Notice of Convocation
The 45th Ordinary General Meeting of Shareholders

The following is an English translation of the Notice of Convocation of the 45th Ordinary
General Meeting of Shareholders of SECOM CO., LTD. to be held on June 27, 2006, except
for the translation of the INSTRUCTION ON ONLINE VOTING and the ACCESS MAP
FOR THE PLACE OF THE MEETING in the Notice. The Company provides this translation
for your reference and convenience only and without any warranty as to its accuracy orotherwise.

Table of Contents

Notice of Convocation of The 45th Ordinary General Meeting of Shareholders ········[Attached Documents]
Business Report ··············································································································
I. Outline of Business ·····························································································
1
The Group’s business development and results of operations ······················
2
The Group's capital investments ······································································
3
The Group's fund raising ··················································································
4
Issues the Group has to cope with ····································································
5
The Group's and the Company's business performance and assets ·············II. Outline of the Company ····················································································
1
Principal Business of the Group ·········································································
2
Principal Offices of the Group ··········································································
3
Matters Concerning Employees of the Group and the Company ·················
4
Matters Concerning Principal Subsidiaries and other Principal Business
Combinations ·······································································································
5
Matters Concerning Shares and Shareholders ···············································
6
Acquisition, disposition and holding of treasury stock ····································
7
Primary Lenders ··································································································
8
Directors and Corporate Auditors ·····································································
9
Remuneration for Accounting Auditors ····························································
III. Important Facts Pertaining to the Group since Fiscal Year End····················
IV. Report on the Company's Internal System ·······················································
Consolidated Balance Sheet ························································································
Consolidated Statement of Income ·············································································
Copy of the Accounting Auditors’ Report (Consolidated)·········································
Copy of the Board of Corporate Auditors’ Report (Consolidated) ··························
Non-Consolidated Balance Sheet ················································································
Non-Consolidated Statement of Income ····································································
Proposal for appropriation of unappropriated retained earnings ··························
Copy of the Accounting Auditors’ Report···································································
Copy of the Board of Corporate Auditors’ Report ····················································
Reference Document Concerning the General Meeting of Shareholders···················

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6
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9
9
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14
14
14
15
16
17
17
18
19
19
20
24
35
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44
46
47
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(Note) This Table of Contents is for this abridged English translation only, and not the same as that in theoriginal Japanese documents.

- 2-[English Translation]

Stock Exchange Code: 9735
June 9, 2006

Notice of Convocation of
The 45th Ordinary General Meeting of Shareholders
Dear Shareholders:
You are cordially invited to attend the 45th Ordinary General Meeting of Shareholders of
SECOM CO., LTD. (the “Company”).
If you are unable to attend the meeting, you are respectfully requested to review the“Reference Document Concerning the General Meeting of Shareholders” below and exercise
your voting right on or before June 26, 2006, by either of the methods stated below: 1[By mail]
Please indicate on the Voting Right Exercise Form enclosed herewith your consent or
dissent to the proposals on the agenda, and return the form to the Company by mail, after
affixing your seal impression thereto.
[By the Internet]
Please access the designated website for exercising voting rights(https://www.evoting.tr.mufg.jp) from your personal computers and use the “log in ID”
and “temporary password” stated on the enclosed Voting Right Exercise Form. Then,please indicate your consent or dissent to the proposals on the agenda by following the
instructions on the display screen. When exercising your voting right by the Internet,
please carefully read the “Instruction on Online Voting”.
Yours very truly,
SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo, Japan
By: KANEMASA HARAGUCHI
President and Representative Director

1(Note): Please note that shareholders with addresses outside Japan may not themselves use these voting
procedures. For these shareholders please consult their standing proxies within Japan as to the exercise of voting
rights.

- 3-[English Translation]

PARTICULARS

1.

Date and Time of the Meeting:
Tuesday, June 27, 2006 at 10:00 a.m.

2.

Place of the Meeting:
HARAJUKU QUEST HALL, on the 3rd floor of HARAJUKU QUEST Building
13-14, Jingumae 1-chome, Shibuya-ku, Tokyo, Japan

3.

Matters to be dealt with at the Meeting:
Matters to be Reported:
1. Report on the Business Report, the Consolidated Balance Sheet and theConsolidated Statement of Income for the 45th Fiscal Year (from April 1, 2005 to
March 31, 2006) and the Results on the Audits of Consolidated Accounting
Documents by the Accounting Auditors and the Board of Corporate Auditors.
2. Report on the Non-Consolidated Balance Sheet and the Non-Consolidated
Statement of Income for the 45th Fiscal Year (from April 1, 2005 to March 31,
2006).
Matters to be Resolved upon :First Item of Business:

Approval of the Proposal for appropriation of
unappropriated retained earnings for the 45th
Fiscal Year

Second Item of Business:

Partial Amendments to the Articles ofIncorporation

Third Item of Business:

Election of Eleven (11) Directors- 4-[English Translation]

4.

Matters related to Exercise of Voting Rights:(i) Exercise of Voting Rights through ProxyIf a shareholder is unable to attend the general meeting of shareholders, theshareholder may exercise voting rights through a proxy who shall be a shareholder of theCompany. In this case, the shareholder or the proxy is required to submit a document
evidencing the proxy's power of representation to the Company at the meeting.
(ii) Non-uniform Exercise of Voting Rights

When the shares are owned by multiple owners but are registered in the name of asole shareholder, each owner may want to exercise his/her voting rights independently
from other owners. The law permits non-uniform exercise of voting rights by a registeredshareholder in such a situation. In order to exercise non-uniform voting, the registeredshareholder shall notify the Company to make such voting and the reason thereof 3 days
before the general meeting of shareholders.
(iii) Validity of the voting in the event of exercise of voting rights by a shareholder both byreturn mail (Voting Right Exercise Form) and by the Internet
In the event that a shareholder exercises voting rights both by return mail (Voting
Right Exercise Form) and by the Internet, the Company will consider the exercise of
voting rights by the Internet to be valid.
(iv) Validity of the voting in the event of exercise of voting rights by a shareholder by theInternet more than once
In the event that a shareholder exercises voting rights by the Internet more than once,
the Company will consider the last exercise of voting rights to be valid.

(Notes)If you plan to attend the meeting, please submit the enclosed Voting Right Exercise
Form to the receptionist at the meeting.
In cases that any content of the Reference Document Concerning the General Meetingof Shareholders and Accounting documents is amended, the Company will announce such
amendment on the Company's website (http://www.secom.co.jp/).

- 5-[English Translation]

[Attached Documents]

Business Report (Fiscal Year Ended March 31, 2006)
I. Outline of Business1. The Group’s business development and results of operations
During the fiscal year ended March 31, 2006, the recovery in the Japanese economy
gradually became more evident as private-sector capital investment increased on account of
improved corporate earnings, consumer spending rose, and exports were firm due toexpanding overseas economies. However, there were some concerns such as higher oil prices.
Meanwhile, against the backdrop of various societal factors, including the recent
deterioration in public safety and the law related to personal information protection coming
into full effect, social needs for safety and security advanced and diversified. In this situation,with the aim to fully developing the “Social System Industry” vision, we, the SECOM Group(the “Group”), expanded our security services, our core business, by addiing new offices,
relocating some offices, and introducing new services and products. At the same time, we
continued to aggressively develop other services, including medical services, insurance
services, geographic information services, and information and communication related andother services. We have worked to provide high-value-added services and products that more
precisely match the needs of our customers.
Security services are mainly responsible for centralized systems (online security systems)
for businesses and private residences, static guard services, armored car services, and the saleof security products. For businesses, we provide services that meet the security needs of ourcustomers, and these services include the following: SECOM AX, which involves image
sensors that make use of image recognition technology at a customer’s building to enableremote monitoring in a time of emergency; the highly-versatile SECOM DX, which can beused to meet a wide range of security needs; and SECOM IX, remote visual monitoring for
24-hour businesses. The number of contracts for online security systems steadily increased. In
addition, sales of security products, including access-control systems and surveillancecameras, remained firm as a result of increased awareness of crime prevention andinformation asset management. In cooperation with the corporation that has the largest shareof the market for shoplifting-prevention systems, we launched sales of the Electronic Article
Surveillance (EAS) system, which can be effectively employed to prevent shoplifting at stores.
SESAMO TR II, an integrated access-control system to manage individuals entering andleaving buildings and to remotely control doors, which can also include an anticrime function,
has also gone on sale. We introduced these new products in response to increased recognitionof the importance of daytime security related to people entering and leaving offices andcommercial facilities.
For residential customers, we have strived to expand sales of the online security system
SECOM Home Security, and actively proposed other products and services including
comprehensive home insurance, External Image Monitoring Service, SECOM Anshin
Glass, SECOM Home Camera System, and SECURIFACE intercom system. We also
introduced the daily-life support service, SECOM Home Service, for subscribers of our
SECOM Home Security service in densely populated residential areas in Tokyo, Kanagawa,
Osaka, and Hyogo. By adding this service, which includes security support, housework- 6-[English Translation]

support, and trouble support to quickly respond to various daily problems, we are able toprovide higher-quality and higher-value-added services to households.
During the fiscal year, in order to provide higher-quality security services, we partiallychanged our organizational structure. Satellite offices were relocated to or newly establishedin areas with a growing number of customers, particularly in large cities, and this has made it
possible to provide quick and meticulous response to customers. System Design Centers,
which are involved in major projects such as those for large-scale buildings, were expanded
throughout Japan, and we have strengthened our sales and proposal abilities.
Medical services contain various activities including home medical services, remote
image diagnosis support services, electronic medical report (EMR) systems, sales of medical
equipment and others, the management of nursing homes, personal care services, and realestate leasing for medical institutions. During the fiscal year, we focused on expanding home
medical services, centered on the home nursing services and pharmaceutical dispensing andhome delivery services. We also provided the SECOM Health Care Club, amembership-based health management service that provides detailed care for each member,and offer high-quality medical services at our affiliated clinic in Chiyoda-ku, Tokyo, which isequipped with the cutting-edge medical equipment.
For insurance services, we continued sales of the comprehensive automobile insurance
policy New SECOM Anshin My Car, which includes express on-site service by SECOM’s
emergency response personnel. Other products include Security Discount Fire Policy forbusinesses, SECOM Anshin My Home for households, and MEDCOM, an unrestricted medical
treatment policy , which is aimed to help policyholders defeat cancer through proper
treatment. We have strived to sell unique insurance policies that can generate synergies
between insurance and security services.
In geographic information services, which were originally part of information andcommunication related and other services but were spun off this fiscal year, we are mainly
engaged in providing services that utilize geographic information system (GIS) that meets theneeds of both regional governments and private sectors, and conducting businesses related tosurveying, measuring, and construction consulting. In the fiscal year, we launched sales of
PasCAL, an integrated GIS product for regional public organizations, and MarketPlanner
Series, which supports the computerization of area marketing activities by private enterprises.
In addition we introduced the Return Home Support Mapping Service, to aid corporation’s
emergency management measures and enhance employees’ ability to get home in the event ofa major earthquake. The Group also focused on expanding its overseas sites, particularly in
Asia.
Information and communication related and other services contain various fields
including information services, real estate development and sales, and real estate leasing. In
the field of information services, while focusing on providing cyber security services andoperating network systems, in addition to our present SECOM Safety Confirmation Service,
we started the SECOM Disaster Response Support Service, which provides support for the
initial response of organizations including corporations to major disasters. In the field of realestate development and sales, efforts were made to develop and sell the condominium series
Glorio, which stresses security.
The Group is engaged in each of its business, including security services, overseas.
During the fiscal year, the Group established the fifth security company in China in the city ofShenzhen and aggressively promoted the development of security services in China, whose
economy is expanding at an incredible pace.
As a result, during the fiscal year, consolidated revenue increased 3.7% year-on-year to¥567.3 billion. Partially in response to returns on pension assets that were substantially greater- 7-[English Translation]

than expected, which reduced operating expenses, consolidated operating profit increased
13.3% to ¥94.1 billion, and consolidated ordinary profit expanded 15.8% to ¥96.6 billion. The
Company also recorded ¥9.3 billion in extraordinary profit including a gain of ¥7.2 billion on
the sales of shares of subsidiaries and affiliated companies, and ¥11.1 billion in extraordinary
losses including a ¥3.2 billion provision for allowance for doubtful accounts, a ¥2.7 billion
revaluation loss on telephone rights and a ¥1.1 billion provision for accrued retirement
benefits for Directors and Corporate Auditors. As a result, consolidated net income increased
9.2% to ¥52.9 billion.

- 8-[English Translation]

2. The Group's capital investments
Capital investment for the fiscal year totaled ¥53.6 billion (a breakdown is given below),a major portion of which was ¥29.9 billion in system investments, including those for alarmsystems and equipment in the security service segment.
(Millions of yen)

Business Segment
Security Services
Medical Services
Insurance Services
Geographic Information Services
Information & Communication Related and Other
Services
Subtotal
Eliminations and Corporate Items
Total

Current fiscal year
29,964
8,671
749
1,840
14,36855,594(1,949)53,644

3. The Group's fund raising
During the fiscal year, no funds were raised by the Group in capital markets through theissuance of corporate bonds or new shares.
The Group uses cash flows from operating activities and short-term loans from financial
institutions to meet its needs for funds.
4. Issues the Group has to cope with
In an ever-changing society, changes in people’s sense of values result in morediversified and advanced social demands for security and safety, such as medical treatment,
insurance, geographic information, and cyber security.
Therefore, by providing numerous services that bring people with security and peace ofmind, such as security services, the SECOM Group is aiming to create the "Social System
Industry" that can help realize a safer, more convenient, and pleasant society. In particular, weare striving to provide high-quality systems that are trusted by customers and meticulous
services that meet the needs of our customers. In addition, we are making further progress in
integrating each service of the Group, and are working to provide integrated services thatmake use of the total abilities of the Group. Furthermore, in regards to businesses that areapproaching a full-fledged growth phase, we are striving to increase the efficiency ofmanagement throughout the Group by continually improving operations.
Through these efforts, the Group is going to establish a “society without any fears” and acorporate structure that is said to “be reliable when there is a problem”.
We hope to receive the continued support of all of our shareholders.

- 9-[English Translation]

5. The Group's and the Company's business performance and assets(1) The Group's earnings and assets
The following table gives the Group’s earnings and assets for the current and the 3
preceding fiscal years.
(Millions of yen except for Net Income per Share)

Fiscal Year
Category
Revenue
Operating Profit
Ordinary Profit
Net Income
Net Income per Share(yen)Total Assets
Net Assets

42nd Fiscal year
(4/1/2002 3/31/2003)

43rd Fiscal year
(4/1/2003 3/31/2004)

44th Fiscal year
(4/1/2004 3/31/2005)

523,271
72,90270,06335,583154.96
1,090,131
369,753

527,40981,28676,243
41,111
181.401,092,067
403,257

547,230
83,04383,47848,517214.41
1,097,548
441,927

45th Fiscal year
(current fiscal year)(4/1/2005 3/31/2006)
567,315
94,10996,66952,994234.281,149,377
496,164A breakdown by business segment reveals that earnings for security services, centered on
centralized systems, were firm, with revenue increasing 4.2% year-on-year to ¥393.4 billion
and operating profit increasing by 7.6% to ¥102.0 billion.
In medical services, the home medical service business was firm and a newly
consolidated subsidiary contributed to the service’s earnings. Therefore, revenue increased
14.3% to ¥29.0 billion, and operating profit surged 64.5% to ¥1.1 billion.
In insurance services, on a non-consolidated basis, Secom General Insurance Co., Ltd.,
revenue rose 4.9% or ¥1.2 billion year on year. However, revenue for insurance services
declined 2.5% to ¥29.2 billion, as a result of various factors including the elimination ofinternal transactions, and absence of ¥0.6 billion in revenue from maturity repayment ofsavings-type insurance policies held by eight companies including the Company for theprevious year. The segment posted an operating loss of ¥3.1 billion, compared to an operating
loss of ¥2.5 billion for the previous year, because of a ¥1.2 billion transfer to actuarial
liabilities for natural disasters and emergencies, and a decline in received interest and dividend
income following Secom General Insurance’s shift of assets from real estate related
investments to safer investments. On account of the nature of the insurance business, ordinary
profit is an important indicator, and Secom General Insurance, which is the core of insurance
services, recorded ¥1.0 billion in ordinary profit, compared to a ¥0.5 billion ordinary loss forthe previous year.
In geographic information services, revenue increased 1.0% to ¥35.2 billion, andoperating profit increased 31.3% to ¥1.6 billion.
For information and communication related and other services, revenue increased 1.2% to¥80.2 billion, and operating profit increased 125.7% to ¥6.1 billion, as a result of various
factors including an improvement in operating profit from the hotel business and a substantial
increase in profit from the real estate development and sales business.
In the fiscal year, geographic information services, which had been included in
information and communication related and other services, was spun off as an independent
segment. Year-on-year comparison are made after re-categorizing the items.

- 10-[English Translation]

Sales by Business Segment [45th Fiscal Year]Business Segment
Security Services
Medical Services
Insurance Services
Geographic Information
Services
Information andCommunication Related andOther Services
Total
Eliminations and Corporate
Items
Consolidated(Millions of yen)
Profit(Loss)from operations
102,019
1,143(3,167)
1,689

Customers
393,479
29,04829,26035,271

Revenue
Inter-segment
8,258
220
2,495
113

Total
401,737
29,26831,75635,38480,255

6,405

86,661

6,115

567,315-

17,492(17,492)

584,808(17,492)

107,799(13,689)

567,315-567,315

94,109(2) The Company's earnings and assets(i) Earning and assets for the current fiscal year and the 3 preceding fiscal years(Millions of yen except for Net Income per Share)

Fiscal Year
Category
Revenue
Operating profit
Ordinary profit
Net Income
Net Income per Share(yen)Total Assets
Net Assets

42nd Fiscal year
(4/1/2002 3/31/2003)

43rd Fiscal year
(4/1/2003 3/31/2004)

44th Fiscal year
(4/1/2004 3/31/2005)

278,610
54,16753,51330,784134.45582,707371,182

288,493
64,231
62,15634,282151.66
580,547
397,862

297,782
66,031
66,21937,704167.09598,711426,288

45th Fiscal year
(current fiscal year)(4/1/2005 3/31/2006)
313,096
72,17270,96443,879194.58643,990
461,646(Notes)1. Since the 43rd fiscal year, in place of the traditional "income" and "income per share", "netincome" and "net income per share" have been used based on “Ministerial Ordinance Partially
Amending Enforcement Ordinance of the Commercial Law” (February 28, 2003, Ministry ofJustice Ordinance No. 7).
2. Net Income per Share was calculated using the average number of shares during the fiscal year.

- 11-[English Translation]

(ii) Revenue and Profit

Total revenue increased 5.1% year-on-year to ¥313.0 billion, operating profit grew 9.3%
to ¥72.1 billion, ordinary profit increased 7.2% to ¥70.9 billion, and net income increased
16.4% to ¥43.8 billion.
Net income per share increased to ¥194.58 from ¥167.09.
A breakdown of revenue reveals that contract revenue accounted for 87.2% of total
revenue, or ¥272.8 billion, and product/equipment sales accounted for 12.8% of total revenue,or ¥40.2 billion.
Within contract revenue, revenue from centralized system contracts, which are the coreof revenue and profit, was firm at ¥223.5 billion, and accounted for 71.4% of total revenue.
There were ¥21.8 billion revenue from static guard services and ¥16.4 billion from armoredcar service. The remaining revenue for contract revenue amounted to ¥11.0 billion, of which
majority came from advising fees from companies, including subsidiaries.
Product sales totaled ¥29.0 billion, 9.3% of total revenue, and equipment sales to othercompanies, including subsidiaries, totaled ¥11.1 billion, 3.5% of total revenue.
We continued to reduce operating expenses, and the return on the investment of pension
assets was substantially greater than expected, which resulted in a decrease in operating
expenses. Therefore, operating profit reached ¥72.1 billion.
Non-operating income was ¥6.2 billion, which included interest and dividends received,
while non-operating expenses totaled ¥7.5 billion due to interest paid and the losses on thesales and disposal of fixed assets. Therefore, ordinary profit was ¥70.9 billion.
In addition, we recorded ¥6.1 billion in extraordinary profit, which included a gain of¥4.6 billion from the sale of investment securities, and ¥5.6 billion in extraordinary losses as aresult of a ¥1.9 billion loss on revaluation of telephone rights and a ¥1.1 billion provision for
accrued retirement benefits for Directors and Corporate Auditors.
As a result, net income came to ¥43.8 billion.

- 12-[English Translation]

(iii) Earnings by business category
The following table gives sales for each business category.
43rd Fiscal year
(4/1/2003 3/31/2004)

Fiscal Year
Category

Contract revenue
Sales
Total

Centralized
systemStatic Guard
Services
Armored Car
Services
Other
Subtotal
Merchandize
Equipment
Subtotal

Amount(Millionsof yen)%212,81173.7

18,29544th Fiscal year
(4/1/2004 3/31/2005)

Change(%)

AmountChange(%)

45th Fiscal year
(current fiscal year)(4/1/2005 3/31/2006)
AmountChange%(Millions(%)
of yen)(Millionsof yen)%2.1

216,65572.8

1.8

223,527

71.4

3.2

6.3

3.7

18,9636.4

3.7

21,8827.0

15.4

15,751

5.5

7.3

15,6095.2(0.9)

16,423

5.3

5.2

10,024
256,883
21,906
9,704
31,610

3.5
89.0
7.6
3.4
11.0

5.5
2.7
21.2
(5.7)
11.4

10,690261,918
24,875
10,98835,863

3.6
88.0
8.3
3.7
12.0

6.6
2.0
13.6
13.2
13.5

11,043272,876
29,036
11,18340,220

3.5
87.2
9.3
3.5
12.8

3.3
4.2
16.7
1.8
12.1

288,493

100.0

3.5

297,782 100.0

3.2

313,096 100.05.1(Note) In the contract revenue business category, local system has been included in centralized systemstarting this fiscal year.
The following are the revenues for the local system included in centralized system: 43rd fiscal
year, ¥3,487 million; 44th fiscal year, ¥3,415 million; 45th fiscal year, ¥3,332 million.

- 13-[English Translation]

II. Outline of the Company (as of March 31, 2006)
1. Principal Business of the GroupThe principal business activities of the Group are as follows: security services centering
on security on contract business, medical services including home medical services andremote image diagnosis support services, non-life insurance, geographic information services
that mainly entails the provision of geographic information system, information andcommunication business including cyber-security services and network services, softwaredevelopment, real estate development and sales, real estate leasing and other miscellaneous
business activities.
2. Principal Offices of the Group(i) Headquarters of the Company:
5-1, Jingumae 1-chome, Shibuya-ku, Tokyo.
(ii) Regional Headquarters:
Hokkaido (Sapporo), Tohoku (Sendai), West Kanto (Saitama), East Kanto (Chiba),
Tokyo (Bunkyo-ku, Tokyo), Metropolitan Static Guard Service(Shinjuku-ku, Tokyo),
Metropolitan Armored Car Service (Shibuya-ku, Tokyo), Kanagawa (Yokohama),
Shizuoka (Shizuoka), Chubu (Nagoya), Osaka (Osaka), Kansai Static Guard
Service(Osaka), Kinki (Kyoto), Hyogo (Kobe), Chugoku (Hiroshima), Shikoku(Takamatsu), Kyushu (Fukuoka)(iii) Domestic Subsidiaries
Secom Joshinetsu Co., Ltd.(Niigata), Secom Techno Service Co., Ltd.(Nakano-ku,
Tokyo), Secom Industries Co., Ltd. (Shiroishi City, Miyagi Prefecture), Pasco
Corporation (Meguro-ku, Tokyo), Secom Medical System Co., Ltd. (Shibuya-ku,
Tokyo), Secom General Insurance Co., Ltd. (Chiyoda-ku, Tokyo), Secom Trust.net Co.,
Ltd. (Shibuya-ku, Tokyo), Secom Home Life Co., Ltd. (Shibuya-ku, Tokyo), Arai & Co.,
Ltd. (Shibuya-ku, Tokyo)(ix) Overseas Subsidiaries
The Westec Security Group, Inc. (Dover, Delaware, US), Secom Plc. (Kenley, Surrey,UK), Secom (China) Co., Ltd. (Beijing, China)
3. Matters Concerning Employees of the Group and the Company(1) Matters Concerning Employees of the Group
Number of Employees

Comparison with the preceding fiscal year

28,224+1,002(2) Matters Concerning Employees of the Company
Number ofComparison with the
Average Age
Average Working Years
Employees
preceding fiscal year
12,800
+282
37.3
11.6
Note: The number of employees refers to the number of full time employees. Part time or temporary
employees are not included.

- 14-[English Translation]

4. Matters Concerning Principal Subsidiaries and Other Principal Business
Combinations(1) Matters Concerning Principal Subsidiaries
Name of the Company

Percentage ofShareholding

IssuedCapital(Percentage of
Voting Rights)(¥ million)
Secom Joshinetsu Co., Ltd.

3,530(¥ million)

Secom Techno Service Co.,
Ltd.

2,357
(¥ million)

Secom Industries Co., Ltd.

499(¥ million)

Pasco Corporation

8,758(¥ million)

Secom Medical System Co.,
Ltd.

200
(¥ million)

Secom General Insurance Co.,
Ltd.

5,611
($)

The Westec Security Group,
Inc.

301
(￡1,000)

Secom Plc

39,126(%)
50.88(50.88)(%)
67.79(67.83)(%)
100.00(100.00)(%)
69.84(73.42)(%)
100.00(100.00)(%)
83.15(83.27)(%)
100.00(100.00)(%)
100.00(100.00)

Principal Business

Security, Safety
Installation and maintenance of
security systems
Manufacture of security systems
Surveying, measuring andgeographic information
Home medical services and remote
image diagnosis support services
Non-life insurance

American holding company

Security business in the UK(Notes)1.
2.

Percentage of Shareholding (Percentage of Voting Rights) is truncated to two
decimal places.
Percentage of Shareholding (Percentage of Voting Rights) for Secom Joshinetsu Co.,
Ltd. and Secom Techno Service Co., Ltd. include those owned by the Company's
subsidiaries.

(2) Ongoing Business Combinations
Nothing particular to comment.
(3) Results of Business Combinations
The Company has a total of 125 consolidated subsidiaries, including the 8 companies
mentioned in section (1), and a total of 30 affiliated companies accounted for byusing a equity method.
Results of business combinations are described in Section I “Outline of Business”,
Subsection 1 “The Group's business development and results of operations”.
(4) Technological Cooperation
The Company has technological cooperation agreements with domestic subsidiaries
and affiliated companies, and the following overseas companies: Taiwan Secom Co.,
Ltd., S1 Corporation, Thaisecom Pitakkij Co., Ltd., Secom (Malaysia) Sdn Bhd,

- 15-

[English Translation]

Secom (Singapore) Pte Ltd., PT. Secom Indopratama, Shanghai Secom Security Co.,
Ltd. and 4 other companies.
5. Matters Concerning Shares and Shareholders(i) Total number of shares to be issued:(ii) Issued number of shares:(iii) Number of shareholders at the end of the fiscal year:(iv) Major shareholders

900,000,000
233,288,717
19,807

Investment in the Company

Shareholders

Japan Trustee Services Bank, Ltd.
The Master Trust Bank of Japan, Ltd.
The State Street Bank and Trust
Company
Mitsubishi UFJ Trust and Banking
Corporation
Trust Account 106
BNP PARIBAS Securities (Japan)
LimitedThe State Street Bank and Trust
Company 505103
Makoto Iida
The State Street Bank and Trust
Company 505025
SECOM Science and Technology
Foundation
Bank of Bermuda Limited, Hamilton

Number ofshares held
(thousands ofshares)Percentage ofshareholding(%)

14,70013,894
7,835

6.30
5.95
3.35

6,153

2.63

4,863

2.08

4,607

1.97

4,320
4,040

Investment in the Principal
Shareholders by the Company
Number ofPercentage ofshares held
shareholding(thousands of(%)
shares)

----

----

--

--

1.85
1.73

--

--

4,025

1.72

--

--

3,221

1.38

--

--

(Notes)
1. Percentage of shareholding (Percentage of Voting Rights) is truncated to two decimal places.
2. As of March 31, 2006, the Company owned 8,301 thousand shares of treasury stock (excluded
from the table above).
3. In the case of the above trust banks, bank business-related shares and trust service-related sharesare registered under different names. Therefore, the number of shares held by each trust bankabove represents the shares regarding trust services.

- 16-[English Translation]

6. Acquisition, disposition and holding of treasury stock(i) Acquisition
Common stock: 35,954 shares
Total acquisition price: ¥191 million(ii) Share disposition
No entry(iii) Shares expired
No entry(iv) The number of shares of treasury stock at the end of the fiscal year
Common stock: 8,301,997 shares(Note) As of March 31, 2005, the Company held 8,266,043 shares of common stock.

7. Primary Lenders

LenderMizuho Bank, Ltd.

Closing balance at the endof the fiscal year(¥ million)
10,867(¥ million)
5,359

The Company's shares
owned by primary lenders
Percentage of
Number of shares held
shareholding(thousands of shares)
0.04%
100

The Bank of(thousands of shares)
3,196
Tokyo-Mitsubishi UFJ, Ltd.
Sumitomo Mitsui Banking(¥ million)-3,296
Corporation(Note) Percentage of shareholding is truncated to two decimal places.

- 17-[English Translation]

1.37%
--%

8. Directors and Corporate Auditors
Position
Director
Director

Name
Makoto Iida
Juichi Toda

Field of Responsibility
Supreme Advisor
Supreme Advisor

Director

Toshitaka Sugimachi

AdvisorChairman and Director
President andRepresentative Director
Senior Executive
Director

Shohei Kimura

Executive officer

Kanemasa Haraguchi

Executive officer

Nobuyuki Sasaki

Executive officer

Executive Director

Katsuhisa Kuwahara

Executive officer

Executive Director

Shuji Maeda

Executive officer

Executive Director
Executive Director

Katsuo Akiyama
Shinobu Iida

Director

Fumio Obata

Corporate Auditor
Corporate Auditor

Teruo Ogino
Ken Tsunematsu

Executive officer
Executive officer
Executive officer, President andRepresentative Director of Secom
Medical System Co., Ltd.
Full-time auditor

Corporate Auditor

Hiroshi Yasuda

Corporate Auditor
Kohei Yamashita(Notes)
1. Ken Tsunematsu, Hiroshi Yasuda and Kohei Yamashita are outside Corporate Auditors as
stipulated in Article 18 Paragraph 1 of the former Law Concerning Special Exceptions toCommercial Code with respect to Audit, etc. of Joint Stock Corporations.
2. Moves in Directors during the fiscal year:(1) Yoichi Tao resigned at the close of the 44th Ordinary General Shareholders’ Meeting held on
June 29, 2005.
(2) Shinobu Iida was elected Director at the 44th Ordinary General Shareholders’ Meeting held on
June 29, 2005. (At the meeting of the Board of Directors held on the same day, he was appointed
Executive Director.)- 18-[English Translation]

9. Remuneration for Accounting Auditors(i) Amount to be paid by the Company and its subsidiaries to Accounting Auditors:¥133 million.
(ii) Of the amount referred to in (i) above, ¥129 million will be paid as audit fees.
(iii)Of the amount referred to in (ii) above, ¥60 million will be paid for auditors by theCompany.
(Note) In the contract between the Company and Accounting Auditors, no distinction is madebetween remuneration for auditing based on the former Law Concerning Special Exceptions
to Commercial Code with respect to Audit, etc. of Joint Stock Corporations and remuneration
for auditing based on the Securities and Exchange Law, and indeed no practical distinction ispossible. Therefore, the amount referred to in (iii) above is the total for both audits.

III. Important Facts Pertaining to the Group since Fiscal Year End
No significant events to be noted.

- 19-[English Translation]

IV. Report on the Company’s Internal System
The Company, at the meeting of its Board of Directors held on May 9, 2006,resolved
upon the basic policy regarding the internal control system, i.e. “the system under which
execution of duties by Directors is ensured to comply with laws and regulations and the
Articles of Incorporation, and the system under which the Company’s business is ensured to
be properly executed” as provided for in Article 362, Paragraph 4, Item 6 of the Companies
Law and Article 100, Paragraphs 1 and 3 of the Enforcement Regulation of the Companies
Law. The contents of the resolution are set out below.
PARTICULAR
1.

GeneralThe resolution expresses the basic policy regarding the internal control system of theCompany to be specifically established by the President and Representative Director
based on Article 362, Paragraph 5 of the Companies Law.
The internal control system based on this resolution shall be established urgently byofficers in charge, and shall be constantly reviewed and improved.

2.

System under which execution of duties by Directors and employees is ensured
to comply with laws and regulations and the Articles of Incorporation(i) The Company has prepared a compliance manual which officers and employeesof the Company are required to follow in order to comply with laws, regulations, theArticles of Incorporation and “constitution of SECOM’s business and operation”
and a manual for the compliance with important laws. To enforce it to the full extent,
Audit and Compliance Department oversees and coordinates the undertaking forcompliance of the entire Company horizontally and this department acts as a corevehicle in education, etc. of officers and employees. Such activities shall be reported
to the Board of Directors and the Board of Corporate Auditors.
Furthermore, an organization climate committee whose chairman is the President andRepresentative Director has been set up and deliberates important matters related tocompliance.
(ii) In connection with the enforcement of the Whistle Blowers Protection Law, we
will examine how effective the aforesaid compliance system is under the law andwill make necessary changes to the systems.
Furthermore, officers in charge will be appointed, who shall control and oversee theconditions of execution of compliance as to each department and shall establish andmanage an appropriate training system for employees.
(iii) Any important changes in the compliance manual shall be subject to approvalof the Board of Directors after obtaining an opinion of Corporate Auditors.
3.

System under which information regarding execution of business by Directors
shall be maintained and controlled(i) Documents and other information regarding execution of duties such as thoseconcerned with decision making (hereinafter referred to as the “information on- 20-[English Translation]

executing duties”) shall be properly maintained, administered (including
destruction) pursuant to the Document Administration Regulation of the Company,
which will be amended upon reviewing the operating conditions if necessary.
(ii) Information on executing duties shall be recorded on data base with necessary
information protection measure so that a search system can be established to enable
quick search as to whether or not the particular document exists or the condition ofstorage of the particular document.
(iii) Any business related to the preceding two paragraphs shall be undertaken by
officers in charge, and in particular the status of examination and review of (i)above, and operation and management of the data base of (ii) above shall bereported to the Board of Directors and the Board of Corporate Auditors.
(iv) Establishment and important amendments of the Regulation of (i) above shallbe subject to approval of the Board of Directors after obtaining opinion of Corporate
Auditors.
4.

Regulation regarding Control of Risk of Loss and other System(i) We will review the Company’s risk control regulation, and each organization
corresponding to each risk shall constantly monitor the risk to the full extent and, in
addition, an officer(s) in charge of each specified risk shall be appointed. The officer
in charge shall, pursuant to the risk control regulation, be responsible to: (1) forecast
and classify the risk, (2) develop a system for emergency by which appropriate
information shall be transmitted promptly and appropriately in case of emergency,and (3) in cooperation with the Audit and Compliance Department, audit theconditions of daily control of risk.
(ii)The officers in charge shall report the President and Representative Director, theBoard of Directors, the Board of Corporate Auditors on matters related to control ofrisks.
(iii) Any important changes of the risk control regulation shall be subject toapproval of the Board of Directors after obtaining opinions of Corporate Auditors.
The Company’s risks shall be classified as follows:▪ Large scale calamity risk (System risk)▪ Security accident risk
▪ Accounting treatment and clerical work risk
▪ Compliance risk
▪ Others

5.

System by which efficient execution of duties of Directors shall be ensured(i) All Directors of the Company shall carry out operation and execution ofbusiness on the basis of “constitution of SECOM’s business and operation” so thatthey may share the idea essential to execution of the duties such as decision making
for management by the Board of Directors and decision making for execution ofduties by the Directors.
(ii) On the basis of the preceding, to implement execution of duties efficiently, thesystem of executive officers was introduced so that decision making and executionof business shall be further facilitated.
- 21-[English Translation]

(iii) In executing duties, in order to unify the power of the entire Company, a systemutilizing IT should be established enabling an information to be immediately
disseminated to the entire Company to the full extent.
(iv) With respect to particular decision making or execution of duties, through asystem utilizing IT, the decision making and execution can be carried out
immediately and definitely.
(v) The Company will share the short- and medium-term business vision and for the
purpose of accomplishment thereof, the Board of Directors will design an annual
business plan and deliberate progress of the plan each month.
6.

System under which the corporate group consisting of the Company and its
parent company and subsidiaries is ensured to properly execute its business(i) The Company stipulated the “constitution of SECOM’s business and operation”
and exerts its efforts to properly execute business with unified force of all officers
and employees of the Company group. Subsidiaries accepts audit and guidance
conducted by the Company, their parent company and exchanges information with
the Company so that they exerts efforts to grasp issues from the viewpoint ofcompliance.
Furthermore, Corporate Auditors of the Company visits important subsidiaries andaudit the subsidiaries with respect to the internal control system.
(ii)The Company shall establish a group management board whose chairman is the
President and Representative Director. The board engages in administrating thegroup information, gives guidance to management of subsidiaries and has theirbusinesses properly executed. The officer in charge will man the secretarial office ofthe board. The officer in charge will report to the Board of Directors and the Boardof Corporate Auditors.
(iii) Upon consultations with the Board of Corporate Auditors, a group corporate
auditors conference will be formed so that information will be shared.

7.

Matters related to employees to assist duties of Corporate Auditors when
Corporate Auditors requests to do so
A Corporate Auditors office will be established and at least two employees will bepositioned to assist audit duties of the Corporate Auditors.

8.

In the case of preceding item, matters related to independence of the employees
concerned from Directors
Transfer and evaluation of assistants in the preceding item shall be subject toapproval of the Board of Corporate Auditors.
The assistants who received necessary instruction on audit duties by Corporate
Auditors shall not be subject to any instruction and order of Directors, executive
officers or employees with respect to the subject audit duties nor be obligated toreport to them.

- 22-[English Translation]

9.

System under which Directors and employees report to Corporate Auditors andsystem under which any report is made to Corporate Auditors(i) Regulation providing for matters to be reported to Corporate Auditors shall beestablished upon discussion with the board of Corporate Auditors, and Directors shallmake report with respect to the following matters: (1) matters resolved by theorganization climate committee; (2) matters likely to be prejudicing materially theCompany; (3) important matters relating to monthly conditions of business; (4)important matters relating to internal audit and risk control; (5) material violation oflaws and regulations or the articles of incorporation; (6) condition of usage andcontent of hot help line; and (7) in addition, important matters from viewpoint ofcompliance.
(ii) If an employee finds a fact falling within the preceding paragraph, a system bywhich the fact may be transmitted directly to the President and Representative
Director through such as the hot help line shall be arranged and the President andRepresentative Director shall report to Corporate Auditors pursuant to the preceding
paragraph.

10.

Furthermore, system under which audit by Corporate Auditors is ensured
efficiently to be performed(i) The Board of Corporate Auditors shall regularly hold the meetings with the
President and Representative Director and Accounting Auditor, to exchange opinions
so that audit shall be performed efficiently.
(ii) The Company ensures that the Board of Corporate Auditors may retain lawyers
at its discretion and if necessary have opportunities to retain and consult professional
accountants with respect to their audit duties.

- 23-[English Translation]

Consolidated Balance Sheet(As of March 31, 2006)(Millions of yen)
ITEM

AMOUNTASSETSITEMAMOUNT

LIABILITIESCurrent Assets:
Cash on hand and in banks
Call loan
Notes and accounts receivable, trade
Due from subscribers
Short-term investments
Inventories
Real estate for sale
Deferred income taxes
Short-term loans receivable
Other current assets
Allowance for doubtful accounts

551,959
271,780
25,00052,667
17,67883,80911,26352,931
9,462
15,564
13,419(1,617)

Current Liabilities:
Notes and accounts payable, trade
Bank loans
Current portion of straight bonds
Payables – others
Income taxes payable
Consumption taxes payable
Accrued expenses
Deferred revenue – service charges
Accrued bonus
Other current liabilities

303,440
18,652
112,868
32,21026,34022,1592,588
2,085
30,747
8,981
46,805

Fixed Assets:
Tangible Fixed Assets:
Buildings and improvements
Security equipment and control stations
Land
Other tangible assets
Intangible Assets:
Software597,370
234,066
77,27063,07065,542
28,18324,384
12,961

314,303
11,18013,44428,982

Consolidated adjustment account
Other intangible assets
Investments and Others:
Investment securities
Long-term loans receivable
Long-term prepaid expenses
Prepaid pension and severance costs
Deferred income taxes
Other investments
Allowance for doubtful accounts

8,477
2,945
338,920
231,096
57,564
14,427
11,186
11,256
26,790(13,401)

Fixed Liabilities:
Straight bonds
Long-term loans
Guarantee deposits received fromsubscribers
Deferred income taxes
Accrued pension and severance costs
Accrued retirement benefits for
Directors and Corporate Auditors
Investment deposits by policyholders,
unearned premiums and otherinsurance liabilities
Other fixed liabilities
Total Liabilities
MINORITY INTEREST IN
SUBSIDIARIES

35,469Deferred Assets:

TOTAL ASSETS

47

1,149,377

SHAREHOLDERS' EQUITY
Common Stock
Capital Surplus
Retained Earnings
Net unrealized gains on securities
Foreign currency translation
adjustments
Common Stock in treasury, at cost
Total Shareholders’ Equity
TOTAL LIABILITIES, MINORITY
INTERESTS AND SHAREHOLDERS'EQUITY- 24-[English Translation]

1,079
11,362
1,565
245,6441,043
617,743

66,377
83,054
388,077
13,230(9,825)(44,749)
496,164
1,149,377

Significant Items for Preparation of Consolidated Financial Statements
1. Scope of Consolidation(1) Number of consolidated subsidiaries

125

Name of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Secom Medical System Co., Ltd.,
Secom General Insurance Co., Ltd., Secom Techno Service Co., Ltd.,
Secom Industries Co., Ltd., SECOM Information System Co., Ltd.,
Secom Trust.net Co., Ltd., Pasco Corporation,
Secom Home Life Co., Ltd., Arai & Co Ltd., Westec Security Group, Inc.
(2) Descriptions of unconsolidated subsidiaries
Name of major unconsolidated subsidiary:

FM-International Laos Co., Ltd.

(The reason for exclusion from consolidation)
FM-International Laos Co., Ltd. is of a small size, so that the aggregate amounts of
total assets, net sales, net income (an amount prorated to the equity ratio) andretained earnings (an amount prorated to the equity ratio) and others do not have asignificant effect on the consolidated financial statements.
2. Equity Method
All 30 affiliated companies are accounted for by the equity method.
Name of major affiliated companies accounted for by the equity method:
Nohmi Bosai, Ltd., Japan Nuclear Security System Co., Ltd., S1 Corporation,
Taiwan Secom Co., Ltd.
3. Changes in Scope of Consolidation and Companies accounted for by Equity Method
Newly consolidated companies:

8

Pasco North America Inc. and other 4 companies:(Investments for establishment)
NS Development, Inc.:(Acquisition of stock)
US Chemical Co., Ltd.:(Acquisition of holding)
GIS Kanto Co., Ltd.:(Changed from affiliated companies accounted for by the equity method)
Exclusion from consolidation:

6

Chuo Bohan Co., Ltd. and other 3 companies:(Merger by absorption)
Chuo Bohan Act Service Co., Ltd. and another company(Sale of stock)- 25-[English Translation]

Newly accounted for by equity method companies:

4

Social Rehabilitation Support Mine Co., Ltd. and another company:(Investments for establishment)
Kamakura Cable Communications Co., Ltd. and another company:(Practical influence)
Exclusion from companies accounted for by equity method: 5Japan Cablenet Holdings Ltd. and other 2 companies:(Sale of stock)
GIS East Co., Ltd.:(Merger with GIS Kanto Co., Ltd.)GIS Kanto Co., Ltd.:(Changed to consolidated subsidiaries)
4. Items for Settlement Date of Consolidated Subsidiaries, etc.
With respect to overseas consolidated subsidiaries, etc., The Westec Securities
Group Inc. and other 12 U.S. subsidiaries, Secominter Australia Pty. Ltd. and other
two Australian companies, Secom Plc and other three U.K. subsidiaries, SECOM(China) Co., Ltd. and other 12 Chinese subsidiaries, P.T. Nusantara Secom
Innfotech, P.T. Secom IndoPratama, Pasco Thailand Co., Ltd., Thaisecom Pitakkij
Co., Ltd., SECOM Vietnam Joint Venture Co., PASCO-CERTEZA COMPUTERMAPPING CORPORATION and FM-International Oy FINMAP settle accounting
as of December 31 each year, and the financial statements as of December 31, 2005
are used for preparation of the consolidated financial statements.
With respect to domestic consolidated subsidiaries, etc., while Ena Urban
Properties, Co., Ltd. settles accounting as of December 31 each year, the financial
statements prepared pursuant to the provisional settlement of accounts conducted asof March 31, 2006, are used for preparation of the consolidated financial statements.
GIS Sendai Co., Ltd., GIS Kitanihon Co., Ltd., GIS Kanto Co., Ltd., and GIS
Kansai Co., Ltd settle accounting as of December 31 each year, and the financial
statements as of December 31, 2005 are used for preparation of the consolidated
financial statements. Other consolidated subsidiaries, etc. settle accounting as ofthe same date of the consolidated settlement date.
5. Significant Accounting Policies(1) Valuation methods for significant assets
1) Securitiesa.

Held-to-maturity debt securities are carried at amortized cost.

b.

With respect to investments classified as other securities, among investment
with fair value, stock and beneficiary certificates are carried at fair value basedon the average stock prices during one month prior to the balance sheet date,and others are carried at fair value as of the balance sheet date, with changes in
unrealized holding gain or loss, net of the applicable income taxes, included
directly in shareholders’ equity. The cost of securities sold is primarily
calculated by the moving average method.

- 26-[English Translation]

Investments without fair value are stated at cost primarily determined by themoving average method.
2) Derivatives are stated at fair value.
3) Inventories are stated principally at cost being determined by the moving
average method.
4) Real estate for sale is stated at the lower of cost or market based on theidentified cost method.
(2) Depreciation and amortization of depreciable and amortizable fixed assets
1) Depreciation of property, plant and equipment is calculated primarily by the
declining-balance method. Provided, however, that the buildings (excluding
improvements) acquired on or after April 1, 1998 is calculated by thestraight-line method.
The useful lives of buildings are principally 22 to 50 years, and alarm devices
and security equipment are principally 5 years.
2) Amortization of intangible assets is calculated by the straight-line method.
The software used in the Company is calculated by the straight-line method
based on the useful lives within the Company (5 years).
3) Amortization of long-term prepaid expenses are calculated by the straight-line
method. With respect to the installation costs related to security equipment at
the customer sites, any portion exceeding the amount received from thecustomer is stated as the “long-term prepaid expenses” and amortized by thestraight-line method over the contract period (5 years).
(3) Basis for significant allowances
1) The allowance for doubtful accounts is provided for possible losses on bad
debts at an amount determined based on the historical experience of bad debts
with respect to ordinary accounts, plus an estimate of uncollectible amounts
determined by reference to specific doubtful accounts from customers who areexperiencing financial difficulties.
2) The allowance for bonuses is provided for the bonus payments to employees, at
an amount to be paid during the fiscal year under review.
3) With respect to accrued pension and severance costs and prepaid pension andseverance costs, the Company and the domestic consolidated subsidiaries, etc.
provide an amount that is recognized to be paid at the end of fiscal year underreview, based on the estimated amount of retirement benefit obligations andplan assets as of March 31, 2006.
Prior service cost and actuarial gains or losses are amortized in the year inwhich the cost and gain or loss are incurred.
(Change in Accounting Policy)
By virtue of the application of the "Partial Revision of Accounting Standard for
Retirement Benefits" (Accounting Standards Board Statement No. 3 issued on
March 16, 2005) and the "Guidance on Partial Revision of Accounting Standard
for Retirement Benefits" (Accounting Standards Board Guidance No. 7 issued
on March 16, 2005) from the fiscal year beginning on or after April 1, 2005, theCompany adopted these accounting standard and guideline for the fiscal year
- 27-

[English Translation]

under review. Due to the effect of accounting change, operating income,ordinary profit and income before income taxes each increased by ¥7,360
million.
(Additional Information)
Certain portions of the cash balance in pension plans of the Company and someof the domestic consolidated subsidiaries, etc. were additionally transferred tothe defined contribution pension plan in April 2005. The amount arising fromthe transfer is accounted for the extraordinary profit of ¥864 million.
4)

With respect to retirement benefits for Directors and Corporate Auditors, theCompany and some of the domestic consolidated subsidiaries, etc. provide forthe amount necessary for payment of retirement benefits at the end of the fiscal
year in accordance with the rules of the retirement benefit for Directors andCorporate Auditors, in preparation for future retirement benefit payment to
Directors and Corporate Auditors.
(Change in Accounting Policy)
Although the retirement benefits for Directors and Corporate Auditors werepreviously accounted for as expenses at the time of decision of payment
amounts, the Company changed the accounting for retirement benefits for
Directors and Corporate Auditors to state an amount necessary for retirement
benefits at the end of the fiscal year concerned in accordance with the rules of
the retirement benefits for Directors and Corporate Auditors from the fiscal year
under review.
Upon the rearrangement of the rules for the retirement benefits for Directors
and Corporate Auditors of the Company during the fiscal year under review, in
the light of the allowance for retirement benefits being in common as theaccounting practice in recent years, this accounting change was made due to theCompany's policy to distribute expenses to the reasonable extent during theterms of office of Directors and Corporate Auditors, whereby the income andloss will be distributed reasonably to the respective terms to achieve soundfinancial structure.
An amount of ¥64 million arising from this accounting change during the fiscal
year under review is stated as the selling, general and administrative expenses,
and an amount corresponding to the prior years of ¥1,137 million is stated as
the extraordinary loss. Consequently, operating income and ordinary profit
are ¥64 million less than they would have been had they been calculated inaccordance with the previous accounting method, as well as net income before
income taxes is ¥1,201 million less than it would have been had it been
calculated in accordance with the previous method.

(4) Revenue recognition
Revenue from contract business of Pasco Corporation and its subsidiaries, etc. isrecognized under the percentage of completion method. Revenue from contract
business of Secom Techno Service Co., Ltd. and its subsidiaries with respect towhich a construction price per transaction exceeds ¥500 million, is recognized under
the percentage of completion method.
(5) Accounting for material leases
Finance leases, except for those in which ownership is considered transferred to thelessee, are accounted for as operating leases similar to the rental of property.

- 28-[English Translation]

(6) Hedge accounting
1) Hedge accounting
The Company principally applies the deferred hedging accounting. Theinterest rate swaps that fulfill requirements for exceptional treatments permitted
for interest rate swaps are accounted for using exceptional treatments.
2) Hedging instruments and hedged items
Hedging instruments: Interest rate swaps
Hedged items:
Bonds and loans payables
3) Hedging policy
The risks for forward interest rate fluctuation is to be hedged principally
pursuant to the risk management policy of the Company.
4) Assessment of hedge effectivenessHedge effectiveness is assessed by comparing the cumulative changes in cash
flows of fair value of the hedging items and hedging instruments from the
beginning of hedging to the point of assessment, taking both changes into
account with those with respect to the hedged items. However, that theinterest rate swap that fulfill requirements for exceptional treatments, theassessment of hedge effectiveness is omitted.
(7) Accounting for consumption tax
Transactions subject to consumption tax and local consumption tax are recorded at
amounts exclusive of consumption taxes.
6. Assets and liabilities of consolidated subsidiaries, etc. are fully carried at fair value.
7. The consolidated adjustments are to be amortized by the straight line method from 5 years
to 10 years.
8. The appropriation of unappropriated retained earnings of the consolidated companies areprepared based on the appropriation of unappropriated retained earnings fixed during the
fiscal year under review.

- 29-[English Translation]

Notes to Consolidated Balance Sheet
1. Cash on hand and cash in banks, Bank loans
For financial institutions, the Company and some of domestic consolidated subsidiaries
operate cash collection from and cash filling to cash dispensers located outside offinancial institution facilities. The balance of Cash on hand and in banks includes Cashon hand and cash in banks representing a total of ¥45,050 million connected with suchservices, which is restricted as to use by the Company group. Short-term borrowing
balance includes ¥10,054 million financed for the purpose of the cash collection andfilling services. Furthermore, the balance of Cash on hand and in banks includes ¥20,136
million connected with cash collection administration services, which is also restricted as
to use by the Company group. Moreover, short-term borrowing balance includes ¥16,014
million financed in connection with the same services.
2. Accumulated depreciation of property, plant and equipment amounted to ¥245,404 million.
3. Assets pledged as collateral and related liabilities:
Cash on hand and in banks (time deposit)
Real estate for sale
Buildings and improvements
Land
Other tangible assets
Intangible assets (leasehold)Investment in securities
Total(Millions of yen)
420
37,52828,59914,730
6
1,976
1,168
84,429Liabilities pledged as collateral
Bank loans
Bonds
Long-term loans payable
Total

63,141
10,89011,162
85,193

4. Shares of unconsolidated subsidiaries, etc. and affiliated companies:(Fixed assets)
Investment in securities (shares) amounted to ¥37,132 million.
5. Contingent liabilities:(1) The Company has contingent liabilities of ¥11,996 million as guarantors of the loans
payable and amounts payable held for lease, etc. of the affiliated companies, etc.
(2) Lawsuits:
Secom General Insurance Co., Ltd. is in litigation with FUJITSU LIMITED over
repayment of fees (an amount claimed totals ¥2,500 million) allegedly incurred with thesystem buildings that Secom General Insurance Co., Ltd. ordered. FUJITSU
LIMITED instituted the suit in July 2004. Secom General Insurance Co., Ltd. has not
only asserted that the amount claimed is unreasonable, but has also counterclaimed foralleged damages (the amount claimed totals ¥1,000 million). The case is currently
pending in the court.
- 30-[English Translation]

Pasco Corporation (“PASCO”) filed a lawsuit against Sumitomo Mitsui Banking
Corporation (“SMBC”) for obtaining a confirmation judgment to the effect that it does
not owe an obligation in the amount of ¥2,010 million to SMBC with the Tokyo District
Court on October 31, 2005. SMBC alleged that it loaned to a third party and was
assigned by the third party as a collateral for the loan the third party’s claim against
PASCO for a sale of equipment to PASCO, and demanded PASCO to pay the claim to
SMBC. However, upon carefully investigating the case together with outside lawyers,
the Company believes that the aforesaid transactions must be null and void, andtherefore the Company’s allegation will be admitted. Furthermore, in connection withthe above, SMBC brought a cross action against PASCO for requesting payment of¥1,846 million together with the late payment charge on December 5, 2005 (a case ofcross action for demanding payment of assigned claim), and both actions wereconsolidated into an action by judicial procedures, which is currently pending.
6. Tax effect accounting:(1) Significant components of deferred tax assets and liabilities:
Deferred tax assets:
Tax loss carryforward
Eliminations of unrealized gain
Accrued pension and severance costs
Allowance for doubtful accounts
Write-down of fixed assets
Adjustment of book value of land and buildings ofsubsidiaries, etc. at fair value at the date of consolidation
Allowance for bonuses
Underwriting funds and funds for outstanding claims
Loss on revaluation of investments securities
Impairment loss
Adjustment of book value of other fixed assets of subsidiaries,
etc. at fair value at the date of consolidation
Other
Subtotal deferred tax assets
Valuation allowance
Total deferred tax assets(Millions of yen)
8,643
7,840
4,565
4,528
4,228
4,110
3,559
3,353
3,321
2,996
2,583
5,508
55,240(14,481)
40,758Deferred tax liabilities:
Unrealized gain on securities
Adjustment of book value of land and buildings ofsubsidiaries, etc. at fair value at the date of consolidation
Prepaid pension costs and severance costs
Adjustment book value of other fixed assets of subsidiaries,
etc. at fair value at the date of consolidation
Other
Total deferred tax liabilities
Net deferred tax assets- 31-[English Translation](Millions of yen)
(9,162)(5,177)(4,255)(2,522)(2)(21,120)
19,638

(2) The reconciliation between the effective tax rate reflected in the consolidated financial
statements and the statutory tax rate is summarized as follows:
Domestic statutory tax rate
(Reconciliation)
Gain on investment pursuant to equity method
Increase in valuation allowance
Permanently nondeductible expenses such asentertainment expenses
Use of tax loss carryforward
Adjustment of gain or loss on sales of stocks ofsubsidiaries and affiliated companies
Installation of inhabitant tax
Depreciation of consolidated adjustment accountTaxation for R&D and promotion of investments in IT
Unrecognized tax benefits from subsidiaries, etc. in
deficiency
Other
Effective tax rate after adoption of tax-effect accounting

40.5(%)
(1.6)
1.0
0.9
(0.8)
(0.8)
0.7
0.7
(0.5)
0.1
(0.1)
40.1

7. Retirement Benefits:(1) Outline of retirement benefit plan adopted by the Company:
The employees of the Company and its domestic consolidated subsidiaries are generally
qualified as recipients of a retirement lump-sum payment or pension at the time of theirrespective retirements.
The retirement benefit plans of the Company and some of its domestic consolidated
subsidiaries, etc. consist of the cash balance pension plan and defined contribution plan.
In calculating the cash balance payment plan, the Company will grant the employees anaccumulated amount of a certain percentage of their annual income, plus interest (withinterim measures) based on the 3-year average yield of applicants for 10-year
government bonds. The defined contribution plan was established in April 2003 towhich a portion equivalent to 20 percent of the cash balance pension plan so far
accumulated was transferred and the Company contributes a specified percentage ofannual income thereto. The ratio of accumulated amounts in the cash balance pension
plan and the amounts of contributions to the defined contribution plan were 80 percent
and 20 percent, respectively. The Company transferred an additional portion of the
cash balance pension plan funds to the defined contribution plan in April 2005, andaccordingly, the ratio of the accumulated amount in the cash balance pension plan andthe amount of contributions to the defined contribution plan, including the past reserve,changed to 70 percent and 30 percent, respectively.
The majority of the consolidated overseas subsidiaries, etc. adopt a variety ofretirement benefit plans that substantially cover all employees. The most of suchplans is the defined contribution pension plans.

- 32-[English Translation]

(2)Item concerning retirement benefit obligation (As of March 31, 2006):(1) Retirement benefit obligation(2) Plan assets *1(3) Unfunded retirement benefit obligation (1)+(2)(4) Unappropriated difference at the time of change inaccounting standard(5) Unrecognized actuarial gain or loss
(6) Unrecognized prior service cost(7) Net retirement benefit obligation recognized in the
consolidated balance sheet ((3)+(4)+(5)+(6))(8) Prepaid pension and severance costs(9)Accrued pension and severance costs ((7)-(8))(Note) *1.

(3)(Millions of yen)
(57,293)
57,118(175)---(175)
11,186(11,362)

Plan assets include the asset of ¥238 million of the retirement benefit trust.

Components of retirement benefit expenses (April 1, 2005 - March 31, 2006):(1) Service cost *1(2) Interest cost(3) Expected return on plan assets(4) Amortization of actuarial gain or loss*2(5) Retirement benefit expenses ((1)+(2)+(3)+(4))(6) Gain or loss on transfer to defined contribution
pension plan
(7) Other *3
Total(Millions of yen)
3,564
1,090
(1,394)(7,652)(4,391)(864)
1,365(3,891)(Notes) *1. Retirement benefit expenses for consolidated subsidiaries, etc. adopting the simplified
method are included in (1) “ Service cost.”*2 In connection with the application of the "Partial Revision of Accounting Standard for
Retirement Benefits" (Accounting Standards Board Statement No. 3 issued on March
16, 2005) and the "Guidance on Partial Revision of Accounting Standard for
Retirement Benefits" (Accounting Standards Board Guidance No. 7 issued on March
16, 2005) from the fiscal year under review, amortization of actuarial gain or loss
includes ¥1,571 million of an unrecognized amount in excess of plan assets at March
31, 2005, which is transferred to the actuarial gain or loss at the beginning of the fiscal
year under review.
*3 The “other” represents the amount payable as premiums to the defined contribution
pension plan.

- 33-[English Translation]

(4)Assumptions used in accounting for the retirement benefit:(1) Attribution of retirement benefit obligation(2) Discount rates(3) Expected rates of return on plan assets(4) Amortization period of prior service cost(5) Amortization period of actuarial gain or
loss

- 34-

[English Translation]

Straight-line method over theestimated years of services of theeligible employees
Principally 2.0% at beginning offiscal year
Principally 1.9% at end of fiscal year
Principally 3.0% for plan assets
0.0% for retirement benefit trust
Prior service cost is amortized in theyear in which the cost are incurred.
Actuarial gain or loss is amortized in
the year in which the gain or loss are
incurred.

Consolidated Statement of Income(Fiscal Year ended March 31, 2006)
ITEM
ORDINARY PROFIT AND LOSSES
Operating Profit and Expenses
Revenue
Costs of revenue
Selling, general and administrative expenses
Operating Profit:
Non-Operating Profit and Expenses
Non-operating income:Interest income
Dividends income
Gain on sales of investment securities
Equity in net gains of affiliated companies
Other
Non-operating expenses:
Interest expenses
Loss on sales and disposal of fixed assets
Provision for allowance for doubtful
accounts
Loss on revaluation of investment securities
Other
Ordinary Profit:
EXTRAORDINARY PROFIT AND LOSSES
Extraordinary profit:
Gain on reversal of allowance for doubtful
accounts
Gain on sales of fixed assets
Gain on sales of subsidiaries' and affiliates'
securities
Gain on sales of investment securities
Gain on transfer to defined contribution
pension Plan
Other
Extraordinary losses:
Provision for allowance for doubtful
accounts
Provision for accrued retirement benefits for
Directors and Corporate Auditors
Impairment loss on fixed assets
Loss on revaluation of telephone rights
Loss on other-than-temporary impairment ofinvestment securities
Write-down of inventory
Loss on disposal of software
Other
Income before income taxes:
Income taxes – current
Income taxes – deferred
Minority interest in subsidiaries
Net Income- 35-[English Translation](Millions of yen)
AMOUNT
567,315
351,020
122,185

1,856
355
6,061
3,781
3,736

473,205
94,10915,792

1,721
2,964
886
2,136
5,524

13,232
96,669

313
407
7,233
493
864
37

9,349

3,276
1,137
820
2,721
1,186
909
214
921

11,18994,82934,8883,131
3,815
52,994

Notes to Consolidated Statement of Income
1. Basic net income per share:¥234.28(Note) The calculation base of basic net income per share is as follows:
Basic net income per share:
Net income for the 45th fiscal year:¥52,994 million
Amounts not attributable to common stock:¥280 million(Bonus to Directors and Corporate Auditors by appropriationof unappropriated retained earnings included in the above): (¥280 million)
Net income attributable to common stock:¥52,713 million
The average number of common stock outstanding
during the fiscal year:
225,002,496 shares
2. Impairment loss of fixed assets:
The Company stated on a consolidated basis an impairment loss of ¥820 million for thefollowing asset group during the fiscal year under review.
The assets of the Company and its consolidated subsidiaries, etc. are on a consolidated basis
grouped by the individual property unit of the real estate held for lease and idle property.
The carrying value of the real estate held for lease and idle property have been decreased tothe collectible value since the profitability of each asset declined substantially during the fiscal
year under review due to a lowered rent standard of the real estate held for lease and a decline
in land prices.
Purpose of use

Type

Area

Real estate held for lease

Land and buildings

Idle property

Land and buildings

5 properties in Kanto area
3 properties in other areas
5 properties in Kanto area
7 properties in otherareas

Impairment loss
(millions of yen)59
761

* The details of the impairment loss by the purpose of use:
· Real estate held for lease· Idle property¥59 million(including land of ¥44 million and buildings of ¥14 million)¥761 million(including land of ¥688 million and buildings of ¥73 million)

The collectible value of the asset group of the Company is on a consolidated basis assessed by
the net selling value, which is based on the actual selling and purchase prices of the real estate.

- 36-[English Translation]

Copy of the Accounting Auditors’ Report (Consolidated)[English Translation of the Independent Auditors' Report Originally Issued in the Japanese Language]

Independent Auditors' Report
May 23, 2006
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA & Co.
Shuji Ohtsu (Seal)
Designated and Engagement Partner
Certified Public Accountant
Kentaro Onishi (Seal)
Designated and Engagement Partner
Certified Public Accountant
We have audited the consolidated statutory report, that is the consolidated balance sheet and theconsolidated statement of income, of SECOM Co., Ltd. for the 45th fiscal year from April 1, 2005
to March 31, 2006 in accordance with Article 19-2 (3) of the former “Law for Special Exceptions
to the Commercial Code Concerning Audit, etc. of Kabushiki Kaisha”. The consolidated
statutory report is the responsibility of the Company’s management. Our responsibility is toexpress an opinion on the consolidated statutory report based on our audit as Accounting Auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those
auditing standards require us to obtain reasonable assurance about whether the consolidated
statutory report is free of material misstatement. An audit is performed on a test basis, andincludes assessing the accounting principles used, the method of their application and estimates
made by management, as well as evaluating the overall presentation of the consolidated statutory
report. We believe that our audit provides a reasonable basis for our opinion. Our audit
procedures also include those considered necessary for the Company's majority-owned subsidiaries
and non-majority owned consolidated subsidiaries.
As a result of the audit, in our opinion, the consolidated statutory report referred to above presents
fairly the consolidated financial position of SECOM Co., Ltd. and consolidated subsidiaries, andthe consolidated results of their operations in conformity with related laws and regulations and the
Articles of Incorporation of the Company.
As discussed in the "Change in Accounting Policy of 5. (3) 3) Accrued pension and severance
costs and prepaid pension and severance costs of Significant Items for Preparation of Consolidated
Financial Statements", the Company adopted the partially revised accounting standard for
retirement benefits in the fiscal year ended March 31, 2006. We concurred with this accountingchange since the "Partial Revision of Accounting Standard for Retirement Benefits" (AccountingStandards Board Statement No. 3 issued on March 16, 2005) and the "Guidance on Partial
Revision of Accounting Standard for Retirement Benefits" (Accounting Standards Board Guidance
No. 7 issued on March 16, 2005) was applied for the fiscal year beginning on or after April 1,
2005.
Our firm and engagement partners have no interest in the Company which should be disclosed
pursuant to the provisions of the Certified Public Accountants Law of Japan.

- 37-[English Translation]

Copy of the Board of Corporate Auditors’ Report (Consolidated)
AUDIT REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
May 26, 2006
To: KANEMASA HARAGUCHI
President and Representative Director
SECOM Co., Ltd.
Board of Corporate Auditors of
SECOM Co., Ltd.
Corporate Auditor (full-time)
Teruo Ogino(Seal)
Corporate Auditor
Ken Tsunematsu(Seal)
Corporate Auditor
Hiroshi Yasuda(Seal)
Corporate Auditor
Kohei Yamashita(Seal)The Board of Corporate Auditors prepared and reports as follows regarding theConsolidated Financial Statements, namely, the Consolidated Balance Sheet and theConsolidated Statement of Income for the 45th Fiscal Year from April 1, 2005 to March
31, 2006, upon deliberation, based on the reports from each Corporate Auditor regarding
the method and the result of audit.
1.

Summary of method of audit
Each Corporate Auditor, in accordance with the audit policy of the current fiscal
year and audit plan, etc. set up by the Board of Corporate Auditors, received from
Directors, etc., and Independent Accountants reports and explanations about theconsolidated financial statements, has conducted audit.
2.

Result of audit
The Board recognizes the method and results of audit carried out by KPMG
AZSA & Co., Independent Public Accountants, are appropriate.
(Note)
Ken Tsunematsu, Hiroshi Yasuda, and Kohei Yamashita are outside Corporate Auditors as provided
in Article 18, Paragraph 1 of the former Law Concerning Special Exceptions to the Commercial
Code with Respect to Audit, etc. of Joint Stock Corporations (Kabushiki Kaisha).

- 38-[English Translation]Non-Consolidated Balance Sheet(As of March 31, 2006)(Millions of yen)ITEM
ASSETSAMOUNTITEM
LIABILITIESAMOUNT

Current Assets:
Cash on hand and in banks
Notes receivables
Due from subscribers
Accounts receivable, trade
Receivable – other
Short-term investments
Merchandise
Supplies
Prepaid expenses
Deferred income taxes
Short-term loans receivable
Other current assets
Allowance for doubtful accounts

215,630
167,097
476
9,475
6,447
3,876
451
5,928
950
1,798
4,531
13,0002,199(604)

Current Liabilities:
Accounts payables
Bank loans
Current portion of Convertible bonds
Payables – others
Income taxes payable
Consumption taxes payable
Accrued expenses
Deposits received
Deferred revenue – service charges
Payable – construction
Accrued bonus
Other current liabilities

157,317
3,168
26,06930,00012,987
15,312
1,509
651
34,442
22,371
3,634
5,232
1,938

Fixed Assets:
Tangible Fixed Assets:
Buildings and improvements
Automobiles
Security machinery and control stations
Security equipment
Tools, furniture and fixtures
Land
Construction in progress
Other tangible assets
Intangible Assets:
Telephone rights
Telephone and telegraph utility rights
Software
Other intangible assets
Investments and Others:
Investment securities
Investment securities in subsidiaries
and invest in subsidiaries
Long-term loans receivable
Lease deposits
Long-term prepaid expense
Prepaid pension and severance costs
Deferred income taxes
Fund for insurance
Other investments
Allowance for doubtful accounts

428,359
122,419
22,811
166
59,442
1,467
4,379
32,200
1,919
32
6,615
0
112
6,420
83
299,324
62,979133,696

Fixed Liabilities:
Guarantee deposits received fromsubscribers
Accrued pension and severance costs
Accrued retirement benefits for
Directors and Corporate Auditors
Total Liabilities

25,027
18,244TOTAL ASSETS

58,7409,006
22,175
8,670
6,206
4,893
955
(7,998)643,990

182,344SHAREHOLDERS' EQUITY
Common Stock
Capital Surplus:
Additional paid-in capital
Retained earnings:
Legal reserve
Voluntary reserve:
Reserve for systems development
Reserve for tax deferral on asset
replacement
General reserve
Unappropriated retained earnings
Net unrealized gains on securities
Common Stock in treasury, at cost

2,212
339,2935,604(44,749)

Total Shareholders’ Equity

461,646

TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY- 39-[English Translation]

5,581
1,201

66,377
83,054
83,054351,358
9,028
3,036
800
24

643,990

Significant Accounting Policies
1. Valuation policies and methods for securities:(1) Investments in subsidiaries and affiliates are carried at cost determined by the moving
average method.
(2) With respect to investments classified as other securities, among investment with fairvalue, stock and beneficially certificates are carried at fair value based on the averagestock price during one month prior to the balance sheet date, and others are carried at fairvalue as of the balance sheet date with changes in unrealized holding gain or loss, net ofthe applicable income taxes, directly included in shareholders’ equity. The cost of
securities sold is calculated by the moving average method.
Investments without fair value are stated at cost determined by the moving averagemethod.
2. Valuation policies and methods for inventories:
Merchandise and supplies are stated at cost determined by the moving average method.
3. Depreciation on property, plant and equipment is calculated by the declining-balancemethod. Provided, however, that the buildings acquired on or after April 1, 1998
(excluding improvements) are calculated by the straight-line method. Amortization of
intangible assets is calculated by the straight-line method. The software used in the
Company is calculated by the straight-line method based on the useful lives within the
Company (5 years).
Amortization of long-term prepaid expenses are calculated by the straight-line method.
With respect to the installation costs related to security equipment at the customer sites,
any portion exceeding the amount received from the customer is stated as the “long-term
prepaid expenses” and amortized by the straight-line method over the contract period (5years).
4. The allowance for doubtful accounts is provided for possible losses on bad debts at an
amount determined based on the historical experience of bad debts with respect to ordinaryaccounts, plus an estimate of uncollectible amounts determined by reference to specificdoubtful accounts from customers who are experiencing financial difficulties.
5. The allowance for bonuses is provided for the bonus payments to employees, at an amountto be paid during the fiscal year under review.
6. With respect to accrued pension and severance costs and prepaid pension and severance
costs, the Company provides an amount that is recognized to be paid at the end of fiscal
year under review, based on the estimated amount of retirement benefit obligations andplan assets as of March 31, 2006.
Prior service cost and actuarial gains or losses are amortized in the year in which the costand gain or loss are incurred.
(Change in Accounting Policy)
By virtue of the application of the "Partial Revision of Accounting Standard for
Retirement Benefits" (Accounting Standards Board Statement No. 3 issued on March 16,- 40-[English Translation]

2005) and the "Guidance on Partial Revision of Accounting Standard for Retirement
Benefits" (Accounting Standards Board Guidance No. 7 issued on March 16, 2005) fromthe fiscal year beginning on or after April 1, 2005, the Company adopted these accounting
standard and guideline for the fiscal year under review. Due to the effect of accountingchange, operating income, ordinary profit and income before income taxes each increasedby ¥5,613 million.
(Additional Information)
Certain portions of the cash balance in pension plans of the Company were additionallytransferred to the defined contribution pension plan in April 2005. The amount arisingfrom the transfer is accounted for as the extraordinary profit of ¥670 million.
7. Accrued retirement benefits for Directors and Corporate Auditors
With respect to retirement benefits for Directors and Corporate Auditors, the Company
provides for the amount necessary for payment of retirement benefits at the end of the
fiscal year in accordance with the rules of the retirement benefit for Directors andCorporate Auditors, in preparation for future retirement benefit payment to Directors andCorporate Auditors. Furthermore, this allowance falls under the allowance provided for by
Article 43 of the Enforcement Regulations of the Commercial Code.
(Change in Accounting Policy)
Although the retirement benefits for Directors and Corporate Auditors were previously
accounted for as expenses at the time of decision of payment amounts, the Company
changed the accounting for retirement benefits for Directors and Corporate Auditors tostate an amount necessary for retirement benefits at the end of the fiscal year concerned inaccordance with the rules of the retirement benefits for Directors and Corporate Auditorsfrom the fiscal year under review.
Upon the rearrangement of the rules for the retirement benefits for Directors andCorporate Auditors of the Company during the fiscal year under review, in the light of theallowance for retirement benefits being in common as the accounting practice in recent
years, this accounting change was made due to the Company's policy to distributeexpenses to the reasonable extent during the terms of office of Directors and Corporate
Auditors, whereby the income and loss will be distributed reasonably to the respective
terms to achieve sound financial structure.
An amount of ¥64 million arising from this accounting change during the fiscal year
under review is stated as the selling, general and administrative expenses, and an amountcorresponding to the prior years of ¥1,137 million is stated as the extraordinary loss.
Consequently, operating income and ordinary profit are ¥64 million less than they would
have been had they been calculated in accordance with the previous accounting method, as
well as net income before income taxes is ¥1,201 million less than it would have been had
it been calculated in accordance with the previous method.

8. Finance leases, except for those in which ownership is considered transferred to the lessee,
are accounted for as operating leases similar to the rental of property.
9. Transactions subject to consumption tax and local consumption tax are recorded at
amounts exclusive of consumption taxes.

- 41-[English Translation]

Notes to Balance Sheet
1.

Cash on hand and cash in banks, bank loans
For financial institutions, the Company operates cash collection from and cash filling tocash dispensers located outside of financial institution facilities. The balance of cash on
hand and in banks includes cash on hand and cash in banks representing a total of¥39,274 million connected with such services, which is restricted as to use by theCompany group. Short-term borrowing balance includes ¥10,054 million financed for the
purpose of the cash collection and filling services. Furthermore, the balance of cash on
hand and in banks includes ¥20,136 million connected with cash collection
administration services, which is also restricted as to use by the Company group.
Moreover, short-term borrowing balance includes ¥16,014 million financed in connection
with the same services.

2.

Short-term receivables from subsidiaries:
Long-term receivables from subsidiaries:¥15,545 million¥44,531 million

3.

Short-term payables to subsidiaries:
Long-term payables to subsidiaries:¥9,884 million¥676 million

4.

Accumulated depreciation of property, plant and equipment: ¥182,796 million

5.

In addition to the fixed assets stated in the balance sheet, there are one building, 1,855
vehicles, some parts of telecommunication circuits and office equipment as fixed assets
used under lease contracts.

6.

Contingent liabilities:(1) Guaranteed liabilities:¥7,467 million(2) Net assets maintaining agreement:
The Company entered into a net assets maintaining agreement with Secom General
Insurance Co., Ltd. (“Secom Insurance”), under which the Company is obligated toprovide funds to Secom Insurance if and when the net assets of Secom Insurance
become lower than the specified amount or its current assets necessary for thepayment of its liabilities are insufficient. The total liabilities of Secom Insurance asat the end of the fiscal year under review are ¥255,732 million, including ¥250,346
million of investment deposits by policyholders, unearned premiums and otherinsurance liability and the total assets are ¥273,024 million.
However, this agreement is not construed as the Company’s guarantee with respect
to payment obligations of Secom Insurance, and Secom Insurance maintained net
assets above the required level and its current assets were not insufficient as at theend of the fiscal year under review.
7.

Amount of shareholders’ equity pursuant to Article 124, Paragraph 3 of Enforcement
Regulations of the Commercial Code:¥5,604 million- 42-[English Translation]

8.

Tax-effect accounting
Significant components of deferred tax assets and liabilities:
Deferred tax assets
Impairment loss
Accrued pension and severance costs
Allowance for bonuses
Allowance for doubtful accounts
Write-down of fixed assets
Loss on revaluation of investments in
subsidiaries
Loss on revaluation of investments insecurities
Accrued enterprise tax
Other
Total deferred tax assets
Deferred tax liabilities
Unrealized gains on securities
Prepaid pension and severance costs
Total deferred tax liabilities
Net deferred tax assets

2,520
2,356
2,119
1,936
1,934
1,837
1,494
1,259
2,605
18,063(3,815)(3,511)(7,326)
10,737- 43-[English Translation](Millions of yen)Non-Consolidated Statement of Income(Fiscal Year ended March 31, 2006)
ITEM
ORDINARY PROFIT AND LOSSES
Operating Profit and Expenses
Revenue
Costs of revenue
Selling, general and administrative expenses
Operating Profit:
Non-Operating Profit and Expenses
Non-operating income:Interest income
Dividends income
Other income
Non-operating expenses:
Interest expenses
Loss on disposal of inventories
Loss on sales and disposal of fixed assets
Loss from write-off of prepaid installation
cost
Provision for allowance for doubtful
accounts
Other expenses
Ordinary Profit:
EXTRAORDINARY PROFIT AND LOSSES
Extraordinary profit:
Gain on sales of investment securities
Gain on transfer to defined contribution
pension plan
Gain on sales of subsidiaries' securities
Other
Extraordinary losses:
Loss on revaluation of telephone rights
Provision for accrued retirement benefits for
Directors and Corporate Auditors
Loss on other-than-temporary impairment ofinvestment securities
Impairment loss on fixed assets
Other
Income before income taxes:
Income taxes – current
Income taxes – deferred
Net Income
Retained earnings brought forward
Unappropriated retained earnings at the end of the period- 44-[English Translation](Millions of yen)
AMOUNT
313,096
171,80369,121

1,021
4,562
715

240,924
72,172

6,299

499
957
2,418
666
1,569
1,395

7,506
70,964

4,670
670
450
355

6,147

1,995
1,137
884
810
787

5,615
71,496
24,7662,850
43,879295,414339,293

Notes to Statement of Income
1.

Transactions between subsidiaries:
Sales to subsidiaries:
Purchases from subsidiaries:
Non-operating transactions with subsidiaries:

2.

Basic net income per share:¥194.58(Note) The calculation base for basic net income per share is as follows:¥13,645 million¥53,460 million¥2,782 million

Basic net income per share
Net income:¥43,879 million
Amounts not attributable to common stock:¥98 million(Bonus to directors and corporate auditors by appropriation of unappropriatedretained earnings included in the above):(¥98 million)
Net income attributable to common stock:¥43,781 million
The average number of common stock outstanding during the year:
225,002,496 shares
3.

Impairment loss of fixed assets:
The Company’s assets are grouped by the individual property unit of the real estate
held for lease and idle property.
The carrying value of the real estate held for lease and idle property has been
decreased to the collectible value, since the profitability of each asset declined
substantially during the fiscal year under review due to a lowered rent standard of thereal estate held for lease and a decline in land prices. As a result, the amountdecreased is stated as an impairment loss (¥810 million) in the category of
extraordinary losses.
Purpose of use

Type

Area

Real estate held for lease

Land and buildings

Idle property

Land and buildings

5 properties in Kanto area
3 properties in otherareas
5 properties in Kanto area
6 properties in other areas

Impairment loss
(millions of yen)59

751

* The details of the impairment loss by the purpose of use:
· Real estate held for lease· Idle property¥59 million(including land of ¥44 million and buildings of ¥14 million)¥751 million(including land of ¥683 million and buildings of ¥67 million)

The collectible value of the asset group of the Company is assessed by the net selling value,
which is based on the actual selling and purchase prices of the real estate.

- 45-[English Translation]

PROPOSALEARNINGSFORAPPROPRIATIONOFUNAPPROPRIATEDRETAINED
(Yen)

Item

AmountAppropriation of unappropriated retained earnings for fiscal
year under review
Unappropriated retained earnings:

339,293,864,441

Reversal of reserve for tax deferral on replacement assets

24,439,271

Total

24,439,271
339,318,303,712

The above amounts are appropriated as follows:
Cash dividends:

13,499,203,200(ordinary dividend of ¥60.00 per share)
Directors' bonuses:

98,200,000

Retained earnings carried forward to the next fiscal year:(Note)

13,597,403,200
325,720,900,512

Dividends for treasury stocks (8,301,997 shares) are excluded from the cash dividends.

- 46-[English Translation]

Copy of the Accounting Auditors’ Report[English Translation of the Independent Auditors' Report Originally Issued in the Japanese Language]

Independent Auditors' Report
May 23, 2006
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA & Co.
Shuji Ohtsu (Seal)
Designated and Engagement Partner
Certified Public Accountant
Kentaro Onishi (Seal)
Designated and Engagement Partner
Certified Public Accountant
We have audited the statutory report, that is the non-consolidated balance sheet, thenon-consolidated statement of income, the business report (limited to accounting matters) and the
proposal for appropriation of unappropriated retained earnings , and its supporting schedules(limited to accounting matters) of SECOM Co., Ltd. for the 45th fiscal year from April 1, 2005 to
March 31, 2006 in accordance with Article 2(1) of the former "Law for Special Exceptions to theCommercial Code Concerning Audit, etc. of Kabushiki Kaisha". With respect to theaforementioned business report and supporting schedules, our audit was limited to those mattersderived from the accounting books and records. The statutory report and supporting schedules
are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the statutory report and supporting schedules based on our audit as Accounting Auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan.
Those auditing standards require us to obtain reasonable assurance about whether the statutory
report and supporting schedules are free of material misstatement. An audit is performed on atest basis, and includes assessing the accounting principles used, the method of their applicationand estimates made by management, as well as evaluating the overall presentation of the statutory
report and supporting schedules. We believe that our audit provides a reasonable basis for our
opinion. Our audit procedures also include those considered necessary for the Company's
subsidiaries.
As a result of the audit, our opinion is as follows:(1) The non-consolidated balance sheet and the non-consolidated statement of income present
fairly the financial position and the results of operations of the Company in conformity withrelated laws and regulations and the Articles of Incorporation of the Company.
(2) As discussed in the "Change in Accounting Policy of 6. Accrued pension and severance costs
and prepaid pension and severance costs of Significant Accounting Policies", the Company
adopted the partially revised accounting standard for retirement benefits in the fiscal year
ended March 31, 2006. We concurred with this accounting change since the "Partial
Revision of Accounting Standard for Retirement Benefits" (Accounting Standards Board
Statement No. 3 issued on March 16, 2005) and the "Guidance on Partial Revision of
Accounting Standard for Retirement Benefits" (Accounting Standards Board Guidance No. 7
issued on March 16, 2005) was applied for the fiscal year beginning on or after April 1, 2005.
(3) The business report (limited to accounting matters) presents fairly the status of the Company
in conformity with related laws and regulations and the Articles of Incorporation of the- 47-[English Translation]

Company.
(4) The proposal for appropriation of unappropriated retained earnings has been prepared inconformity with related laws and regulations and the Articles of Incorporation of theCompany.
(5) With respect to the supporting schedules (limited to accounting matters) there are no items to
be noted that are not in conformity with the provisions of the Commercial Code.
Our firm and engagement partners have no interest in the Company which should be disclosed
pursuant to the provisions of the Certified Public Accountants Law of Japan.

- 48-[English Translation]

Copy of the Board of Corporate Auditors’ Report
AUDIT REPORTMay 26, 2006
To: KANEMASA HARAGUCHI
President and Representative Director
SECOM Co., Ltd.
Board of Corporate Auditors of
SECOM Co., Ltd.
Corporate Auditor (full-time)
Teruo Ogino(Seal)
Corporate Auditor
Ken Tsunematsu(Seal)
Corporate Auditor
Hiroshi Yasuda(Seal)
Corporate Auditor
Kohei Yamashita(Seal)The Board of Corporate Auditors prepared and reports as follows regarding theperformance of duties of the Directors of the Company for the 45th fiscal year from April
1, 2005 to March 31, 2006, upon deliberation, based on the reports from each Corporate
Auditor regarding the method and the result of audit.
1.

Summary of method of audit
Each Corporate Auditor, in accordance with the audit policy of the current fiscal
year and audit plans, etc. set up by the Board of Corporate Auditors, has attended meetingsof the Board of Directors and other meetings as deemed important, received on heard from
Directors, etc. reports on the execution of their duties, perused the documents whereby theimportant decisions were made, and examined business and conditions of assets at the head
office and the principal offices, required reports on business from the Company’s
subsidiaries, visited the subsidiaries when deemed it necessary, and has examined businessand financial conditions. In addition, from time to time, we received from the Independent
Accountants reports and explanation on audit and examined the accounting statements andattached schedules.
As for the transactions between Directors acting on their own behalf and thecompanies which businesses are competitive to the Company, transactions between
Directors and the Company in which interests in both parties are contradictory, theprovision, free of charge, of proprietary interests made by the Company, transactions not in
the ordinary course of business between the Company and its subsidiaries or between the
Company and its shareholders and acquisition and disposal of its own shares and the like,
Each of Corporate Auditor required reports from the Directors, as necessary, andthoroughly examined the reports, in addition to the method of audit mentioned above.
2.

Result of audit(1) The method and results of audit carried out by KPMG AZSA & Co., Independent
Public Accountants, are appropriate.
(2) The Business Report fairly sets forth the situation of the Company in accordance- 49-[English Translation]

with laws and regulations and the Articles of Incorporation.
(3) With respect to the item concerning the proposal for appropriation of profits,nothing unusual is to be pointed out in accordance with the financial condition of
the Company and other circumstances.
(4) The attached schedules fairly set forth the matters to be stated therein andnothing unusual is to be pointed out.
(5) With respect to the performance of their duties by the Directors, including theperformance of duties for subsidiaries, no illegal act nor any fact which is inviolation of the laws and regulations and the Articles of Incorporation is
ascertainable.
We confirm that there is no illegal acts of Directors with respect to transactions
between Directors acting on their behaves and the companies which businesses
are competitive to the Company, transactions between Directors and theCompany in which interests in both parties are contradictory, the provision, freeof charge, of proprietary interests made by the Company, transactions not in theordinary course of business between the Company and its subsidiaries or
between the Company and its shareholders and acquisition and disposal of theCompany’s own shares and the like.
(Note)
Ken Tsunematsu, Hiroshi Yasuda, and Kohei Yamashita are outside Corporate Auditors as provided in
Article 18, Parahraph 1 of the former Law Concerning Special Exceptions to the Commercial Codewith Respect to Audit, etc. of Joint Stock Corporations (Kabushiki Kaisha).

- 50-[English Translation]

Reference Document Concerning the General Meeting of Shareholders

First Item of Business: Approval of the Proposal for Appropriation of UnappropriatedRetained Earnings for the 45th Fiscal Year
The proposal for appropriation of unappropriated retained earnings is as stated on page
46. The Company considers the return of profit to shareholders as one of the important issues,and the Company determines a dividend payout ratio and a level of internal reserves after
making an overall judgment on the expansion of the Company’s business and forecast for
future sales and profits with consideration of the Company’s basic policy that the stable andcontinued dividends are ensured to be paid.
It is proposed that based on the aforesaid management policy cash dividends for the
45th Fiscal Year to be increased by ¥10 per share to ¥60 per share from ¥50 per share for theprevious fiscal year to reward shareholders’ continued support.

Second Item of Business:
1.

Partial Amendments to the Articles of Incorporation

Reasons for the amendments(1) Proposed Article 4 (Method of Giving Public Notice) will change the method for public
notice to electronic notice to enhance the availability for inspection and provide foralternative measures if electronic notice cannot be used for unavoidable reasons.
(2) Proposed Article 7 (Number of Shares per Unit and Non-Issuance of Share Certificatesfor Shares Constituting Less Than One Unit), Paragraph 1 will reflect proposed change
in the number of shares of one unit from 500 shares to 100 shares with effect from
August 1, 2006.
(3) Proposed Article 8 (Additional Purchase of Shares Constituting Less Than One Unit) will
be newly established providing for a new system whereby a shareholder owning any
number of shares less than a whole unit is able to demand the Company to sell
additional number of shares to make up a whole unit of shares.
(4) By virtue of the coming into force of the “Companies Law” (Law No. 86, 2005), the“Law Concerning Streamlining, etc. of Related Laws upon Enforcement of Companies
Law” (Law No. 87, 2005), the “Companies Law Enforcement Rules“ (Ministry ofJustice Ordinance No. 12, 2006) and the “Company Accounting Rules” (Ministry ofJustice Ordinance No. 13, 2006) on May 1, 2006, the Company proposes to makeamendments to its Articles of Incorporation as follows:(i) With respect to the matters which by virtue of the provisions of Companies Law,etc. are deemed to be provided in the Article of Incorporation (provision thatcertificates for shares are issued; the administrator of the register of shareholders;and establishing Board of Directors, Corporate Auditors, Board of Corporate
Auditors, and Accounting Auditor), Article 7 (Number of Shares per Unit and
Non-Issuance of Share Certificates for Shares Constituting Less Than One Unit),
Article 11 (Administrator of the Register of Shareholders), Article 20(Establishment of the Board of Directors), Article 32 (Establishment of Corporate
Auditors and Board of Corporate Auditors), Article 41 (Establishment of- 51-[English Translation]

Accounting Auditor), Article 42 (Election of Accounting Auditor), Article 43(Term of Office of Accounting Auditor) and Article 44 (Remuneration, etc. for
Accounting Auditor) will be amended or newly provided.
(ii) Proposed Article 9 (Rights of Holders of Shares Constituting Less Than One Unit)
will be newly provided to restrict rights of shareholder of shares constituting lessthan one unit to the reasonable extent.
(iii)Proposed Article 16 (Disclosure of Reference Materials for the General Meetingof Shareholders via the Internet and Deemed Furnished) will be newly provided toenable the Company to disclose via the Internet a part of reference materials forthe general meeting of shareholders to facilitate to disclose sufficient information
to shareholders.
(iv) Proposed Article 30 (Alternatives of Resolution of the Board of Directors) will be
newly provided to operate the Board of Directors flexibly and efficiently, and toenable the Board of Directors to make resolution in writing or electronically if all
Directors consent and no Corporate Auditors dissent.
(5) In addition, in the entirety, an arrangement for the composition, and amendments,
additions, eliminations with respect to wordings and letters, will be made and thenumbers of Articles and Paragraphs will be adjusted.
(6) The supplemental provisions relating to the effective date for the change of the number ofshares of one unit (August 1, 2006) and the enforcement date for the additionalpurchase system for shares constituting less than one unit (August 1, 2006) will beeliminated after the effective date or the enforcement date (August 1, 2006).

- 52-[English Translation]

2.

Details of amendments:
The details of amendments are as follows:(The underlined parts are changed parts.)
Current Articles of Incorporation

Proposed changes

CHAPTER 1
GENERAL PROVISIONSCHAPTER 1
GENERAL PROVISIONS(Trade name)
Article 1.

(Provisions Omitted)(Trade Name)
Article 1.

(Same as the current provision)(Purpose)
Article 2.

(Provisions Omitted)(Purpose)
Article 2.

(Same as the current provision)(Location of Head Office)
Article 3.
(Provisions Omitted)(Location of Head Office)
Article 3.
(Same as the current provision)(Method of Giving Public Notice)(Method of Giving Public Notice)
Article 4. Public notices of the Company shall be Article 4. Public notices of the Company shall beplaced in the Nihon Keizai Shinbun.
placed electronically. Provided, however, that
the Company is unable to place a electronic
public notice due to an accident or any otherunavoidable reason, public notices shall beplaced in the Nihon Keizai Shinbun.
CHAPTER 2
SHARESCHAPTER 2
SHARES(Total Number of Shares to be Issued)
Article 5. The total number of shares authorized to beissued by the Company shall be nine hundred
million (900,000,000) shares. In the case of theretirement of shares, the number of shares retired
shall be reduced.
(Self Equity)
Article 6. In accordance with the provisions ofCommercial Law article 211-3, Section 1, No. 2,
the Company may acquire its own sharespursuant to a resolution from the board of
directors.

(Total Number of Shares to be issued)
Article 5. The total number of shares that theCompany may issue shall be nine hundred
million (900,000,000) shares.

(Purchase of Own Shares)
Article 6. In accordance with Article 165,
Paragraph 2 of the Companies Law, theCompany may purchase its own shares upon
resolution of the Board of Directors throughmarket transactions, etc.

- 53-

[English Translation]

Current Articles of Incorporation

Proposed changes(Number of single unit of shares and non-issuance of
non-whole unit shares)
Article 7. The number of single unit shares to beissued by the Company shall be 500 shares.
2.
The Company shall not issue certificates forshares constituting less than one unit.

(Number of Shares per Unit and Non-Issuance ofShare Certificates for Shares Constituting Less Than
One Unit)
Article 7. The number of shares of the Company
constituting one unit shall be 100 shares.
2.
The Company shall issue certificates forshares. The kinds of share certificates to beissued by the Company shall be prescribed by
the Share Handling Regulations established by
the Board of Directors.
Notwithstanding the preceding
3.
Paragraph, the Company may not issue sharecertificates for shares constituting less than one
unit.
(Provided in Article 7)(Denominations of Share Certificates)
Article 8. The denominations of share certificatesshall be governed by the Share Handling
Regulations established by the Board of
Directors.
(Newly provided)(Newly provided)(Additional Purchase of Shares Constituting Less
Than One Unit)
The shareholders of the Company
Article 8.
(including beneficial shareholders; the same
hereinafter being applicable) may request theCompany to sell them such number of shares aswill constitute, together with the sharesconstituting less than one unit of shares already
held, one full unit in accordance with the Share
Handling Regulations.
(Rights of Holders of Shares Constituting Less Than
One Unit)
Article 9. Shareholders of the Company shall not be
entitled to exercise any rights with respect to theshares constituting less than one unit held by
them, except for the following rights:(1) Rights enumerated in each Item of Article
189, Paragraph 2 of the Companies Law;
(2) Rights to make a request in accordance withthe provisions of Article 166, Paragraph 1of the Companies Law;
(3) Rights to receive the allotment of offeredshares and offered stock acquisition rights,
in proportion to the number of shares heldby shareholders;(4) Rights to make a demand provided for in
the preceding Article.

- 54-[English Translation]

Current Articles of Incorporation

Proposed changes(Share Handling Regulations)(Handling of Matters relating to Shares)
Article 9. Registration of transfers of shares, Article 10. Matters concerning the handling of sharesregistration of pledges or cancellation thereof,and charges therefor and procedure, etc. forindication of trust assets or cancellation thereof,
exercise of rights of shareholders shall bereissuance of share certificates, listing on register
governed by the Share Handling Regulations toof beneficial shareholders, the register of lostbe established by the Board of Directors, inshare certificates, purchase by the Company ofaddition to laws and regulations, or the Articles
shares constituting less than a full unit and otherof Incorporation.
handling business relating to shares of theCompany and charges therefor shall be governedby the Share Handling Regulations established by
the Board of Directors.
(Transfer Agent)(Administrator of the Register of Shareholders)
The Company shall have an
Article 10. The Company shall appoint a transfer Article 11.
agent with respect to its shares.
administrator of the register of shareholders.
2. The transfer agent and its handling offices
2.
The administrator of the register ofshareholders and the place of handling of its
shall be designated by a resolution of the Boardof Directors and public notices shall be given
business shall be determined by resolution of theBoard of Directors and a public notice thereofwith regard thereto.
shall be given.
3. The register of shareholders (including registerof beneficial shareholders) and a record of lost3.
Preparation and maintenance of theshare certificates of the Company shall be kept at
register of shareholders (including the register ofthe handling office of the transfer agent, andbeneficial shareholders, the same hereinafter
registration of transfers of shares, listing on
applicable), the register of lost share certificatesregister of beneficial shareholders, the register ofand the register of stock acquisition rights of thelost share certificates, purchase of sharesCompany, and other business relating to theconstituting less than a full unit by the Company
resister of shareholders, the register of lost shareand other business pertaining to shares shall becertificates and the register of stock acquisitionrights shall be handled by the administrator of thehandled by the transfer agent and the Company
register of shareholders and the Company shall
shall not handle any of such business directly.
not handle any of such business directly.
(Record Date)
The Company shall consider the
Article 11.
shareholders whose names appear as such on thelast record of register of shareholders at the closeof each business year (including beneficial
shareholders) to be those entitled to exercise theirrights at an ordinary general meeting ofshareholders for that business year.
2.In addition to the preceding paragraph, theCompany may, whenever necessary, temporarilysuspend changes of any entry in the register ofshareholders or fix a record date upon giving notless than two weeks' prior public notice.

- 55-[English Translation](Deleted)

Current Articles of Incorporation

Proposed changes

CHAPTER 3
GENERAL MEETING OF SHAREHOLDERS

CHAPTER 3
GENERAL MEETING OF SHAREHOLDERS(Time of Convocation of General Meetings)(Time to Convene General Meeting of Shareholders)
Article 12. An ordinary general meeting of share- Article 12. The ordinary general meeting ofholders of the Company shall be convened withinshareholders of the Company shall be convened
three (3) months from the day following the day
in June each year and an extraordinary generalof each closing of accounts. An extraordinary
meeting of shareholders shall be convened at any
general meetings of shareholders may betime when necessary.
convened from time to time whenever necessary.
(Newly provided)(Record Date for Ordinary General Meeting of
Shareholders)
Article 13. The record date for an ordinary general
meeting of shareholders of the Company shall be
March 31 of each year.

(Person to Convene General Meetings)(Person to Convene General Meetings)
Article 13. Unless otherwise provided by laws or Article 14. Except as otherwise provided by laws
ordinances, the President and Director shalland regulations, the general meeting of
convene general meetings of shareholders
shareholders shall be convened by the President
pursuant to a resolution of the Board of Directors.
and Director by resolution of the Board of
2. When the President and Director is unable to
Directors.
act, one of the other Directors selected in
2. When the President and Director is prevented
from so acting, one of the other Directors selectedaccordance with the order of priority previouslyin accordance with the order of priority
determined by a resolution of the Board of
Directors shall take his place.
previously determined by a resolution of theBoard of Directors shall take his/her place.
(Chairman of General Meetings)(Chairman of General Meeting of Shareholders)
Article 14. The President and Director shall act Article 15. The Director and President shall act aschairman at the general meeting of shareholders.
as the chairman of general meetings of shareholders.
2. If the Director and President is prevented
2. When the President and Director is unable tofrom so acting, one of the other Directors
act, one of the other Directors selected inselected in accordance with the order of priority
accordance with the order of priority previously
previously determined by a resolution of theBoard of Directors shall take his place.
determined by a resolution of the Board of
Directors shall take his place.

(Newly provided)(Disclosure of Reference Materials for General
Meeting of Shareholders via the Internet and Deemed
Furnished)
Article 16. When convening a General Meeting of
Shareholders, the Company may, in a mannerusing the Internet pursuant to Ministry of JusticeOrdinances, disclose information concerning
matters required to be described or presented in
the reference materials of the General Meeting of
Shareholders,business
reports,
financialstatements and consolidated financial statements
and deem such information furnished toshareholders.

- 56-[English Translation]

Current Articles of Incorporation

Proposed changes(Method of Adopting Resolution)(Method of Resolution)
Article 15. Unless otherwise provided by laws or Article 17. Except as otherwise provided by laws
ordinances, resolutions of general meetings ofand regulations and the Articles of Incorporation,
resolutions of general meetings of shareholders
shareholders shall be adopted by a majority of theshall be adopted by a majority affirmative vote ofaffirmative votes held by the shareholders present
thereat.
the shareholders having voting rights exercisableand present thereat.
2. Resolution in accordance with Commercial
Law article 343 shall require the attendance of2.
Resolutions provided for in Article 309,
Paragraph 2 of the Companies Law shall be
one-third of the shareholders with voting rights
adopted by an affirmative vote of two-thirds (2/3)
and a two-thirds majority vote by those inor more of the voting rights of shareholders
attendance.
present and exercisable at the general meeting ofshareholders, of which a quorum shall be thepresence of shareholders with not less than
one-third (1/3) of the voting rights exercisable atsuch meeting.
(Exercise of Voting Rights by Proxy)(Exercise of Voting Rights by Proxy)
Article 16. A shareholder may exercise his Article 18. A shareholder may exercise his/her voting
voting rights through a proxy who is also arights by a proxy who is another shareholder
shareholder of the Company having voting rights.
holding a voting right of the Company.
In this case the proxy shall file with the Company
2. In the case of the preceding paragraph, aproxy must submit to the Company a written
a document evidencing his authority.
document
certifying
his/herpowerofrepresentation at each general meeting ofshareholders.
(Minutes of General Meetings)(Minutes of General Meetings)
Article 17. The substance of proceedings at a general
meeting of shareholders and the results thereof
Article 19. Minutes of a general meeting ofshareholders shall describe or record theshall be recorded in the minutes of the meeting,proceedings and the results thereof and matters as
which shall bear the electronic signatures or thenames and seals of the chairman and of theotherwise provided for in laws and regulations.
Directors present at the meeting.
CHAPTER 4
DIRECTORS AND BOARD OF DIRECTORSCHAPTER 4
DIRECTORS AND BOARD OF DIRECTORS(Newly provided)(Establishment of the Board of Directors)
Article 20. The Company shall establish the Boardof Directors.

(Number of Directors)(Number of Directors)
Article 18. The Company shall have not more than Article 21. The Company shall have not more thantwenty (20) Directors.
twenty (20) Directors.

- 57-[English Translation]

Current Articles of Incorporation

Proposed changes(Election)(Election of Directors)
Article 19. Directors shall be elected at general
Article 22. Directors shall be elected by resolutionof the general meeting of shareholders.
meetings of shareholders, provided, however, thatno cumulative voting shall be used for the2.
Resolution for election of Directors shallbe adopted by a majority affirmative vote of theelection of Directors.
shareholders present at the general meeting ofshareholders, a quorum of which shall be thepresence of shareholders with not less than
one-third (1/3) of the voting rights exercisable atsuch meeting.
Resolution for election of Directors shall3.
not be adopted by cumulative voting.
(Term of Office)(Term of Office of Directors)
Article 20. The term of office of Directors shall Article 23. The term of office of Directors shall
expire at the conclusion of the ordinary general
expire at the close of the ordinary general
meeting of shareholders held with respect to themeeting of shareholders held with respect to thelast closing of accounts within one (1) years after
closing of the last business term that falls within
their assumption of office.
one (1) year after their election.
(Representative Directors and Directors with Special (Representative Directors and Directors with Special
Titles)Titles)
Article 21. The Board of Directors shall, by its Article 24. The Board of Directors shall, by its
resolution, appoint not more than three (3)resolution, elect not more than three (3)Representative Directors from among theRepresentative Directors from among the
Directors.
Directors.
2. The Board of Directors shall, by its resolution,
2. The Board of Directors shall, by its
appoint one Chairman and Director and one
resolution, appoint one Chairman and Director
President and Director. In addition to theand one President and Director. In addition to
the foregoing, the Board of Directors may
foregoing, the Board of Directors may appoint
appoint one or more Executive Vice Chairmen
one or more Executive Vice Chairmen andand Directors, Executive Vice Presidents andDirectors, Executive Vice Presidents andDirectors, Senior Executive Directors andDirectors, Senior Executive Directors andExecutive Directors.
Executive Directors.
(Remuneration and Retirement Allowances for (Remuneration etc. to Directors)
Directors)
Article 25. The remuneration, bonus, and otherproprietary interests received by Directors from
Article 22. The remuneration and retirement
allowances for Directors shall be determined by a
the Company as a consideration of their duties
shall be determined by resolution of the general
resolution of a general meeting of shareholders.
meeting of shareholders.
(Person to Convene Meetings)(Person to Convene Meetings of the Board of
Article 23. Unless otherwise provided by laws or Directors)
ordinances, the President and Director shall Article 26. Unless otherwise provided for by laws
and regulations, the President and Director shallconvene meetings of the Board of Directors.
convene meetings of the Board of Directors.
2. When the President and Director is unable to
2. When the President and Director is unable toact, one of the other Directors selected inact, one of the other Directors selected inaccordance with the order of priority previously
accordance with the order of priority previously
determined by a resolution of the Board of
Directors shall take his place.
determined by a resolution of the Board of
Directors shall take his/her place.

- 58-[English Translation]

Current Articles of Incorporation

Proposed changes(Convocation Notices)(Notice for Convening the Board of Directors’
Article 24. Notice of a meeting of the Board of Meeting)Directors shall be given to each Director and each Article 27. Notice of a meeting of the Board of
Directors shall be given to each Director andStatutory Auditor at least three (3) days prior toeach Corporate Auditor at least three (3) days
the date set for such meeting; provided, however,that when the consent of all the Directors andprior to the date set for such meeting of theBoard of Directors; provided, however, that the
Statutory Auditors is obtained, meetings of theconsent of all the Directors and Statutory
Board of Directors may be convened without any
Auditors is obtained, the meetings of the Board
procedure for convocation.
of Directors may be convened without any
procedure for convocation.
(Chairman)(Chairman)
Article 25. The President and Director shall act as the Article 28. The President and Director shall act aschairman at meetings of the Board of Directors.
the chairman at meetings of the Board of
2. When the President and Director is unable to
Directors.
act, one of the other Directors selected in
2. When the President and Director is unable toaccordance with the order of priority previously
act as the chairman, one of the other Directors
determined by a resolution of the Board of
selected in accordance with the order of priority
Directors shall take his place.
previously determined by a resolution of theBoard of Directors shall take his/her place.
(Method of Resolutions of the Board of Directors)(Method of Adopting Resolutions)
Article 26. Resolutions of meetings of the Board of Article 29. Resolutions of a meeting of the Board of
Directors shall be adopted by an affirmative vote
Directors shall be adopted by a majorityof a majority of the Directors present thereat,affirmative vote of the Directors entitled toparticipate in a resolution and present thereat, ofwhen the Directors present constitute a majority
which a quorum shall be the presence of aof all Directors then in office.
majority of Directors then in office.
(Newly provided)(Alternative of Resolution of the Board of Directors)
Article 30. The Company may deem that a
resolution of the Board of Directors is adopted, if
all of the Directors consent in writing or byelectromagnetic record to matters to be resolved
upon; however, the foregoing shall not beapplicable if Corporate Auditor(s) dissent(s)thereto.

(Minutes of Meetings)(Minutes of Meetings)
Article 27. The substance of proceedings at a meeting Article 31. The substance of proceedings at aof the Board of Directors and the results thereof
meeting of the Board of Directors and the results
shall be recorded in the minutes of the meeting,thereof and matters provided for in laws andregulations shall be described or recorded in thewhich shall bear the electronic signatures orminutes of the meeting, which shall bear thenames and seals of the Directors and Statutorynames and seals or electronic signatures of the
Auditors present at the meeting.
Directors and Statutory Auditors present at themeeting.

- 59-[English Translation]

Current Articles of Incorporation

Proposed changes

CHAPTER 5
STATUTORY AUDITORSANDBOARD OF STATUTORY AUDITORSCHAPTER 5
CORPORATE AUDITORSANDBOARD OF CORPORATE AUDITORS(Newly provided)(Establishment of Corporate Auditors and Board of
Corporate Auditors)
The Company shall establish
Article 32.
Corporate Auditors and the Board of Corporate
Auditors.
(Number of Corporate Auditors)(Number of Corporate Auditors)
Article 28. The Company shall have not more than Article 33.
four (4) Statutory Auditors.
(Same as present English translation, thoughminor changes in Japanese wordings have beenmade.)(Election)(Election of Corporate Auditors)
Article 29. Statutory Auditors shall be elected at Article 34. Corporate Auditors shall be elected byresolution of the general meeting of shareholders.
general meetings of shareholders.
2. Resolution for election of Corporate Auditors
shall be adopted by a majority affirmative vote of
the shareholders present at the general meeting ofshareholders, a quorum of which shall be thepresence of shareholders with not less than
one-third (1/3) of the voting rights exercisable atsuch meeting.
(Term of office)(Term of office of Corporate Auditors)
Article 30. The terms of office of Statutory Auditors Article 35. The term of office of Corporate Auditors
shall expire at the conclusion of the ordinary
shall expire at the close of the ordinary generalgeneral meeting of shareholders held with respectmeeting of shareholders held with respect to thelast business term that falls within four (4) years
to the last closing of accounts within four (4)years after their assumption of office.
after their election.
2. The term of office of any Statutory Auditor
2. The term of office of any Corporate Auditor
elected to fill a vacancy shall expire when theelected to fill a vacancy of office of Corporate
term of office of his predecessor would have
Auditor who resigns prior to the expiration of the
expired.
terms of office shall expire at the expiration of
the terms of office of the Corporate Auditor so
resigned.
(Full-time Corporate Auditor)(Full-time Corporate Auditors)
Article 31. The Statutory Auditors select full-time Article 36. The Board of Corporate Auditors shall
Statutory Auditors from amongst each other.
elect full-time Corporate Auditors among
Corporate Auditors.

- 60-[English Translation]

Current Articles of Incorporation

Proposed changes(Remuneration and Retirement Allowances for (Remuneration etc. for Corporate Auditors)
Statutory Auditors)
Article 37. The remuneration etc. for Corporate
Auditors shall be determined by a resolution of a
Article 32. The remuneration and retirement
allowances for Statutory Auditors shall be
general meeting of shareholders.
determined by a resolution of a general meeting ofshareholders.
(Notice for Convening the Board of Corporate(Convocation Notices)
Auditors’ Meeting)
Article 33. Notice of a meeting of the Board of Article 38. Notice of a meeting of the Board of
Statutory Auditor shall be given to each Statutory
Corporate Auditor shall be given to each
Auditor at least three (3) days prior to the date set
Corporate Auditor at least three (3) days prior tofor such meeting; provided, however, that when
the date set for such meeting; provided, however,the consent of all Statutory Auditors is obtained,that the consent of all Corporate Auditors isthe meetings of the Board of Statutory Auditors
obtained, meetings of the Board of Corporate
Auditors may be convened without any procedure
may be convened without any procedure forfor convocation.
convocation.

(Method of Adopting Resolutions)(Method of Resolutions of the Board of Corporate
Article 34. Resolutions of meetings of the Board of Auditors)
Statutory Auditors shall be adopted by an Article 39. Resolutions of meetings of the Board of
Corporate Auditors, except as otherwise provided
affirmative vote of a majority of the Statutory
for in laws and regulations, shall be adopted by a
Auditors, unless the law has special provisions.
majority affirmative vote of the Corporate
Auditors.

(Minutes of Meetings)(Minutes of Meetings)
Article 35. The substance of proceedings at a meeting Article 40. The substance of proceedings at aof the Board of Statutory Auditors and the resultsmeeting of the Board of Statutory Auditors andthereof shall be recorded in the minutes of thethe results thereof and matters provided for inlaws and regulations shall be described or
meeting, which shall bear the electronic signatures
recorded in the minutes of the meeting, whichor names and seals of the Statutory Auditors
shall bear the electronic signatures or names andpresent at the meeting.
seals of the Statutory Auditors present at themeeting.
CHAPTER 6
ACCOUNTING AUDITOR(Newly Provided)(Newly Provided)(Establishment of Accounting Auditor)
Company
shall
Article 41. The
Accounting Auditor.

(Election of Accounting Auditor)
Accounting Auditor shall be elected by
Article 42.
resolution of a general meeting of shareholders.

- 61-[English Translation]

establish

Current Articles of Incorporation

Proposed changes(Newly Provided)(Term of Office of Accounting Auditor)
The term of office of Accounting
Article 43.
Auditor shall expire at the close of the ordinary
general meeting of shareholders held with respect
to the closing of the last business term that falls
within one (1) year after Accounting Auditor’s
election.
Except as otherwise resolved at the2.
general meeting of shareholders referred to in thepreceding paragraph, an Accounting Auditor
shall be deemed to have been re-elected at suchgeneral meeting of shareholders.
(Remuneration etc. for Accounting Auditor)
Article 44. Representative Director(s) shall determine
remuneration etc. for Accounting Auditor upon
obtaining consent of Board of Corporate
Auditors.

CHAPTER 6
ACCOUNTS

CHAPTER 7
ACCOUNTS(Business Year)(Business Year)
Article 36. The business year of the Company shall Article 45. The business year of the Company shallbe from April 1 each year until March 31 of the
be one (1) year commencing from the April 1
each year to the March 31 of the following year.
following year, and the accounts shall be closed on
March 31 each year.
(Dividends to Shareholders)(Record date for Distribution of Surplus)
Article 37. Dividends to shareholders shall be paid to Article 46. The record date of the Company forthe shareholders or registered pledges whose
distribution of year-end dividend shall be March
names appear as such on the last record of the
31 each year.
register of shareholders at the close of eachbusiness year.
(Prescription Period of Dividends)(Prescription Period of Dividends)
Article 38. The Company shall be exempted from the Article 47. In the event that dividend are paid in
obligation of the payment of dividends tocash, the Company shall be exempted from theshareholders if such dividends remain unreceived
obligation of the payment of dividends toshareholders if such dividends remain unreceived
for three (3) full years from the date offor three (3) full years from the date ofcommencement of the payment thereof.
commencement of the payment thereof.
No interest shall accrue on unpaid
2.
dividends.

(Newly provided)

Supplemental provision: The amendments to Article
7, Paragraph 1 and Article 8 shall take effect on
August 1, 2006.

- 62-[English Translation]

Third Item of Business: Election of Eleven (11) Directors
The term of office of all of the eleven (11) Directors will expire at the close of thismeeting. Therefore, it is proposed that eleven (11) Directors be elected.
The candidates are as follows:(Candidates for Directors)

1

Name(Date of Birth)
Makoto Iida
(April 1, 1933)

2

Juichi Toda
(March 7, 1932)3

Toshitaka Sugimachi(September 10, 1937)

4

Shohei Kimura(May 2, 1943)*

5

Kanemasa Haraguchi(August 7, 1950)*

6

Nobuyuki Sasaki(March 17, 1941)*

7

Katsuhisa Kuwahara(May 9, 1948)*

Profile(Title, Responsibility, and Representatives for Other Companies)

Jul 1962
Feb 1976
Jun 1997
Jul 1962
Feb 1976

President and Representative Director (Founder)
Chairman and Representative Director
Supreme Advisor (up to the present)
Senior Executive Director (Co-founder)
Executive Vice Chairman and Representative
Director
Jun 1997
Supreme Advisor (up to the present)
Oct 1976
Joined SECOM Co., Ltd.
Feb 1979
Director
Feb 1986
Executive Director
Jun 1994
Senior Executive Director
Jun 1995
President and Representative Director
Apr 2002
Chairman and Director
Apr 2005
Advisor (up to the present)(Representatives for other companies)
President and Representative Director, Secom Credit Co., Ltd.
Apr 1967
Joined SECOM Co., Ltd.
Feb 1985
Director
Feb 1988
Executive Director
Jun 1995
Senior Executive Director
Apr 2002
President and Representative Director
Jun 2004
President and Representative Director andExecutive Officer
Apr 2005
Chairman and Director (up to the present)
Apr 1974
Joined SECOM Co., Ltd.
Jun 1990
Director
Jun 1995
Executive Director
Jun 1997
Senior Executive Director
Jun 2002
Executive Vice President
Jun 2004
Executive Vice President and Executive Officer
Apr 2005
President and Representative Director (up to thepresent)
Mar 1988
Branch Manager, Kyoto Branch, The Bank ofJapan
May 1990 General Manager, Information System Services
Department, The Bank of JapanMay 1991 Advisor, SECOM Co., Ltd.
Jun 1991
Executive Director
Jun 1997
Senior Executive Director
Jun 2004
Director and Senior Managing Executive Officer
Apr 2005
Senior Executive Director (up to the present)
Apr 1971
Joined SECOM Co., Ltd.
Jun 1990
Director
Jun 1995
Executive Director
Jun 2004
Director and Managing Executive Officer
Apr 2005
Executive Director (up to the present)- 63-[English Translation]

The number of
Shares Held
4,320,500

3,152,216

5,232

36,2008,244

12,500

3,000

8

Name
(Date of Birth)
Shuji Maeda(September 27, 1952)*

9

Katsuo Akiyama(June 20, 1945)*

10

Shinobu Iida
(May 27, 1945)*

11

Fumio Obata(July 6, 1946)*

Profile(Title, Responsibility, and Representatives for Other Companies)

Jan 1981
Jun 1997
Jun 2000
Jun 2004
Apr 2005
Feb 1974
Jun 1995
Jun 2002
Jun 2004
Apr 2005
Jun 1995

Joined SECOM Co., Ltd.
Director
Executive Director
Director and Managing Executive Officer
Executive Director (up to the present)
Joined SECOM Co., Ltd.
Director
Executive Director
Director and Managing Executive Officer
Executive Director (up to the present)
Executive Director, Foundation for Ambulance
Service Development
Nov 1996
Advisor, Office of Chairman, SECOM Co., Ltd.
Jun 1997
Director (up to Jun 2004)
Jun 2004
Executive Officer (up to the present)
Jun 2005
Executive Director (up to the present)
Apr 1996
General Manager, Business Development
Department, the Bank of Mitsubishi, Ltd.
(Presently the Bank of Tokyo-Mitsubishi UFJ,Ltd.)
Nov 1998
Senior Executive Director, the Long-Term Credit
Bank of Japan (under state control then;presently the Shinsei Bank, Limited)
Mar 2000
Joined SECOM Co., Ltd., Associate Manager,
Strategic Planning Division, SECOM Co., Ltd.
Jun 2000
General Manager, Medical Services Department
Jun 2000
Director (up to the present)
Mar 2002
President and Representative Director, Secom
Medical System Co., Ltd. (up to the present)
Jun 2004
Executive Officer (up to the present)(Representatives for other companies)
President and Representative Director, Secom Medical System
Co., Ltd.

The number of
Shares Held
4,000

5,500

5,000

1,500

(Notes)1. There is no particular interest between the Company and each of the said candidates.
2. Asterisk marks (*) indicate incumbent Executive Officer of the Company.

-End-

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[English Translation]