Internet Disclosure Accompanying
the Notice of the Convocation of
The 51st Ordinary General Meeting of Shareholders

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

1
18

Pursuant to the relevant law and ordinance, and Article 16 of the Articles of Incorporation of
SECOM Co., Ltd, “Notes to Consolidated Financial Statements” and “Notes to
Non-Consolidated Financial Statements” are made available on the Company’s web site(http://www.secom.co.jp/english/ir/). The Company provides this translation for yourreference and convenience only and without any warranty as to its accuracy or otherwise.

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

Scope of Consolidation(1) Number of Consolidated Subsidiaries: 172
Names of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Nohmi Bosai Ltd., Secom Medical System
Co., Ltd., Secom General Insurance Co., Ltd., Secom Industries Co.,
Ltd., Secom Trust Systems Co., Ltd., Pasco Corporation, Secom Home
Life Co., Ltd., Arai & Co., Ltd., The Westec Security Group, Inc.
(2) Descriptions of Non-Consolidated Subsidiaries:
FM-International Laos Co., Ltd., Nohmi Kosaku Co., Ltd., Nohmi Facilities
Co., Ltd., Nohmi Baoli (Beijing) Intelligent Fire Protection Co., Ltd., Eishin
Denshi Co., Ltd. and 8 other companies(The reason for exclusion from scope of consolidation)
All of these 13 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:
US Collections, Inc., Global Sales Training, Inc., CLP Auto Interior Corp.,
US Juice Partners, LLC, Gold Canyon Mining & Construction, LLC, US
Water, LLC, CLP Consumer Products, 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: 26
Names of major affiliates accounted for under the equity method:
Japan Nuclear Security System Co., Ltd., S1 Corporation, Toyo Tec Co.,
Ltd., Taiwan Secom Co., Ltd.
(2) Number of non-equity method affiliates: 8(The reason for not applying the equity method)
These 8 companies are not accounted for under the equity method because
their effect on net income/loss (an amount prorated to ownership) andretained earnings (an amount prorated to ownership) is insignificant andimmaterial as a whole.
(3) Names of other companies owing between 20% and 50% of voting rights
not regarded as affiliates:
Global T&M Holdings, LLC[English Translation]
1

(The reason for not regarded as an affiliate)This company was acquired by a subsidiary of The Westec Security Group,
Inc. through normal course of business with the objective of investment, notwith the objective of control.
3.

Changes in Scope of Consolidation and Companies Accounted for under the
Equity Method
Consolidation
Newly consolidated subsidiaries: 7
Kurashi-TEL Co., Ltd. and 3 other companies (New establishment)
Capital Q High Security Services Ltd. and 2 other companies(Acquisition)
Excluded from consolidation: 1
Secom Techno Service Co., Ltd. (Merger)
Equity Method
New companies accounted for under the equity method: 1
PCCWEB Co., Ltd. (New establishment)
Excluded from affiliates accounted for under the equity method: 1
SpaceFish LLP (Liquidation)

4.

Closing Dates of Consolidated Subsidiaries and Equity Method Affiliates
With respect to overseas consolidated subsidiaries, 10 U.S. subsidiaries suchas The Westec Security Group Inc., 9 Australia and New Zealandsubsidiaries such as Secom Australia Pty. Ltd., 5 U.K. subsidiaries such as
Secom Plc, 16 Chinese subsidiaries such as Secom (China) Co., Ltd., P.T.
Nusantara Secom Infotech, P.T. Secom Indopratama, Pasco Thailand Co.,
Ltd., Thaisecom Pitakkij Co., Ltd., Secom Vietnam Co., Ltd., Pasco
Philippines Corp., FM-International Oy, Nohmi Taiwan Ltd., Base
Aerofotogrametria E Projetos S.A., Pasco Do Brasil Participacoes Ltda.,
Aerodata International Surveys BVBA, Pasco International Europe B.V. and
Secom Trading Co., Ltd. close their book as of December 31 each year, andthe financial statements as of this date are used for preparation of theconsolidated financial statements.
With respect to domestic consolidated subsidiaries, while 15 companies
such as Ena Urbane Properties Co., Ltd. close their book as of December 31
each year, the financial statements prepared pursuant to the provisional
closing of books conducted as of March 31 are used for preparation of theconsolidated financial statements.
With respect to equity method affiliates, 10 companies such as S1
Corporation and Taiwan Secom Co., Ltd. close their book as of December
31 each year, and the financial statements as of this date are used for
preparation of the consolidated financial statements. While Koatsu Co., Ltd.
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 dates. The
closing dates of other consolidated subsidiaries and equity method affiliates
are the same as the consolidated closing date.

[English Translation]
2

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 with fair value
Stock and beneficiary securities: At fair value based on the
average market price one month prior to the fiscal year-end
Others: At fair value based on market price at fiscal year-end
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.
Securities with no fair value
At cost, principally based on the moving average method
2) Derivatives
Derivatives are stated at fair value.
3) Inventories
Inventories are principally stated at cost based on 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).
4) 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
Assets1) Tangible Assets (except for leased assets)a. Security equipment and control stations
Security equipment and control stations are depreciated over theiraverage estimated useful service lives (5–8 years) by the
declining-balance method.
b. Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line
method.
Their main useful service lives are as follows:
Buildings and improvements: 22–50 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 service lives within the Company (5years).
3) Leased Assets
a. Leased assets related to ownership-transfer finance leasetransactions[English Translation]3

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 over a useful life
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. With respect to the installation costs related to security
equipment at the customer premises, any portion exceeding theamount received from the customer is included in “long-term
prepaid expenses” and amortized by the straight-line method overthe contract period (5 years).
(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 thehistorical loss rate with respect to ordinary accounts, and an estimateof uncollectable amounts respectively determined by reference tospecific doubtful accounts from customers who are experiencing
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) Reserve for Losses on Construction Contracts
To prepare for future losses on construction contracts etc., an accrualis provided based on the estimated losses on construction contracts
etc. that are undelivered at the end of the current fiscal year.
4) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company
and its domestic consolidated subsidiaries provide an amount of
accrued pension and severance costs and prepaid pension andseverance costs at the end of the current fiscal year, based on theestimated amount of projected retirement benefit obligations andplan assets as of the end of the current fiscal year.
Prior service liability 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).
5) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for outlays for retirement benefits of Directors andCorporate Auditors of the Company and certain domestic
consolidated subsidiaries, a necessary amount at the end of thecurrent fiscal year is appropriated based on the rules of the Directors
and Corporate Auditors’ retirement benefits.

[English Translation]4(4) Revenue and Cost Recognition Policies
1) Revenue Recognition Policies for Construction Contracts
Percentage-of-completion method is applied to construction
contracts whose outcomes are deemed certain for progress until theend of the current fiscal year, and the completed-contract method isapplied to other construction contracts. The percentage of costs
incurred to the estimated total cost is used for estimating thepercentage of completion.
2) Recognition Policies for Revenue and Costs 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 Major Hedge
a. Hedge Accounting Policy
The Company principally applies deferred hedging accounting. Theinterest rate swaps that fulfill requirements for exceptional
treatments permitted for interest rate swaps are accounted for using
exceptional treatments.
b. Hedging Instruments and Hedged Items
Hedging instruments:
Hedged items:
Interest rate swap
Loans payablec. Hedging Policy
The risks for forward interest rate fluctuations are to be hedged
principally pursuant to the risk management policy of theCompany.
d. Assessment of Hedge EffectivenessHedge effectiveness is assessed by comparing the cumulative totals
of price fluctuations of the hedged items and hedging instrumentsfrom the beginning of hedging to the effective point of assessment,
taking the changes of both the hedged items and hedging
instruments into account. However, when an item is judged tofulfill requirements for exceptional treatments, the assessment ofhedge effectiveness is omitted.
2) Amortization of Goodwill and Negative Goodwill
Goodwill, and negative goodwill incurred before March 31, 2010 are
amortized by the straight-line method over a 5–10 year period.
3) Accounting for Consumption Tax etc.
Tax-exclusive method is adopted.
(Additional Information)
Adoption of Accounting Standard for Accounting Changes and Error
Corrections, etc. and Others
From the current fiscal year, the Company applied the "Accounting Standard
for Accounting Changes and Error Corrections” (ASBJ Statement No. 24,
issued on December 4, 2009) and the “Guidance on Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Guidance No. 24, issued
on December 4, 2009) to accounting changes and past error corrections.

[English Translation]
5Notes to Consolidated Balance Sheet
1.

Cash Deposits for Armored Car Services and Short-term Bank Loans
For financial institutions, the Company and some of the domestic
consolidated subsidiaries provide cash collection from and cash filling tocash dispensers located outside of financial institution facilities. The balanceof cash deposits for armored car services includes cash on hand and cash inbanks representing a total of Yen 28,555 million connected with cash filling
services, which is restricted in use by the Group. The short-term bank loanbalance includes Yen 9,383 million financed for the cash filling services.
Furthermore, the balance of cash deposits for armored car services includes
Yen 25,456 million connected with cash collection administration services,which is also restricted in use by the Group. Also, the short-term bank loanbalance includes Yen 18,275 million financed for the cash collection
administration services.

2.

Accumulated Depreciation of Tangible Assets
Yen 329,838 million

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

Cash on hand and in banks (time deposit)
Short-term loans receivables
Other - current assets (receivable - other)
Buildings and improvements
Land
Other - intangible assets (leasehold)Investment securities
Long-term loans receivable
Other - investments and others (long-term deposit)
Total

2,009
18
692
27,75225,820
818
694
787
200
58,794(2) Collateral-related Liabilities(Millions of Yen)

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

13,386
5,983
9,625
10,164
39,160In addition to the above liabilities, investment securities and long-term loans
receivable are pledged as collateral for the debts of affiliates and otherdebts.
4.

Investment in Non-Consolidated Subsidiaries and Affiliates:(Fixed assets)
Investment securities (stocks)
Yen 38,219 million

5.

Contingent Liabilities:
Guarantees of liabilities
of entities and individuals

6.

Yen 02,399 million

Presentation of Goodwill and Negative Goodwill
Goodwill and negative goodwill are presented in netted amount. Listed
below are the amounts before the offset.

[English Translation]
6

(Millions of Yen)
8,476
1,156
7,320

Goodwill
Negative goodwill
Net amountNotes to Consolidated Statement of Income
1.

Write-down on Real Estate Inventories Included in Cost of Revenue
Yen 20,723 million

2.

Impairment Loss
The Group of the Company recognized impairment loss (Yen 8,133 million)
for the following asset groups during the current fiscal year. The Company
and its consolidated subsidiaries group their operating assets in accordancewith the managerial accounting categories, while grouping their rental office
and idle asset on an individual property basis. Regarding operating asset,
idle asset and rental office whose profitability decreased significantly during
the current consolidated fiscal year due to weak business performance, inthe case of operating assets, or decline in rent and land price, in the case ofrental office, the book values of the relevant assets were reduced to their net
realizable values.
Use

Category

Area and Number

Impairmentof Properties

Loss (Millions
of Yen)Hokkaido

1
8,100

Operating

Building and Land,

Kanto

3

Asset

etc.

Other

1

Idle Asset

Building and Land,

Kanto

2

27

Kanto

1

5

etc.
Rental OfficeLand

The net realizable values of the asset groups were measured at net salevalue, based mainly on the disposal value or the real estate appraisal value,etc., or value in use, calculated by discounting future cash flows by 5.0%.
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

Increase in thenumber of shares in
the fiscal year

Decrease in thenumber of shares in
the fiscal year

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

233,288,717－－

233,288,717

15,258,553

76,091

316,953

15,017,691

Issued shares
Common stocks
Treasury stocks
Common stocks[English Translation]
7

(Outline of reasons for change)
The increase of 1,658 in the number of common stocks is due to thepurchase of shares constituting less than one unit, the increase of 74,400 isdue to the purchase of shares from shareholders opposing theabsorption-type merger of Secom Techno Service Co., Ltd., and theincrease of 33 is due to the purchase of fractional shares resulting from theabsorption-type merger.
The decrease of 44 in the number of common stocks is due to requests tosell such number of shares as will constitute, together with the sharesconstituting less than one unit of shares already held, one full unit, and thedecrease of 316,909 is due to allocation of treasury stocks, resulted by theabsorption-type merger.
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 June24, 2011

Common stock

19,62290

March 31, 2011

June 27, 2011

(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:
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 June
26, 2012

Commonstock

Retainedearnings

19,64490

March 31,2012

June 27,2012

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 ofprocuring funds from markets and borrowing money from financial
institutions. The Group, except for its insurance services segment, also holds
financial instruments for promoting its business and investment. 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[English Translation]
8

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 fromarising.
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, 2012 are listed below. Items
whose fair value has been deemed extremely difficult to identify are notincluded in the table below. (See Note 2)(Millions of Yen)

(1)Cash on hand and in banks(2)Cash deposits for armored car services(3)Call loans(4)Notes and accounts receivable, trade(5)Due from subscribers(6)Short-term investments and investment
Securities(i) Held-to-maturity debt securities(ii) Investment securities in affiliates(iii) Available-for-sale securities(7)Lease receivables and investment inleased assets(8)Short-term loans receivable
Allowance for doubtful accounts

Amountrecognized ontheconsolidatedbalance sheet
182,41254,011
28,00085,744
24,8307,948
25,690141,706
14,605
4,389
(42)
4,346
46,197(16,352)
29,844599,141
30,731
47,98527,627
14,68815,60910,700
5,004
152,347(9)Long-term loans receivable
Allowance for doubtful accounts (*1)

Fair value

Difference

182,41254,011
28,00085,744
24,830-7,512
60,163
141,706
14,777(436)
34,472
171

4,346

-

30,295450
Total assets
633,799
34,658(1)Notes and accounts payable, trade30,731(2)Bank loans
47,985(3)Payables - other
27,627(4)Accrued income taxes
14,688(5)Straight bonds
15,652
43(6)Long-term loans
10,72323(7)Guarantee deposits received
4,912
(91)
Total liabilities
152,322(25)
Derivative transactions (*2)(i) Hedge accounting not applied(ii) Hedge accounting applied
(157)
(157)
Total derivative transactions
(157)
(157)
*1 Excludes allowance for doubtful accounts for loans receivable.
*2 Net claims and obligations arising from derivative transactions are shown as net values. Items
for which the total is a net obligation are shown in parentheses.

[English Translation]
9

(Note 1) Calculation method of fair value of financial instruments and mattersconcerning securities and derivative transactions
Assets:(1) Cash on hand and in banks, (2) Cash deposits for armored car services, (3)Call loans, (4) Notes and accounts receivable, trade, (5) Due from subscribersand (8) Short-term loans receivable
These items are stated at their book value, as these items are mainly settled ina short period of time and their fair value approximates their book value.
(6) 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 etc. is based on the price quoted on theexchange or the price presented by the corresponding financial institution.
(7) Lease receivables and investment in leased assets
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 leasetransaction is performed.
(9) Long-term loans receivable
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 loantransaction is performed with respect to each category based on type, internalrating and period of the loans receivable. The fair value of doubtful accounts
is approximately the same as the value on the balance sheet as of the fiscal
year-end less the current estimated loan loss, as the estimated loan loss iscalculated based on the discounted present value of estimated cash flow or the
expected recoverable amount with collateral and guarantee etc.; therefore, thesaid value is stated as fair value. Certain consolidated subsidiaries calculate
the present value of future cash flow by discounting the future cash flow at aninterest rate equal to an appropriate index such as the yield of government
bonds plus the credit spread according to the residual period.
Liabilities:(1) Notes and accounts payable, trade, (2) Bank loans, (3) Payables - otherand (4) Accrued income taxes
These items are stated at their book value, as these items are mainly settled ina short period of time and their fair value approximates their book value.
(5) 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.
(6) 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.
(7) Guarantee deposits received
Guarantee deposits received are stated at present value calculated bydiscounting the future cash flow at risk-free interest rate.

[English Translation]10

Derivative transactions:
Derivatives are stated at the price presented by the financial institution withwhich the Group has concluded an agreement.
For hybrid instruments which do not separate the fair value of the embedded
derivatives, the fair value of the hybrid instruments is calculated as a whole,and included in “(i) held-to-maturity debt securities” in “(6) Short-term
investments and investment securities.”(Note 2) Financial instruments whose fair value is deemed extremely difficult to
identify(Millions of Yen)
Amount recognizedon the consolidated balance
sheet
4,402
12,528Item

Unlisted stock (*1)
Unlisted stock of affiliates (*1)
Investments in limited partnerships for
5,315
investment etc. (*1)
Deposit from business activities (*2)
33,231*1 Not included in “(6) Short-term investments and investment securities” due to lack ofmarket price and extreme difficulty in identifying fair value.
*2 Not included in “(7) Guarantee deposits received” because reasonable estimation of cash
flow is deemed extremely difficult due to lack of market price and difficulty incalculating the effective depositing period.

Notes to Leased 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 leased
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
35,953
9,174
45,127

Fair value at theend of the fiscal
year

Office buildings
54,800
Medical44,868739
45,60740,375facilities
Other
8,807
497
9,305
8,210
Total
89,62910,411
100,041
103,387(Note 1) The amount recognized on the consolidated balance sheet equals the acquisition costless accumulated depreciation and accumulated impairment loss.
(Note 2) The increase of office buildings during the current fiscal year is mainly due to theincrease in Arai & Co., Ltd., a subsidiary of the Company, by Yen 9,812 million
including the purchase of Kojimachi Business Center.
(Note 3) The fair value at the end of the current fiscal year is, in the case of major properties,
the amount based on real-estate appraisal by an external real-estate appraiser, and in
the case of other properties, the amount calculated in-house based on the Real EstateAppraisal Standard. However, if no significant fluctuations have occurred in a certain[English Translation]
11

valuation or an index that is deemed to properly reflect the market price since theacquisition of the property from a third party or the most recent external valuation, thefair value is based on such valuation or the amount adjusted by using the index.

Profit or loss on leased properties and other real estate for the fiscal year ended
March 31, 2012 is as follows:

Rental income

Rental expenses

Difference(Millions of Yen)
Other(gains/losses onsale etc.)
11

Office buildings
3,222
1,380
1,841
Medical
5,136
2,191
2,944
4
facilities
Other
565
212
353
(10)
Total
8,924
3,784
5,140
5
(Note) The rental expenses include depreciation, repair costs, insurance premium, taxes andpublic imposts, etc.

Notes to Deferred Tax Accounting
1. The Significant Components of Deferred Tax Assets and Deferred Tax
Liabilities:
Deferred tax assets:
Eliminations of unrealized gain
Operating loss carry-forwards
Investment deposits by policyholders, unearned premiums and other insurance
liabilities and provision for outstanding claims
Allowance for doubtful accounts
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Write-down on real estate inventories
Impairment loss
Accrued bonuses
Accrued pension and severance costs
Write-down on fixed assets
Loss on impairment of investment securities
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets(Millions of Yen)
8,815
8,067
7,090
6,509
6,260
5,371
5,275
4,830
4,293
3,199
1,475
5,913
67,103(31,167)
35,936

Deferred tax liabilities:
Adjustment of book value of land and buildings of subsidiaries at fair value atthe date of consolidation (land and buildings)
Prepaid pension and severance costs
Adjustment of book value of other fixed assets of subsidiaries at fair value atthe date of consolidation (other fixed assets)
Unrealized gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets[English Translation]
12(6,849)(6,698)(2,209)(1,348)(1,070)(18,175)
17,761

2.

Summary of the Reconciliation between the Statutory Tax Rate and the
Effective Tax Rate after the Application of Deferred Tax Accounting:Statutory tax rate
(Reconciliation)
Increase in valuation allowance
Utilization of tax loss carry-forwards
Net gains from investment in affiliates
accounted for under the equity method
Adjustment for decrease in year end
deferred tax asset due to tax rate changes
Unrecognized tax benefits from subsidiaries
in deficit
Per capita levy of corporate inhabitant tax
Research and development tax credits
Permanently non-deductible expenses suchas entertainment expenses
Amortization of goodwill
Difference of tax rates between the
Company and consolidated subsidiaries
Other
Effective tax rate after the application ofdeferred tax accounting

3.

40.5(%)
13.3
(8.1)
(2.5)
1.9
1.1
1.0
(0.6)
0.6
0.5
0.0
0.1
47.8(%)

Adjustment of Deferred Tax Assets and Liabilities due to Changes in
Statutory Tax Rate
Due to the promulgation on December 2, 2011 of the Act for Partial
Amendment of the Income Tax Act, etc. for the Purpose of Creating a
Taxation System Responding to Changes in Economic and Social Structures(Act No. 114, 2011) and the Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for Reconstruction Following
the Great East Japan Earthquake (Act No. 117, 2011), the statutory tax rateused to calculate the deferred tax assets and liabilities for the current
consolidated fiscal year (limited to those scheduled for collection or
payment on or after April 1, 2012) changed mainly from the 40.5% of theprevious fiscal year to 37.8% for those scheduled for collection or payment
during the period from April 1, 2012 to March 31, 2015, and to 35.4% for
those scheduled for collection or payment on or after April 1, 2015.
As a result, deferred tax assets (less deferred tax liabilities) decreased by
Yen 1,280 million, and income taxes-deferred and unrealized gains onavailable-for-sale securities recognized for the current consolidated fiscal
year increased by Yen 1,472 million and Yen 191 million, respectively.

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 forlump-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 a[English Translation]
13

defined contribution pension plan. The method of calculating the severance
indemnity under the severance indemnity plan is to pay out to theemployees an amount equal to a certain percentage of their annual income
over their period of service, plus interest which is calculated as the 3-year
average yield of applicants for 10-year government bonds. The defined
contribution pension plan was established in April 2003, a portion
equivalent to 20 percent of the severance indemnity plan so far accumulated
was transferred to the new plan, 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, and accordingly, 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 avariety of pension plans that essentially cover all employees. Most of theseplans are defined contribution pension plans.
2.

Items Concerning the Retirement Benefit Obligation (As of March 31,2012):(1) Projected benefit obligation(2) Plan assets(3) Unfunded projected benefit obligation ((1)+(2))(4) Unappropriated difference at the time of change inaccounting standard(5) Unrecognized actuarial gains or losses(6) Unrecognized prior service liability(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))

3.

(Millions of Yen)
(76,693)
69,529(7,163)
13,7096,545
19,130(12,585)

Components of Pension and Severance Costs (from April 1, 2011 to March
31, 2012)(Millions of Yen)
4,436
1,529
(1,889)
2,023
(25)

(1)
(2)
(3)
(4)
(5)
(6)

Service cost *1
Interest cost
Expected return on plan assets
Amortization of actuarial gains or losses
Amortization of prior service benefit
Pension and severance costs
6,075((1)+(2)+(3)+(4)+(5))(7) Loss due to transfer to defined contribution plan
42*2(8) Other *3
1,612
Total
7,730
(Notes) *1. Pension and severance costs for consolidated subsidiaries adopting thesimplified method are included in (1) “Service cost.”*2. In July 2011, Secom General Insurance Co., Ltd, a subsidiary of theCompany, partly transfers its pension and severance plan to defined
contribution plan.

[English Translation]14*3. “Other” represents the amount payable as premiums to the defined
contribution pension plan.

4.

Assumptions Used in Accounting for Retirement Benefits(1) Attribution of projected benefit
obligation(2) Discount rates(3) Expected rates of return on plan
assets(4) Amortization period of priorservice liability(5) Amortization period of actuarial
gains or losses

Straight-line method over the estimated years ofservices of the eligible employees
Principally 2.1% at beginning of fiscal year
Principally 1.8% at end of fiscal year
Principally 3.0% for plan assets
Prior service liability is amortized in the year
incurred.
Amortizing actuarial gains and losses from thefollowing fiscal year of occurrence, using thestraight-line method over certain years within the
average remaining service period (mainly 10 years).

Notes to Business Combination
1.

Name and Business Description of Company Subject to Business
Combination, Date of Business Combination, Legal Form of Business
Combination, Name of Company Subsequent to Combination and Outlineof Transaction Including Its Purpose(1) Name and Business Description of Company Subject to Business
Combination
1) Company Subject to Business Combination
Secom Techno Service Co., Ltd. (hereinafter “Secom Techno”)
2) Business Description
Installation of on-line security systems, maintenance of building equipment,
design to installation and maintenance of various architectural equipment
and sales and installation of security systems for condominiums(2) Date of Business Combination
July 1, 2011
(3) Legal Form of Business Combination
The Company absorbed Secom Techno and became the surviving company;
Secom Techno was subsequently dissolved.
(4) Name of Company Subsequent to Combination
There was no change in the name of the company subsequent to businesscombination.
(5) Outline of Transaction Including Its Purpose
For the purpose of increasing the corporate value of the entire SECOM
Group by accelerating the Group’s efforts to establish “Social System
Industry” through maximization of synergy, which was achieved by meansof operational integration with Secom Techno.
2.

Outline of Accounting Treatment
Pursuant to “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, issued on December 26, 2008) and “Guidance on
Accounting Standard for Business Combinations and Accounting Standards
for Business Divestitures” (ASBJ Guidance No. 10, revised on December
26, 2008), the transaction was accounted for as a transaction under common
control.

[English Translation]15

3.

Acquisition Cost of Company Subject to Business Combination andBreakdown Thereof
Consideration for Acquisition
Fair value of common stock of the Company
delivered on the date of business combination
Costs Directly Associated with Acquisition
Advisory fees, etc.
Acquisition Cost

Yen 1,204 million
Yen
43 million
Yen 1,247 million

4.

Merger Ratio for Each Share Classes, the Calculation Method, and the
Number of Shares Delivered(1) Share classes and merger ratio
Common stock of Secom Techno
1 shareCommon stock of the Company
0.85 shares(2) The calculation method
The Company and Secom Techno referred to and carefully reviewed thecalculation results for the merger ratio submitted by their respective
financial advisors, consulted with each other and decided the merger ratio.
(3) The number of shares delivered
316,909 shares
5. Amount of Goodwill, Cause of Goodwill, Amortization Method and Period(1) Amount of Goodwill
Yen 406 million(2) Cause of Goodwill
The goodwill is attributable to the fair value of common stock of theCompany delivered by the merger exceeding the decrease in minority
interest caused by the merger.
(3) Amortization Method and Period
Amortization by the straight-line method over a 10-year period
Notes to Per-Share Information
Net assets per share:

Yen 2,785.56

Net income per share:Yen

162.63

Notes to Significant Subsequent Events
On January 10, 2012, the Company entered into a share transfer agreement with
JS Group Corporation and LIXIL Corporation, its consolidated subsidiary, toacquire 100% of common shares outstanding (14,328,000 shares) of LIXIL
NITTAN Co., Ltd., held by LIXIL Corporation, on April 1, 2012. As a result of
the share acquisition, LIXIL NITTAN Co., Ltd. became a consolidated
subsidiary of the Company, and changed its name to Nittan Co., Ltd.
1. Purpose of Acquisition(1) To enhance the fire protection services, including flexible response toenvironmental changes, such as change of awareness for disaster prevention
due to the Great East Japan Earthquake domestically and increasing demandfor disaster prevention in emerging countries overseas.
(2) Research and development of next-generation systems for disasterprevention[English Translation]
16

2.

Counterparty of Acquisition
LIXIL Corporation.

3.

Outline of the Company Acquired (Affiliated)
1) Company Name: LIXIL NITTAN Co., Ltd.
(changed its name to Nittan Co., Ltd.)
2) Business:
Installation, sales, maintenance and check-up ofvarious fire extinguishers
3) Size:
Capital Yen 2,302 million

4.

Date of Acquisition
April 1, 2012

5.

Number of Shares Transferred, Acquisition Cost and Ownership Ratio after
the Acquisition
1) Number of shares transferred:
14,328,000 shares
2) Acquisition cost:
Yen 12,700 million3) Ownership ratio after the acquisition:
100%

6.

Funding Method
Fund on hand[English Translation]
17

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 with fair value
Stock and beneficiary securities: At fair value based on the average
market price in one month prior to the fiscal year-end.
Others: At fair value based on market price at fiscal year-end
Net unrealized gains and losses of securities are reported directly in net
assets. The cost of securities sold is calculated by the moving averagemethod.
Securities with no fair value
At cost, based on the moving average method or amortized cost
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 theiraverage estimated useful service 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 service lives are as follows:
Buildings and improvements: 22–50 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 service 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 in possession.
2) Leased assets related to non-ownership-transfer finance leasetransactions
Depreciated, using the straight-line method over a useful life equal to
the lease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on or[English Translation]18

before March 31, 2008 are treated using the method applicable tooperating lease transactions.
(4) Long-term Prepaid Expenses: Straight-line method
Long-term prepaid expenses are amortized by the straight-line method.
With respect to the installation costs related to security equipment at thecustomer premises, any portion exceeding the amount received from thecustomer is included in “long-term prepaid expenses” and amortized by
the straight-line method over the contract period (5 years).
3.

Basis for Significant Allowances(1) Allowance for Doubtful Accounts
To prepare for losses from bad debts such as losses on trade receivables
and loans, the allowance for doubtful accounts provides an estimatedamount of uncollectables. It is determined based on historical loss ratewith respect to ordinary accounts, and an estimate of uncollectableamounts, respectively determined by reference to specific doubtful
accounts from customers who are experiencing financial difficulties.
(2) Accrued Bonuses
Accrued bonuses are provided for the bonus payments to employees, at
an amount incurred during the current fiscal year.
(3) 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 and severance costs at the end of the current fiscal year, based on
the estimated amount of projected benefit obligation and plan assets as ofthe end of the current fiscal year.
Prior service liability is recognized as profit or loss in the year ofoccurrence.
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 (mainly 10 years).
(4) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for outlays for retirement benefits of Directors and Corporate
Auditors of the Company, a necessary amount at the end of the current
fiscal year is appropriated based on the rules of the Directors andCorporate Auditors’ retirement benefits.
4.

Revenue and Cost Recognition Policies
Revenue Recognition Policies for Construction Contracts
Percentage-of-completion method is applied to construction contracts whose
outcomes are deemed certain for progress until the end of the current fiscal
year, and the completed-contract method is applied to other construction
contracts. The percentage of costs incurred to the estimated total cost is used
for estimating the percentage of completion.

5.

Other Significant Accounting Policies(1) Amortization of Goodwill
Goodwill is amortized by the straight-line method over 10 years.
(2) Accounting for Consumption Tax etc.
Tax-exclusive method is adopted.

[English Translation]
19

(Additional Information)
Adoption of Accounting Standard for Accounting Changes and Error
Corrections, etc. and Others
From the current consolidated fiscal year, the Company applied the"Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Statement No. 24, issued on December 4, 2009) and the “Guidance on
Accounting Standard for Accounting Changes and Error Corrections” (ASBJ
Guidance No. 24, issued on December 4, 2009) to accounting changes andpast error corrections.
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 26,929 million connectedwith cash filling services, which is restricted in use by the Company. The
short-term bank loan balance includes Yen 9,383 million financed for the
cash filling services.
The balance of cash deposits for armored car services includes Yen 25,456
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 18,275million 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
18
Investment securities
357
45
Investment securities in subsidiaries andaffiliates
Long-term loans receivable
787
Total
1,209
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:[English Translation]
20

Yen 242,866 million

4. Contingent Liabilities(1) Guarantees
Liabilities of the below entities and employees are guaranteed.
(Millions of Yen)
Alive Medicare Co., Ltd.
1,805
Secom Fort West Co., Ltd.
690
Secom Home Life Co., Ltd.
505
Prime Stage Co., Ltd.
127
Sanwakai (Medical institution)
47
Other
82
Employees
217
Purchaser of merchandises by leasing
921
transactions etc.
Total
4,397
(2) Net Assets Maintaining Agreement
The Company entered into a net assets maintaining agreement with
Secom General Insurance Co., Ltd., under which the Company isobligated to provide funds to Secom General Insurance Co., Ltd. if andwhen the net assets of Secom General Insurance Co., Ltd. become lower
than the specified amount or its current assets necessary for the paymentof its liabilities are insufficient. The total liabilities of Secom General
Insurance Co., Ltd. at the end of the current fiscal year are Yen 136,696
million, including Yen 131,774 million of investment deposits bypolicyholders, unearned premiums and other insurance liabilities, and thetotal assets are Yen 158,629 million.
However, this agreement is not construed as the Company’s guaranteewith respect to payment obligations of Secom General Insurance Co.,
Ltd., Secom General Insurance Co., Ltd. maintained net assets above therequired 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)
19,376
Short-term receivables
129,602
Long-term receivables
5,441
Short-term payables
1,240
Long-term payables

Notes to Non-Consolidated Statement of Income
1.

Transactions with Subsidiaries and Affiliates
Operating transactions(Millions of Yen)
Revenue
14,644
Amount of purchased costs and sub-contract costs
39,401Non-operating transactions
32,135[English Translation]21

2.

Impairment Loss
The Company groups its rental offices individually.
The Company reduced the book value of the rental offices whose
profitability decreased significantly, to its reliable value and recorded an
extraordinary loss of Yen 7,909 million for the current fiscal year, due todecline in office rent.

Use

Category

Area and Number of
Properties

Impairment
Loss(Millions of Yen)

Rental Office

Building andHokkaido 1
7,909
Land, etc
The net realizable values of the asset groups were measured at value in use,
calculated by discounting future cash flows by 5.0%.

Notes to Non-Consolidated Statements of Changes in Net Assets
Items Related to Classes and Total Number of Treasury Stocks
Classes ofsharesNumber ofshares at the
beginning of
the fiscal year

Increase in
number ofshares in thefiscal year

Decrease in
number ofshares in thefiscal year

(Unit: 1 share)
Number ofshares at theend of the
fiscal year

Commonstock

15,258,553

76,091

316,953

15,017,691(Outline of reasons for change)
The increase of 1,658 in the number of common stocks is due to thepurchase of shares constituting less than one unit, the increase of 74,400 isdue to the purchase of shares from shareholders opposing theabsorption-type merger of Secom Techno Service Co., Ltd., and the increaseof 33 is due to the purchase of fractional shares resulting from theabsorption-type merger.
The decrease of 44 in the number of common stocks is due to requests tosell such number of shares as will constitute, together with the sharesconstituting less than one unit of shares already held, one full unit, and thedecrease of 316,909 is due to allocation of treasury stocks, resulted by theabsorption-type merger.

Notes to Deferred Tax Accounting
1. The Significant Components of Deferred Tax Assets and Deferred Tax
Liabilities:[English Translation]
22

Deferred tax assets:(Millions of Yen)
Allowance for doubtful accounts
6,803
Loss on impairment of investment securities in subsidiaries and5,732
affiliates
Impairment loss
4,717
Accrued bonuses
2,311
Write-down on fixed assets
1,535
Accrued pension and severance costs
1,418
Other
3,963
Gross deferred tax assets
26,482
Valuation allowance(15,873)
Total deferred tax assets
10,608Deferred tax liabilities:
Prepaid pension and severance costs
Other
Total deferred tax liabilities
Net deferred tax assets
2.

(5,629)(578)(6,208)4,400

Summary of the Reconciliation between the Statutory Tax Rate and the
Effective Tax Rate after the Application of Deferred Tax Accounting:Statutory tax rate
(Reconciliation)
Increase in valuation allowance
Gain on extinguishment of tie-insharesAdjustment for decrease in year end
deferred tax asset due to tax ratechanges
Permanently non-taxable income
such as dividends income
Per capita levy of corporate
inhabitant tax
Research and development tax
credits
Other
Effective tax rate after theapplication of deferred tax
accounting

3.

40.5 (%)
27.6(16.2)
4.6
(3.6)
0.7
(0.6)
0.4
53.4 (%)

Adjustment of Deferred Tax Assets and Liabilities due to Changes in
Statutory Tax Rate
Due to the promulgation on December 2, 2011 of the Act for Partial
Amendment of the Income Tax Act, etc. for the Purpose of Creating a
Taxation System Responding to Changes in Economic and Social Structures(Act No. 114, 2011) and the Act on Special Measures for Securing Financial
Resources Necessary to Implement Measures for Reconstruction Following
the Great East Japan Earthquake (Act No. 117, 2011), the statutory tax rateused to calculate the deferred tax assets and liabilities for the current
consolidated fiscal year (limited to those scheduled for collection or
payment on or after April 1, 2012) changed mainly from the 40.5% of theprevious fiscal year to 37.8% for those scheduled for collection or payment[English Translation]23

during the period from April 1, 2012 to March 31, 2015, and to 35.4% for
those scheduled for collection or payment on or after April 1, 2015.
As a result, deferred tax assets (less deferred tax liabilities) decreased by
Yen 2,563 million, and income taxes-deferred and unrealized gains onavailable-for-sale securities recognized for the current consolidated fiscal
year increased by Yen 2,637 million and Yen 73 million, respectively.
Notes to Fixed Assets under Leases
Besides the ones booked as fixed assets on the balance sheet of theCompany, some of buildings, automobiles and tools, furniture and fixtures
are used based on the finance lease contracts other than those deemed totransfer the ownership of the leased assets to the lessees.
Notes to Transactions with Related Parties
Relationship
Concurrent
posts ofDirectors
Businessandrelationship
Corporate
Auditors

Address

Capital(Millionsof
Yen)

Business
content

VotingRights Heldby theCompany(%)

Subsidiary

Secom
TechnoService Co.,
Ltd.

-

-

Installationof security
systems--

Construction
subcontractor

Subsidiary

Secom
Home Life
Co., Ltd.

Shibuya
-ku,
Tokyo

3,700

Real estatedevelopment
and sales

99.9

1 personLoan
andinvestmentof funds

Subsidiary

SecomCredit Co.,Ltd.

Shibuya
-ku,
Tokyo

400

Leasing
service100.0

1 personLoan
andinvestmentof funds

Subsidiary

Secom
MedicalSystem Co.,Ltd.

Shibuya
-ku,
Tokyo

6,545

Medicalservice100.0

1 personLoan
andinvestmentof funds

Subsidiary

Pasco
Corporation

Meguro
-ku,
Tokyo

8,758

Geographic
information
service

72.9

-

Loan
and
investmentof funds

Subsidiary

Arai & Co.,Ltd.

Shibuya
-ku,
Tokyo

3,000

Real estateleasing

92.5

1 personLoan
andinvestmentof funds

Type

Name ofCompany[English Translation]24

Transactions

Amount ofTransactions(Millions ofYen)

Account

Year-end
Balance(Millions of
Yen)

Secom Techno
ServiceCo.,
Ltd.

Installation costs etc.
(Note 2)

10,074--

Secom Home
Life Co., Ltd.

Execution of loans(Collection of loans)
Receipt of interests (Note 3)Loans receivable (Note5)

40,410(17,952)289(25,000)

Long-term
loans
receivable (Note 4)

44,847500

Secom Credit
Co., Ltd.

7,300(26,300)
362

Short-term
receivableloans

Execution of loans(Collection of loans)
Receipt of interests (Note 3)Long-term
receivableloans

Execution of loans(Collection of loans)
Receipt of interests (Note 3)

5,619(6,491)
544

Short-term
receivable

loans

Secom Medical
SystemCo.,
Ltd.

Long-term
receivable

loans

Pasco
Corporation

Execution of loans
Receipt of interests (Note3)

10,00024

Short-term
receivable

loans

Arai
Ltd.

Execution of loans
Receipt of interests (Note3)

12,000115

Long-term
receivable

loans

&

Co.,

(Notes)1. Consumption taxes are not included in the transaction amounts listed above.
2. The installation costs are determined by price negotiations, by taking market prices
into consideration. Since Secom Techno Service Co., Ltd. was merged with theCompany on July 1, 2011, and it is no more a related company of the Company, theamount in the table above shows the amount during the period when it was the relatedcompany.
3. The interest rates for the loans above are determined, referring to market interest ratesetc.
4. The amount of Yen 10,505 million has been recorded as allowance for doubtful
accounts for the long-term loans receivable to Secom Home Life Co., Ltd. Also inthe current fiscal year, the amount of Yen 5,612 million was provided as doubtful
accounts for the long-term loans receivable.
5. On the long-term loans receivable to Secom Home Life Co., Ltd., the Company
entered into debt-equity-swap transaction, and posted Yen 24,999 million ofdebt-equity-swap loss.

[English Translation]
25

19,0003,917
34,342

10,00018,051

Notes to Business Combination
1.

Name and Business Description of Company Subject to Business
Combination, Date of Business Combination, Legal Form of Business
Combination, Name of Company Subsequent to Combination and Outlineof Transaction Including Its Purpose(1) Name and Business Description of Company Subject to Business
Combination
1) Company Subject to Business Combination
Secom Techno Service Co., Ltd. (hereinafter “Secom Techno”)
2) Business Description
Installation of on-line security systems, maintenance of building
equipment, design to installation and maintenance of various
architectural equipment and sales and installation of security systems forcondominiums(2) Date of Business Combination
July 1, 2011
(3) Legal Form of Business Combination
The Company absorbed Secom Techno and became the surviving company;
Secom Techno was subsequently dissolved.
(4) Name of Company Subsequent to Combination
There was no change in the name of the company subsequent to businesscombination.
(5) Outline of Transaction Including Its Purpose
For the purpose of increasing the corporate value of the entire SECOM
Group by accelerating the Group’s efforts to establish “Social System
Industry” through maximization of synergy, which was achieved by meansof operational integration with Secom Techno.

2.

Outline of Accounting Treatment
Pursuant to “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, issued on December 26, 2008) and “Guidance on
Accounting Standard for Business Combinations and Accounting Standards
for Business Divestitures” (ASBJ Guidance No. 10, revised on December
26, 2008), the transaction was accounted for as a transaction under common
control.

3.

Acquisition Cost of Company Subject to Business Combination andBreakdown Thereof

Consideration for Acquisition
Acquisition cost relating to the tender offer
held by the Company in the previous fiscal year
Fair value of common stock of the Company
delivered on the date of business combination
Costs Directly Associated with Acquisition
Advisory fees, etc.
Acquisition Cost[English Translation]
26

Yen 13,443 million
Yen 01,204 million
Yen 00,043 million
Yen 14,691 million

4.

Merger Ratio for Each Share Classes, the Calculation Method, and the
Number of Shares Delivered(1) Share classes and merger ratio
Common stock of Secom Techno
1.00 share
Common stock of the Company
0.85 shares(2) The calculation method
The Company and Secom Techno referred to and carefully reviewed thecalculation results for the merger ratio submitted by their respective
financial advisors, consulted with each other and decided the merger ratio.
(3) The number of shares delivered
316,909 shares
5. Amount of Goodwill, Cause of Goodwill, Amortization Method and Period(1) Amount of Goodwill
Yen 3,715 million(2) Cause of Goodwill
The goodwill is attributable to the total amount of both acquisition cost
relating to the tender offer held by the Company in the previous period andfair value of common stock of the Company delivered by the merger
exceeding the corresponding part of net assets of the dissolved company.
(3) Amortization Method and Period
Amortization by the straight-line method over a 10-year period
Notes to Per-Share Information
Net assets per share:
Net income per share:

Yen 2,601.16
Yen0,122.90

Notes to Significant Subsequent Events
Please refer to “Notes to Significant Subsequent Events” in “Notes toConsolidated Financial Statements.”[English Translation]
27