other expenses not deductible 1.9Per capita equalization inhabitants’ taxes 0.5Dividends received not taxable (0.2)Amortization of goodwill 1.7Valuation allowance 40.1Others (5.5)

Effective tax rate as shown in statements of income 79.0%

10. Income Taxes



The Company and its consolidated subsidiaries had the following commitments and contingentliabilities:


Loans guaranteed:Unconsolidated subsidiaries and affiliates ¥11,728 $117,058Others 950 9,482

Off-balance notes receivable with repurchase obligation 584 5,829Commitments outstanding for the purchases of property, plant and equipment 193 1,926

The following pro forma amounts concern the finance leases, which would have been reflectedin the financial statements if finance lease accounting had been applied to the finance leasetransactions currently accounted for as operating leases: (As lessee)


Acquisition costs:Machinery and equipment ¥11,939 $119,164

Accumulated depreciation:Machinery and equipment 5,474 54,636

Net book value:Machinery and equipment 6,465 64,528

Lease obligations (excluding the interest portion thereon):Due within one year 2,408 24,034Due after one year 4,092 40,842

Total ¥ 6,500 $ 64,876

Lease payments relating to finance lease transactions accounted for as operating leases:Total ¥ 2,256 $ 22,517

Depreciation expense 1,904 19,004Interest expense 151 1,507

The depreciation expense is computed by the straight-line method over the lease terms.

Information concerning operating leases is as follows:(As lessee)


Lease obligations:Due within one year ¥ 477 $ 4,761Due after one year 712 7,106

Total ¥1,189 $11,867

Derivatives under contract Derivative financial instruments, which include foreign exchange forward contracts and interestrate swap agreements, were used.

Use policyThe Company and its consolidated subsidiaries use derivatives only for the purpose of hedgingrelated to exports, imports, funding and others.

Hedging instrumentsForeign exchange forward contracts, foreign currency option contracts and interest rate swapagreements were used.

Hedging objectsCurrency exchange rate risk and interest rate risk on existing assets and liabilities in foreigncurrencies are hedging objects.

13. Derivative FinancialInstruments

12. Leases

11. Commitments andContingent Liabilities


Assessing the effectiveness of hedgingInterest rate risk

The effectiveness of hedging is assessed by comparing the accumulated cash flows betweenhedging instruments and hedging objects. However, with regard to the interest rate swapsthat agree with hedge criteria, the assessments are omitted.

Currency exchange rate riskAs long as one hedging instrument and one hedging object correspond, the hedge is consid-ered effective.

Risk concerning derivative contractsAlmost all derivative transactions are entered into to hedge the risk associated with changesin interest rates and foreign currency exchange rates, but the risk is largely offset by equal andopposite movements. It is not expected that any of the counterparties will fail to meet theirobligations because the majority are large-scale financial institutions.

Risk management organizationThe Company manages its derivative financial instruments based on internal rules that definethe dealing authority and the dealing limit. The Company manages its subsidiaries’ derivativerisk based on the dealing guidelines for subsidiaries and affiliates.

Business segment information of the Company and consolidated subsidiaries for the yearsended March 31, 2008 and 2007, is as follows:

Millions of yenFluid Machinery Environmental Precision Elimination and

Year ended March 31, 2008 & Systems Engineering Machinery corporate Consolidated

Sales to third parties ¥318,450 ¥141,446 ¥107,295 ¥ — ¥567,191Intersegment sales and transfer 2,465 6,489 161 (9,115) —

Total 320,915 147,935 107,456 (9,115) 567,191Operating costs and expenses 310,631 160,116 99,471 (9,044) 561,174

Operating income (loss) ¥ 10,284 ¥ (12,181) ¥ 7,985 ¥ (71) ¥ 6,017

Assets ¥295,377 ¥138,993 ¥107,884 ¥64,753 ¥607,007Depreciation expense 7,356 2,672 5,334 (46) 15,316Impairment losses on fixed assets 895 8 — — 903Capital expenditures 9,844 4,249 8,436 (148) 22,381

Year ended March 31, 2007



Operating income (loss) ¥ 11,521 ¥ (8,348) ¥ 10,083 ¥ (7) ¥ 13,249

Assets ¥281,034 ¥158,575 ¥129,900 ¥55,524 ¥625,033Depreciation expense 5,372 3,359 4,142 (31) 12,842Capital expenditures 8,540 2,483 6,941 (47) 17,917

The Group changed the segmentation of wind power generation business and cooling and water supplysystems for nuclear power plants from the Environmental Engineering Group to the Fluid Machinery &Systems Group at the beginning of the fiscal year ended March 31, 2008 to optimize the Group from anoverall perspective and restructure its organization. Figures for the year ended March 31, 2007 under newsegmentation are as follows:

Millions of yenFluid Machinery Environmental Precision Elimination and

Year ended March 31, 2007 & Systems Engineering Machinery corporate Consolidated



Operating income (loss) ¥ 10,592 ¥ (7,444) ¥ 10,083 ¥( 18 ¥ 13,249

Assets ¥299,698 ¥139,910 ¥129,900 ¥(55,525) ¥625,033Depreciation expense 6,065 2,666 4,142 (31) 12,842Capital expenditures 8,680 2,343 6,941 (47) 17,917

14. Segment Information



Thousands of U.S. dollarsFluid Elimination

Machinery Environmental Precision andYear ended March 31, 2008 & Systems Engineering Machinery corporate Consolidated

Sales to third parties $3,178,461 $1,411,777 $1,070,915 $ — $5,661,153Intersegment sales and transfer 24,603 64,767 1,607 (90,977) —

Total 3,203,064 1,476,544 1,072,522 (90,977) 5,661,153Operating costs and expenses 3,100,419 1,598,123 992,824 (90,269) 5,601,097

Operating income (loss) $ 102,645 $ (121,579) $ 79,698 $ (708) $ 60,056

Assets $2,948,169 $1,387,294 $1,076,794 $646,302 $6,058,559Depreciation expense 73,421 26,669 53,239 (459) 152,870Impairment losses on fixed assets 8,930 83 — — 9,013Capital expenditures 98,253 42,410 84,200 (1,477) 223,386

Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulatedin the revised corporate tax regulations, and that are acquired on or before March 31, 2007, andhave been fully depreciated to the limit prescribed in previous corporate tax provisions. Beginningwith the year following depreciation to the limit of 5% of the original value, the difference betweenthe remaining value of such assets and a hypothetical reminder value will be depreciated in equalamounts over a five-year period. As a result of these adoptions, operating income of the FMSGroup was ¥540 million less than, the PM Group was ¥336 million less than, and the operatingloss of the EE Group was ¥119 million larger than the previous method of calculation.

Geographical segment information of the Company and consolidated subsidiaries for theyears ended March 31, 2008 and 2007, is as follows:

Millions of yenElimination

andYear ended March 31, 2008 Japan North America Other corporate Consolidated

Sales to third parties ¥457,448 ¥64,142 ¥45,601 ¥ — ¥567,191Intersegment sales and transfer 17,706 9,488 6,467 (33,661) —


Operating income (loss) ¥ (3,987) ¥ 5,228 ¥ 4,957 ¥ (181) ¥ 6,017

Assets ¥512,030 ¥55,328 ¥48,295 ¥ (8,646) ¥607,007

Millions of yenElimination


Sales to third parties ¥440,576 ¥61,957 ¥35,565 ¥ — ¥538,098Intersegment sales and transfer 20,173 4,820 6,042 (31,035) —


Operating income ¥ 8,671 ¥ 2,603 ¥ 2,991 ¥ (1,016) ¥ 13,249

Assets ¥537,849 ¥55,847 ¥40,240 ¥ (8,903) ¥625,033

Thousands of U.S. dollarsElimination


Sales to third parties $4,565,805 $640,203 $455,145 $ — $5,661,153Intersegment sales and transfer 176,724 94,700 64,548 (335,972) —

Total 4,742,529 734,903 519,693 (335,972) 5,661,153Operating costs and expenses 4,782,323 682,722 470,217 (334,165) 5,601,097

Operating income (loss) $ (39,794) $ 52,181 $ 49,476 $ (1,807) $ 60,056

Assets $5,110,590 $552,231 $482,034 $ (86,296) $6,058,559


Accompanying the revision of Japan’s Corporate Tax Law, beginning with the current fiscal year,tangible fixed assets acquired on April 1 or later are depreciated according to methods stipulatedin the revised corporate tax regulations, and that are acquired on or before March 31, 2007, andhave been fully depreciated to the limit prescribed in previous corporate tax provisions. Beginningwith the year following depreciation to the limit of 5% of the original value, the difference betweenthe remaining value of such assets and a hypothetical reminder value will be depreciated in equalamounts over a five-year period. As a result of these adoptions, the operating loss in Japan was¥996 million larger than this loss would have been under the previous method of calculation.

Overseas sales of the Company and consolidated subsidiaries for the years ended March 31,2008 and 2007, are as follows:

Millions of yen

Year ended March 31, 2008 Asia North America Other Total

Overseas sales ¥83,803 ¥38,755 ¥90,214 ¥212,772Consolidated net sales 567,191Ratio of overseas sales to consolidated net sales 14.8% 6.8% 15.9% 37.5%

Millions of yen


Overseas sales ¥63,950 ¥38,589 ¥64,523 ¥167,062Consolidated net sales 538,098Ratio of overseas sales to consolidated net sales 11.9% 7.2% 12.0% 31.0%

Thousands of U.S. dollars


Overseas sales $836,441 $386,815 $900,429 $2,123,685Consolidated net sales 5,661,153Ratio of overseas sales to consolidated net sales 14.8% 6.8% 15.9% 37.5%

Appropriation of unappropriated retained earningsThe following appropriation of unappropriated retained earnings for the year ended March 31, 2008,was approved at the general meeting of shareholders of the Company held on June 27, 2008:

Thousands ofMillions of yen U.S. dollars

Cash dividends ¥3,169 $31,629

Reversal of special retirement allowanceThe operating environment for EBARA’s Environmental Engineering (EE) Company is challengingbecause of the reduction in the Japanese government’s public works investments. EBARA isworking to restructure the activities of the EE Company and reduce the size of its operations to alevel that is appropriate for the current size of the market. As part of these restructuring activities,EBARA has instituted a system to provide special benefits to employees taking early retirement.

To implement this early retirement system, EBARA estimated special retirement costs underthis system and set aside a reserve for special retirement allowances of ¥1,500 million at the endof the fiscal year ended March 31, 2008; however, through June 13, 2008, which was the end ofthe period for applying for early retirement benefits, 93 employees had applied. As a result, thefinal figure for special retirement costs was reduced to ¥712 million and a reversal of the specialretirement allowance reserve in the amount of ¥787 million, representing the difference betweenthe estimated amount and the confirmed amount to be paid to employees taking early retire-ment, will be reported in the current fiscal year.

15. Subsequent Event



Report of Independent Certified Public Accountants

To the Board of Directors of EBARA CORPORATION

We have audited the accompanying consolidated balance sheets of EBARA CORPORATION and its consolidated subsidiaries as

of March 31, 2008 and 2007, and the related consolidated statements of income, net assets and cash flows for each of the three

years in the period ended March 31, 2008, stated in yen. These financial statements are the responsibility of the Company’s man-

agement; our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits of these statements in accordance with auditing standards generally accepted in Japan, which

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating

the overall financial statement presentation. We believe that our audits provide reasonable basis for our opinion.

In our opinion, the consolidated financial statements examined by us present fairly the financial position of EBARA CORPORA-

TION and its consolidated subsidiaries as of March 31, 2008 and 2007, and the results of their operations and their cash flows

for each of the three years in the period ended March 31, 2008, in conformity with accounting principles generally accepted in

Japan applied on a consistent basis.

(1) As described in Note 3, effective for the year ended March 31, 2008, the Company applied early the new accounting stan-

dards for valuation of inventories.

(2) As described in Note 15, in the current fiscal year, the Company will reverse the special retirement allowance reserve in the

amount of ¥787 million.

The U.S. dollar amounts in the consolidated financial statements have been translated for convenience only on the basis

described in Note 4.

HIJIRIBASHI AUDIT CORPORATION

Tokyo, Japan

June 27, 2008


EBARA Global Network (As of April 30, 2008)

Italy Office Via Pacinotti 32, 36040 Brendola (Vicenza), ItalyPhone: 39-0444-706-857Fax: 39-0444-706-950Beijing Office 2001 Beijing Fortune Bldg., 5 Dong Sanhuan Bei-Lu, Chaoyang District, Beijing 100004, China Phone: 86-10-6590-8150 Fax: 86-10-6590-8158 Bangkok Office 3rd Floor, ACME Bldg., 125 Petchburi Road, Thungphayathai, Rajthevee, Bangkok 10400,Thailand Phone: 66-2-216-4935/4936 Fax: 66-2-216-4937

Manila Branch Unit 1-C, Cypress Gardens Condominiums, 112 V.A.Rufino St., Legaspi Village, Makati City, Philippines Phone: 63-2-816-7524 Fax: 63-2-817-6662 Taipei Office Room 1402, Chia Hsin Bldg. (13F) 96, Sec. 2, Chung Shan N. Rd.,Taipei, TaiwanPhone: 886-2-2567-1310Fax: 886-2-2567-1046Ebara Middle East P.O. Box 61383, Jebel Ali Dubai, UAE Phone: 971-4-8838-889 Fax: 971-4-8835-307

Zurich Representative OfficeThurgauerstr. 40, 8050 Zurich, SwitzerlandPhone: 41-44-307-3527Fax: 41-44-307-3526Cairo Representative Office27, El-Geziera El-Wosta Street, Zamalek, Cairo, EgyptPhone: 20-2-736-3466Fax: 20-2-736-2499Ho Chi Minh City Representative OfficeSun Wah Tower, Unit 1607, 115 Nguyen Hue St., Dist. 1, Ho Chi Minh City,VietnamPhone: 84-8-821-9910Fax: 84-8-821-9911

PRINCIPAL SUBSIDIARIES AND AFFILIATED COMPANIES ✩ Consolidated subsidiary

DOMESTIC

Fluid Machinery & Systems Company✩ EBARA DENSAN LTD.

Engineering and manufacture of electrical and electronic equipment

✩ Ebara Techno-serve Co., Ltd.Maintenance services Sale of standard pumps

✩ Ebara Shinwa Ltd.Manufacture of cooling towers

✩ Ebara Material Co., Ltd.Manufacture of cast products

✩ Ebara Yoshikura Hydro-Tech Co., Ltd.Manufacturing and sales of pumps for industrial use,installation of industrial equipment, and plant-relatedconstruction

✩ EBARA HAMADA BLOWER CO., LTD.Manufacture of industrial fans and machines

✩ Ebara Environmental Technologies Hokkaido Co., Ltd.

Design and engineering of machines and facilities✩ Ebara-Byron Jackson, Ltd.

Sale and maintenance of pumps for nuclear power plants✩ Ebara Refrigeration Equipment

& Systems Co., Ltd.Manufacture, sale, installation, maintenance, and trialoperation of, as well as technical guidance for, chillersand heat-exchange systems

✩ EBARA KIDEN CO., LTD.Manufacturing and sales of pump motors and relatedequipment; manufacturing, sales, and service for equip-ment supplied to the rental industry

✩ ECO Power Co., Ltd.Sale and engineering of wind power generation systems

✩ Elliott Ebara Turbomachinery CorporationDesign, manufacture, sale, construction, and installationof compressors, turbines, and blowers

E-Square Co., Ltd.Sale of electric power

Pacific Machinery and Engineering Co., Ltd. Manufacture and sale of special-purpose pumps,including slurry pumps, facilities for transportation of liquid, and powder processing equipment

Environmental Engineering Company✩ Ebara Engineering Service Co., Ltd.

Maintenance of environmental facilities✩ EBARA INDUSTRIAL CLEANING CO., LTD.

Chemical cleaning and decontamination of power plants✩ Aqua Engineering Co., Ltd.

Engineering of water treatment equipment✩ Nissetsu Co., Ltd.

Engineering and construction of air-conditioning,sanitation, and electric supply equipment

✩ Ebara Environmental Engineering CorporationDesign, implementation, and operational maintenance aswell as supervision for environment-related equipment

Chubu Recycle Co., Ltd.Melting and reuse of incinerator ash and fly ash

Clean System CorporationProcessing and recycling of industrial and householdwaste

Precision Machinery Company✩ Ebara Field Tech. Corporation

After-sales service of products for semiconductors✩ Ebara Kyushu Co., Ltd.

Manufacture of systems for semiconductors

Corporate✩ Ebara Research Co., Ltd.

Technical research and development services✩ Ebara Agency Co., Ltd.

Internal agency service for insurance, travel,printing, and real estate

✩ Ebara Shohnan Sports Center Inc.Management of sports club

✩ Ebara Meister Co., Ltd.Temporary staff agency

✩ Ebara Ballard CorporationManufacture, sale, and maintenance of power systems(stationary fuel cells)

ECE Co., Ltd.Development, manufacture, and sale of function materialsmaking use of radioactive grafting technology

IT Engineering LimitedConsultation of integrated IT systems and developmentand operational support of business management,operational management, and engineering systems

OVERSEAS

Fluid Machinery & Systems Company✩ Ebara Industrias Mecánicas e Comércio Ltda.

Manufacture and sale of pumps Rua Joaquim Marques de Figueiredo 2-31,Bauru, São Paulo, Brazil Phone: 55-14-3103-0000Fax: 55-14-3103-0044✩ Ebara Pumps Europe S.p.A.

Manufacture and sale of pumps Via Campo Sportivo 30, 38023,Cles (Trento), Italy Phone: 39-0463-660411Fax: 39-0463-422782 ✩ Sumoto S.r.l.

Manufacture and sale of deep well motorsVia Peripoli 1/3, 36041 Montecchio Maggiore,Vicenza, ItalyPhone: 39-0444-490515Fax: 39-0444-490518✩ Ebara Engineering Singapore Pte. Ltd.

Sale of Ebara products, engineering and construction,and sale and after-sales service of products for semiconductors

No. 1 Tuas Link 2, Singapore 638550Phone: 65-6862-3536 Fax: 65-6861-0589 ✩ Ebara Benguet, Inc.

Manufacture of castings Canlubang Industrial Estate, Cabuyao 4025, Laguna, Philippines Phone: 63-49-549-1806Fax: 63-49-549-1915✩ Elliott Ebara Company Ltd.

Holding company for the Elliott Group (with ElliottCompany and Ebara Elliott as subsidiaries)

901 North Fourth Street, Jeannette, PA 15644, U.S.A.Phone: 1-724-527-2811Fax: 1-724-600-8525✩ Yantai Ebara Air Conditioning

Equipment Co., Ltd. Manufacture and sale of chillers

720 Yongda Road, New & Hi-Tech Industry Zone, Fushan,Yantai, Shandong, ChinaPhone: 86-535-6322300 Fax: 86-535-6321078

OVERSEAS OFFICES



✩ Ebara Great Pumps Co., Ltd.Design, manufacture, and sale of process pumps, high-pressure pumps, and peripheral equipment

North Industrial Zone, Phase II, Ruian, Zhejiang 325204, ChinaPhone: 86-577-6532-2287Fax: 86-577-6532-3555✩ Ebara International Corporation

Manufacture and sale of pumps 350 Salomon Circle, Sparks, NV 89434, U.S.A. Phone: 1-775-356-2796Fax: 1-775-356-2884✩ Elliott Company

Design, manufacture, and sale of air and gas turbo-compressors and steam turbines

901 North Fourth Street, Jeannette, PA 15644, U.S.A. Phone: 1-724-527-2811Fax: 1-724-600-8525✩ Ebara-Elliot Service (Taiwan) Co., Ltd.

Maintenance and repair of turbo-compressors1, Road 42, Industrial Zone, Taichung City, TaiwanPhone: 886-4-2359-4202Fax: 886-4-2359-5510✩ Elliott Ebara Singapore Pte. Ltd.

After-sales services for Elliott products, including salesof parts, dispatching of service/training personnel,repairs, and inspection

29 International Business Park, #04-05, Acer Building Tower B, Singapore 609923Phone: 65-6563-6776Fax: 65-6563-1387Ebara España Bombas S.A.

Manufacture and sale of industrial and standard pumps C/Cormoranes nR 6y8, Poligono Industrial La Estacio, 28320, Pinto (Madrid), Spain Phone: 34-91-692-3630Fax: 34-91-691-0818Ebara (Thailand) Limited

Sale of Ebara products, engineering, and construction 3rd Floor, ACME Bldg., 125 Petchburi Road,Thungphayathai, Rajthevee, Bangkok 10400,Thailand Phone: 66-2-216-4935 Fax: 66-2-216-4937 P.T. Ebara Indonesia

Manufacture and sale of pumps Jl. Raya Jakarta-Bogor KM. 32, Desa Curug,Cimanggis-Bogor, Jawa Barat, Indonesia Phone: 62-21-8740852 Fax: 62-21-8740033 Ebara Hai Duong Company Ltd.

Manufacture and sale of pumps Nguyen Trai Road, Hai Duong City, Hai DuongProvince, Vietnam Phone: 84-320-850182Fax: 84-320-850180 Ebara Pumps Malaysia Sdn. Bhd.

Sale and service of pumps and chillers 20, Jalan Juruhebah U1/50,Temasya Industrial Park,40150 Shah Alam, Selangor, MalaysiaPhone: 60-3-5569-1655Fax: 60-3-5569-3766Ebara-Densan Taiwan Manufacturing Co., Ltd.

Manufacture of electrical submergible motors and after-sales service of products for semiconductors

No. 7 Nan-Yuen 2nd Road, Chung Li City,Tao Yuen Hsien, Taiwan Phone: 886-3-451-5881 Fax: 886-3-452-7904 Ebara Machinery (China) Co., Ltd.

Manufacturing, sales, and service for standard pumpsand related equipment in China

Beizang Cun Countryside Tiangon, Industry Area,Daxing Xian, Beijing 102609, ChinaPhone: 86-10-6027-5167Fax: 86-10-6027-5163

Ebara Densan (Kunshan) Mfg. Co., Ltd.Manufacture and sale of submergible motors andpumps

No. 521, Qingyangbeilu, Zhoushi-Countryside, Kunshan City, Jiangsu Province, ChinaPhone: 86-512-5762-6121Fax: 86-512-5762-6125Ebara Boshan Pumps Co., Ltd.

Design, manufacturing, and sales of large-scale pumpsand high-pressure pumps in China

No. 7 Kaifaqu North Road,New and High Technology Zone,Zibo City, Shandong Province 255086, ChinaPhone: 86-533-3919555Fax: 86-533-3919567Ebara Pumps Australia Pty. Ltd.

Sale of standard pumps2 Diligent Drive, Bayswater, VIC 3153, AustraliaPhone: 61-3-9738-1530Fax: 61-3-9738-1540Hyosung-Ebara Co., Ltd.

Manufacture and sale of pumps 450, Kongduk-Dong, Mapo-ku,Seoul 121-720, Republic of Korea Phone: 82-2-707-6972Fax: 82-2-711-5501 Kirloskar Ebara Pumps Limited

Manufacture and sale of process pumps Pride Kumar Senate Building, Senapati Bapat Road,Pune 411016, India Phone: 91-20-25600151Fax: 91-20-25600351Ebara Pump Industries (P.J.S.)

Sale of standard pumps No. 8 Mohamadian Alley, Aliakbari St.,Motahari Ave., Tehran 15766, IranPhone: 98-21-88743913Fax: 98-21-88742608

Environmental Engineering Company✩ Ebara Qingdao Co., Ltd.

Manufacture of boilers 1 Banghai Rd., Sifang Qingdao, Shandong Province, China Phone: 86-532-84862975Fax: 86-532-84862983P.T. Ebara Prima Indonesia

Manufacture and sale of activated carbon Kawasan Industri Modern Cikande, Jl. Modern Industri,1 No. 12 Cikande, Serang, Jawa Barat, Indonesia Phone: 62-254-402184Fax: 62-254-401950Ebara Vietnam Corporation

Engineering and construction of environmental facilities13th Floor, Tung Shing Square, 2 Ngo Quyen Street, Hoan Kiem District, Hanoi City, VietnamPhone: 84-4-934-9601Fax: 84-4-934-9617Shanghai Ebara Engineering and Services Co., Ltd.

Engineering and construction of environmental facilities D-308 Room, Oriental International Plaza 85,Loushanguan Rd., Shanghai 200336, China Phone: 86-21-6208-2211Fax: 86-21-6208-6195Qingdao Ebara Rebirth Resource Power Co., Ltd.

Sale of electric power from ICFBs making use of flyash raw materials and production and sale of steam

183 Changcheng Road, Jiaonan, Shandong, ChinaPhone: 86-532-618-1937Fax: 86-532-618-1251Hyosung Ebara Engineering Co., Ltd.

Engineering and construction of environmental facilities Bangbae B/D 7F, 1006-2, Bangbae-Dong,Seocho-Gu, Seoul 137-850, Republic of Korea Phone: 82-2-707-5800Fax: 82-2-707-5888

Precision Machinery Company✩ Ebara Precision Machinery Europe GmbH

Sale and after-sales service of products forsemiconductors

Rodenbacher Chaussee 6, D-63457 Hanau, GermanyPhone: 49-6181-1876-0 Fax: 49-6181-1876-40 ✩ Ebara Precision Machinery Korea

IncorporatedSale and after-sales service of products forsemiconductors

20 FL, Kangnam Bldg., 1321 Seocho-dong, Seocho-ku, Seoul, Republic of Korea Phone: 82-2-581-6901 Fax: 82-2-581-4211✩ Ebara Precision Machinery Taiwan

IncorporatedSale and after-sales service of products forsemiconductors

Room No. 1402, No. 96. Chungshan N. Rd., Sec. 2, Taipei, Taiwan Phone: 886-2-2560-1166Fax: 886-2-2560-1177✩ Ebara Technologies Incorporated

Manufacture and sale of products for semiconductors 51 Main Avenue, Sacramento, CA 95838, U.S.A.Phone: 1-916-920-5451Fax: 1-916-925-6654Shanghai Ebara Precision Machinery Co., Ltd.

Sale and after-sales service of products for semiconductors

Zhangjiang High-Tech Park, No. 76, Lane 887,Zuchongzhi Road, Shanghai 201203, ChinaPhone: 86-21-5131-7008 Fax: 86-21-5131-7048

Corporate✩ Ebara America Corporation

Finance, investment, and holding2157-H O’Toole Avenue, San Jose, CA 95131, U.S.A.Phone: 1-408-434-1008Fax: 1-408-434-1994


EBARA History Resolute Commitment to Research and Development

1912 Inokuchi Type Machinery Office founded Issey Hatakeyama was appointed general manager, under the supervision of Ariya Inokuchi, professor of Tokyo Imperial University.

1920 EBARA CORPORATION established A plant was constructed near Shinagawa, Tokyo, marking the establishment of the Company, which assumed the responsibilities of the Inokuchi TypeMachinery Office and began manufacturing centrifugal pumps.

1938 New plant built in Haneda The head office and manufacturing operations shifted from Shinagawa to the new facility in Haneda.

1941 New plant built in Kawasaki The new plant began manufacturing machine tools according to the Machine Tool Manufacturing Law.

1945 Haneda Plant damaged in war All operations, except a pump testing facility, fabrication & welding shop, and main building, deemed no longer functional. As a result, production was transferred to the Kawasaki Plant.

1955 Haneda Plant reopens The Haneda Plant was resurrected to spearhead the Company’s manufac-turing operations.

1956 Ebara-Infilco Co., Ltd., established A 50-50 joint venture between EBARA CORPORATION and Infilco Inc., of the United States, was set up to manufacture water treatment equipment.

1964 Bangkok Office opened EBARA’s first post-WWII overseas sales office

1965 Fujisawa Plant opened The first facility in Japan to mass-produce standard pumps, ittook over the production of chillers from the Haneda Plant.

1971 Central Research Institute established within Fujisawa Plant complex

1972 Ebara-Infilco Central Research Institute established

1975 Ebara Indústrias Mecánicas e Comércio Ltda. EBARA’s first overseas production facilityestablished in Brazil

Sodegaura Plant opened To manufacture mainly compressors and turbines

1981 Ebara International Corporation established in Pump business base in North Americathe United States

1984 Ebara Research Co., Ltd., established Set up to assume and expand the functions of the EBARA and Ebara-Infilcocentral research institutes

1985 Kawasaki Plant integrated into Fujisawa Plant

1987 No. 1 precision machining facility established Vacuum equipment production for the semiconductor manufacturing at Fujisawa Plant industry commenced

1989 Ebara Italia S.p.A. established To manufacture stainless steel standard pumps

1990 Environment Business Division established To strengthen EBARA’s environmental engineering capabilities

1991 Sodegaura Chemical Plant opened

1992 Ebara Qingdao Co., Ltd., established in China To manufacture various types of boilers

1994 Company merged with Ebara-Infilco

2000 Ebara Techno-serve Co., Ltd., established Combined sales and maintenance services for the standard pumps business New Elliot Corporation became a wholly For expansion of compressor and turbine businessowned subsidiary

2002 Global Marketing & Sales Group established

2005 In-house company system introduced Former operating groups realigned under Corporate, which will function as theHead Office, with three core in-house companies (Fluid Machinery & SystemsCompany, Environmental Engineering Company, and Precision MachineryCompany) and one strategic company (New and Renewable Energy Company)

Ebara Boshan Pumps Co., Ltd., established To act as a manufacturing and sales base in China for large-scale pumps and in China high-pressure pumps

2006 Ebara Environmental Engineering Corporation The domestic water and sewage processing department was split off as a established separate company.



Corporate Data (As of March 31, 2008)

EBARA CORPORATION

Head Office 11-1, Haneda Asahi-cho, Ohta-ku, Tokyo 144-8510, Japan Phone: 81-3-3743-6111 Fax: 81-3-5736-3100

Date of Foundation November 1912

Number of Employees (Consolidated)16,074

Paid-in Capital ¥61,284 million

Common Stock Issued and outstanding: 422,725,658 shares

Number of Shareholders 55,894

Securities Traded Tokyo Stock Exchange and Sapporo Securities Exchange

Transfer Agent and Registrar The Chuo Mitsui Trust and Banking Company, Limited33-1, Shiba 3-chome, Minato-ku, Tokyo 105-8574, Japan

Auditor Hijiribashi Audit Corporation (Ernst & Young Shin Nihon will become thecompany auditor as of June 27, 2008, the date of the Company’sOrdinary General Meeting of Shareholders.)

Major Shareholders (% of total) JP Morgan Chase Bank 380055 7.0The Master Trust Bank of Japan, Ltd. (Trust Account) 4.1Nippon Life Insurance Company 4.0Mizuho Corporate Bank, Ltd. 2.4Japan Trustee Service Bank, Ltd. (Trust Account) 2.3The Chase Manhattan Bank N.A. London S.L., Omnibus Account 2.0Bank of Tokyo-Mitsubishi UFJ, Ltd. 1.7EBARA CORPORATION Employee Shareholders 1.4Deutsche Bank Securities Co., Ltd. 1.3State Street Bank and Trust Company 505041 1.2

COMPOSITION OF SHAREHOLDERS

Securities Companies3.4%Other Domestic

Corporations6.4%

Financial Institutions25.5%

Individualsand Others

38.6%

Foreign Corporations and Individuals26.1%

0

500

1,000

1,500

2,000

0

5,000

10,000

15,000

20,000

4/07 6/07 8/07 10/07 12/07 2/0812/06 2/07

EBARA Stock Price (Yen) Nikkei Average (Yen)

Nikkei AverageEBARA Stock PriceEBARA Stock Turnover (Thousand shares)

100,000

200,000

4/06 6/06 8/06 10/0610/05 12/05 2/06 0

STOCK PRICE RANGE AND TURNOVER

EBARA CORPORATIONHead Office

11-1, Haneda Asahi-cho, Ohta-ku,

Tokyo 144-8510, Japan

Phone: 81-3-3743-6111

Fax: 81-3-5736-3100

Internet home page: http://www.ebara.co.jp

E-mail: [email protected]

Printed in Japan on recycled paper using soybean-oil ink

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