The Electronic Provision Measures Matters(The Matters Omitted from the Document for Delivery)for
The 63rd Ordinary General Meeting of Shareholders

Notes to Consolidated Financial Statements
Notes to Non-Consolidated Financial Statements

1
22

Pursuant to the relevant law and ordinance, and Article 16, Paragraph 2 of the Articles of Incorporationof SECOM CO., LTD., the aforementioned Matters are not included in the document that is to be issued toa shareholder who requested the issuance of such a document.

Notes to Consolidated Financial Statements
Notes to Significant Items for Preparation of Consolidated Financial
Statements
1.

Scope of Consolidation(1) Number of Consolidated Subsidiaries: 151
Names of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Asahi Security Co., Ltd., Nohmi Bosai Ltd.,
Nittan Co., Ltd., Secom Medical System Co., Ltd., Secom General
Insurance Co., Ltd., Pasco Corporation, Secom Trust Systems Co., Ltd., At
Tokyo Corporation, TMJ, Inc., The Westec Security Group, Inc., SecomPlc, Secom Medical System (Singapore) Pte. Ltd., Takshasila Hospitals
Operating Pvt. Ltd.
(2) Descriptions of Non-Consolidated Subsidiaries:
Eishin Denshi Co., Ltd., Kyoudou Setubi Ltd. and 7 other companies(The reason for exclusion from scope of consolidation)
All of these 9 non-consolidated subsidiaries are of a small size, so that theaggregate amounts of total assets, revenue, net income/loss (an amountprorated to ownership) and retained earnings (an amount prorated toownership) and others do not have a significant effect on the consolidated
financial statements.
(3) Names of Other Companies Owing Majority of Voting Rights not Regarded
as Subsidiaries:
Katzkin Holdings, LLC, United Tactical Systems Holdings, LLC, CLP Legal
Services, LLC, PF Holdco, LLC, Austin Fitness Holdings, LLC, Handel’s
Holdco, LLC, CLP ICS Holdings, LLC.
(The reason for not regarded as subsidiaries)
These companies were acquired by subsidiaries of The Westec Security
Group, Inc. through normal course of business with the objective ofinvestment, not with the objective of control.
2.

Equity Method(1) Number of equity method affiliates: 17
Names of major affiliates accounted for under the equity method:
S1 Corporation, Toyo Tec Co., Ltd., Taiwan Secom Co., Ltd.
(2) Number of non-equity method non-consolidated subsidiaries and affiliates:
16
Eishin Denshi Co., Ltd., Kyoudou Setubi Ltd. and 14 other companies(The reason for not applying the equity method)
These 9 non-consolidated subsidiaries and 7 non-equity method affiliates
are not accounted for under the equity method because their effect on net
income/loss (an amount prorated to ownership) and retained earnings (anamount prorated to ownership) is insignificant and immaterial as a whole.

[English Translation]
1

3.

Changes in Scope of Consolidation and Companies Accounted for under the
Equity Method
Consolidation
Excluded from consolidation: 7
Ichibou Co., Ltd. and another company (Merger)
Social Rehabilitation Support Kitsuregawa Co., Ltd. and 4 othercompanies (Liquidation)
Equity Method: 1
ARTERIA Networks Corporation (Share acquisition)

4.

Closing Dates of Consolidated Subsidiaries and Equity Method Affiliates
With respect to consolidated subsidiaries, 52 overseas subsidiaries close theirbooks as of December 31 each year, and the financial statements as of thisdate are used for preparation of the consolidated financial statements.
With respect to equity method affiliates, 6 companies close their book as ofDecember 31 each year, and the financial statements as of this date are used
for preparation of the consolidated financial statements. While 1 company
closes its book as of September 30 each year, the financial statements
prepared pursuant to the provisional closing of books conducted as of March
31 are used for preparation of the consolidated financial statements.
The necessary adjustments related to the consolidation are made for any
major transactions which arise between the consolidated closing date andtheir closing dates. The closing dates of other consolidated subsidiaries andequity method affiliates are the same as the consolidated closing date.

5.

Significant Accounting Policies(1) Valuation Policies and Methods for Significant Assets
1) Securities
a. Held-to-maturity debt securities are carried at amortized cost.
b. Available-for-sale
Securities other than shares that do not have a market value
At fair value
Net unrealized gains and losses of securities are primarily
reported directly in net assets. The cost of securities sold isprimarily calculated by the moving average method.
Shares that do not have a market value
At cost, principally based on the moving average method
2) Inventories
Inventories are principally stated at cost based on the moving
average method (or at the net realizable value (NRV) calculated bywriting down the book value to reflect a decrease in the NRV).
3) Real estate for saleStated at cost by the specific cost method (or at the NRV calculated
by writing down the book value to reflect a decrease in the NRV).
(2) Depreciation and Amortization of Depreciable and Amortizable Fixed
Assets[English Translation]21) Tangible Assets (except for leased assets)a. Security equipment and control stations
Security equipment and control stations are depreciated over theiraverage estimated useful lives (5-8 years) by the decliningbalance method.
b. Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line
method.
Their main useful lives are as follows:
Buildings and improvements: 33-50 years
Tools and equipment: 2-20 years
2) Intangible Assets (except for leased assets)
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by the straight-line
method based on the useful lives within the Company (5 years).
3) Leased Assets
a. Leased assets related to ownership-transfer finance leasetransactions
Depreciated, using the same depreciation method applied to
fixed assets in possession.
b. Leased assets related to non-ownership-transfer finance leasetransactions
Depreciated, using the straight-line method mainly over a usefullife equal to the lease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on
or before March 31, 2008 are treated using the method applicable
to operating lease transactions.
4) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line
method.
(3) Basis for Significant Allowances
1) Allowance for Doubtful Accounts
To prepare for losses from bad debts such as losses on tradereceivables and loans, the allowance for doubtful accounts provides
an estimated amount of uncollectables. It is determined based on
the historical loss rate with respect to ordinary accounts, and an
estimate of uncollectable amounts respectively determined byreference to specific doubtful accounts from customers who areexperiencing financial difficulties.
2) Accrued Bonuses
The accrued bonuses are provided for the bonus payments toemployees, at an amount incurred during the current fiscal year.
3) Accrued bonuses to directors
The accrued bonuses to directors are provided for bonuses
payments to directors, at an amount incurred during the current
fiscal year.
4) Provision for Loss on Construction Contracts[English Translation]3

To prepare for future losses on construction contracts etc., an
accrual is provided based on the estimated losses on construction
contracts etc. that are undelivered at the end of the current fiscal
year.
5) Accrued Retirement Benefits for Directors and Audit &Supervisory Board Members
To prepare for payment for retirement benefits of Directors andAudit & Supervisory Board Members of domestic consolidated
subsidiaries, a necessary amount at the end of the current fiscal year
is accrued based on the rules of the Directors and Audit &Supervisory Board Members’ retirement benefits.
(4) Recognition Policies for Significant Revenue and Cost
1) Recognition Policies for Revenue and Cost from Contracts with
Customers
In the major businesses of the Company and its consolidated
subsidiaries related to revenue from contracts with customers, thedetails of major performance obligations, as well as the normal point
in time when such performance obligations are satisfied (i.e., thenormal point in time when revenue is recognized) are as follows:a. Revenues from Security Services are mainly from centralized
systems for businesses and homes, static guard services, andarmored car services, and the Company identifies theperformance obligation to provide services based on the security
contract with the customer.
As such security contracts represent contracts in which services
are continuously provided over the contract period, based on thecontract with the customer, and it has been determined that theperformance obligations are satisfied over a certain period, theCompany recognizes revenue through allocation on a straightline over the period stipulated by the contract in which theservice is provided. Equipment installation work fees received ina lump sum at the start of services for centralized systems andother points in time are allocated on a straight-line basis over thesame period as the period in which the service is provided andrevenue is recognized in the amount corresponding to the current
fiscal year, if the customer is thought to receive the benefits as
the performance obligations in the security contract are satisfied.
It should be noted that equipment installation work expenses areallocated on a straight line over the same period as the period inwhich the service is provided and recognized as expenses in theamount corresponding to the current fiscal year.
Additionally, consideration for these performance obligations isgenerally collected within one year from the time theperformance obligations are satisfied, unless they are received ascontract liabilities prior to the satisfaction of the performanceobligations, and the amount of consideration contains no
significant financing components.
b. Revenues from construction for the Fire Protection Services aremainly related to fire protection equipment, and the Company
recognizes revenue over time by measuring the progress towards
complete satisfaction of the performance obligation, as it has
been determined that the performance obligation is satisfied overa certain period. As it has been determined that the cost of
construction incurred is proportionate to the progress towards
complete satisfaction of the performance obligation, progress is[English Translation]4

measured based on the cost of construction incurred by the endof each reporting period as a percentage of the total estimatedcost of construction.
It should be noted that in cases where the expenses incurred are
expected to be recovered despite not being able to reasonably
estimate the degree of completion of the satisfaction of
performance obligations, revenue is recognized using the cost
recovery method.
Additionally, consideration for performance obligations ofconstruction contracts is generally collected within one year
from the time the performance obligations are satisfied, unlessthey are received as contract liabilities prior to the satisfaction of
the performance obligations, and the amount of consideration
contains no significant financing components.
2) Recognition Policies for Revenue and Cost of Finance Leases
Revenue and cost are recognized upon receipt of lease payments.
(5) Other Significant Items for Preparation of Consolidated Financial
Statements
1) Accounting for Retirement Benefit
To prepare for the retirement benefits of employees, the Company
and its domestic consolidated subsidiaries recognize a net defined
benefit asset and a net defined benefit liability for the amountcalculated by deducting plan assets from retirement benefit
obligations, based on the estimated amount of these items at theend of the current fiscal year.
Prior service cost is recognized as profit or loss in the year ofoccurrence.
Actuarial gains and losses are amortized from the following fiscal
year of occurrence, using the straight-line method over certain
years within the average remaining service period (mainly 10
years).
Unrecognized actuarial gains and losses are included in the line
item “Remeasurements of defined benefit plans, net of taxes” ofaccumulated other comprehensive income in the net assets section.
2) Amortization of Goodwill and Negative Goodwill
Goodwill is amortized by the straight-line method over 5-20 years.
6. Notes on Accounting Estimates(1) Allowance for Doubtful Accounts
1) Amounts stated in the consolidated financial statements
The Company has recognized short-term loans receivable of YEN
2,448 million, long-term loans receivable of YEN 23,334 million, an
allowance for doubtful accounts of YEN 2,143 million for current
assets, and an allowance for doubtful accounts of YEN 10,284
million for fixed assets in the consolidated balance sheet for thecurrent fiscal year.
2) Other information to facilitate the understanding of accounting
estimates
As stated in the above 5. (3) 1) Allowance for Doubtful Accounts, toprovide for doubtful accounts such as trade accounts receivable andloans receivable, provisions are recognized as allowance for doubtful
accounts. The amount of such an allowance for general receivables[English Translation]5

is determined based on historical default rates and the amount for
specific receivables such as delinquent claims is determined as the
expected non-recoverable amount based on recoverability
assessment on an individual basis.
In identifying specific loans that are required to be assessed forrecoverability on an individual basis, the Company takes into
consideration the status of delinquency in repaying debts as well as
the financial condition, past operating results, and future businessplans of the debtors.
Among these factors, business plans are subject to uncertainty as they
are affected by unforeseeable changes in business assumptions.
The non-recoverable amount of specific loans identified is estimatedbased on the debtors’ financial condition and future business plans
and involves significant judgment of the management on whether theplans for future revenue and expenses developed as part of thebusiness plans are feasible, including whether the impact of
unforeseeable changes in business assumptions is properly
considered in these plans.
(2) Goodwill and Other Intangible Assets
1) Amounts stated in the consolidated financial statements
The Company has recognized goodwill of YEN 63,505 million andother intangible assets of YEN 39,739 million in the consolidatedbalance sheet for the current fiscal year.
2) Other information to facilitate the understanding of accounting
estimates
Goodwill and other intangible fixed assets are amortized in a regularmanner. However, if there is an indication of impairment for theasset group containing these intangible assets, they need to be tested
to determine whether an impairment loss needs to be recognized bycomparing the total amount of undiscounted future cash flows
arising from the asset group with their carrying amount. If it isdetermined that an impairment loss needs to be recognized as a resultof such a test, the Company writes down the carrying amount to therecoverable amount and recognizes the amount of write-down as an
impairment loss.
An indication of impairment is considered to exist, for example,
when operating activities continue to make losses or when there has
been or there is expected to be a significant deterioration in thebusiness environment.
The carrying amounts of goodwill and other intangible fixed assets
reflect the consolidated subsidiaries’ excess earnings power, valueof their customer base, etc., based on the expectations for the future
growth of their business as at the time of the acquisition of eachconsolidated subsidiary. For this reason, in such cases where thebusiness growth expected at the time of acquisition of eachconsolidated subsidiary is not achieved or where there has been or
there is expected to be a significant deterioration in the businessenvironment on which the business plan was based, an indication of
impairment is considered to exist and goodwill and other intangible
assets may need to be tested for the recognition of an impairment
loss, even if its operating activities in which the asset groupcontaining these intangible fixed assets is used are not making
continuous losses.

[English Translation]
6

Notes to Consolidated Balance Sheet
1.

Cash on Hand and in Banks, and “Other” in Investments and others
Under certain provisions on sales agreements for investment securities that
apply to certain consolidated subsidiaries, restrictions are imposed on the useof part of cash on hand and in banks, YEN 0 million, and other, YEN 42
million, in investments and others.

2.

Cash Deposits for Armored Car Services and Short-term Bank Loans, andDeposits Received for Armored Car Services
For financial institutions, the Company and some of the domestic
consolidated subsidiaries provide cash collection from and cash filling to cash
dispensers located outside of financial institution facilities, and cash
collection and delivery. The balance of cash deposits for armored car services
includes cash on hand and cash in banks representing a total of YEN 17,337
million connected with cash filling services, which is restricted in use by theGroup.
The balance of cash deposits for armored car services includes YEN 20,402
million connected with cash collection administration services, which is also
restricted in use by the Group. Also, the short-term bank loan balance includes
YEN 14,746 million financed for the cash collection administration services.
The balance of cash deposits for armored car services includes cash on handand cash in banks representing a total of YEN 100,821 million connected withcash collection and delivery services, which is restricted in use by the Groupand also the balance of deposits received for armored car services includes
deposits received representing a total of YEN 100,523 million connected withcash collection and delivery services.

3.

Assets Pledged as Collateral and Collateral-related Liabilities:(1) Assets Pledged as Collateral(Millions of Yen)

Short-term loans receivables
Buildings and improvements
Land
Other - intangible assets (leasehold)Investment securities
Long-term loans receivable
Total

3
14,23825,325
507
1,398
566
42,040(2) Collateral-related Liabilities(Millions of Yen)

Bank loans
Current portion of straight bonds
Straight bonds
Long-term loans
Total

1,020
398
2,683
7,641
11,743

In addition to the above liabilities, short-term loans receivable, investment
securities and long-term loans receivable are pledged as collateral for the
debts of affiliates and other debts.
4. Receivables from Contracts with Customers and Contract Assets andContract Liabilities[English Translation]7

(1) The amounts of receivables from contracts with customers and contract assets
included in notes and accounts receivable-trade and contract assets, due fromsubscribers, and other of current assets are as follows.
(Millions of Yen)

Notes receivable
Accounts receivable
Due from subscribers
Other
Contract assets

12,703
126,719
39,706
1,097
22,757(2) The amount of contract liabilities included in deferred revenue, other of current
liabilities, and long-term deferred revenue is as follows.
Contract liabilities
YEN 55,105 million(Note) The amounts of contract liabilities included in deferred revenue, otherof current liabilities, and long-term deferred revenue are YEN 36,837
million, YEN 2,399 million, and YEN 15,868 million, respectively.
5. Accumulated Depreciation of Tangible Assets
YEN 604,418 million
6.

Investment in Non-Consolidated Subsidiaries and Affiliates:(Fixed assets)
Investment securities (stocks)
YEN 108,195 million

7.

Contingent Liabilities:
Guarantees of liabilities of entities and individuals

YEN

320 million

Notes to Consolidated Statement of Income
1. Revenue from Contracts with Customers
Revenue stated in the Consolidated Statements of Income has not beenclassified into revenue from contracts with customers and other revenue.
The amount of revenue from contracts with customers has been stated in “1.
Information on the breakdown of revenue from contracts with customers” of“Notes on Revenue Recognition” of “Notes to Consolidated Financial
Statements.”
2. Impairment Losses
The Group recognized impairment losses, YEN 2,973 million, in thefollowing groups of assets for the current fiscal year. The Company and its
subsidiaries determine the grouping of assets in accordance with thecategories used for management accounting purposes for operating assets andon the basis of individual assets for idle assets and rental real estate. With
regard to operating assets, idle assets and rental real estate whose profitability
fell significantly for the current fiscal year due to sluggish businessperformance, etc., the Group reduced their book values to the recoverable
amounts.

[English Translation]
8

Impairment loss
Use

Type

Region(Millions of Yen)
Kanto 11

Operating assets

Software and goodwill, etc.

2,261
Other 4

Idle assets

Buildings

Other 1390

Buildings

Kanto 1

322

Rental realestateThe net realized value of the asset groups is measured at net selling price orvalue in use. Net selling price is determined based on the disposal price or theappraisal value provided by real estate appraisers. Value in use is calculated
mainly based on future cash flows discounted by the rate of 6.0%.
Notes to Consolidated Statement of Changes in Net Assets
1.

Items Related to Issued Shares and Treasury Stocks
Number of shares atthe beginning of the
fiscal year

Issued shares
Common stocks
Treasury stocks
Common stocks

Increase in thenumber of sharesin the fiscal year

(Unit：1 share)
Number of shares atthe end of the fiscal
year

Decrease in thenumber of sharesin the fiscal year

233,299,898--

233,299,898

18,763,110

4,539,443

494,093

22,808,460(Outline of reasons for change)
The increase of 4,539,443 shares of common stock in treasury stock is due tothe repurchase of 4,537,300 shares resolved by the Board of Directors, thepurchase of 1,607 shares constituting less than one unit, and the free-ofcharge acquisition of 536 shares of restricted stock.
The decrease of 494,093 shares of common stock in treasury stock is due tothe disposal of 492,675 shares as restricted stock to employees of theCompany and its subsidiaries and the disposal of 1,418 shares as restricted
stock remuneration to directors.
2. Items Related to Dividends(1) Amount of Dividends Paid
Resolution

Classes ofsharesTotal amount ofcash dividend(Millions of yen)

Cash dividend pershare (Yen)Record date

Effective dateOrdinary General
Meeting of
Shareholders
on June 27, 2023

Common stock

20,38095

March 31, 2023

June 28, 2023

Board of Directors
Meeting on
November 9, 2023

Common stock

20,10195

September 30,
2023

December 8,
2023(2) Of the dividends whose record date belongs to the current fiscal year, thefollowing are those dividends whose effective date belongs to the next fiscal
year.
The matters planned to be resolved on the general meeting of shareholders
are as follows:[English Translation]
9

Resolution

Classes ofshares

Source ofdividend

Total amount ofcash dividend(Millions of
yen)

Cash
dividend per
share
(Yen)

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June25, 2024

Commonstock

Retainedearnings

19,99695

March 31,2024

June 26,
2024

Notes to Financial Instruments
1.

Items Related to Status of Financial Instruments
The Group (excluding its insurance services segment) raises necessary funds,
with the aim of establishing “Social System Industry,” by means of procuring
funds from markets and borrowing money from financial institutions. The
Group also holds financial instruments for promoting its business andinvestment. Derivatives are primarily used for averting market risks
associated with loans, etc., and it is the Group’s policy not to perform
speculative transactions.
The Group’s insurance services segment manages funds using financial
instruments for the purpose of safely and carefully holding and managing
insurance premiums received from policyholders for underwriting insurance
policies as a source of funds for paying for future insurance claims. As thefinancial instruments in which the Group’s insurance services segment
invests are exposed to market risks including interest rate fluctuation risks,
the Group’s insurance services segment performs asset-liability management(ALM) to prevent any adverse impact of such risks from arising.

2.

Items Related to Fair Values of Financial Instruments etc.
The amounts recognized on the consolidated balance sheet, fair values andcorresponding differences as of March 31, 2024 are listed below.
(Millions of Yen)
Amountrecognized on the
consolidatedbalance sheet

Fair value

Difference

11,71762,720284,659
40,007

12,013
142,899284,659
39,899296
80,179(108)

23,334(9,438)13,89620,095433,097
3,081
10,92423,70137,70813,867
18,943512,282
3,081
10,91823,681
37,681(28)(1,152)
79,185
(6)
(20)
(26)

(1)Short-term investments and investment
securities(i) Held-to-maturity debt securities(ii) Investment securities in affiliates(iii) Available-for-sale securities(2)Lease receivables and investment inleased assets(3)Long-term loans receivable
Allowance for doubtful accounts (*3)(4)Lease deposits
Total assets(1)Straight bonds(2)Long-term loans(3)Guarantee deposits received
Total liabilities*1 “Cash on hand and in banks,” “Cash deposits for armored car services,” “Notes and accounts
receivable-trade and contract assets,” “Due from subscribers,” “Short-term loans receivable,”[English Translation]
10

“Notes and accounts payable, trade,” “Bank loans,” “Payables - other,” “Accrued income
taxes, ” and “Deposits received for armored car services” are not included, as they fall undercash or they are settled in a short period of time and their fair values approximate their bookvalues.
*2 Shares that do not have a market value are not included in “(1) Short-term investments andinvestment securities”. The amounts of these financial instruments recognized on theConsolidated Balance Sheet are as follows(Millions of Yen)
Amount recognizedItemon the consolidated balance
sheet
Unlisted stock

38,732Unlisted stock of affiliates

45,474*3 Allowance for doubtful accounts for long-term loans receivable is deducted.
*4 The Company's shares in Investments in partnerships and similar entities, which are recognizedin net amounts in the Consolidated Balance Sheet, are not included. The amount of suchinvestments recognized in the Consolidated Balance Sheet is YEN 2,044 million.

3.

Matters Related to the Breakdown of the Fair Value of Financial Instruments
by Level
The fair value hierarchy of financial instruments is categorized into thefollowing three levels according to the degree of observability and importanceof the inputs used in the calculation of fair value.
Level 1 fair value: The fair value calculated based on quoted market
prices of assets and liabilities for fair values in active
markets among the observable inputs for calculating
fair value
Level 2 fair value: The fair value calculated using inputs other thanthose included in Level 1 inputs, among theobservable inputs for calculating fair value
Level 3 fair value: The fair value calculated using unobservable inputs
If multiple inputs with significant impact are used for the fair value
measurement of a financial instrument, the financial instrument is classified
into the lowest priority level of fair value measurement to which each input
belongs.

(1) Financial instruments at fair value on the Consolidated Balance Sheet(Millions of Yen)
Item
Short-term
investments
and investment securities
Available-for-salesecurities
StocksGovernment bonds andMunicipal bonds
Straight bonds
Other
Total assets

Fair value
Level2
Level3

Level1

Total

80,008--80,008

11,87425,425-37,29943,789135,672

70,507
10,675
106,608

42,37742,37770,507
96,843284,659[English Translation]11

(2) Financial instruments which other than stated at fair value on theConsolidated Balance Sheet(Millions of Yen)
Item
Short-term investments and investment
securities
Held-to-maturity debt securities
Government bonds and Municipal
bonds
Straight bonds
Other
Investment securities in affiliates
Lease receivables andinvestment in leased assets
Long-term loans receivable
Lease deposits
Total assets
Straight bonds
Long-term loans
Guarantee deposits received
Total liabilities

Fair value
Level2
Level3

Level1

Total

11,015--

11,015

142,899

389
-

609
-

609
389
142,899-

39,899-39,899

153,914-

6,283
18,94365,515
3,081
10,91823,681
37,681

7,584
8,193
-

13,867
18,943
227,623
3,081
10,91823,681
37,681(Note 1) Description of the valuation techniques and inputs used to measure fair
value
Assets:Short-term investments and investment securities
The fair value of stocks is based on the price quoted on the exchange whereas
the fair value of straight bonds, investment trusts, etc. is based on the pricequoted on the exchange or the price presented by the corresponding financial
institution. As listed stock, government bonds and exchange-traded funds aretraded on active markets, they are classified into Level 1 fair value. Other
bonds, etc. are less frequently traded on the market and their prices are notdeemed to be quoted prices on an active market, and their fair values are,therefore, classified into Level 2 fair value. For investment trusts which do nothave prices quoted on the market, the net asset value per unit is deemed theirfair value and they are classified into Level 2 fair value provided that there areno significant restrictions to the extent that compensation for risks is demandedby market participants concerning a cancellation or a buyback request. If theirvalues are calculated using techniques such as the present value techniquebased on significant unobservable inputs, they are classified into Level 3 fairvalue.
Lease receivables and investment in leased assets
These items are stated at present value calculated by discounting the sum of theprincipal and interest at the interest rate assumed when a new similar leasetransaction is performed, and classified into Level 2 fair value.
Long-term loans
Long-term loans are stated at present value calculated by discounting the sumof the principal and interest at the interest rate assumed when a new similarloan transaction is performed with respect to each category based on type,internal rating and period of the loans receivable, and are therefore classified
into Level 2 fair value. The fair value of doubtful accounts is approximately
the same as the value on the balance sheet as of the fiscal year-end less thecurrent estimated losses from the loan, as the estimated losses from the loan are[English Translation]
12

calculated based on the discounted present value of the estimated cash flow or
upon separately considering the expected recoverable amount; therefore, thesaid value is stated as fair value, and their fair values are, therefore, classified
into Level 3 fair value. Certain consolidated subsidiaries calculate the present
value of future cash flow by discounting the future cash flow at an interest rateequal to an appropriate index such as the yield of government bonds plus thecredit spread according to the residual period, and their fair values are,therefore, classified into Level 2 fair value.
Lease deposits
Lease deposits are stated at present value calculated by discounting the future
cash flow at risk-free interest rate and classified into Level 2 fair value.
Liabilities:
Straight bonds
These items are stated at present value calculated by discounting the sum of
the principal and interest at the interest rate assumed when new similar
straight bonds are issued, according to the residual period of the straightbonds, and classified into Level 2 fair value.
Long-term loans
These items are stated at present value calculated by discounting the sum of
the principal and interest at the interest rate assumed when a new similar
debt is taken on, and classified into Level 2 fair value.
Guarantee deposits received
Guarantee deposits received are stated at present value calculated bydiscounting the future cash flow at risk-free interest rate, and classified into
Level 2 fair value.
(Note 2) Information about financial assets and liabilities measured and stated on
the consolidated balance sheet at fair value and classified into Level 3(1) Quantitative information on significant unobservable inputs
Item

Valuation
TechniqueSignificant
Unobservable Inputs

Present value
Technique

Discount rate
Year of disposal
EBITDA multiples

Scope of Input

Short-term investments andinvestment securities
Available-for-sale securities
Other[English Translation]
13

20% - 30%2024 - 2025
5 - 7.5x

(2) Reconciliation from beginning balance to ending balance, and net evaluation
gains or losses recognized in profit or loss for the current fiscal year
(Millions of Yen)
Short-term investments andinvestment securities
Available-for-sale securities
OthersBeginning balance

25,310

Profit or loss or other comprehensive income for thecurrent fiscal year
Profit or loss (*1)

14,439Other comprehensive income

1,861

Net changes due to purchases, sales, issues and766
settlements
Ending balance

42,377Of the amounts recorded as gains or losses for the current
fiscal year, net evaluation gains or losses on financial
14,644assets and liabilities held on the date of consolidatedbalance sheet (*1)(*1) Included in loss or gain on investment partnerships in the Consolidated
Statements of Income(3) Description of the fair value valuation process
The Group has established policies and procedures for measuring the fair value
approved by an appropriate person of authority. In the measurement of fairvalue, the validity of the valuation technique and inputs used in themeasurement of fair value, and the appropriateness of the classification of thefair value level are verified. The verification results are reported in an
appropriate manner to the person of authority, thereby ensuring theappropriateness of the policies and procedures for measuring fair value.
In the measurement of fair value, a valuation model that most suitably reflects
the nature, characteristics and risks of the individual assets is used. In addition,
when using the quoted market prices obtained from a third party as fair value,
the validity of the prices is verified by appropriate methods such asconfirmation of the valuation technique and inputs used and comparison withthe fair value of similar financial instruments.
(4) Description of the impact on fair values where significant unobservable
inputs are varied
Significant unobservable inputs include the discount rate, the time of disposal,
and EBITDA multiples. Generally, fair values decrease when the discount rateis raised, the time of disposal is extended, and the EBITDA multiples arelowered. Fair values increase when the discount rate is lowered, the time ofdisposal is shortened, and the EBITDA multiples are raised.

[English Translation]
14

Notes to Rental Property and Other Real Estate
The Company and some of its consolidated subsidiaries own rental officebuildings and medical facilities such as hospitals, in addition to rental housing etc.
mainly in Tokyo and other major cities across the country.
The amount recognized on the consolidated balance sheet, the amount of
increase/decrease during the current fiscal year and the fair value of such rental
properties are as follows:(Millions of Yen)
Amount recognized on the consolidated balance sheet
Balance at the
Increase/decrease
Balance at the
beginning of theduring the fiscal
end of the fiscal
fiscal year
year
year
Officebuildings
Medicalfacilities

Fair value atthe end of the
fiscal year

47,294(444)

46,85090,16449,600(1,464)

48,13563,040

Other

9,934

(50)

9,884

12,684

Total

106,829(1,959)104,869

165,889(Note 1) The amount recognized on the consolidated balance sheet equals the acquisition cost lessaccumulated depreciation and accumulated impairment loss.
(Note 2) The fair value at the end of the current fiscal year is, in the case of major properties, theamount based on real-estate appraisal by an external real-estate appraiser, and in the caseof other properties, the amount calculated in-house based on the Real Estate Appraisal
Standard. However, if no significant fluctuations have occurred in a certain valuation or
an index that is deemed to properly reflect the market price since the acquisition of theproperty from a third party or the most recent external valuation, the fair value is basedon such valuation or the amount adjusted by using the index.

Profit or loss on rental properties and other real estate for the fiscal year ended
March 31, 2024 is as follows:

Difference(Millions of Yen)
Other(gains/losses onsale etc.)

Rental income

Rental expenses

Office buildings

4,096

1,818

2,278

(187)

Medicalfacilities

7,119

3,842

3,277

(216)

Other

462

218

244

(391)

Total

11,679

5,878

5,800

(795)

(Note 1) The rental expenses include depreciation, repair costs, insurance premium, taxes andpublic imposts, etc.
(Note 2) Other includes impairment losses on fixed assets recognized as extraordinary losses, etc.

[English Translation]
15

Notes on Revenue Recognition
1. Information on the Breakdown of Revenue from Contracts with Customers(Millions of Yen)
Reportable segments
Security
services

Fire protection
services

Medicalservices

Geospatial
information
services

Insuranceservices

Revenue fromsecurity contracts

517,015

-

-

-

-

Other

88,234

160,60272,969714

60,500

Revenue fromcontracts withcustomers

605,249

160,60272,969714

60,500

Other revenue

8,834

-

7,155

57,432-

Revenue from
customers

614,083

160,60280,124

58,14660,500

Reportable segments
BPO and ICT
services
Revenue fromsecurity contracts

Subtotal

Other services

Total

-

517,015-

517,015

Other

127,228510,249

37,454

547,704

Revenue fromcontracts withcustomers

127,228

1,027,265

37,454

1,064,720

Other revenue-

73,421

16,59990,020

Revenue from
customers

127,228

1,100,686

54,053

1,154,740(Note) “Other services” is an operating segment not designated as a reportable segment, andcomprises real estate leasing, construction and installation services, etc.

2. Basic Information for Understanding Revenue from Contracts with Customers
Please refer to “5. (4) Recognition Policies for Significant Revenue and Cost”
of “Notes to Significant Items for Preparation of Consolidated Financial
Statements” of “Notes to Consolidated Financial Statements.”[English Translation]16

3. Information for Understanding the Amounts of Revenue in and after the Fiscal
Year Ended March 31, 2024
(1) Balance, etc. of contract assets and contract liabilities(Millions of Yen)
Fiscal year ended
March 31, 2024
Claims arising from contracts with customers (beginning balance of the year)

173,166

Claims arising from contracts with customers (ending balance of the year)

180,226

Contract assets (beginning balance of the year)

22,476

Contract assets (ending balance of the year)

22,757

Contract liabilities (beginning balance of the year)

55,052Contract liabilities (ending balance of the year)

55,105Contract assets comprise rights to claim consideration on construction contracts,
etc., by the Company and its consolidated subsidiaries that have been completed
by the fiscal year-end but remain unclaimed. Contract assets are transferred toreceivables from contracts with customers at the point in time when the rights toclaim consideration by the Company and its consolidated subsidiaries become
unconditional.
Contract liabilities mainly comprise deferred revenue received from customers
concerning service contracts, etc., and are reversed upon the recognition ofrevenue.
For the fiscal year ended March 31, 2024, most of the YEN 38,931 million of the
beginning balance of contract liabilities of one year or less has been recognized asrevenue in the current fiscal year.
(2) Transaction price allocated to remaining performance obligations
In the notes to the transaction price allocated to remaining performanceobligations, the Company and its consolidated subsidiaries apply the practical
expedient, and contracts with terms initially expected to be one year or less are
not included in the notes.
The total transaction price allocated to remaining performance obligations andthe expected time of revenue recognition are as follows.
(Millions of Yen)
Fiscal year ended
March 31, 2024
One year or less

157,077

More than one year

194,491

Total

351,568[English Translation]
17

Notes to Deferred Income Tax Accounting
1. The Significant Components of Deferred Income Tax Assets and Deferred
Income Tax Liabilities:
Deferred income tax assets:(Millions of Yen)

Investment deposits by policyholders, unearned premiums and other insurance
liabilities
Net defined benefit liability
Accrued bonuses
Eliminations of unrealized gain
Write-down on fixed assets
Impairment loss
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Allowance for doubtful accounts
Operating loss carryforwards
Write-down on inventories
Asset retirement obligations
Other
Gross deferred income tax assets
Valuation allowance
Total deferred income tax assets

19,462
6,339
6,112
5,538
5,114
4,691
4,665
3,986
2,525
1,776
1,457
11,33673,009(14,095)
58,913

Deferred income tax liabilities:
Net defined benefit asset
Unrealized gains on securities
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (intangible assets)
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Investment securities
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (other fixed assets)
Other
Total deferred income tax liabilities
Net deferred income tax assets

2. Summary of the Reconciliation between the Statutory Tax Rate and the
Effective Tax Rate after the Application of Deferred Income Tax Accounting
In the current fiscal year, difference between the statutory tax rate and theeffective tax rate after the application of deferred income tax accounting
accounted for less than 5% to the statutory tax rate. Accordingly, the note isomitted.
Notes to Retirement Benefits
1.

Outline of the Retirement Benefit Plan Adopted:
Employees of the Company and its consolidated domestic subsidiaries whose
services are terminated are, under most circumstances, eligible for lump-sum
severance indemnities and/or eligible for pension benefits.
The Company and its domestic consolidated subsidiaries with the sameretirement benefit plan have adopted a severance indemnity plan and adefined contribution pension plan, and have also implemented a matching[English Translation]
18(20,908)(16,355)(7,546)(4,296)(3,129)(973)(2,252)(55,462)3,451

contribution plan since July 2012. The method of calculating the severance
indemnity under the severance indemnity plan is to pay out to the employees
an amount equal to a certain percentage of their annual income over theirperiod of service, plus interest which is calculated as the 3-year average yieldof applicants for 10-year government bonds. The defined contribution
pension plan was established in April 2003, a portion equivalent to 20 % of
the severance indemnity plan so far accumulated was transferred to the newplan, and a specified percentage of annual income is contributed thereto. The
Company transferred an additional portion of the severance indemnity plan
funds to the defined contribution pension plan in April 2005, andaccordingly, the ratio of the accumulated amount in the severance indemnity
plan and the amount of contributions to the defined contribution pension plan,
including the past reserve, changed to 70 % and 30 %, respectively.
The majority of the consolidated overseas subsidiaries have adopted a varietyof pension plans that essentially cover all employees. Most of these plans aredefined contribution pension plans.
In defined benefit pension plans and lump-sum severance indemnity plans
for some consolidated subsidiaries, net defined benefit liabilities andretirement benefit expenses are calculated using the simplified method.
2.

Defined Benefit Plans(1) Reconciliation of beginning and ending balances of retirement benefit
obligations (excluding those pertaining to plans to which the simplified
method is applied)
Beginning balance of retirement benefit obligations
Service cost
Interest cost
Actuarial gains and losses incurred
Retirement benefits paid
Ending balance of retirement benefit obligations(Millions of Yen)
104,667
6,035
808
(524)
(6,609)104,377(2) Reconciliation of beginning and ending balances of plan assets (excluding
those pertaining to plans to which the simplified method is applied)
Beginning balance of plan assets
Expected rate of return
Actuarial gains and losses incurred
Contributions from the employer
Retirement benefits paid
Ending balance of plan assets[English Translation]
19(Millions of Yen)
139,398
3,904
10,194
6,714(5,442)
154,769

(3) Reconciliation of beginning and ending balances of net defined benefit
liability pertaining to plans to which the simplified method is applied
Beginning balance of net defined benefit liability
Retirement benefit expenses
Retirement benefits paid
Contributions to the plan
Ending balance of net defined benefit liability(Millions of Yen)
3,114
544
(403)
(138)
3,117

(4) Reconciliation of ending balances of retirement benefit obligations andplan assets with net defined benefit liability and net defined benefit asset
recognized in the consolidated balance sheet
Retirement benefit obligations of funded plans
Plan assets
Retirement benefit obligations of non-funded plans
Net amount of assets and liabilities recognized in the
consolidated balance sheet

Net defined benefit liability
Net defined benefit asset
Net amount of assets and liabilities recognized in the
consolidated balance sheet(Millions of Yen)
88,342(157,684)(69,341)
22,067(47,274)(Millions of Yen)
22,308(69,583)(47,274)(Note) Including plans to which the simplified method is applied.
(5) Retirement benefit expenses and their breakdown
Service cost
Interest cost
Expected rate of return
Amortization of actuarial gains and losses
Retirement benefit expenses calculated using thesimplified method
Retirement benefit expenses pertaining to defined benefit
plans(Millions of Yen)
6,035
808
(3,904)(2,092)544
1,391(6) Remeasurements of defined benefit plans
The breakdown of the amount recognized in remeasurements of defined
benefit plans (before the tax effect) is as follows:
Unrecognized actuarial gains and losses
Total(Millions of Yen)
(17,906)(17,906)(7) Matters concerning actuarial assumptions
Major actuarial assumptions applied at the end of the current fiscal year
Discount rateLong-term expected rate of return
3.

Mainly 1.2%
Mainly 3.0%

Defined Contribution Plans
The amount of contribution required for the Company and its consolidated
subsidiaries is YEN 2,452 million in total.

[English Translation]
20

Notes to Asset Retirement Obligation
1. Asset Retirement Obligations Recognized in Consolidated Balance Sheet
Footnote information of asset retirement obligations recognized in the
consolidated balance sheet is omitted as they are immaterial.
2. Asset Retirement Obligations not Recognized in Consolidated Balance Sheet
A certain building of a consolidated subsidiary must be restored to its originalstate under the building lease agreement upon returning the building at the
expiry of the lease. However, the Company does not plan to relocate from thebuilding in its business strategies and it is assumed to be used until thebuilding is demolished through the renewal of the agreement. In cases where
the building is demolished, it is not expected to execute the contractual
obligation to restore the building to its original state. For this reason, though
the Company tried to establish best estimates, considering evidence available
as at the closing date, asset retirement obligations have not been recognizedwith respect to such obligations, since it is impracticable to forecast theprobability regarding the scope and the amount of asset retirement
obligations.
Notes to Per-Share Information
Net assets per share:
Net income per share:

YEN
YEN

5,816.74
482.04

Notes to Significant Subsequent Events(Repurchase of the Company’s own shares)
At the Board of Directors meeting held on May 10, 2024, the Company resolved
matters regarding the repurchase of the Company’s own shares pursuant to
Article 156 of the Companies Act, as applied pursuant to Article 165, Paragraph
3, of such act.
1. Reason for Repurchase
The Company strives to increase its corporate value by conducting business witha focus on all stakeholders in order to realize sustainable growth. The Company
will enhance shareholder returns and improve capital efficiency through flexible
repurchases of its own shares, comprehensively taking into account, among
others, growth investments, dividend levels, capital efficiency, and share pricelevels.
2. Details of the Purchase(1) Class of shares to be purchased(2) Total number of shares that may
be repurchased(3) Total repurchase price(4) Repurchase period(5) Repurchase method

Shares of common stock of theCompany
4,500,000 shares (maximum)(2.14% of total issued shares(excluding treasury shares))
YEN 30,000,000,000 (maximum)
From May 13, 2024 to August 6,
2024
Market purchase on the Tokyo Stock
Exchange[English Translation]
21

Notes to Non-Consolidated Financial Statements
Notes to Significant Accounting Policies
1.

Valuation Policies and Methods for Assets(1) Valuation Policies and Methods for Securities
1) Held-to-maturity debt securities
Amortized cost method
2) Investment Securities in Subsidiaries and Affiliates
At cost, based on the moving average method
3) Available-for-sale Securities
Securities other than shares that do not have a market value
At fair value
Net unrealized gains and losses of securities are reported directly in net
assets. The cost of securities sold is calculated by the moving averagemethod.
Shares that do not have a market value
At cost, principally based on the moving average method.
(2) Valuation Policies and Methods for Inventories
Merchandise and supplies are stated at cost determined by the moving
average method (or at the net realizable value (NRV) calculated by writing
down the book value to reflect a decrease in the NRV).
2.

Depreciation and Amortization of Depreciable and Amortizable Fixed Assets(1) Tangible Assets: (except for leased assets)
1) Security equipment and control stations
Security equipment and control stations are depreciated over their average
estimated useful lives (5-8 years) by the declining-balance method.
2) Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line method.
Their main useful lives are as follows:
Buildings and improvements: 33-50 years(2) Intangible Assets
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by the straight-line method
based on the useful lives within the Company (5 years).
(3) Leased Assets
1) Leased assets related to ownership-transfer finance lease transactions
Depreciated, using the same depreciation method applied to fixed assets inpossession.
2) Leased assets related to non-ownership-transfer finance leasetransactions
Depreciated, using the straight-line method over a useful life equal to thelease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on or
before March 31, 2008 are treated using the method applicable to operatinglease transactions.
(4) Long-term Prepaid Expenses:
Long-term prepaid expenses are amortized by the straight-line method.

[English Translation]
22

3.

Basis for Significant Allowances(1) Allowance for Doubtful Accounts
To prepare for losses from bad debts such as losses on trade receivables andloans, the allowance for doubtful accounts provides an estimated amount of
uncollectables. It is determined based on historical loss rate with respect toordinary accounts, and an estimate of uncollectable amounts, respectively
determined by reference to specific doubtful accounts from customers whoare experiencing financial difficulties.
(2) Accrued Bonuses
The accrued bonuses are provided for the bonus payments to employees, at
an amount incurred during the current fiscal year.
(3) Accrued bonuses to directors
The accrued bonuses to directors are provided for bonuses payments todirectors, at an amount incurred during the current fiscal year.
(4) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company provides
an amount of accrued pension and severance costs and prepaid pension andseverance costs at the end of the current fiscal year, based on the estimatedamount of projected benefit obligation and plan assets as of the end of thecurrent fiscal year.
In calculating retirement benefit liabilities, the benefit formula basis isadopted to attribute the estimate amount of retirement benefit to the current
fiscal year end.
Prior service liability is recognized as profit or loss in the year of occurrence.
Actuarial gains and losses are amortized from the following fiscal year ofoccurrence, using the straight-line method over certain years within the
average remaining service period (10 years).
(5) Allowance for Loss on Contracts
To prepare for future losses relating to the performance of contracts, anaccrual is provided in the amount of the estimated future loss for thosecontracts for which future losses are estimated at the end of the current fiscal
year and for which the amount of such losses can be reasonably estimated.
4.

Revenue and Cost Recognition Policies
In the Company’s major businesses related to revenue from contracts withcustomers, the details of major performance obligations, as well as the normal
point in time when such performance obligations are satisfied (i.e., the normal
point in time when revenue is recognized) are as follows.
In Security Services including the centralized systems for businesses andhomes, the static guard services, and the armored car services, the Company
identifies the performance obligation to provide services based on the
security contract with the customer.
As such security contracts represent contracts in which services arecontinuously provided over the contract period, based on the contract withthe customer, and it has been determined that the performance obligations
are satisfied over a certain period, the Company recognizes revenue throughallocation on a straight line over the period stipulated by the contract inwhich the service is provided. Equipment installation work fees received ina lump sum at the start of services for centralized systems and other points
in time are allocated on a straight-line basis over the same period as theperiod in which the service is provided and revenue is recognized in theamount corresponding to the current fiscal year, if the customer is thought
to receive the benefits as the performance obligations in the security contract
is satisfied.

[English Translation]23

It should be noted that security equipment installation work expenses areallocated on a straight line over the same period as the period in which theservice is provided and recognized as expenses in the amount corresponding
to the current fiscal year.
Additionally, consideration for these performance obligations is generallycollected within one year from the time the performance obligations are
satisfied, unless they are received as contract liabilities prior to thesatisfaction of the performance obligations, and the amount of consideration
contains no significant financing components.
5.

Other Significant Accounting Policies
Accounting for retirement benefits
The accounting for unrecognized actuarial gains and losses to retirement
benefits is different from the accounting for those items in the
consolidated financial statements.

6.

Changes in Presentation Method(Notes to Statements of Income)“Gain on liquidation of subsidiaries and affiliates” and “Gain on sales oftangible assets,” which were included in “Other” under extraordinary profit
in the previous fiscal year, are presented as separate line items from thecurrent fiscal year due to their increased importance. For the previous fiscal
year, “Gain on liquidation of subsidiaries and affiliates” was YEN 0
million, and “Gain on sales of tangible assets” was YEN 8 million.
“Impairment losses” which was included in “Other” under extraordinary
losses in the previous fiscal year, is presented as a separate line item in thecurrent fiscal year due to its increased importance. “Impairment losses” forthe previous fiscal year was YEN 154 million.

Notes on Accounting Estimates
Investment Securities in Subsidiaries and Affiliates(1) Amounts Stated in Financial Statements
The amount of investment securities in subsidiaries and affiliates of YEN
453,175 million stated in the balance sheet for the current fiscal year
includes investments in unlisted subsidiaries that the Company has acquired
through an acquisition transaction.
(2) Other Information to Facilitate the Understanding of Accounting Estimates
Shares for which market prices are not available acquired throughinvestments in unlisted subsidiaries are stated in the balance sheet atacquisition costs. If the net asset value of an issuer of these shares is judged
to have declined significantly due to the deterioration in the financial
condition of the issuer, a valuation loss on these securities needs to berecognized unless the recoverability of the net asset value is supported bysufficient evidence.
In the case where the Company acquires shares of an investee at a price thatis considerably higher than its net assets per share as per its financial
statements reflecting the excess earnings power and the like of the investee,
if the net asset value subsequently declines significantly due to a decline inexcess earnings power and the like, a valuation loss on the investment in theinvestee needs to be recognized even if there has been no deterioration in its
financial condition.
The acquisition cost of shares pertaining to the investment in unlisted
subsidiaries acquired through an acquisition reflects their excess earnings
power, value of their customer base, etc., based on the expectations for the[English Translation]24

future growth of their business as at the time of the acquisition of eachsubsidiary. For this reason, if the excess earnings power and the like has
been impaired because the business growth expected at the time ofacquisition is not achieved and/or there has been or there is expected to bea significant deterioration in the business environment on which thebusiness plan was based, a valuation loss may need to be recognized oninvestments in these subsidiaries, even if there has been no deterioration in
their financial condition since the acquisition.
Notes to the Non-Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services and Short-term Bank Loans
For financial institutions, the Company provides cash filling to and cash
collection from cash dispensers located outside of financial institution
facilities.
The balance of cash deposits for armored car services includes cash on handand cash in banks of representing a total of YEN 14,951 million connectedwith cash filling services, which is restricted in use by the Company.
The balance of cash deposits for armored car services includes YEN 20,391
million connected with cash collection administration services, which is also
restricted in use by the Company. Also, the short-term bank loan balance
includes YEN 14,746 million financed for the cash collection administration
services.
2.

Assets Pledged as Collateral and Collateral-related Liabilities
Assets Pledged as Collateral(Millions of Yen)
Short-term loans receivable
3
Investment securities
1,358
Investment securities in subsidiaries and affiliates
40
Long-term loans receivable
566
Total
1,968
Collateral-related Liabilities—
Short-term loans receivables, investment securities, investment securities
in subsidiaries and affiliates, and long-term loans receivable are pledged
as collateral for the debts of subsidiaries and affiliates and other debts.

3.

Accumulated Depreciation of Assets
Accumulated depreciation of tangible assets: YEN 317,286 million[English Translation]25

4.

Contingent Liabilities(1) Guarantees
Liabilities of the below entities and employees are guaranteed.
(Millions of Yen)
Secom Aktif Güvenlik Yatirim A.S.
1,084
Alive Medicare Co., Ltd.
999
Employees
145
Purchasers of real estate the Company sold139
Secom Fort West Co., Ltd.
112
Purchasers of merchandises by leasing
96
transactions etc.
Others
28
Total
2,607
(2) Net Assets Maintaining Agreement
The Company entered into a net assets maintaining agreement with Secom
General Insurance Co., Ltd., under which the Company is obligated toprovide funds to Secom General Insurance Co., Ltd. if and when the net assets
of Secom General Insurance Co., Ltd. become lower than the specified
amount or its current assets necessary for the payment of its liabilities are
insufficient.
The total liabilities of Secom General Insurance Co., Ltd. at the end of thecurrent fiscal year are YEN 201,813 million, including YEN 187,778 millionof investment deposits by policyholders, unearned premiums and otherinsurance liabilities, and the total assets are YEN 251,941 million.
However, this agreement is not construed as the Company’s guarantee withrespect to payment obligations of Secom General Insurance Co., Ltd. Secom
General Insurance Co., Ltd. maintained net assets above the required level,
and its current assets were not insufficient at the end of the current fiscal year.
5.

Financial Receivables/Payables to Subsidiaries and Affiliates (excluding
those separately presented)(Millions of Yen)
24,193
Short-term receivables
51,416Long-term receivables
8,559
Short-term payables
2,350
Long-term payables[English Translation]
26

Notes to Non-Consolidated Statement of Income
Operating Transactions and Non-operating Transactions with Subsidiaries
and Affiliates(Millions of Yen)
Operating transactions (Revenue)
18,746
Operating transactions (Expense)
43,588Non-operating transactions (Income)
37,394
Notes to Non-Consolidated Statements of Changes in Net Assets
Items Related to Classes and Total Number of Treasury Stocks(Unit: 1 share)
Classes ofsharesCommonstock

Number ofshares at the
beginning of
the fiscal year
18,763,110

Increase in
number ofshares in thefiscal year
4,539,443

Decrease in
number ofshares in thefiscal year
494,093

Number ofshares at theend of the fiscal
year
22,808,460(Outline of reasons for change)
The increase of 4,539,443 shares of common stock in treasury stock is due tothe repurchase of 4,537,300 shares resolved by the Board of Directors, thepurchase of 1,607 shares constituting less than one unit, and the free-ofcharge acquisition of 536 shares of restricted stock.
The decrease of 494,093 shares of common stock in treasury stock is due tothe disposal of 492,675 shares as restricted stock to employees of theCompany and its subsidiaries and the disposal of 1,418 shares as restricted
stock remuneration to directors.
Notes to Revenue Recognition
Basic Information for Understanding Revenue
Please refer to “4 Revenue and Cost Recognition Policies” of “Notes to
Significant Accounting Policies.”
Notes to Deferred Income Tax Accounting
1. The Significant Components of Deferred Income Tax Assets and Deferred
Income Tax Liabilities:
Deferred income tax assets:(Millions of Yen)
Loss on impairment of investment securities in subsidiaries and affiliates
8,210
Impairment loss
2,539
Accrued bonuses
2,041
Write-down on fixed assets
1,335
Write-down on inventories
641
Excess depreciation of fixed assets
602
Effect from the application of Accounting Standard for Revenue
500
Recognition (prepaid expenses)
Effect from the application of Accounting Standard for Revenue
479
Recognition (deferred revenue)
Other
3,213
Gross deferred income tax assets
19,564
Valuation allowance(1,302)
Total deferred income tax assets
18,262[English Translation]
27

Deferred income tax liabilities:
Prepaid pension and severance costs
Other
Total deferred income tax liabilities(11,712)(5,800)(17,512)Net deferred income tax assets (liabilities)
2.

750

Summary of the Reconciliation between the Statutory Tax Rate and the
Effective Tax Rate after the Application of Deferred Income Tax
Accounting:Statutory tax rate
(Reconciliation)
Permanently non-taxable income such as
dividends income
Per capita levy of corporate inhabitant tax
Research and development tax credits
Permanently non-taxable expenses such asentertainment expenses
Other
Effective tax rate after the application ofdeferred income tax accounting

30.5 (%)
(9.8)
0.5
(0.3)
0.2
(0.3)
20.8 (%)

Notes to Fixed Assets under Leases
Besides the ones booked as fixed assets on the balance sheet of the Company,
some of buildings are used based on the finance lease contracts other thanthose deemed to transfer the ownership of the leased assets to the lessees.

[English Translation]
28

Notes to Transactions with Related Parties
1. Subsidiaries, affiliates etc.

Type

Name ofCompany

VotingRightsHeld by theCompany(%)

Subsidiary

Secom
MedicalSystem Co.,
Ltd.

100.0

Loan of funds
Concurrent appointment ofofficers

Subsidiary

Arai & Co.,
Ltd.

92.5

Loan of funds
Concurrent appointment ofofficers

Subsidiary

At Tokyo
Corporation

50.8

Loan of funds
Concurrent appointment ofofficers

Relationship with the Related
Party

Name ofCompany

Transactions

Amount ofTransactions(Millions of Yen)

Secom
MedicalSystem Co.,
Ltd.

Execution of loans(Collection of loans)
Receipt of interests(Note 1)

5,135
(6,090)227

Arai & Co.,Ltd.

(Collection of loans)
Receipt of interests(Note 1)

At Tokyo
Corporation(1,501)
172

Execution of loans
Receipt of interests(Note 1)

19,50073

Account

Short-term loans
receivable

9,520

Long-term loans
receivable

17,822

Short-term loans
receivable

1,334Long-term loans
receivable

9,559

Short-term loans
receivable

3,000

Long-term loans
receivable

16,500(Notes)1. The interest rates for the loans above are determined, referring to market interest rates
etc.

[English Translation]
29

Year-end
Balance(Millions ofYen)2. Officers (Directors/audit and supervisory board members), major individual shareholders,
etc.

Type

Voting Rights
Held by theCompany(%)

Name of Company

Company whose majority

Provision of services

voting rights are owned by
an officer and his/her close

Relationship with theRelated Partysuch as security services

Watanabe Pipe Co., Ltd.
(Note 1)-

Concurrent appointment

relatives (including itsof an officer

subsidiary)Year-end
Amount ofBalance
Name of Company

Transactions

Transactions

Account(Millions(Millions of Yen)of Yen)Accruedservice fee

Watanabe Pipe Co., Ltd.
(Note 1)0Electronic security service
and maintenance,

64

etc.(Note 2)

Receivables– other

Unearned
service fee

Notes:
1. A company 100% of whose voting rights are directly held by a company whose majority
voting rights are held by Mr. Hajime Watanabe, a Director of the Company, and his close
relatives.
2. The transactions are carried out under standard terms and conditions similar to those applied
to arms-length transactions.

Notes to Per-Share Information
Net assets per share:
Net income per share:

YEN
YEN

[English Translation]
30

4,148.69
411.0400Notes to Significant Subsequent Events
Such notes are omitted because the same notes are described in Consolidated
Financial Statements, “Consolidated Financial Statements (Notes to
Significant Subsequent Events).”[English Translation]31