Financial Highlights
Analysis on Operating Results
Descriptions and statements in relation to forward-looking projections disclosed in this document reflect the judgment of
the Group as of March 31, 2019.
Operating Results Review for the Current Fiscal Year
During the fiscal year ended March 31, 2019, business conditions of the Japanese economy have recovered moderately.
This is reflected in an improving labor market and increases in salary levels brought about as a result of the implementation of
the economic and monetary policy set out by the Government. In terms of the world economy, despite uncertainty about the
future such as Chinese economic slowdown and concern about trade conflict between the US and China, economic situation
generally remains steady.
Under such circumstances, in light of environment surrounding our business and development of the Group, the Group haschanged the corporate philosophy and established the Midterm Business Plan 2020 (from the fiscal year ended March 31,
2019 to fiscal year ending March 31, 2021), as a good refresh of the 10th anniversary of the Group foundation. In order toachieve the Plan, the Group tries our best to implement the priority measures: i) strategic development investment, ii)
business strategy (enhancement of foundation field and expansion of growth field) and iii) efforts of sustainable ESG.
The domestic business environment in which the Group operates has continued to face challenges including a downward
trend in the level of public spending, a sharp increase in labor costs arising from shortage of human resources, and somedelays in civil engineering projects and construction work.
In the overseas businesses, the Group sought to accelerate business developments centered around Europe and the UnitedStates., where stable market growth is expected. As part of it, the Group has sought to achieve further business expansion
especially through Aqua-Aerobic Systems, Inc., the subsidiary located in the United States, as our business base.
For the operating results of the Group for the fiscal year ended March 31, 2019, net sales was ¥117,342 million (5.8%
increase year to year), operating income was ¥7,607 million (12.8% increase year to year), ordinary income was ¥7,624
million (17.9% increase year to year) and profit attributable to owners of parent was ¥5,170 million (31.5% increase year toyear). Sales orders for the fiscal year ended March 31, 2019 was ¥123,807 million (5.9% decrease year to year), of which¥142,347 million (4.8% increase year to year) was outstanding as of March 31, 2019.
The Group’s business consists of two segments: Plant Engineering Business Segment including EPC as foundation field andforeign business as growth field and Service Solutions Business Segment including O&M as foundation field and PPP as
growth field.

(Plant Engineering Business)
For the Plant Engineering Business, net sales amounted to ¥65,517 million (0.9% increase year to year) and operating
income amounted to ¥3,191 million (21.6% increase year to year), due to a steady growth in EPC and foreign businesses.
Outstanding order was ¥73,915 million (5.7% increase year to year).
(Service Solutions Business)
For the Service Solutions Business, net sales amounted to ¥51,824 million (12.8% increase year to year) due to a steady
growth in O&M and PPP businesses. Operating income amounted to ¥4,416 million (7.1% increase year to year).
Outstanding order was ¥49,892 million (19.1% decrease year to year).

Net sales(Millions of yen)

Plant Engineering Business
Service Solutions Business

1,200

650

655

(Cash flows from investing activities)
The funds used for investing activities was ¥805 million (¥62 million decrease year to year): ¥555 million used for purchaseof property, plant and equipment and ¥114 million used for purchase of intangible assets.
(Cash flows from financing activities)
The funds used for financing activities was ¥2,617 million (¥1 million decrease year to year): ¥1,555 million used for payment
of dividends and ¥833 million used for repayments of PFI and other project finance loans.
Issues to be Addressed
In the Group’s main business in the domestic water and sewage treatment market, the financial difficulties of local
governments and shortage of engineers have become evident, which are attributable to the population decline. In addition,measures for facilities and equipment, which are aging, as well as natural disasters such as large earthquakes and torrential
rains are urgent issues. Under these circumstances, new government policies including revisions of the PFI Act and theWater Supply Act (promulgated in December 2018) are encouraging public-private partnerships using private funds,
technology and know-how in public infrastructure development as well as studies of expanded coverage areas as measures
to strengthen the management of water and sewage business operators. In addition, the creation of new business
opportunities and business models backed by technological innovations such as IoT, AI and 5G is expected in the future.
On the other hand, overseas water and sewage market, mainly in Europe and the United States, are faced with needs forcountermeasures against aging facilities and equipment and the tightening of environmental regulations. While in areas
including emerging Asian countries, demand is growing for the development of a water and sewage infrastructure in
conjunction with the increasing population and demand for water. Going forward, the emergence of business opportunities inline with these issues and needs of the water and sewage market of each country is expected to continue.
In light of this business environment, the Group has developed the Midterm business plan 2020, covering the period up to
FY2020 (fiscal year ending March 31, 2021), as the first stage in achieving its long-term vision (ten-year-vision). The entire
Company is working together to achieve the management targets for FY2020 of sales orders of ¥140.0 billion, net sales of¥128.0 billion, and operating income of ¥9.0 billion.

60

26

32

40
30

400

459

518

20

41

44

2018.32019.310
002018.363

Service Solutions Business

80

50

600

200

Plant Engineering Business(Cash flows from operating activities)
The funds generated by operating activities was ¥6,236 million (¥1,061 million increase year to year): ¥7,624 million ofincome before income taxes, ¥5,361 million increase in advances received and ¥1,348 million of depreciation, offsetting with
¥4,165 million increase in notes and accounts receivable - trade and ¥2,165 million used for payment of income taxes.

70

1,000
800

Operating income(Millions of yen)

Cash Flow Review
The balance of cash and cash equivalents (hereinafter the “funds”) as of March 31, 2019 increased by ¥2,819 million
compared to March 31, 2018 to ¥27,796 million. An analysis of the cash flows for the fiscal year ended March 31, 2019 andrelated commentary thereon is presented below:

Financial Information

Operating results by segment are as follows:

Financial Position Review for the Current Fiscal Year
Total assets as of March 31, 2019 increased by ¥9,668 million compared to March 31, 2018 to ¥132,620 million.
Current assets increased by ¥10,137 million compared to March 31, 2018 to ¥115,538 million due to an increase in cash anddeposits and notes and accounts receivable - trade. Non-current assets decreased by ¥468 million compared to March 31,2018 to ¥17,082 million due to a decrease in goodwill and customer-related assets.
Current liabilities increased by ¥7,399 million compared to March 31, 2018 to ¥56,326 million due to an increase in advances
received, offsetting with a decrease in accounts payable - trade. Non-current liabilities decreased by ¥1,720 million comparedto March 31, 2018 to ¥17,262 million due to a decrease in PFI and other project finance loans.
Total net assets increased by ¥3,988 million compared to March 31, 2018 to ¥59,031 million due to recognition of profit
attributable to owners of parent and payment of dividends.

METAWATER REPORT 20192019.3METAWATER REPORT 201964

Consolidated Balance Sheets

Thousands of
U.S. dollars

Millions of yen
As of March 31,
2018

As of March 31,
2019

As of March 31,
2019

Assets

As of March 31,
2018

As of March 31,
2019

As of March 31,
2019

Liabilities

Current assets

Current liabilities

Cash and deposits*325,805*3, *428,589257,581

Accounts payable - trade

18,372

18,278

164,681

Notes and accounts receivable - trade*3

72,164*3

76,282687,287

Electronically recorded obligations

8,155

8,380

75,502

269

337

3,036

844

7,604

Work in process

2,623

4,670

42,075

Short-term loans payable

Supplies

3,299

3,932

35,426

Current portion of PFI and other projects finance loans

2,062

18,578

Income taxes payable

2,173

2,419

21,794

115,538

1,040,976

Advances received

10,71916,075

144,832

Provision for warranties for completed construction

857

1,361

12,262

Provision for loss on construction contracts

204

517

4,658

1,508

Other current assets*4

Total current assets

105,401*4

Non-current assets
Property, plant and equipment

*3

833

*3

Buildings and structures, net

1,189

1,300

11,712Other current liabilities

7,340

8,111

73,078

Machinery and equipment, net

818

970

8,739

Total current liabilities

48,92756,326

507,487

Tools, furniture and fixtures, net

423

462

4,162

Construction in progress

235

153

1,378

Long-term loans payable

2,050

1,847

16,641Other property, plant and equipment, net

315

301

2,711

PFI and other projects finance loans

10,70596,4503,188

28,723Liability for retirement benefit

5,294

4,603

41,472Other non-current liabilities

88

107

964

Total non-current liabilities

18,982

17,262

155,527

67,91073,589663,023

Total property, plant and equipment

*2

2,982

*2

Intangible assets

Non-current liabilities*3

11,549

*3

890

517

4,658

Software in progress

94

29

261

Goodwill

1,842

1,670

15,046

Customer-related assets

2,769

2,539

22,875

Shareholders’ equity

Other intangible assets

1,463

1,314

11,838

Capital stock

11,946

11,946

107,631

Total intangible assets

7,060

6,072

54,707

Capital surplus

15,08015,080135,868

Retained earnings

30,21433,830304,802

(0)

(0)

(0)

57,24160,856548,301

Investment securities*1, *4

1,345
224*1, *4

Total liabilities
Net assets

1,342

12,091

Treasury stock

196

1,765

Total shareholders’ equity

Long-term loans receivable*4

Guarantee deposits

1,528

1,604

14,451

Assets for retirement benefits

821

1,374

12,379Valuation difference on available-for-sale securities

54

49

441

Deferred tax assets - non-current

3,541

3,268

29,444Foreign currency translation adjustment

84

(371)

(3,342)

47

35

315

Remeasurements of defined benefit plans(2,474)(1,645)(14,821)

7,509

7,822

70,474

Total accumulated other comprehensive income(2,335)(1,967)(17,722)

17,551

17,082

153,905

136

142

1,279

122,952

132,620

1,194,882

55,04259,031

531,858

122,952

132,620

1,194,882

Other non-current assets
Total investments and other assets
Total non-current assets
Total assets*4

Accumulated other comprehensive income

Non-controlling interests
Total net assets
Total liabilities and net assets

METAWATER REPORT 2019

Financial Information

SoftwareInvestments and other assets

65

Thousands of
U.S. dollars

Millions of yen

METAWATER REPORT 201966

Consolidated Statement of Income and Statement of Comprehensive Income[Consolidated Statement of Income][Consolidated Statement of Comprehensive Income]Thousands of
U.S. dollars

Millions of yen
Fiscal year ended
March 31, 2018
Net sales
Cost of sales

110,895*1

Gross profit
Selling, general and administrative expenses
Operating income

Fiscal year ended
March 31, 201986,925*1

23,970*2, *4

17,224
6,745*2, *4

Thousands of
U.S. dollars

Millions of yen

Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2019

3,951

5,178

46,652

117,342

1,057,230

Net income

91,442

823,876

Other comprehensive income

25,899233,345

Valuation difference on available-for-sale securities

21

(4)

(36)

18,291

164,798

Foreign currency translation adjustment

(49)

(455)

(4,099)7,607

68,537

Remeasurements of defined benefit plans

364

828

7,460

367

3,306

4,287

5,545

49,959

4,267

5,538

49,89620

763

Non-operating income:

Total other comprehensive income

Interest income

193

194

1,747

Dividends income

34

56

504

Foreign exchange gain

—

152

1,369

Miscellaneous income

17

7

63

Total non-operating income

245

410

3,694

Interest expenses

217

218

1,964

Loss on valuation of investment securities

—

87

783

84

756

Comprehensive income

*1

336

*1

(Details)
Comprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

Non-operating expenses:

66*3

Foreign exchange loss

236

—

—

Miscellaneous loss

4

3

27

526

394

3,549

Ordinary income

6,465

7,624

68,690

Income before income taxes

6,465

7,624

68,690

Income taxes - current

2,187

2,526

22,758

Income taxes - deferred

325

(80)

(720)

Total income taxes

2,513

2,446

22,038Net income

3,951

5,178

46,652

20

7

63

3,931

5,170

46,580Total non-operating expenses

Profit attributable to non-controlling interests
Profit attributable to owners of parent

67*3

METAWATER REPORT 2019

Financial Information

Loss on disposal of non-current assets

METAWATER REPORT 201968

Consolidated Statement of Changes in Shareholders’ Equity

Fiscal year ended March 31, 2018

Fiscal year ended March 31, 2019
(Millions of yen)

(Millions of yen)

Shareholders’ equity

Balance at April 1, 2017

Shareholders’ equity

Capital stock

CapitalsurplusRetainedearnings

Treasurystock

11,94615,08027,787(0)

Total
shareholders’equity54,814

Balance at April 1, 2018

Changes during the year

Capital stock

CapitalsurplusRetainedearnings

Treasurystock

11,94615,08030,214(0)57,241

Changes during the year

Dividends from surplus(1,503)(1,503)

Dividends from surplus(1,555)(1,555)

Profit attributable to ownersof parent

3,931

3,931

Profit attributable to ownersof parent

5,170

5,170

(0)

Purchase of treasury stock

Purchase of treasury stock(0)

Changes in other equity, net
Total changes during the year
Balance at March 31, 2018

—

—

2,427

(0)

2,427

Total changes during the year

11,94615,08030,214(0)57,241

Balance at March 31, 2019

(0)

—

—

3,615

(0)

3,614

11,94615,08033,830(0)60,856

Accumulated other comprehensive income

Total
Valuation
Foreign currency Remeasurements accumulateddifference onof definedothertranslation
available-for-salebenefit planscomprehensive
adjustment
securities
income32

133(2,838)(2,671)

Noncontrollinginterests

Total net
assets117

52,260Changes during the year

Total
Valuation
Foreign currency Remeasurements accumulateddifference onof definedothertranslation
available-for-salebenefit planscomprehensive
adjustment
securities
incomeBalance at April 1, 2018

54

84

(2,474)(2,335)

Noncontrollinginterests

Total net
assets136

55,042

Changes during the year

Dividends from surplus(1,503)

Dividends from surplus(1,555)

Profit attributable to ownersof parent

3,931

Profit attributable to ownersof parent

5,170

Purchase of treasury stock(0)

Purchase of treasury stock(0)

Changes in other equity, net

21

(49)

364

336

18

354

Changes in other equity, net

(4)

(455)

828

367

5

373

Total changes during the year

21

(49)

364

336

18

2,782

Total changes during the year

(4)

(455)

828

367

5

3,988

Balance at March 31, 2018

54

84

(2,474)(2,335)

136

55,042

Balance at March 31, 2019

49

(371)

(1,645)(1,967)

142

59,031METAWATER REPORT 2019

METAWATER REPORT 2019

Financial Information

Balance at April 1, 2017

(0)Changes in other equity, net

Accumulated other comprehensive income

69

Total
shareholders’equity70

Consolidated Statement of Cash Flows

Fiscal year ended
March 31, 2018

Shareholders’ equity

Balance at April 1, 2018

Capital stock

CapitalsurplusRetainedearnings

Treasurystock

107,631

135,868

272,222(0)515,731

Changes during the year
(14,010)(14,010)

Profit attributable to ownersof parent

46,58046,580Purchase of treasury stock(0)

Balance at March 31, 2019

68,690Depreciation

1,441

1,348

12,145

Amortization of goodwill

140

138

1,243

Increase/(decrease) in liabilities for retirement benefits

(349)

(156)

(1,405)(Increase)/decrease in assets for retirement benefits

68

(550)

(4,955)

(194)

510

4,595

37

313

2,820

Interest income and dividends income

(228)

(250)

(2,252)(0)32,561

Interest expenses

217

218

1,964

107,631

135,868

304,802(0)548,301

Foreign exchange (gain)/loss

209

(174)

(1,567)

Loss on disposal of property, plant and equipment

66

84

756

Loss/(gain) on valuation of investment securities

—

87

783

(Increase)/decrease in notes and accounts receivable(4,311)(4,165)(37,525)(Increase)/decrease in inventory

1,292(2,707)(24,389)

Increase/(decrease) in notes and accounts payable - trade

(858)

248

2,234

Increase/(decrease) in advances received

2,067

5,361

48,301Other cash flows from operating activities

1,496

441

3,973

Subtotal

7,562

8,372

75,430Interest and dividends income received

228

250

2,252

Interest expenses paid

(220)

(220)

(1,982)

Income taxes paid

(2,394)(2,165)(19,506)

Cash flows from operating activities

5,175

6,236

56,185

Net (increase)/decrease in time deposits

50

34

306

Purchase of property, plant and equipment

(527)

(555)

(5,000)Purchase of intangible assets

(217)

(114)

(1,027)Purchase of investment securities

(110)

(95)

(855)

Payments of loans receivable

(1)

—

—

Collection of loans receivable

28

27

243

Other cash flows from investing activities

(91)

(103)

(928)

Net cash used in investing activities

(868)

(805)

(7,252)486

756(22,290)(21,037)

Noncontrollinginterests

1,225

Total net
assets495,918

Dividends from surplus(14,010)

Profit attributable to ownersof parent

46,580Purchase of treasury stock(0)

Changes in other equity, net(36)(4,099)

7,460

3,306

45

3,360

Total changes during the year(36)

(4,099)

7,460

3,306

45

35,931

Balance at March 31, 2019441

(3,342)(14,821)(17,722)

1,279

531,858

Financial Information

32,570Changes during the year

METAWATER REPORT 2019

7,624

—

Total
Valuation
Foreign currency Remeasurements accumulateddifference onof definedothertranslation
available-for-salebenefit planscomprehensive
adjustment
securities
income

71

6,465

—

Accumulated other comprehensive income

Balance at April 1, 2018

Fiscal year ended
March 31, 2019

Income before income taxes

Increase/(decrease) in provision for warranties for completed
construction
Increase/(decrease) in provision for loss on
construction contracts(0)

Changes in other equity, net
Total changes during the year

Fiscal year ended
March 31, 2019

Cash flows from operating activities

Total
shareholders’equityDividends from surplus

Thousands of
U.S. dollars

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

Cash flows from investing activities

METAWATER REPORT 201972

[Notes to Consolidated Financial Statements](Basis of Presentation)
The accompanying consolidated financial statements of METAWATER Co., Ltd. (the “Company”) and consolidated subsidiaries are prepared on the basisof accounting principles generally accepted in Japan, which are different in certain respects as to the application and disclosure requirements ofThousands of
U.S. dollars

Millions of yen
Fiscal year ended
March 31, 2018

Fiscal year ended
March 31, 2019

Fiscal year ended
March 31, 2019

International Financial Reporting Standards, and are compiled from the consolidated financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.

Cash flows from financing activities
Proceeds from short-term loans payable

452

55

495

Repayments of short-term loans payable

(740)

(282)

(2,540)The yen amounts are truncated at millions and U.S. dollar amounts are rounded off in thousands. The total Japanese yen and U.S. dollar amounts shown

Repayments of PFI and other projects finance loans

(825)

(833)

(7,505)in the financial statements do not necessarily agree with the sum of the individual amounts. U.S. dollar amounts presented in the financial statements

(0)

(0)

(0)

(1,503)(1,555)(14,010)

(1)

(1)

(9)

(2,619)(2,617)(23,578)

(63)

4

36

Net increase/(decrease) in cash and cash equivalents

1,625

2,819

25,398by the Company.

Cash and cash equivalents at April 1

23,352

24,977225,038

Investments in companies over which the Company exercises significant influence in terms of their operating and financial policies have been accounted

27,796

250,436

Purchase of treasury stock
Cash dividends paid
Cash dividends paid to non-controlling interests
Cash flows from financing activities
Effect of exchange rate change on cash and cash
equivalents

Cash and cash equivalents at March 31*1

24,977*1(Presentation of Amounts in the Consolidated Financial Statements)

are included solely for convenience. The rate of ¥110.99 to US$1.00, prevailing on March 31, 2019, has been used for translation into U.S. dollar amounts
in the financial statements. The inclusion of such amounts should not be construed as a representation that Japanese yen amounts have been or could in
the future be converted into U.S. dollars at that or any other rate.

(Principles of Consolidation)
The accompanying consolidated financial statements include the accounts of the Company and any significant companies controlled directly or indirectly

for by the equity method.
As of March 31, 2019, the numbers of consolidated subsidiaries were 9 (9 in 2018). Non-consolidated subsidiaries whose combined assets, net sales,
profit and retained earnings are not significant in the related consolidated totals, have not been consolidated with the Company. Investments in nonconsolidated subsidiaries and affiliated companies which have immaterial effect on the consolidated financial statements are accounted for at costwithout applying the equity method of accounting. METAWATER USA, INC. and four other subsidiaries are consolidated using their financial statements
as of their fiscal year end, which falls on December 31 and necessary adjustments are made to their financial statements to reflect any significant(Summary of Significant Accounting Policies)
1. Valuation standard and methods for significant assets(1) Securities

Financial Informationtransactions from January 1 to March 31. All significant intercompany balances and transactions have been eliminated in consolidation.

1)Available-for-sale securities
Available-for-sale securities with market value
Available-for-sale securities with market value are stated at fair value based on the market price as of the end of the accounting period. Any
unrealized gain or loss, net of applicable taxes is reported as a component of accumulated other comprehensive income. The cost of
securities sold is calculated using the moving average method.

Available-for-sale securities without market value
Available-for-sale securities without market value are stated at cost using the moving average method.

73

METAWATER REPORT 2019

METAWATER REPORT 201974

(2) Inventory(2) Method for amortizing actuarial gain or loss and prior service cost
Prior service cost is amortized as incurred by the straight-line method over a period not exceeding the estimated average remaining service1) Supplies
Supplies are stated at cost using the weighted average method. (Balance sheet amounts are written down on the basis of any decreased

period of employees (10 to 14 years) at the time of occurrence.

profitability.)

Actuarial gain or loss is amortized from the fiscal year following the year in which the gain or loss is recognized, amortized by the straight-line
method over a period not exceeding the average remaining service period of the employees (10 to 14 years) at the time of occurrence.

2) Work in process
Work in process is stated at cost using the individual identification method.
5.

Recognition for revenue and cost
For long-term construction contracts whose outcome can be estimated reliably, the percentage-of-completion method is adopted. The stage(3) Derivativesof completion of a contract is determined by the percentage of the cost incurred to date to the estimated total cost. When the outcome of

Derivatives are stated at fair value.

the construction contracts cannot be estimated reliably, the completed-contract method is adopted.
2.

Method of depreciation and amortization
6.

(1) Property, plant and equipment

Foreign currency translation

Depreciation of property, plant and equipment is mainly computed by the declining-balance method over the applicable useful lives. However,Monetary receivables and payables in foreign currencies are translated into yen using the spot exchange rates on the consolidated balance

the buildings acquired on and after April 1, 1998 (excluding accompanying facilities) and the accompanying facilities and structures acquired

sheet date, and translation adjustments are recorded as gains or losses. For foreign subsidiaries assets and liabilities are translated into yen

on and after April 1, 2016 are depreciated by the straight-line method.

using the spot exchange rates on the consolidated balance sheet date; revenues and expenses are translated into yen using the average

Useful lives of assets are principally as follows:

exchange rates during the period; and translation adjustments are included in foreign currency translation adjustment under net assets.

Buildings and structures:

2 to 50 years

Machinery and equipment:

2 to 17 years

7.

Hedge accounting(1) Hedge accounting method
As interest rate swaps meet the requirements for short-cut method, the accounting is applied to them.

(2) Intangible assets
Intangible assets are amortized by the straight-line method. Computer software for internal use is amortized by the straight-line method over(2) Hedging instruments and hedged items

the estimated useful life of 5 years. Customer-related assets are amortized by the straight-line method over the estimated useful life of 17

Hedging instruments: Interest rate swaps

years.

Hedged items: interest on loans payable3.

Accounting standard for significant allowances and provisions(3) Hedging policy(1) Allowance for doubtful accounts

Allowances for ordinary debt are computed based on the historical rate of default. For certain debts, such as those where recovery is(4) Method for evaluating hedging effectivenessdoubtful, the Company considers the likelihood of recovery on an individual basis and records an allowance for the amount of debt expected

The evaluation of hedging effectiveness is omitted for interest rate swaps as the requirements for short-cut method are met.

to be unrecoverable. Allowance for doubtful accounts was not recorded at the end of the fiscal year ended March 31, 2019.

(2) Provision for warranties for completed construction

8.

The amortization method and amortization period of goodwill

Financial Information

Interest rate swaps are used on some of loans payable from financial institutions to avoid risks resulting from interest rate fluctuation.

To provide for potential loss on receivables, the Company provides an allowance for the expected amount of irrecoverable receivables.

Goodwill is amortized by the straight-line method over a period of 15 years.

The Company records provision for warranties for completed construction based on the estimated amount of future warranties forconstruction revenue in order to provide for costs of free-of-charge repair under defect liability for contract construction.
9.

Cash and cash equivalents in the consolidated statement of cash flows
Cash and cash equivalents consist of cash at hand, demand deposits at banks, and highly liquid short-term investments with negligible risk of(3) Provision for loss on construction contracts

fluctuation in value and maturities of three months or less.

In order to provide for potential loss on construction contracts, the Company records provision for loss on construction contracts at an
estimated amount of loss on contracts undelivered at the end of the fiscal year, loss of which are expected to be incurred and such expectedamount of loss can be reasonably estimated.

10.

Consumption tax
Consumption tax and local consumption tax are excluded from respective transaction amounts.

4.

Accounting method for retirement benefits(1) Method of allocating projected retirement benefit obligation
In calculating the retirement benefit obligation, the benefit formula basis is used to allocate the projected retirement benefit obligation to theestimated periods of service of the eligible employees until the end of the fiscal year.

75

METAWATER REPORT 2019

METAWATER REPORT 201976

(Unapplied Accounting Standards, etc.)(Notes to Consolidated Balance Sheets)- Accounting Standards Board of Japan (ASBJ) Statement No. 29 “Accounting Standard for Revenue Recognition” (March 30, 2018)*1.

Investments in non-consolidated subsidiaries and affiliated companies are as follows:- ASBJ Guidance No. 30 “Implementation Guidance on Accounting Standard for Revenue Recognition” (March 30, 2018)

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

1,020

1,020

9,190

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

3,491

3,827

34,480Investment securities(1) Outline
A comprehensive accounting standard on revenue recognition. Revenue is recognized by applying the following five steps.
Step 1: Identify the contract with a customer*2.

Accumulated depreciation of property, plant and equipment

Step 2: Identify performance obligations in the contract
Step 3: Determine the transaction price

Accumulated depreciation ofproperty, plant and equipment

Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the performance obligations are satisfied*3.
(2) Scheduled date of application“Current portion of PFI and other project finance loans” and “PFI and other project finance loans” are loans payable secured by the PFI businessfrom financial institutions to WATER NEXT YOKOHAMA Co., Ltd., which is a special purpose company established for the PFI business and the

They are scheduled to be applied from the beginning of the fiscal year ending March 31, 2022.

Company’s consolidated subsidiary, and other consolidated subsidiaries.
The amounts of assets including accounts receivable of the special purpose company corresponding to the above PFI and other project finance(3) Impact of application of the accounting standard, etc.

loans are as follows:

The impact of application is under evaluation at the time of preparing the consolidated financial statements.

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)(Changes in Presentation Methods)

Cash and deposits

1,534

1,599

14,406(Changes due to the application of “Partial Amendments to Accounting Standard for Tax Effect Accounting”)

Notes and accounts receivable - trade

13,63013,393

120,668

15,164

14,993135,084

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

Investments in subsidiaries

152

152

1,369

Long-term loans receivable

524

487

4,387

Total

676

639

5,757

Total

The Company has applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018;
hereinafter the “Partial Amendments to Tax Effect Accounting Standard”) from the beginning of the fiscal year ended March 31, 2019. Accordingly,
deferred tax assets are presented under investments and other assets, deferred tax liabilities are presented under non-current liabilities, and changes

The following assets eliminated in the consolidation procedures are pledged as security.

have been made to the notes to income taxes.
As a result, in the consolidated balance sheets for the fiscal year ended March 31, 2018, deferred tax assets - current of ¥1,492 million under current
assets and ¥39 million of the ¥115 million of deferred tax liabilities included in other current liabilities under current liabilities have been reclassified andliabilities included in other current liabilities under current liabilities have been reclassified and included in ¥88 million of other non-current liabilities under
non-current liabilities.
In addition, the notes to income taxes have been changed to include the details stated in Note 8 (excluding the total amount of valuation allowance) andNote 9 of “Accounting Standard for Tax Effect Accounting” as set forth in Paragraphs 3 through 5 of the Partial Amendments to Tax Effect Accounting*4.

The following assets are pledged as security for PFI and other project finance loans to subsidiaries and affiliated companies operating the PFI
business (non-consolidated).
As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

Investment securities

405

408

3,676

Long-term loans receivable

211

195

1,756

Total

617

603

5,432

Standard. However, among such details, those relating to the fiscal year ended March 31, 2018 have been omitted, in accordance with transitional
provisions as set forth in Paragraph 7 of the Partial Amendments to Tax Effect Accounting Standard.

77

METAWATER REPORT 2019

METAWATER REPORT 2019

Financial Information

included in ¥3,541 million of deferred tax assets - non-current under investments and other assets, and ¥76 million of the ¥115 million of deferred tax

78

*5.

Guarantees of indebtedness(Notes to Consolidated Statement of Comprehensive Income)

The Company provides guarantees to the following companies for their loans payable from financial institutions.

*1.

(1) Guarantee for loans payable
As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

161

144

1,297

Osaka Bioenergy Co., Ltd.

(2) Performance guarantee
As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

Ariake Water Management Co., Ltd.

25

27

243

Aizuwakamatsu Aqua Partner Co., Ltd.

583

542

4,883

Sasebo Aqua Solution Co., Ltd.

255

242

2,180

Sorami Bio Partners Co., Ltd.

63

63

567

Northern Akita Eco-resource Management Co.,
Ltd.

17

17

Valuation difference on available-for-salesecurities
Amount arising during the year

30

(7)

Reclassification adjustments

—

—

—

Amount before tax effect

30

(7)

(63)

Tax effect

(9)

3

27

Valuation difference on available-forsale securities

21

(4)

(36)

(49)

(455)

(4,099)Amount recognized during the year
Amount recognized during the year

(171)

533

4,802

Reclassification adjustments

695

659

5,937

Before tax effect adjustment

524

1,193

10,748Tax effects

(160)

(365)

(3,288)

364

828

7,460

336

367

3,306

—

13

117

Gotemba Oyama Eco Partners Co., Ltd.

—

14

126

946

922

8,307

Remeasurements of defined benefit
plans
Total other comprehensive
incomeProvision for loss on construction contracts included in cost of sales are as follows:
Fiscal year ended March 31, 2018
(Millions of yen)

Fiscal year ended March 31, 2019
(Millions of yen)

Fiscal year ended March 31, 2019
(Thousands of U.S. dollars)

63

363

3,270

(Notes to Consolidated Statement of Changes in Shareholders’ Equity)
Fiscal year ended March 31, 2018
1. Shares issued

*4.

79

The major items and their amounts of selling, general and administrative expenses are as follows:
Fiscal year ended
March 31, 2018
(Millions of yen)

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S. dollars)

Salaries and allowances

4,066

4,050

36,489Bonuses

1,540

1,466

13,208Retirement benefit expenses

525

501

4,513

Provision for warranties
for completed construction

(243)

446

4,018

Research and development expenses

1,706

1,908

17,190

Increase

Decrease

Number of shares
as of March 31, 201825,923,500——

25,923,500

Number of shares
as of April 1, 2017

Increase

Decrease

Number of shares
as of March 31, 2018

44

47

—

91

2. Treasury stock
Type of shares
Common stock(shares)(Details of the changes)
Increase resulting from purchase of shares less than one unit: 47 shares
3. Dividends(1) Dividends paid

The details of loss on disposal of non-current assets are as follows:
Fiscal year ended March 31, 2018

Fiscal year ended March 31, 2019

Loss on sales and retirement of machinery and equipment

Loss on sales and retirement of machinery and equipment

Total amount of research and development expenses included in general and administrative expenses and in production cost in the fiscal year are
as follows:
Fiscal year ended March 31, 2018
(Millions of yen)

Fiscal year ended March 31, 2019
(Millions of yen)

Fiscal year ended March 31, 2019
(Thousands of U.S. dollars)

1,706

1,908

17,190METAWATER REPORT 2019

Common stock(shares)Number of shares
as of April 1, 2017

Financial Information

*3.

(63)

Foreign currency translation adjustment

Type of shares*2.

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

Fiscal year ended
March 31, 2019
(Millions of yen)

153

(Notes to Consolidated Statement of Income)*1.

Fiscal year ended
March 31, 2018
(Millions of yen)

Remeasurements of defined benefit plans

Ofunato Sewer Management Co., Ltd.

Total

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for theyears ended March 31, 2019 and 2018

Resolution

Type of shares

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Cut-off date

Effective date

Board of Directors’
meeting held on May
23, 2017

Common stock

751

29.00

March 31, 2017

June 8, 2017

Board of Directors’
meeting held on
November 14, 2017

Common stock

751

29.00

September 30, 2017

December 4, 2017

(2) Dividends whose record date falls in the fiscal year ended March 31, 2018, but whose effective date is in the following fiscal year
Resolution

Type ofshares

Source ofdividends

Total amount ofdividends(Millions of yen)

Dividend pershare (Yen)

Cut-off date

Effective date

Board of Directors’
meeting held on May 23,
2018

Commonstock

Retainedearnings

751

29.00

March 31, 2018

June 7, 2018

METAWATER REPORT 201980

Fiscal year ended March 31, 2019

(Financial Instruments)

1. Shares issued

1. Overview

Type of shares
Common stock(shares)Number of shares
as of April 1, 2018

Increase

Decrease

Number of shares
as of March 31, 201925,923,500——

25,923,500(1) Group policy for financial instruments
The Group restricts its fund management to short-term deposits and raises funds through loans from financial institutions including banks.
Derivatives are used for receivables and payables arising from transactions associated with the actual demand, and the Group does not intend to
make speculative transactions.

2. Treasury stock
Type of shares

Number of shares
as of April 1, 2018

Increase

Decrease

Number of shares
as of March 31, 2019

91

59

—

150

Common stock(shares)

Although notes and accounts receivable - trade are exposed to customer credit risk, the Group works to reduce such risk in accordance with credit
management rules. Although trade receivables in foreign currencies arising from overseas operations are exposed to currency fluctuation risk, they

(Details of the changes)

are hedged with forward foreign currency contracts where necessary.

Increase resulting from purchase of shares less than one unit: 59 shares

Investment securities are mainly limited to shares of companies with which the Group has built a business relationship. Listed stocks are
exposed to risk of fluctuation in the market value, while they are marked to market on a quarterly basis.

3. Dividends(1) Dividends paid
Resolution(2) Type of financial instruments, related risk and risk management system

The payment terms of notes and accounts payable - trade are mostly one year or less than one year.
Type of shares

Total amount ofdividends(Millions of yen)

Dividend per share(Yen)

Cut-off date

751

29.00

March 31, 2018

Effective date

Although some of trade payables are denominated in foreign currencies and are exposed to currency fluctuation risk, they are hedged withforward foreign currency contracts where necessary.

Board of Directors’
meeting held on May
23, 2018

Common stock

Board of Directors’
meeting held on
November 13, 2018

Common stock

803

Resolution

Type of shares

Total amount ofdividends(Thousands of U.S.
dollars)

Dividend per share(U.S. dollars)

Cut-off date

Effective date

Board of Directors’
meeting held on May
23, 2018

Common stock

6,766

0.26

March 31, 2018

June 7, 2018

Board of Directors’
meeting held on
November 13, 2018

Common stock

June 7, 2018

Loans payable are mainly used for the acquisition of shares of subsidiaries, with the maximum maturity period of 7 years after the balance
sheet date. PFI and other project finance loans are intended to raise funds for specific businesses such as the PFI business, with the maximum

31.00

September 30, 2018

December 4, 2018

maturity period of 15 years and 8 months after the accounting period. Although some of PFI and other project finance loans are exposed to risk ofinterest rate fluctuation, while they are hedged with derivatives (interest rate swaps).
Derivatives include forward foreign currency contracts which are used to hedge currency fluctuation risk associated with trade receivables andpayables, and interest rate swaps which are used to hedge risk of fluctuation in interest on loans payable. The evaluation of hedging effectivenessis omitted based on the judgment that interest rate swaps meet the requirements for short-cut method.

2. Fair value of financial instruments
The carrying value of financial instruments on the consolidated balance sheets as of March 31, 2019 and 2018 and estimated fair value are shown

0.27

September 30, 2018

December 4, 2018

in the following table. The financial instruments whose fair value is deemed extremely difficult to determine are not included in the table below(please see Note 2).

(2) Dividends whose record date falls in the fiscal year ended March 31, 2019, but whose effective date is in the following fiscal year
Resolution

Type ofshares

Source ofdividends

Total amount ofdividends(Millions of yen)

Dividend pershare (Yen)

Cut-off date

Effective date

Board of Directors’
meeting held on May 22,
2019

Commonstock

Retainedearnings

803

31.00

March 31, 2019

June 6, 2019

Resolution

Type ofshares

Source ofdividends

Cut-off date

Effective date

Board of Directors’
meeting held on May 22,
2019

Commonstock

Retainedearnings

March 31, 2019

June 6, 2019

Total amount ofdividends
Dividend per share(Thousands of U.S.
(U.S. dollars)
dollars)
7,234

0.27

Financial Information

7,234(Notes to Consolidated Statement of Cash Flows)*1.

Cash and cash equivalents in the consolidated statement of cash flows are reconciled to cash and deposits in the consolidated balance sheets asfollows:

Cash and deposits
Time deposits with maturities of over threemonthsCash and cash equivalents

81

METAWATER REPORT 2019

Fiscal year ended
March 31, 2018
(Millions of yen)

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

25,80528,589257,581

(827)

(792)

(7,135)24,977

27,796

250,436METAWATER REPORT 201982

As of March 31, 2018

(Note 1) Computation method of fair values of financial instruments and other matters concerning securities and derivatives
AssetsCarrying value(Millions of yen)

Fair value(Millions of yen)

Difference(Millions of yen)

(1) Cash and deposits

25,80525,805—(2) Notes and accounts receivable - trade72,16472,061(103)(1)

Cash and deposits
The fair value of cash and deposits is based on their carrying amount, since the fair value approximates their carrying amount due to the shortmaturity period of the instrument.

(3) Investment securities
Available-for-sale securities

111

111

—

98,08197,978(103)(1) Accounts payable - trade

18,372

18,372—(2) Electronically recorded obligations

8,155

8,155

—

(3) Short-term loans payable

269

269

—

(4) Current portion of PFI and other projects
finance loans

833

833

—

(5) Long-term loans payable

2,050

2,053

2

(6) PFI and other projects finance loans

11,54911,819270

Total assets(7) Derivatives
Total liabilities(2)

Notes and accounts receivable - trade
The fair value of notes and accounts receivable - trade is based on their present value calculated by discounting the amount of each receivableclassified by a certain period using a discount rate that reflects the credit risk and the period until the maturity.

(3)

Investment securities
The fair value of stocks is based on their prices quoted on the concerned stock exchanges.

—

—

—

Liabilities

41,23041,503272(1)

Accounts payable - trade, (2) Electronically recorded obligations, (3) Short-term loans payable and (4) Current portion of PFI and other project
finance loans

As of March 31, 2019

The fair value of accounts payable - trade, electronically recorded obligations, short-term loans payable and current portion of PFI and otherproject finance loans is based on their carrying amounts, since the fair value approximates their carrying amounts due to the short maturity
Carrying value(Millions of yen)

Fair value(Millions of yen)

Difference(Millions of yen)

(1) Cash and deposits

28,58928,589—(2) Notes and accounts receivable - trade76,282

76,332

49

103

103

—

period of the instruments.

(5)(3) Investment securities
Available-for-sale securities

104,976

105,025

49(1) Accounts payable - trade

Total assets

18,27818,278—(2) Electronically recorded obligations

8,380

8,380

—

337

337

—

844

844

—

1,847

1,840

(6)

(6) PFI and other projects finance loans

10,705

10,974

269

—

—

—

40,39240,655262

Carrying value(Thousands of U.S.
dollars)

Fair value(Thousands of U.S.
dollars)

Difference(Thousands of U.S.
dollars)(7) Derivatives
Total liabilities(1) Cash and deposits

257,581257,581—(2) Notes and accounts receivable - trade687,287

687,737441(3) Investment securities
Available-for-sale securities

928

928

—

945,814946,256441(1) Accounts payable - trade164,681

164,681—

Total assets(2) Electronically recorded obligations

75,50275,502—(3) Short-term loans payable(4) Current portion of PFI and other projects
finance loans(5) Long-term loans payable

3,036

3,036

—

7,604

7,604

—

16,641

16,578(54)(6) PFI and other projects finance loans

96,45098,873

2,423

—

—

—

363,924

366,2942,360(7) Derivatives
Total liabilities

83

METAWATER REPORT 2019

The fair value of long-term loans payable and PFI and other project finance loans is computed based on their present value calculated bydiscounting the aggregate value of principal and interest using the discount rate at which a similar and new borrowing is assumed to be made.

(7)

Derivatives
The fair value of interest rate swaps is based on the quoted price obtained from the counterparty financial institution.
Since interest rate swaps under short-cut method are treated together with long-term loans payable and PFI and other project finance loans that

Financial Information(3) Short-term loans payable(4) Current portion of PFI and other projects
finance loans(5) Long-term loans payable

Long-term loans payable and (6) PFI and other project finance loans

are subject to hedging, their fair value is included in the fair value of PFI and other project finance loans.

(Note 2) The amount of financial instruments recorded in the consolidated balance sheets, of which it is deemed extremely difficult to determine the fairvalue.

Category
Unlisted stocks (including shares of non-consolidated
subsidiaries and affiliated companies)

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S.
dollars)

1,233

1,238

11,154Since there is no quoted market price for the above item and it is deemed extremely difficult to determine its fair value, the item is not includedin “(3) Investment securities”.

METAWATER REPORT 201984

(Note 4) The repayment schedule for loans payable and PFI and other project finance loans subsequent to the consolidated closing date

(Note 3) The redemption schedule for monetary receivables subsequent to the consolidated closing date
As of March 31, 2018

As of March 31, 2018
Due in one year or
less(Millions of yen)

Due after one year Due after five years
Due after ten years
through five years through ten years(Millions of yen)
(Millions of yen)
(Millions of yen)

Cash and deposits

25,805———

Notes and accounts receivable - trade60,182

3,580

3,876

4,524

85,987

3,580

3,876

4,524

Total

Due in one year or
less(Millions of yen)

Due after one year Due after five years
through five years through ten years(Millions of yen)
(Millions of yen)

Due after ten years
through fifteen
years(Millions of yen)

Due after fifteen
years(Millions of yen)

Loans payable

269

1,253

796

—

—

PFI and other projects finance loans

833

3,436

3,787

3,624

701

1,103

4,690

4,584

3,624

701

Due after ten years
through fifteen
years(Millions of yen)

Due after fifteen
years(Millions of yen)

Total
As of March 31, 2019
As of March 31, 2019
Due in one year or
less(Millions of yen)

Due after one year Due after five years
Due after ten years
through five years through ten years(Millions of yen)
(Millions of yen)
(Millions of yen)

Cash and deposits

28,589———Notes and accounts receivable - trade

62,894

4,892

3,971

4,524

91,483

4,892

3,971

4,524

Total

Due in one year or
less(Millions of yen)
Loans payable

337

1,292

554

—

—

PFI and other projects finance loans

844

3,477

3,694

3,532

—

1,181

4,769

4,249

3,532

—

Total
Due in one year or Due after one year Due after five years
Due after ten years
through five years through ten years
less(Thousands of U.S.
(Thousands of U.S. (Thousands of U.S. (Thousands of U.S.
dollars)
dollars)
dollars)
dollars)
257,581———

Notes and accounts receivable - trade566,663

44,07635,77740,760824,245

44,07635,77740,760Total

Due after ten years
Due in one year or Due after one year Due after five years
Due after fifteen
through fifteen
lessthrough five years through ten years
years
years
(Thousands of U.S. (Thousands of U.S. (Thousands of U.S.
(Thousands of U.S.
(Thousands of U.S.
dollars)
dollars)
dollars)
dollars)
dollars)
Loans payable

3,036

11,640

4,991

—

—

PFI and other projects finance loans

7,604

31,32733,282

31,822—

10,64042,96738,282

31,822

—

Total

85

METAWATER REPORT 2019

METAWATER REPORT 2019

Financial Information

Cash and deposits

Due after one year Due after five years
through five years through ten years(Millions of yen)
(Millions of yen)86

(Securities)(Derivatives)

Available-for-sale securities

1. Derivative transactions to which hedge accounting is not applied
No items to report.

As of March 31, 2018
Category

Carrying value(Millions of yen)

Acquisition cost
(Millions of yen)

Unrealized gain (loss)(Millions of yen)Amounts in the consolidated balance sheets
exceeding acquisition cost:
StocksTotal

2. Derivative transactions to which hedge accounting is applied
Interest rate-related derivatives

111

33

78

111

33

78

As of March 31, 2018
Hedge accounting
methodAs of March 31, 2019
Category

Carrying value(Millions of yen)

Acquisition cost
(Millions of yen)

Unrealized gain (loss)(Millions of yen)Amounts in the consolidated balance sheets
exceeding acquisition cost:
Stocks
Total

Category

103

33

70

103

33

70

Carrying value(Thousands of U.S. dollars)

Acquisition cost(Thousands of U.S. dollars)

Unrealized gain (loss)(Thousands of U.S. dollars)

928

297

630

928

297

630

Amounts in the consolidated balance sheets
exceeding acquisition cost:
Stocks
Total

Short-cut method
for interest rate
swaps

Contract amount(Millions of yen)Contract amountdue after one year
(Millions of yen)

Fair value(Millions of yen)

Long-term loans
payable

1,062

929

(Note)

PFI and otherprojects financeloans

11,328

10,573(Note)

12,391

11,503

Type of derivativetransaction

Main hedged
itemsInterest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rate
Interest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rate
Total

(Note)

Since interest rate swaps to which short-cut method is applied are accounted together with long-term loans payable and PFI and other project
finance loans that are subject to hedging, their fair value is included in the fair value of such long-term loans payable and PFI and other project
finance loans.

As of March 31, 2019

Hedge accounting
methodContract amountdue after one year
(Millions of yen)

Fair value(Millions of yen)

Long-term loans
payable971

832(Note)

PFI and otherprojects financeloans

10,5719,806(Note)

11,543

10,638Contract amount(Thousands of
U.S. dollars)

Contract amountdue after one year
(Thousands of
U.S. dollars)

Fair value(Thousands of
U.S. dollars)

Main hedged
itemsInterest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rate
Interest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rate
Total

Hedge accounting
methodShort-cut method
for interest rate
swaps

Type of derivativetransaction

Main hedged
itemsInterest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rateLong-term loans
payable

8,748

7,496

(Note)

Interest rate swaps:
Payment on a
floating interest
rate/Receiving on
a fixed interest rate

PFI and otherprojects financeloans

95,24288,350(Note)

104,000

95,846

Total(Note)

Financial Information

Short-cut method
for interest rate
swaps

Contract amount(Millions of yen)Type of derivativetransaction

Since interest rate swaps to which short-cut method is applied are accounted together with long-term loans payable and PFI and other project
finance loans that are subject to hedging, their fair value is included in the fair value of such long-term loans payable and PFI and other project
finance loans.

87

METAWATER REPORT 2019

METAWATER REPORT 201988

(4) The components of retirement benefit expenses are as follows:(Retirement Benefits)
1.

Overview of retirement benefit plans
Fiscal year ended
March 31, 2018
(Millions of yen)

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

Service cost

730

736

6,631

Interest cost

151

154

1,387

certain domestic consolidated subsidiary has a retirement benefit plan under which such subsidiary pays additional retirement benefits to employees

Expected return on plan assets

(139)

(146)

(1,315)

who meet the prescribed requirements upon their retirement.

Amortization of actuarial gain or loss

668

648

5,838

Amortization of prior service cost

7

8

72

(33)

(43)

(387)

1,385

1,358

12,235The Company has lump-sum payment plans and a contract-type corporate pension plan as its defined benefit plan. In addition, the Company has adefined contribution pension plan. The Company has established a retirement benefit trust.
Certain overseas consolidated subsidiaries have a defined benefit or defined contribution plan.
Certain domestic consolidated subsidiary has The Smaller Enterprise Retirement Allowance Mutual Aid Scheme. In addition to such scheme,

In certain cases, the Group may also pay additional retirement benefits that are not subject to any actuarial calculations.

Other
2.

Defined benefit plans

Retirement benefit expenses(1) The changes in the retirement benefit obligation are as follows:

Retirement benefit obligation at the beginning of the year

Fiscal year ended
March 31, 2018
(Millions of yen)

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)
151,401

16,554

16,804Service cost

730

736

6,631

Interest cost

151

154

1,387

Actuarial gain and loss

95

117

1,054

Retirement benefits paid

(705)

(636)

(5,730)

Other
Retirement benefit obligation at the end of the year

(21)

(12)

(108)

16,804

17,163

154,635(5) The components of remeasurements of defined benefit plans included in other comprehensive income (before tax effect) are as follows:
Fiscal year ended
March 31, 2018
(Millions of yen)
Prior service cost

(6)

7

8

72

516

1,184

10,667

Total

524

1,193

10,748The components of remeasurements of defined benefit plans included in accumulated other comprehensive income (before tax effect) are as
follows:

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)
111,100

Unrecognized prior service cost

As of March 31, 2019
(Thousands of U.S. dollars)

25

16

144

Unrecognized actuarial gain and loss

3,540

2,355

21,218

Total

3,565

2,372

21,371

11,96012,331

139

146

1,315

Actuarial gain and loss

(56)

653

5,883

Contribution by the companies

586

1,036

9,334

Retirement benefits paid

(317)

(267)

(2,405)

Stocks

37%

29%

387

Bonds

35

39

General accounts

22

20

Plan assets at fair value at the end of the year19
12,33143
13,935125,551

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of March 31,2018 and 2019 for the Company’s and the consolidated subsidiaries’ defined benefit plans:(7) The fair value of plan assets, by major category as a percentage of total plan assets are as follows:
As of March 31, 2018

As of March 31, 2019

Other

6

12

Total

100

100

(Note)

Financial Information

Fiscal year ended
March 31, 2019
(Millions of yen)

As of March 31, 2019
(Millions of yen)

Expected return on plan assets

Other

(3)

As of March 31, 2018
(Millions of yen)
Fiscal year ended
March 31, 2018
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

Actuarial gain and loss

(2) The changes in plan assets are as follows:

Plan assets at fair value at the beginning of the year

Fiscal year ended
March 31, 2019
(Millions of yen)

Retirement benefit trust established for the corporate pension plans is included and equivalent to 8.7% of total amount of plan assets as ofMarch 31, 2018 and 9.4% as of March 31, 2019.

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S. dollars)

Funded retirement benefit obligation

14,426

14,761

132,993

Plan assets at fair value(12,331)(13,935)(125,551)

The long-term expected rate of return on plan assets have been determined as a result of consideration of both the portfolio allocation at present
and in the future, and long-term rates of return from multiple plan assets at present and in the future.

2,094

826

7,442

Unfunded retirement benefit obligation

2,378

2,402

21,641

Net amount of liabilities and assets recognized in the
consolidated balance sheet

4,473

3,228

29,083Liability for retirement benefit

5,294

4,603

41,472Long-term expected rates of return on plan assets

Assets for retirement benefits

821

1,374

12,379

Expected rates of salary increase

4,473

3,228

29,083(8) The assumptions used in accounting for the defined benefit plans are as follows:
Fiscal year ended March 31,
2018
Discount rates

Net amount of liabilities and assets recognized in the
consolidated balance sheet

89

METAWATER REPORT 2019

0.5–1.2%

Fiscal year ended March 31,
2019
0.6–1.2%

Mainly 1.5

Mainly 1.5

1.2–8.5

1.2–8.5

METAWATER REPORT 2019

90

3.

Defined contribution plans

2. The breakdown of major items that caused differences between the effective statutory tax rate and the effective income tax rate

Contributions of defined contribution plans for the fiscal years ended March 31, 2018 and 2019 were ¥140 million and ¥142 million (US$1,279
thousand), respectively.

As of March 31, 2018

As of March 31, 2019

30.9%

30.6%

Effective statutory tax rate
(Adjustment)(Income Taxes)
1. The significant components of deferred tax assets and deferred tax liabilities

As of March 31, 2018
(Millions of yen)

As of March 31, 2019
(Millions of yen)

As of March 31, 2019
(Thousands of U.S.
dollars)

Deferred tax assets:

Permanently non-deductible items such as entertainment expenses

3.8

4.0

Permanently non-taxable items such as dividends income

(0.1)

(0.1)

Per capita inhabitants’ tax

1.0

0.9

Tax credit for experiment and research expenses

(2.1)

(3.0)

Reduction of deferred tax assets at end of period due to change in tax rates

2.1—

Changes in valuation allowance

0.4

3.4

Enterprise tax payable

180

178

1,603

Difference in tax rates of overseas consolidated subsidiaries

0.0

(0.5)

Accrued bonuses

873

824

7,424

Other

2.9

(3.2)

Provision for loss on construction contracts

64

158

1,423

Effective income tax rate

38.9

32.1

Provision for warranties for completed
construction

209

367

3,306

Excess of depreciation

318

328

2,955

Liability for retirement benefit

2,154

1,849

16,659

Unused tax losses (Note 2)

148

187

1,684

Other

628

705

6,351

4,578

4,600

41,445

Valuation allowance for unused tax losses (Note 2)

—

(165)

(1,486)

Valuation allowance for the total amount of
deductible temporary differences

—

(257)

(2,315)

Valuation allowance subtotal (Note 1)

(168)

(422)

(3,802)

Total deferred tax assets

4,410

4,177

37,634Gain on contribution of securities toretirement benefit trust

(691)

(727)

(6,550)

Other

(254)

(282)

(2,540)Total deferred tax liabilities(945)(1,009)(9,090)Net deferred tax assets (liabilities)

3,465

3,168

28,543

Subtotal(Asset Retirement Obligations)
The Group recognizes asset retirement obligations to restore corporate offices to their original condition upon termination of their lease contracts.
However, the statement is omitted because the total amount of the asset retirement obligations is immaterial.
Regarding some of the obligation to restore corporate offices to their original condition, the Group estimate nonrecoverable amounts of deposits for
those premises and record the portion attributable to the current year as expenses, instead of recording asset retirement obligations.

(Segment Information)[Segment Information]

Deferred tax liabilities:

1. Outline of reportable segment
The Company’s segments represent components of the Company for which separate financial information is available and that are subject toperiodical review by the board of directors in determining how to allocate operating resources and evaluating performance.

comprehensive domestic and overseas strategies developed for its products and services.
Therefore, the Group basically consists of two reportable segments: “Plant Engineering” and “Service Solutions”, which are based on the(Notes)1. The valuation allowance has increased by ¥254 million (US$2,288 thousand). The increase mainly consists of the additional recognition ofCompany’s business divisions in consideration of similarities of types and natures of products and services. “Plant Engineering” segment is primarily

valuation allowance relating to the provision for loss on construction contracts in the amount of ¥107 million (US$964 thousand) at the

involved in design and construction of water and sewage treatment plants. “Service Solutions” segment is primarily involved in operation, control andCompany and the valuation allowance for unused tax losses in the amount of ¥121 million (US$1,090 thousand) at a consolidated subsidiary,

repair of water and sewage treatment plant facilities.
2. Determination of sales, income or loss, assets, liabilities and other items for each reportable segment

METAWATER USA, INC.

Accounting treatment applied to the business segment reported is generally consistent with accounting treatment stated in “Important Matters for2. Amounts of unused tax losses and deferred tax assets by carryforward period

Basis of Preparation of Consolidated Financial Statements”.

As of March 31, 2019

Unused tax losses (a)Valuation allowance
Deferred tax assets

After one year After two years After three years After four years
One year or less through two
through three
through four
through five
After five years
Total(Millions of yen)
years
years
years
years
(Millions of yen) (Millions of yen)
(Millions of yen) (Millions of yen) (Millions of yen) (Millions of yen)
1
—
—
23
—
162
187
(1)
—
—
(2)
—
(161)
(165)
—
—
—
21
—
1
22
One year or less(Thousands of
U.S. dollars)

Unused tax losses (a)Valuation allowance
Deferred tax assets

Financial Information

The Company has established business divisions by its products and services at the corporate office, each of which operates under

9
(9)
—

After one year
through two
years(Thousands of
U.S. dollars)———

After two years After three years After four years
through three
through four
through five
years
years
years
(Thousands of(Thousands of(Thousands of
U.S. dollars)
U.S. dollars)
U.S. dollars)
—
207
—
—
(18)
—
—
189
—

After five years(Thousands of
U.S. dollars)

Total(Thousands of
U.S. dollars)

1,459(1,450)9

1,684(1,486)
198

In addition, segment income is determined based on operating income, which is consistent with operating income for the consolidated
statement of income.

(a) Unused tax losses are multiplied by the effective statutory tax rate.

91

METAWATER REPORT 2019

METAWATER REPORT 201992

3. Sales, income or loss, assets, liabilities and other items by reportable segment[Related Information]
Fiscal year ended March 31, 2018

Fiscal year ended March 31, 2018
(Millions of yen)

A description is omitted because similar information has been disclosed under segment information.

Reportable segments
Plant
Engineering
Business

Service
Solutions
Business

1. Information by products and services

Total

Adjustments(Note)

Consolidated
2. Information by region(1) Net sales

Net sales
Sales to third parties
Inter-segment sales and transfers
Net sales

64,96545,930110,895—

110,895

—

—

—

—

—
110,895

64,96545,930110,895—

Segment income

2,623

4,121

6,745

—

6,745

Segment assets

46,37449,07995,45327,499122,952

A description is omitted because sales to third parties in Japan exceed 90% of net sales in the consolidated statement of income.

(2) Property, plant and equipment(Millions of yen)Japan

North America

Total

1,171

1,810

2,982

Name of customer

Net sales

Related business segment

TOKYO METROPOLITAN GOVERNMENT

17,256

Plant Engineering Business
Service Solutions Business

Other items
Depreciation

862

578

1,441

—

1,441

Capital expenditures

582

174

757

—

757

(Note) The amount of corporate assets included in adjustments of segment assets is ¥27,499 million. The corporate assets mainly represent cash and3. Information about major customers(Millions of yen)deposits and investment securities.

Fiscal year ended March 31, 2019
(Millions of yen)
Reportable segments
Adjustments(Note)

Fiscal year ended March 31, 2019

Plant
Engineering
Business

Service
Solutions
Business

Total

65,517

51,824

117,342

—

—

—

—

—

—

65,517

51,824

117,342—

117,342

Segment income

3,191

4,416

7,607

—

7,607

Segment assets

56,15846,512

102,671

29,949132,620

Consolidated

1. Information by products and services
A description is omitted because similar information has been disclosed under segment information.

Net sales
Sales to third parties
Inter-segment sales and transfers
Net sales

117,342
2. Information by region(1) Net sales
A description is omitted because sales to third parties in Japan exceed 90% of net sales in the consolidated statement of income.

Depreciation

765

582

1,348

—

1,348

Capital expenditures

584

307

891

—

891

(Thousands of U.S. dollars)(2) Property, plant and equipment(Millions of yen)Japan

North America

Total

1,346

1,841

3,188

Reportable segments
Adjustments(Note)(Thousands of U.S. dollars)

Plant
Engineering
Business

Service
Solutions
Business

Total

590,296

466,924

1,057,230

—

—

—

—

—

—

590,296

466,924

1,057,230—

1,057,230

Segment income

28,75039,787

68,537—

68,537

Segment assets

505,973

419,064925,047

269,835

1,194,882

Consolidated

Japan

North America

Total

12,127

16,58728,723Name of customer

Net sales

Related business segment

TOKYO METROPOLITAN GOVERNMENT

19,967

Plant Engineering Business
Service Solutions Business

Name of customer

Net sales

Related business segment

TOKYO METROPOLITAN GOVERNMENT

179,899

Plant Engineering Business
Service Solutions Business

Financial Information

Other items

Net sales
Sales to third parties
Inter-segment transactions and transfers
Net sales

1,057,230

Other items
Depreciation

6,892

5,243

12,145—

12,145

Capital expenditures

5,261

2,766

8,027

—

8,027

(Note) The amount of corporate assets included in adjustments of segment assets is ¥29,949 million (US$269,835 thousand). The corporate assets
mainly represent cash and deposits and investment securities.

93

METAWATER REPORT 2019

3. Information about major customers(Millions of yen)(Thousands of U.S. dollars)

METAWATER REPORT 201994

[Information about Impairment Loss on Non-current Assets by Reportable Segment](Related Party Information)

Fiscal year ended March 31, 2018

Fiscal year ended March 31, 2018

No items to report.

1.

Business transactions with related parties(1)Business transactions between the company filing the consolidated financial statements and related parties

Fiscal year ended March 31, 2019

Unconsolidated subsidiaries and affiliated companies of the company filing the consolidated financial statements

No items to report.
Category

Related party

Address[Information about Amortization and Unamortized Balance of Goodwill by Reportable Segment]

OtheraffiliateFiscal year ended March 31, 2018

FUJI ELECTRIC
CO., LTD.

(Millions of yen)

Kawasaki-ku,
Kawasaki-shi

Capital stock orcontributions(Millions of yen)

47,586

Reportable segments
Plant
Engineering
Business
Amortization
Unamortized balance

Corporate/
Eliminations

Service
Solutions
Business

Total

140

—

140

—

140

1,842

—

1,842

—

1,842

(Millions of yen)

FUJI FURUKAWAENGINEERING &CONSTRUCTION
CO. LTD.

Saiwaiku,
Kawasaki
-shi

1,970

Subsidiary of Hokkaido Fuji Electric Chuo-ku,
other affiliateCo., Ltd.
Sapporo-shi

100

Subsidiaryof otheraffiliate

Reportable segments

Amortization
Unamortized balance

Service
Solutions
Business

Total

Corporate/
Eliminations

Total

138

—

138

—

138

—

1,670

—

1,670

(Notes)1.

2.

(Held)
Direct 28.9

Purchase of
products

Entrustmentof theCompany’s
construction
contracts

Design and execution of
construction of plantfacilities, air conditioning/
electricity/building/incidental
facilities, andtelecommunications—

Sale, installation, and repairof electrical machinery andapparatus/control systems
and electronic components—

Account
title

Balance atthe end ofyear(Millions ofyen)

Purchase of
products(Note 1, 2)

9,209

Accounts
payable trade

3,846

Entrustment ofconstruction
contracts(Note 1, 2)

4,636

Accounts
payable trade

1,491

Acceptance ofconstruction
contracts(Note 1, 2)

1,143

Accounts
receivable trade

1,145

Concurrent
holding of
positions byofficers
Acceptance ofconstruction
contracts ofsaid company

Of the amounts stated above, the transaction amount excludes consumption taxes, while the balance at end of the fiscal year includes

Transaction terms and the policy to determine transaction terms
Transaction terms such as prices are determined through negotiation in each case based on a quotation as is the case with generaltransactions, as well as by reference to actual situation of the market.

(Thousands of U.S. dollars)

Total

Corporate/
Eliminations

No items to report.

Total

Amortization

1,243

—

1,243

—

1,243

Unamortized balance

15,046—

15,046—

15,0462.

Note concerning the parent company or significant affiliated companies
No items to report.

[Information about Gain on Bargain Purchase by Reportable Segment]

Financial Information(2)Business transactions between consolidated subsidiaries of the company filing the consolidated financial statements and related parties

Reportable segments
Service
Solutions
Business

Development, manufacture,and sale of products related
to power electronics
systems, electric
generation, electronic
devices and food
distribution, and provision ofservices related thereto

Transaction
amount(Millions ofyen)

Nature oftransaction

consumption taxes.

1,670

Plant
Engineering
Business

Relationship

Total

Fiscal year ended March 31, 2019

Plant
Engineering
Business

Type of business

Percentage ofvoting rights
holding (held)(%)

Fiscal year ended March 31, 2018
No items to report.

Fiscal year ended March 31, 2019No items to report.

95

METAWATER REPORT 2019

METAWATER REPORT 201996

Fiscal year ended March 31, 2019
1.

(Per Share Information)
Fiscal year ended
March 31, 2018
(Yen)

Fiscal year ended
March 31, 2019
(Yen)

Fiscal year ended
March 31, 2019
(U.S. dollars)

Net assets per share

2,118.02

2,271.67

20.46

Net income per share

151.65199.46

1.79

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

Business transactions with related parties(1)Business transactions between the company filing the consolidated financial statements and related parties
Unconsolidated subsidiaries and affiliated companies of the company filing the consolidated financial statements

Category

Related party

Other
affiliate

NGK INSULATORS,
LTD.

Other
affiliate

FUJI ELECTRIC
CO., LTD.

FUJI FURUKAWAENGINEERING &CONSTRUCTION
CO. LTD.

Subsidiaryof otheraffiliate

Subsidiaryof otheraffiliate(Notes)Hokkaido Fuji
Electric Co., Ltd.

1.

Address

Mizuho-ku,
Nagoya-shi

Capital stockor
contributions(Millions ofyen)Type of business

Development, manufacture,and sale of products related
69,849to electric power, ceramics,(US$629,326
electronics, and process
thousand)technology, and provision ofservices related thereto

Percentage
of votingrightsholding(held) (%)

Purchase of
products(Held)
Direct 28.9

Transaction
amount(Millions ofyen)Account
title

Balance atthe endof year(Millions ofyen)

Purchase of
products (Note
1, 2)

1,590
(US$14,325
thousand)Accounts
payable trade

1,258(US$11,334
thousand)Concurrent
holding of
positions byofficers

Development, manufacture,and sale of products related
47,586 to power electronics(US$428,741 systems, electric generation,
thousand) electronic devices and food
distribution, and provision ofservices related thereto

Saiwaiku,
Kawasaki-shi

Design and execution of
construction of plant
1,970
facilities, air conditioning/(US$17,749
electricity/building/incidental
thousand)facilities, andtelecommunications—

Sale, installation, and repair
100of electrical machinery and(US$900
apparatus/control systems
thousand)and electronic components—(Held)
Direct 28.9

Purchase of
products

Entrustment of
the Company’s
construction
contracts

Acceptance ofconstruction
contracts ofsaid company

Purchase of
products(Note 1, 2)

Entrustmentofconstruction
contracts(Note 1, 2)

Acceptance ofconstruction
contracts(Note 1, 2)

7,268(US$65,483
thousand)

5,048(US$45,481
thousand)Accounts
payable trade

Accounts
payable trade

858 Accounts(US$7,730 receivable thousand)trade

Diluted net income per share is not presented as there are no diluted shares.

2.

Net income per share is calculated on the following basis.

Fiscal year ended
March 31, 2018
(Millions of yen)

2,786
(US$25,101
thousand)

1,221(US$11,000
thousand)

831(US$7,487
thousand)

3,931

5,170

46,580

—

—

—

3,931

5,170

46,58025,923,452

25,923,379

25,923,379

Fiscal year ended
March 31, 2019
(Millions of yen)

Fiscal year ended
March 31, 2019
(Thousands of U.S.
dollars)

Profit not attributable to common shareholders
Profit attributable to owners of parent related tocommon stock
Average number of shares outstanding during theperiod (number of shares)
3.

Net assets per share are calculated on the following basis.
Fiscal year ended
March 31, 2018
(Millions of yen)

59,031

531,858

136

142

1,279

(Non-controlling interests included in the above)

(136)

(142)

(1,279)Transaction terms such as prices are determined through negotiation in each case based on a quotation as is the case with general

Net assets attributable to shares of common stock

54,90658,889530,579

transactions, as well as by reference to actual situation of the market.

Number of common stock used for calculation of net
assets per share (number of shares)

25,923,409

25,923,350

25,923,350

Of the amounts stated above, the transaction amount excludes consumption taxes, while the balance at end of the fiscal year includes
Transaction terms and the policy to determine transaction terms

No items to report.

Total net assets
Deduction from total net assets(Significant Subsequent Event)No items to report.

Note concerning the parent company or significant affiliated companies

Financial Information

55,042(2)Business transactions between consolidated subsidiaries of the company filing the consolidated financial statements and related parties

2.

1.

Net income per shareconsumption taxes.
2.

(Notes)Profit attributable to owners of parent

Kawasaki-ku,
Kawasaki-shi

Chuo-ku,
Sapporoshi

Relationship

Nature oftransaction

No items to report.

97

METAWATER REPORT 2019

METAWATER REPORT 2019

98

5.

[Supplementary Schedules][Schedule of Bonds]
No items to report.

[Schedule of Loans]
Balance as ofApril 1, 2018
(Millions ofyen)

Category

Balance as ofMarch 31, 2019
(Millions ofyen)

Balance as of
Balance as ofApril 1, 2018
March 31, 2019
(Thousands of U.S. (Thousands of U.S.
dollars)
dollars)

Averageinterest rate(%)

Due date

Short-term loans payable

269

337

2,423

3,036

3.76

—

Current portion of PFI andother project finance loans

833

844

7,505

7,604

1.06

—

Long-term loans payable

2,050

1,847

18,47016,641

3.23

April 25, 2022 toJanuary 14, 2026

PFI and other projects financeloans

11,54910,705104,054

96,4501.16

June 22, 2026 toNovember 30,
2033

Total

14,703

13,733

132,471

123,731——(Notes)1.

“Average interest rate” is stated at weighted average interest rate on the balance of loans payable at the end of the fiscal year.

2.

Repayment schedule for long-term loans payable and PFI and other project finance loans (excluding current portion) per year for five years
subsequent to the consolidated balance sheet date

Due after one year
through two years(Millions of yen)

Due after two years
through three years(Millions of yen)

Due after three years
through four years(Millions of yen)

Due after four years
through five years(Millions of yen)

Long-term loans payable

281

281

451

277

PFI and other projects
finance loans

855

862

873

885

Category

Financial Information

Category

Due after one year
Due after two years
Due after three years
Due after four years
through two years
through three years
through four years
through five years(Thousands of U.S. dollars) (Thousands of U.S. dollars) (Thousands of U.S. dollars) (Thousands of U.S. dollars)Long-term loans payable

2,531

2,531

4,063

2,495

PFI and other projects
finance loans

7,703

7,766

7,865

7,973

[Schedule of Asset Retirement Obligations]
No items to report.

（1）The Company’s consolidated financial statements are prepared based on “Ordinance on Terminology, Forms, andPreparation Methods of Consolidated Financial Statements” (Ordinance of the Ministry of Finance No. 28 of 1976).
（2）The Company’s non-consolidated financial statements are prepared based on “Ordinance on the Terminology, Forms,
and Preparation Methods of Non-consolidated Financial Statements, etc.” (Ordinance of the Ministry of Finance No. 59
of 1963; hereinafter “Ordinance on Non-consolidated Financial Statements, etc.”)
The Company falls under a company submitting special financial statements, and therefore prepares its nonconsolidated financial statements pursuant to the provisions of Article 127 of Ordinance on Non-consolidated Financial
Statements, etc.
（3）The Company is carrying out special initiatives to ensure the appropriateness of its consolidated financial statements,
etc. Specifically, we have joined the Financial Accounting Standards Foundation and participate in trainings organized byaudit firms, etc., in order to develop a system to accurately grasp the content of accounting standards, etc., andappropriately respond to changes in accounting standards, etc.

99

METAWATER REPORT 2019

METAWATER REPORT 2019100