Notice of the 147th Ordinary General Meeting of Shareholders. Table of Contents

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1 Notice of the 147th Ordinary General Meeting of Shareholders Table of Contents Notice of the 147th Ordinary General Meeting of Shareholders... 1 [Attached Papers] Business Report for the 147th Period Condition of the Corporate Group Common Stock Warrants to Purchase New Shares, etc Corporate Officers Independent Audit Company The Company s Systems and Policies Consolidated Financial Statements Consolidated Balance Sheet Consolidated Statement of Income Consolidated Statement of Changes in Net Assets Notes to the Consolidated Financial Statements Non-consolidated Financial Statements Non-consolidated Balance Sheet Non-consolidated Statement of Income Non-consolidated Statement of Changes in Net Assets Notes to the Non-consolidated Financial Statements Audit Reports Copy of the Report of Independent Auditors on Consolidated Financial Statements (translation) Copy of the Report of Independent Auditors (translation) Copy of the Board of Corporate Auditors Report (translation) [Reference Document for the Ordinary General Meeting of Shareholders] Proposals and references Proposal Proposal Proposal

2 (Translation) Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. To Those Shareholders with Voting Rights Securities Code: 6361 June 7, 2012 Natsunosuke Yago President and Representative Director EBARA CORPORATION 11-1, Haneda Asahi-cho, Ohta-ku, Tokyo Japan Notice of the 147th Ordinary General Meeting of Shareholders We hereby inform you of the 147th Ordinary General Meeting of Shareholders of Ebara Corporation to be held as follows: If you are unable to attend the meeting, please study the attached Reference Document for the Ordinary General Meeting of Shareholders, and you are requested to exercise your voting rights in either of the following methods by 5:15 p.m. on Wednesday, June 27, [Exercise of voting rights in writing] Please indicate your approval or disapproval of the respective items for resolution and return the enclosed Voting Rights Exercise Form so that it will reach us by the exercise deadline. 1. Date and Time: 10 a.m., Thursday, June 28, 2012 (Reception of attendees will begin at 9:15 a.m.) 2. Location: Large Hall, Ohta Kumin Hall Aprico 37-3, Kamata 5-chome, Ohta-ku, Tokyo 3. Purpose of the Meeting: Matters to be reported: 1. The Business Report and the Consolidated Financial Statements for the 147th Fiscal Year (from April 1, 2011 to March 31, 2012) and the Report of the Results of the Audits of the Consolidated Financial Statements by the Accounting Auditors and the Board of Corporate Auditors 2. The Financial Statements for the 147th Fiscal Year (from April 1, 2011, to March 31, 2012) Matters to be resolved: Proposal 1: Appropriation of Surplus Proposal 2: Partial Amendment of the Articles of Incorporation of the Company Proposal 3: Election of Twelve (12) Directors 4. Decisions Regarding the Convocation of the Ordinary General Meeting of Shareholders If any shareholder has exercised his/her voting rights both by mailing the Voting Rights Exercise Form and via the electromagnetic method (the Internet), only the exercise of voting rights via the electromagnetic method (the Internet) shall be deemed effective. If any shareholder has exercised his/her voting rights several times via the electromagnetic method (the Internet), only the final execution shall be deemed as his/her effective exercise of voting rights. Notes: 1. For those attending, please present the enclosed Voting Rights Exercise Form at the reception desk on arrival at the meeting. 2. In case any circumstances require us to revise the attached documents and/or the Reference Document for the Ordinary General Meeting of Shareholders, the revised matter(s) will be immediately presented on the Company s Web site ( 3. On the day of the meeting, the Company will adopt the Cool Biz style (light clothing with no tie and no jacket) in order to cooperate in conserving electricity. We would appreciate it if you could come to the meeting wearing light clothing. 1

3 [Attached Papers] Business Report for the 147th Period (For the Period from April 1, 2011, to March 31, 2012) EBARA CORPORATION 1. Condition of the Corporate Group (1) Business Developments and Results 1 Overall Review of Operations During the fiscal year ended March 31, 2012, the business environment overseas was characterized by gradual improvement in economic conditions despite the persistence of high unemployment rates in the United States, declines in housing prices, and other factors. However, in Europe, economic growth decelerated because of the continuation of unsettled fiscal and monetary conditions there. In Asia, the economies of China and India, which had shown robust performance supported mainly by domestic demand, began to weaken. In Japan, investment by the public sector, which had been delayed by the effects of the Great East Japan Earthquake, began to show a recovery trend due to the positive effects of supplementary budgets, and private sector capital investment, which moved into a slump following the Great East Japan Earthquake, is also bottoming out, and the economy is showing moderate improvement. Amid these adverse economic conditions, the EBARA Group (the Group) launched a new three-year, medium-term management plan entitled E-Plan2013 covering the period through the year ending March 31, This plan is based on four policies: (1)Promoting regional production for regional supply in priority areas and establishing an optimally located production and supply system from a global perspective, (2)working to enter new markets by expanding core business domains, (3)aiming to optimize monozukuri (manufacturing) processes through scientific approaches, and (4)expanding the functions of the corporate headquarters in keeping with the globalization of business domains. The beginning of E-Plan2013 marks the start of EBARA s movement toward establishing a stronger and stabler business structure. As a consequence, sales in the Fluid Machinery & Systems (FMS) Company and the Precision Machinery (PM) Company increased, but operating income decreased in all business segments. Consolidated net sales for the fiscal year amounted to 412,076 million (an increase of 2.6% year on year), operating income for the fiscal year amounted to 23,266 million (decreased 26.2% year on year), ordinary income for the fiscal year amounted to 21,086 million (decreased 26.7% year on year) and net income for the fiscal year amounted to 2,889 million (decreased 89.7% year on year), as a result of the reporting of an extraordinary loss of 10,294 million in connection with the withdrawal from a business accompanying the concluding of an agreement to make a final transfer of a plant to the client in the InfraServ project in Germany and the reversal of deferred tax assets by 2,453 million with tax reform in the fiscal year The Company regards returning profits to shareholders as one of its most important tasks. In view of EBARA s performance and financial position during the fiscal year under review, it will pay a final cash dividend for the fiscal year of 5 per share. 2 Review by Business Segment Fluid Machinery & Systems In the FMS Company, in the pump business, demand expanded in overseas markets and led to an increase in the number of projects in the oil and gas as well as water infrastructure equipment industries, mainly in the Middle East. However, tough price competition continued due to the appreciation of the yen. In Japan, budgets in the public sector for pumps and other related equipment are on a declining trend, but the market for equipment for buildings in the private sector improved as the number of building starts continued above the level of the previous year. Amid these conditions, the FMS Company identified customer needs through its marketing activities by region and strengthened its systems, including its network of service and support bases. In the compressor and turbines business, as crude oil prices remained at a high level, the number of projects in the oil and gas market increased, but tough competition with European and U.S. companies for large projects continued. Amid these conditions, measures were taken to upgrade and expand the FMS Company s global sales and service networks. In the chillers business, although demand for high-efficiency electric-powered chillers increased in the domestic market, growth in the market as a whole was weak, while, on the other hand, sales performance continued to be favorable in the expanding Chinese market. Sales in the FMS Company for the fiscal year amounted to 286,089 million (an increase of 6.4% year on year). The segment income amounted to 15,578 million (a decline of 27.9% year on year). Environmental Engineering In the EE Company, construction and related activities rose to a scale above the average level in previous years 2

4 as public-sector investments related to operation and maintenance (O&M) of waste processing facilities rose along with construction work connected with recovery from the Great East Japan Earthquake. Although some new engineering, procurement, and construction (EPC) investments by the public sector were delayed by the earthquake, signs of gradual recovery appeared. In the midst of these conditions, the EE Company is further strengthening its capabilities to respond accurately to changes in the market environment and customer needs by integrating its capabilities for providing new plant construction (engineering, procurement, and construction, EPC) based on its technological capabilities, and the capabilities of its domestic network for providing operation and maintenance (O&M) services on a nationwide basis. Sales in the EE Company for the fiscal year amounted to 50,128 million (a decline of 3.0% year on year), but the segment secured income of 322 million (a decline of 65.8% year on year) despite additional losses on construction that were incurred in an overseas waste incineration plant project (the InfraServ project in Germany). Precision Machinery In the PM Company, in the semiconductor market demand for flash memories for use in high-performance cell phones and tablet-type mobile terminals increased over the course of the fiscal year, but investment plans of semiconductor manufacturers were postponed, thus leading to stagnation in demand for semiconductor manufacturing equipment. In the PM Company s customer markets other than semiconductor manufacturers, capital investment in the flat panel display, photovoltaic batteries, and LEDs remained stagnant. Amid these conditions, the PM Company continued its production innovation campaign in its manufacturing divisions, implementing measures to reduce lead times, increase productivity, and lower manufacturing costs. Through its service and support business global network, the PM Company worked to increase customer satisfaction by maintaining the stable operation of client equipment, offering proposals for making improvements in equipment to upgrade productivity, and providing other services. Sales in the PM Company for the fiscal year amounted to 68,373 million (an increase of 0.7% year on year). The segment income amounted to 6,594 million (a decline of 17.7% year on year). (2) Capital Expenditures Regarding investments, during the fiscal year the Group implemented capital investments amounting to 12,316 million. These were primarily for the expansion of production capability and the installation of equipment to enhance productivity. This figure for investment includes expenditures for the acquisition of intangible fixed assets and long-term prepaid expenses. Principal capital investments by business segment were as follows. Please note that these investment figures include inter-segment transactions. Fluid Machinery & Systems Investments were made primarily for the expansion of production capability and the amount of capital investment during the fiscal year was 7,272 million. Environmental Engineering This segment invested in equipment intended for the development of environment-responsive products. Investments by this segment totaled 440 million. Precision Machinery Investments were made principally for equipment intended for the development. Investments by this segment totaled 2,931 million. (3) Fund-Raising and Capital Resources During the fiscal year ended March 31, 2012, the Group raised funds through long-term borrowings amounting to 16,267 million and short-term borrowings totaling 7,315 million, including syndicated loan amounting to 15,000 million (executed on February 29, 2012). In addition, the Group repaid long-term borrowings amounting to 14,465 million and short-term borrowings totaling 5,978 million along with redemption of bonds with stock acquisition rights amounting to 20,000 million (matured on September 30, 2011). (4) Issues Being Addressed Based on the medium term management plan E-Plan 2013 which set the fiscal 2013 for the target year, the Group will continue to strengthen its management base and take this further to establish an even stronger and stabler business structure by strengthening global competitiveness in core businesses and strive unrelentingly to maximize the value of individual businesses. The Group pursues initiatives to increase the soundness of its financial position and address financial issues. These initiatives include reducing the balance of the Group s interest-bearing debt, increasing capital, and securing liquidity for its operations. Regarding the InfraServ project, agreement was reached with the client to make a final handover of the plant in 3

5 its present form, but, because the client is making use of project finance arrangements to finance this plant, the final handover will require the approval of the banks providing the financing. The client is currently in the process of conducting procedures to secure the approval of the members of the project finance bank syndicate. The Company watches the process and addresses this issue. As provided for in the sales contract for the land where EBARA s former Headquarters and its Haneda Plant were located, the area was handed over to Yamato Transport Co., Ltd. Subsequently, during the course of the construction of a logistics terminal by this company, slate fragments containing asbestos were discovered. This company has brought a lawsuit for compensation of damages due to defects as provided for under the contract for sale of the property. After investigating this matter, the Company has drawn the conclusion that the said slate fragments do not constitute defects under the contract. The Company has obtained a written legal opinion from a law office substantiating this view and will use this to assert the correctness of its position in this matter. To strengthen its corporate governance framework and ensure the highest standards of compliance, EBARA is structuring a corporate governance system appropriate for a company developing its business operations on a global basis. The objectives of this system are to secure transparency and objectivity in management. (5) Financial Results Fiscal Year (FY) Item Orders received (Millions of yen) Net Sales (Millions of yen) Net Income (Loss) (Millions of yen) Net Income (Loss) per Share (Yen) Total Assets (Millions of yen) 144th Period (FY ended March 31, 2009) 145th Period (FY ended March 31, 2010) 146th Period (FY ended March 31, 2011) 147th Period (FY under review) (FY ended March 31, 2012) 481, , , , , , , ,076 (13,113) 5,441 28,191 2,889 (31.04) , , , ,964 (6) Important Matters Related to the Parent Company and Subsidiaries 1 Matters Related to the Parent Company None applicable 2 Principal Subsidiaries (As of March 31, 2012) EBARA Capital Company Ownership Main Lines of Business Percentage (%) Manufacture and sale of electrical machinery and EBARA DENSAN LTD. 450 millions fixtures, and construction work for electrical machinery and instrumentation Sale, installation, test operation, adjustment and Ebara Techno-serve Co., Ltd. 450 millions maintenance for fluid machinery Ebara Refrigeration Equipment & Systems Co., Ltd. Elliott Ebara Turbomachinery Corporation Ebara Yoshikura Hydro-Tech Co., Ltd. EBARA HAMADA BLOWER CO., LTD. Ebara Environmental Plant Co., Ltd. 450 millions millions 100.0* 472 millions millions ,812 millions Ebara Field Tech. Corporation 100 millions 100.0* Ebara Agency Co., Ltd. 80 millions Ebara Pumps Europe S.p.A. 22,400 thousand Ebara International Corporation US$35,250 thousand 100.0* 4 Manufacture, sale, installation of refrigerators and cooling towers, and design and construction work of heat exchange systems, etc. Manufacture, sale, after-sales service of compressors, turbines and blowers Manufacture and sale of pumps for industrial use, and plant-related construction Manufacture, sale and after-sales service of industrial fans Design, construction work, operation and maintenance of waste processing systems Sale of dry vacuum pumps, sale, installation,test operation and after-sales service of CMP equipments Business support services, internal agency service for insurance, travel agency services Manufacture and sale of stainless pumps and metallic mold pumps Manufacture and sale of cryogenic submersible pumps and sale of standard pumps

6 Company Capital EBARA Ownership Percentage (%) Elliott Company US$ * Ebara Technologies Incorporated US$53,100 thousand 100.0* Yantai Ebara Air Conditioning Equipment Co., Ltd. 1,888 millions 60.0* Ebara Boshan Pumps Co., Ltd. US$19,475 thousand 72.3 Main Lines of Business Manufacture, sale and after-sales service of air and gas turbo-compressors and steam turbines Sale and after-sales service for dry vacuum pumps and CMP equipments Manufacture and sale of refrigerators and cooling towers Manufacture and sale of large-scale pumps and high pressure pumps Notes: 1. An asterisk (*) indicates a figure that includes indirect ownership. 2. Effective July 1, 2011, Elliott Ebara Turbomachinery Corporation changed its trade name to Elliott Group Holdings Co., Ltd., and all of its business operations were subsequently inherited by Elliott Ebara Turbomachinery Corporation, a newly established entity through demerger. 3. Effective July 1, 2011, the Company provided all of its shareholdings in Elliott Company to Elliott Group Holdings Co., Ltd. as in-kind capital contribution. 4. Effective March 23, 2012, Ebara Environmental Plant Co., Ltd. increased its capital through a rights issue to stabilize its financial base. 5. Effective April 1, 2012, the Company merged Ebara Techno-serve Co., Ltd. and Ebara Yoshikura Hydro-Tech Co., Ltd. 3 Principal affiliated company (As of March 31, 2012) Company Capital (Millions) EBARA Ownership Percentage (%) Swing Corporation (7) Principal Products (As of March 31, 2012) Main Lines of Business Design, installation, operation and maintenance of water treatment facilities and environmental and sanitary facilities Segment Fluid Machinery & Systems Environmental Engineering Precision Machinery Principal Products Pumps, blowers, compressors, turbines and freezer chillers Municipal waste processing plants and industrial waste incineration plants Vacuum pumps, CMP systems, plating systems, and other machinery and equipment used in the semiconductor manufacturing industry (8) Principal Business Offices and Factories (As of March 31, 2012) 1 EBARA CORPORATION Name Location Name Location Head Office Haneda District Ohta-ku, Tokyo Osaka Branch Kita-ku, Osaka Haneda South District Ohta-ku, Tokyo Hokkaido Branch Chuo-ku, Sapporo Futtsu District Futtsu, Chiba Tohoku Branch Miyagino-ku, Sendai Fujisawa District Fujisawa, Kanagawa Niigata Branch Chuo-ku, Niigata Sodegaura District Sodegaura, Chiba Chugoku Branch Naka-ku, Hiroshima Suzuka District Suzuka, Mie Shikoku Branch Takamatsu, Kagawa Kumamoto District Tamana-Gun, Kumamoto Kyushu Branch Chuo-ku, Fukuoka Chubu Branch Naka-ku, Nagoya 5

7 2 Principal Subsidiaries In Japan Overseas EBARA DENSAN LTD. Ebara Techno-serve Co., Ltd. Name Ebara Refrigeration Equipment & Systems Co., Ltd. Elliott Ebara Turbomachinery Corporation Ebara Yoshikura Hydro-Tech Co., Ltd. EBARA HAMADA BLOWER CO., LTD. Ebara Environmental Plant Co., Ltd Ebara Field Tech. Corporation Ebara Agency Co., Ltd. Ebara Pumps Europe S.p.A. Ebara International Corporation Elliott Company Ebara Technologies Incorporated Name Yantai Ebara Air Conditioning Equipment Co., Ltd. Ebara Boshan Pumps Co., Ltd. Location Ohta-ku, Tokyo Ohta-ku, Tokyo Ohta-ku, Tokyo Sodegaura, Chiba Chuo-ku, Tokyo Suzuka, Mie Ohta-ku, Tokyo Fujisawa, Kanagawa Ohta-ku, Tokyo Location Trento, Italy Nevada, U.S.A. Pennsylvania, U.S.A. California, U.S.A. Shandong, China Shandong, China 3 Principal affiliate company In Japan Swing Corporation Company Location Ohta-ku, Tokyo (9) Employees by Business Segment (As of March 31, 2012) Business Segment Number of Employees Change from the Previous Fiscal Year Fluid Machinery & Systems 10, Environmental Engineering 2, Precision Machinery 1, Corporate Departments, etc Total 14, (10) Principal Banks (As of March 31, 2012) Principal Lenders to the Group 6 Amount Lent (Millions of yen) Mizuho Corporate Bank, Ltd. 17,518 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 12,106 Development Bank of Japan Inc. 18,915 The Shoko Chukin Bank, Ltd. 4,600 Sumitomo Mitsui Banking Corporation 4,455 Resona Bank, Limited 3,850 Note: Apart from the above, a syndicated loan (total 42,562 million) exists.

8 2. Common Stock (As of March 31, 2012) (1) Number of shares authorized 1,000,000,000 (2) Total number of shares issued 4,22,899,658 (Change from previous year: -36,346,020) (Including 689,200 shares of Treasury stock) The treasury common stock of 36,520,020 was cancelled on June 30th according to Article 178 of the Corporation Law of Japan. (3) Paid-in capital 61,313,819,423 (Change from previous year: 29,754,000) (4) Number of shareholders 46,236 (Change from previous year: 204) (5) Principal Shareholders Name Number of Shares Held (thousands) Percentage against Total Shares Issued (%) The Master Trust Bank of Japan, Ltd. (Trust Account) 30, Japan Trustee Services Bank, Ltd. (Trust Account) 28, Mizuho Corporate Bank, Ltd. 10, Japan Trustee Services Bank, Ltd. (Trust Account 9) 8, PICTET AND CIE (EUROPE) S. A. 7, The Bank of Tokyo-Mitsubishi UFJ, Ltd. 7, EBARA CORPORATION Employee Shareholders 5, Nippon Life Insurance Company 5, Aioi Nissay Dowa Insurance Co., Ltd. 5, Mizuho Securities CO., Ltd 4, Notes: Treasury stock is eliminated from total number of shares issued in calculating the percentage. 3. Warrants to Purchase New Shares, etc. (As of March 31, 2012) (1) Warrants to purchase new shares issued in compensation for the execution of duties and held by the Company s Corporate Officers who were in office at the end of the fiscal year Name (Date of issuance) Warrants held by Corporate Officers Directors (excluding Outside Directors) [Note 1] Outside Directors Corporate Auditors [Note 2] Class and number of shares purchasable with rights [Note 3] Amount to be paid upon exercise of rights Period during which rights may be exercised Conditions for exercising rights 1st Stock Acquisition Rights November 5, (7 persons) 7 (1 person) Common stock of the Company 453,000 shares 1 per share July 1, 2011, to November 5, 2024 [Note 4(a),(b)] 2nd Stock Acquisition Rights September 28, (1 person) Common stock of the Company 3,000 shares 1 per share July 1, 2011, to November 5, 2024 [Note 4(a),(b)] 3rd Stock Acquisition Rights September 27, (8 persons) 3 (1 person) Common stock of the Company 648,000 shares 1 per share July 1, 2014, to June 30, 2026 [Note 4(a),(c),(d)] Notes: 1. Warrants held by Directors include those issued while they served as Executive Officers. 2. Warrants held by Corporate Auditors are those issued while they served as Executive Officers. 3. For each stock acquisition right, 1,000 shares of common stock of the Company will be issued. 4. The following are the conditions for exercise of the stock acquisition rights: (a) Holders of the stock acquisition rights can exercise the rights during the period in which they serve 7

9 as the Company s Directors and/or Executive Officers or within five years after their retirement. (b) If the Company s consolidated return on equity (ROE) actually achieved (hereinafter the actual achievement ) for the latest fiscal year that ends within two years since the rights were allotted for 1st Stock Acquisition Rights or within one year since the rights were allotted for 2nd Stock Acquisition Rights (hereinafter the latest year ) does not reach 8% (hereinafter the target achievement ), the number of exercisable rights shall be defined by multiplying the number of allotted rights by the degree of achievement which shall be the number obtained by dividing the actual achievement by the target achievement and not be less than 0.5. (c) If the Company s consolidated rate of return on invested capital (ROIC) actually achieved (hereinafter the actual achievement ) for the latest fiscal year that ends within three years since the rights were allotted (hereinafter the latest year ) reaches 8% (hereinafter the target achievement ), then all of the rights allotted may be exercised, but if the actual achievement does not reach the target achievement, the number of exercisable rights shall be defined by multiplying the number of allotted rights by the degree of achievement which shall be the number obtained by dividing the actual achievement by the target achievement and not be less than 0.5. (d) For holders of stock acquisition rights who retired from the office of Director or Executive Officer prior to the end of the latest year, the number of exercisable rights shall be defined by multiplying the number of exercisable rights determined as described in Note 4(c) by the rate of time in office which shall be the rate of months in office against the period from April 2012 to March However, this does not apply if the issuance number has already been adjusted. (2) Warrants to purchase new shares issued to the Company s Executive Officers and employees and the Corporate Officers and employees of the Company s subsidiaries in compensation for the execution of their duties during the fiscal year Warrants held Name (Date of issuance) The Company s Executive Officers (excluding the Company s Corporate Officers) The Company s employees Corporate Officers and employees of the Company s subsidiaries (excluding the Company s Corporate Officers and employees) Class and number of shares purchasable with rights [Note 1] Amount to be paid upon exercise of rights Period during which rights can be exercised Conditions for exercising rights 3rd Stock Acquisition Rights September 27, (22 persons) Common stock of the Company 967,000 shares 1 per share July 1, 2014, to June 30, 2026 [Note 2] Notes: 1. For each stock acquisition right, 1,000 shares of common stock of the Company will be issued. 2. The conditions for exercise of the stock acquisition rights are the same as Note 4(a), (c) and (d) of (1) Warrants to purchase new shares issued in compensation for the execution of duties and held by the Company s Corporate Officers who were in office at the end of the fiscal year. (3) Other matters related to warrants to purchase new shares, etc. At the end of the fiscal year under review, the following bonds with stock acquisition rights were outstanding (issued on September 25, 2006). Name of Issue Euroyen bonds, maturing in 2013, with stock acquisition rights Balance of Bonds with Stock Acquisition Rights Outstanding Class of Shares Purchasable with the Stock Acquisition Rights 20,000 million Common shares Conversion Price Date of Maturity Initial conversion price: 693 September 30,

10 4. Corporate Officers (1) Names and other information on Directors and Auditors (As of March 31, 2012) Name Position Assignment and important concurrent positions Natsunosuke Yago President and Representative Director Masayoshi Hirose Atsuo Suzuki Akihiro Ushitora Tetsuji Fujimoto Akira Itoh Director, Vice President Executive Officer Director, Senior Managing Executive Officer Director, Managing Executive Officer Director, Managing Executive Officer Director, Managing Executive Officer Manabu Tsujimura Director, Managing Executive Officer Toichi Maeda Director, Managing Executive Officer Tetsuya Yamamoto Director President, Environmental Engineering Company President and Representative Director, Swing Corporation President, Fluid Machinery & Systems Company Seiichi Ochiai Director Professor, Chuo Law School Vice President, Environmental Engineering Company President and Representative Director, Ebara Environmental Plant Co., Ltd. Responsible for Group Management, Finance & Accounting and Internal Control, General Manager, Group Management Department Responsible for Enterprise Risk Control, General Affairs & CSR Division Executive, Enterprise Risk Control Division Executive General Manager, Haneda Office President and Representative Director, Ebara Agency Co., Ltd. President, Precision Machinery Company Responsible for Technologies, R & D and Intellectual Property Head of Business Unit, Custom Pump Business Unit, Fluid Machinery & Systems Company Akio Mikuni Director Representative Director, Mikuni & Co., Ltd. Sakon Uda Director Professor, Kenichi Ohmae Graduate School of Business Full-Time Corporate Toshihiro Yamashita Auditor Akira Hashimoto Full-Time Corporate Auditor Professor, Graduate School of Professional Accountancy, Yoshihiro Machida Corporate Auditor Aoyama Gakuin University Outside Corporate Auditor, ÆON Mall Co., Ltd. Fumio Takahashi Corporate Auditor Certified Public Accountant Outside Corporate Auditor, Business Brain Showa-ota Inc. Attorney at Law Tadashi Urabe Corporate Auditor Outside Corporate Auditor, JPN Holdings Company, Limited Outside Corporate Auditor, JPN COLLECTION SERVICE CO.,LTD. Notes: 1. Four Directors, Tetsuya Yamamoto, Seiichi Ochiai, Akio Mikuni and Sakon Uda, are outside directors as specified in Article 2-15 of the Corporation Law of Japan. 2. Three Corporate Auditors, Yoshihiro Machida, Fumio Takahashi and Tadashi Urabe, are outside corporate auditors as specified in Article 2-16 of the Corporation Law of Japan. 3. Four Directors, Tetsuya Yamamoto, Seiichi Ochiai, Akio Mikuni and Sakon Uda, and three Corporate Auditors, Yoshihiro Machida, Fumio Takahashi and Tadashi Urabe, satisfy the qualification for the independent directors/corporate auditors stipulated by the Tokyo Stock Exchange and the Sapporo Securities Exchange. The Company has filed a required notification to both the exchanges for appointing Tetsuya Yamamoto and Seiichi Ochiai as its independent directors/corporate auditors. 4. Full-time Corporate Auditor, Akira Hashimoto has held the position of Division Executive of Finance & 9

11 Corporate Accounting Division of the Company, Corporate Auditor, Yoshihiro Machida is a specialist of audit and internal control, and Corporate Auditor, Fumio Takahashi is a certified public accountant. All the three individuals have respectable knowledge in finance and accounting. 5. Three Directors, Toichi Maeda, Akio Mikuni and Sakon Uda; Full-time Corporate Auditor, Akira Hashimoto; and two Corporate Auditors, Fumio Takahashi and Tadashi Urabe, were newly elected at the 146th Ordinary General Meeting of Shareholders held on June 24, 2011, and assumed their positions thereafter. 6 Two Directors, Kozo Nakao and Itaru Shirasawa, Full-time Corporate Auditor, Michihisa Hozumi, and two Corporate Auditors, Seigoh Hirayama and Yoshio Omori, completed their terms of service at the end of the 146th Ordinary General Meeting of Shareholders held on June 24, 2011, and retired from their positions. 7. The following changes in the status of Directors became effective on April 1, Name After Change Prior to Change Masayoshi Hirose Director Director, Vice President Executive Officer Atsuo Suzuki Director Director, Senior Managing Executive Officer 8. The Company has no special relationship with the organizations at which the outside directors and outside corporate auditors hold important concurrent positions. (2) Amount of Compensation Paid to Directors and Corporate Auditors 1 Amount of Compensation Paid to Directors and Corporate Auditors during the fiscal year Position Total Amount of Compensation, etc. Total Amount of Compensation, etc by items Base pay Bonus Stock options Directors (14) 293 million 233 million 59 million Outside Directors (4) 42 million 42 million Corporate Auditors (8) 80 million 80 million Outside Corporate 32 million 32 million Auditors (5) Notes: 1. The upper limit on base pay for Directors, set by a decision made at the 137th Ordinary General Meeting of Shareholders held on June 27, 2002, is 40 million per month. Directors and Executive Officers received only compensation of Directors and did not receive salaries of employee. 2. The upper limit on base pay for Corporate Auditors, set by a decision made at the 136th Ordinary General Meeting of Shareholders held on June 28, 2001, is 10 million per month. 3. The amount of stock options is the amount of expenses recorded on the financial statements of the financial year under review of stock acquisition rights issued to the Directors as stock-linked compensation in accordance with the resolutions at the 144th Ordinary General Meeting of Shareholders held on June 26, 2009 and at the 146th Ordinary General Meeting of Shareholders on June 24, More specifically, pursuant to the Accounting Standard for Share-based Payment (ASBJ Statement No. 8), based on the calculation of fair price of the stock options obtained from a third party organization, the fair price shall be evenly allocated to each fiscal year between the dates of allotment and exercise of rights to be recorded as expenses. 2 Policies regarding a decision on the content of compensation for individual Executive Officers a. Method of deciding the policies The policy regarding compensation for the Company s Directors is determined by a resolution of the Board of Directors, with reference to the results of discussions made by the Compensation Committee, over half of whose members consist of outside Directors. The policy on compensation for Corporate Auditors is decided through deliberation of the Board of Corporate Auditors. b. Outline of the policies The Company s remuneration system for Directors is high compatibility with the business performance of the Company and designed to encourage the execution and supervision of operations 10

12 in line with the Company s management philosophy and to strongly motivate them to achieve the medium- and long-term management targets (exclusion of outside Directors). Such remuneration consists of Basic Compensation, Performance-Linked Annual Bonus and Long-Term Incentives. The remuneration for Directors with higher positions and therefore greater responsibility for the performance of the Company is more linked to the business results of the Company. (a) The Basic Compensation is a fixed amount of monthly payment. The amount depends on whether the individual holds the right of representation and concurrent office, or the position of Executive Officer, but not the performance of the individual and the Company. (b) The Performance-Linked Annual Bonus focuses on accountability to stakeholders, including shareholders, and incentives for Corporate Officers. This is a profit-sharing type of bonus in that its resources depend on the profit of the Company and are allotted for the bonus payment according to the degree of achieving profit targets. (c) The Long-Term Incentives are designed to avoid shortsighted managerial acts and ensure agreement with the interests of shareholders, and therefore consist of share-based payment stock options that are linked to the Company s medium- and long-term performance and share prices. Under this stock option program, stock acquisition rights with restriction on transfer are allotted, for which the amount to be paid upon the exercise of the right is 1 per share. Outside Directors who are in a position independent from the execution of operations are paid the fixed-amount compensation. Corporate Auditors are paid the fix-amount compensation and the amount of remuneration for each Corporate Auditor is determined through discussions among the Corporate Auditors according to whether the auditor serves full-time or part-time, what degree of auditing duties he/she is assigned and other factors. (3) Matters Related to Outside Directors and Outside Corporate Auditors 1 Important other positions held concurrently and their relationship with the Company As stated in the table, (1) Names and other information on Directors and Auditors. 2 Specific relationships with major business partners and others None 3 Principal activities during the fiscal year under review i Attendance at Board of Directors meetings and Board of Corporate Auditors meetings and statements made: Outside Directors Name Tetsuya Yamamoto Seiichi Ochiai Attendance at Board of Directors meetings Attendance at Board of Corporate Auditors meetings 11 Status of statements 16/16 He attended the Board of Directors meetings, the Executive Committee meetings and CSR Committee meetings, and expressed his opinions from the view point of general management based on his extensive experience and knowledge of a corporate management at a listed company. 16/16 He attended the Board of Directors meetings, Executive Committee meetings and CSR Committee meetings, and expressed his opinions from the view point of legality of the execution of Directors duties based on his extensive knowledge and high-level insight as a university professor specializing in juristic research. Akio Mikuni 11/11 He attended the Board of Directors meetings, the Executive Committee meetings and CSR Committee meetings, and expressed his opinions from the view point of general management based on his extensive knowledge and high-level insight as a professional specializing in corporate ratings and financial market.

13 Outside Corporate Auditors Name Attendance at Board of Directors meetings Attendance at Board of Corporate Auditors meetings Status of statements Sakon Uda 11/11 He attended the Board of Directors meetings, Executive Committee meetings and CSR Committee meetings, and expressed his opinions from the view point of general management based on his extensive knowledge and high-level insight as a professional specializing in management strategy and a corporate management. Yoshihiro Machida Fumio Takahashi Tadashi Urabe 13/16 16/18 Based on his extensive knowledge as a professor of audits and internal controls, he expressed his opinions from the view point of audit issues of management and execution of the Director s duties. 11/11 13/13 Based on his extensive knowledge and high-level insight as a certified public accountant, he expressed his opinions about audit issues of management and performance of the Director s duties. 11/11 13/13 Based on his extensive knowledge and high-level insight as a lawyer, he expressed his opinions about audit issues of management and performance of the Director s duties. Note: As both Akio Mikuni and Sakon Uda were newly elected as Directors at the 146th Ordinary General Meeting of Shareholders held on June 24, 2011 and assumed the position on the same day, attendance only includes the Board of Directors meetings that were held after the date. As both Fumio Takahashi and Tadashi Urabe were newly elected as Corporate Auditors at the 146th Ordinary General Meeting of Shareholders held on June 24, 2011 and assumed the position on the same day, attendance only includes the Board of Directors meetings and the Board of Corporate Auditors meetings that were held after the date. ii. Company policies that were changed as a result of opinions expressed by Corporate Auditors None iii. Outline of their responses to the Company s violations of the law, etc.: None 4 Outline of the agreement to limit liability for damage The Company has entered into an agreement with them to limit their liability for damages as outlined under Article 423, Paragraph 1, of the Company Law in accordance with Article 427, Paragraph 1, of the Company Law. The limit of liability for damages under the agreement is the minimum liability amount stipulated under Article 425, Paragraph 1, of the Company Law. However, this limit will be applicable only when the performance of his duties giving rise to such responsibilities is recognized to have been carried out in good faith and with no gross negligence. 5 Amount of compensation received as director/auditor of a subsidiary of the Company during the fiscal year None 12

14 5. Independent Audit Company (1) Name of Independent Audit Company Ernst & Young ShinNihon LLC (2) Outline of Contracts Limiting Responsibility None (3) Amount of Compensation Paid to the Audit Company 1 Compensation to be paid by the Company to the Audit 109 million Company 2 Other monetary and other payments to be paid by the 159 million Company and its subsidiaries Note: In the agreement between the Company and the Audit Company, the amount of compensation is determined as a lump-sum payment without breakdown for the audit in accordance with the Company Law and the Financial Instruments and Exchange Law. Accordingly, the amount shown above represents the total amount of compensation. (4) Description of Other Services Provided by the Independent Audit Company Special advisory for the evaluation of the financial reporting process and internal controls, etc. (5) Policy Regarding Dismissal or Nonrenewal of the Contract with the Independent Audit Company When it is recognized that the provisions of Article of the Company Law of Japan are applicable, the Board of Corporate Auditors will dismiss the independent audit company by unanimous approval. In other cases, when it is recognized that the independent audit company has not maintained its qualifications and independence, a proposal for the dismissal or nonrenewal of the independent audit company will be submitted to the General Meeting of Shareholders by the Directors with the approval of the Board of Corporate Auditors or at the request of the Board of Corporate Auditors. 6. The Company s Systems and Policies (1) Systems to Ensure that the Execution of Duties by Directors and Employees Complies with Laws and Regulations and the Company s Articles of Incorporation, and Other Systems to Ensure the Properness of Operations of the Company The Company clarified its intention to establish and operate systems for internal control by a resolution of its Board of Directors in May 2006.The contents of the resolution were officially adopted as a Company policy titled Basic Policies for Internal Control, which have been revised as necessary. This regulation is mentioned below. 1. Systems to Ensure that the Execution of Duties by Directors and Employees Complies with Laws and Regulations and the Company s Articles of Incorporation The Company shall be responsible for the formulation of and education on the code of conduct on compliance applicable across the Group. Also, the Company shall develop a compliance system by building up an organizational framework that best fits the implementation of the code of conduct, while monitoring the progress of compliance activities. 2. Systems for Storage and Management of Information Related to Directors Execution of Duties The Company shall, in accordance with relevant laws, regulations and internal rules, adequately store and manage the information and materials concerning the execution of Directors duties including the minutes of the Board of Directors meetings. 3. Regulations and Other Systems Related to Management of the Risk on Losses The Company shall engage in the formulation of and education on the policies of risk management as well as rules of its operation. Meanwhile, the Company shall develop a risk management system by building up an organizational framework for implementing risk management, while monitoring the progress of risk management activities. 4. Systems to Ensure the Efficient Execution of Duties by the Directors The Company shall ensure that Directors execute their duties efficiently by presenting clearly defined operational function for each Director, along with clarified management plan whose implementation status shall be monitored. 13

15 5. Systems for Shutting Out Antisocial Elements The Company will create systems to prevent the providing of any economic profit, benefits, favors, etc., whatsoever to antisocial elements for any reason or engaging in any activities that provide profit for antisocial elements. 6. Systems to Ensure the Appropriate Operations of the EBARA Group, Comprising the Company and Its Subsidiaries The Company shall be responsible for developing an Internal Control system within the Ebara Group comprising the Company and its subsidiaries. Meanwhile, for the purpose of optimum benefit for the whole Group, the Company, as the management company of the Group, shall get involved with the subsidiaries management through providing advice, guidance and instructions as necessary, while respecting the autonomy of each subsidiary as an independent corporate entity. 7. Systems for Assigning Employees to Assist Corporate Auditors in Their Duties The Company shall strengthen its audit systems by appointing the employees assigned to provide supplementary assistance to the Board of Corporate Auditors from among general employees, subject to the approval of the Board of Corporate Auditors. 8. Ensuring the Independence of the Employees Assigned to Provide Supplementary Assistance to the Board of Corporate Auditors from Directors The employees assigned to provide supplementary assistance to the Board of Corporate Auditors will not engage concurrently in other business activities. Meanwhile, decisions on the reassignmentconcerning the employees assigned to provide supplementary assistance to the Board of Corporate Auditors, shall be taken subject to the approval of the Board of Corporate Auditors, whereby such employees can stay independent from Directors. 9. System for Directors, Employees Reporting to Corporate Auditors and Systems Related to Other Reports to Corporate Auditors The Company shall ensure the system that Corporate Auditors are able to attend the important meeting such as the Board of Directors and the system that Corporate Auditors are able to request reports from Directors and employees. 10. Other Systems for Ensuring the Effective Implementation of Audits by the Corporate Auditors The Company shall ensure to maintain effectiveness of audits by Corporate Auditors, through establishing collaboration between Corporate Auditors and the Company s Internal Control division as well as Internal Audit division, based on the promotion of mutual exchange of opinions from time to time. 11. Systems for Ensuring the Credibility of Financial Reports The Company shall develop and operate an Internal Control system to ensure credibility of financial reporting, in accordance with Standards of Assessment and Audit on Internal Control over Financial Reporting, as well as Practice Standards of Assessment and Audit on Internal Control over Financial Reporting. Apart from the above Basic Policies for Internal Control, the Board of Directors adopts resolution for each fiscal year on the Compliance Action Plan, setting out the annual agenda to be pursued under the initiative of the Board, and follows up its implementation. All Directors shall be committed to ensuring compliance-oriented corporate behavior and establishing compliance-embedded corporate culture, based on the Basic Policies for Internal Control and the Compliance Action Plan. (2) Policy for Deciding the Dividends of Surplus and Other Related Matters The Company regards returning profits to shareholders as one of its most important tasks. Regarding dividends, the Company will aim to pay stable dividends on a continuing basis, taking into consideration the Company s performance, financial position, and other matters for the period to which the dividends apply and future periods. Regarding retained earnings, the Company policies will be to invest them effectively to develop new businesses from a medium- to long-term perspective, strengthen competitiveness and improve the efficiency of business operations. 14

16 Consolidated balance sheets March 31, 2012 EBARA CORPORATION Natsunosuke Yago, President (Millions of yen) Assets Liabilities Account Amount Account Amount Current assets 346,248 Current liabilities 250,345 Cash and time deposits 84,955 Trade payables 105,638 Trade receivables 160,995 Short-term bank loans 79,377 Securities 2,856 Accrued income taxes 3,324 Finished goods 10,621 Deferred tax liabilities 18 Work in process 40,112 Bonus payment reserve 6,219 Raw materials 18,976 Directors bonus payment reserve 119 Deferred tax assets 11,514 Reserve for losses on construction completion guarantees 5,359 Others 17,323 Reserve for product warranties 1,712 Allowance for doubtful receivables 1,106 Reserve for construction losses 8,757 Fixed assets 142,715 Reserve for expenses related to the sale of land 1,849 Tangible fixed assets 89,104 Others 37,967 Buildings 36,384 Long-term liabilities 83,965 Machinery and equipment 21,391 Bonds with subscription rights to shares 20,000 Land 21,668 Long-term bank loans 42,640 Construction in progress 4,642 Deferred tax liabilities 259 Others 5,017 Reserve for retirement benefits 15,047 Intangible assets 5,567 Reserve for directors' retirement benefits 201 Goodwill 859 Asset retirement obligations 1,799 Software 3,015 Others 4,015 Others 1,693 Total liabilities 334,311 Investments and 48,043 Net assets long-term receivables Investment securities 22,236 Shareholders equity 168,028 Long-term loans receivable 731 Common stock 61,313 Deferred tax assets 19,115 Capital surplus 65,243 Others 17,035 Retained earnings 41,750 Allowance for doubtful receivables 11,075 Treasury stock, at cost 279 Accumulated other comprehensive income 16,967 Net unrealized gain on investment securities 1,116 Deferred gains (losses) on hedges 6 Translation adjustments 18,090 Subscription rights to shares 438 Minority interests in consolidated subsidiaries 3,154 Total Net assets 154,653 Total assets 488,964 Total liabilities and net assets 488,964 15