Notice of Convocation
The 54th Ordinary General Meeting of Shareholders

The following is an English translation of the Notice of Convocation of the 54th
Ordinary General Meeting of Shareholders of SECOM CO., LTD. to be held on
June 25, 2015, except for the translation of the INSTRUCTION ON ONLINE
VOTING and the ACCESS MAP FOR THE PLACE OF THE MEETING in the
Notice. The Company provides this translation for your reference andconvenience only and without any warranty as to its accuracy or otherwise.

Table of Contents
Notice of Convocation of The 54th Ordinary General Meeting of Shareholders ····
Reference Document Concerning the General Meeting of Shareholders ··············

4
7[Attached Documents]
Business Report ···················································································I.
Outline of the Group’s Business ·····················································
1. The Current Business Development and Results of Operations ··············
2. Issues the Group Has to Cope with ·················································
3. Capital Expenditures ··································································
4. Fund Raising ············································································
5. Trends in Earnings and Assets of the Group ·····································
6. Trends in Earnings and Assets of the Company ···································
7. Matters Concerning Principal Subsidiaries ·······································
8. Principal Business of the Group ·····················································
9. Principal Offices of the Group ·······················································
10. Matters Concerning Employees of the Group and the Company ············
11. Principal Lenders ······································································
12. Other Important Matters Concerning the Group ·······························

16
16
16
19
21
21
21
22
24
25
25
25
26
26

II.
1.
2.
3.
4.
5.

Matters Concerning the Company’s Shares and Shareholders ···············
Total Number of Shares to be Issued ···············································
Total Number of Issued Shares ······················································
Number of Shareholders at the End of the Fiscal Year ·························
Number of Shares Constituting a Unit of Shares ································
Major Shareholders ····································································

27
27
27
27
27
27

III.
1.

28

4.

Directors and Audit & Supervisory Board Members ···························
Names and Titles of Directors and Audit & Supervisory Board
Members ·················································································
Remuneration of Directors and Audit & Supervisory Board
Members ·················································································
Policy for Determining the Amount of Remuneration of Directors
and Audit & Supervisory Board Members ·······································
Outside Directors and Outside Audit & Supervisory Board Members ······

IV.
1.
2.
3.
4.

Accounting Auditor ····································································Name of Accounting Auditor ························································
Remuneration of Accounting Auditor ··············································
Non-Audit Duties ········································································
Policy for Decision for Dismissal or Non-reappointment ························

2.
3.

[English Translation]
2

28
30
30
31

34
34
34
34
34

V.
1.
2.

System under which the Company’s Business is Ensured to be
Properly Executed ·····································································
Basic Policy Regarding Internal Control System ································
Organizations etc. Relating to Internal Control System ························

Consolidated Financial Statements
Consolidated Balance Sheet ··································································
Consolidated Statement of Income ··························································
Consolidated Statement of Changes in Net Assets ·······································
Non-Consolidated Financial Statements
Non-Consolidated Balance Sheet ····························································
Non-Consolidated Statement of Income ···················································
Non-Consolidated Statement of Changes in Net Assets ·································
Auditors’ Reports
Certified Copy of the Accounting Auditor’s Report (Consolidated) ·················
Certified Copy of the Accounting Auditor’s Report (Non-Consolidated) ···········
Certified Copy of the Audit & Supervisory Board’s Report ···························(Note) This Table of Contents is for this abridged English translation only, and not the same as that in
the original Japanese documents.

[English Translation]
3

35
35
41

43
44
45
47
48
49
52
54
56

Stock Exchange Code: 9735
June 3, 2015

Notice of Convocation of
The 54th Ordinary General Meeting of Shareholders
Dear Shareholders:
You are cordially invited to attend the 54th Ordinary General Meeting of
Shareholders of SECOM CO., LTD. (the “Company”).
If you are unable to attend the aforesaid meeting, you can exercise yourvoting rights through either of the methods stated below. The Company
respectfully requests you to study the “Reference Document Concerning theGeneral Meeting of Shareholders” below and exercise your voting rights on or
before 6:00 p.m. (JST) June 24, 2015 (Wednesday):[In case of exercising voting rights by mail]Please indicate on the Voting Rights Exercise Form enclosed herewith
your approval or disapproval to the proposals on the agenda, and returnthe form to the Company by mail on or before the time limit statedabove.
[In case of exercising voting rights via the Internet]
Please access the website for the exercise of voting rights(http://www.evote.jp/), using the log-in ID and temporary password
which are shown on the Voting Rights Exercise Form. After logging in,please indicate whether you approve or disapprove the items on theagenda by following the instructions on the display screen by the time
limit stated above.
Yours very truly,
SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo, Japan
By: HIROSHI ITO
President and Representative Director(Note) Please note that shareholders with addresses outside Japan may notthemselves use these voting procedures. For these shareholders please consult theircustodian in Japan as to the exercise of voting rights.

[English Translation]
4

PARTICULARS

1.

Date and Time of the Meeting:Thursday, June 25, 2015 at 10:00 a.m.

2.

Place of the Meeting:Bersarle Hanzomon, Sumitomo Fudosan Hanzomon-Ekimae Building 2F,
6-4, Kojimachi 1-chome, Chiyoda-ku, Tokyo

3.

Matters to be dealt with at the Meeting:
Matters to be Reported:
1. Report on the Business Report, the Consolidated Financial
Statements for the 54th Fiscal Year (from April 1, 2014 to March
31, 2015) and the Results on the Audits of Consolidated Financial
Statements by the Accounting Auditor and the Audit &Supervisory Board.
2. Report on the Non-Consolidated Financial Statements for the
54th Fiscal Year (April 1, 2014 to March 31, 2015).
Matters to be Resolved upon:First Item of Business:
Second Item of Business:
Third Item of Business:

4.

Proposed Distribution of Surplus
Election of Eleven (11) Directors
Election of Five (5) Audit &Supervisory Board Members

Matters related to Exercise of Voting Rights:
1) In the event that a shareholder wants to exercise non-uniform
voting, he/she shall notify the Company to make non-uniform
voting and the reason thereof in writing three (3) days prior to thedate of the General Meeting of Shareholders.
2) In the event that a shareholder exercises voting rights both via
return mail (Voting Rights Exercise Form) and the Internet, theCompany will consider the exercise of voting rights via the Internet
to be valid.
3) In the event that a shareholder exercises voting rights via theInternet more than once, the Company will consider the last
exercise of voting rights to be valid.
(Internet disclosure)
Following matters are made available on the Company’s website
pursuant to the relevant laws and ordinances, and Article 16 of the
Articles of Incorporation of the Company and are not included in the
Attached Documents.
1) “Notes to Consolidated Financial Statements” in the Consolidated
Financial Statements[English Translation]52) “Notes to Non-Consolidated Financial Statements” in the
Non-Consolidated Financial Statements
The Company’s Website: http://www.secom.co.jp/english/ir/(on the “Investor Relations: Stocks and Bonds” section)
The Consolidated Financial Statements and Non-Consolidated
Financial Statements audited by the Accounting Auditor and the
Audit & Supervisory Board consist of each document attached to the
Notice of Convocation of the Ordinary General Meeting of
Shareholders, as well as the Notes to Consolidated Financial
Statements and the Notes to Non-Consolidated Financial Statements
available on the Company’s Website.
(Note)
If you plan to attend the Meeting, please submit the enclosed Voting
Rights Exercise Form to the receptionist at the Meeting.
(Notice)
If there are any amendments to the contents of the Reference
Document Concerning the General Meeting of Shareholders, theBusiness Report, the Consolidated Financial Statements and theNon-Consolidated Financial Statements, the Company will announce
such amendments on the “Investor Relations: Stocks and Bonds”
section of the Company’s website(http://www.secom.co.jp/english/ir/).

[English Translation]
6

Reference Document Concerning the General Meeting of Shareholders
Proposal and Reference Items
First Item of Business: Proposed Distribution of Surplus
The Company considers the return of profit to shareholders as one of theimportant managerial issues, and the Company has determined a dividend payout
ratio on a consolidated basis and the level of internal reserves after making an
overall judgment on the expansion of the Company’s business and trends of future
revenues and profits of the Company on a consolidated basis while considering
the Company’s basic policy that ensures the payment of continual and steady
dividends. The Company has made it a basic rule to distribute a dividend twice ayear, as the interim dividend which record date is September 30 each year andcommenced from the fiscal year under review, and the year-end dividend which
record date is March 31 each year. The interim dividend is determined by the
Board of Directors and the year-end dividend is determined by the General
Meeting of Shareholders. Furthermore, the Company will utilize internal reserves
for investments required for increased new customers, research and development
and investments and the like for strategic businesses so that the Company will
exert its efforts to reinforce the corporate structure and to expand its business.
Based on the aforesaid basic policy for cash dividends and to reward
shareholders’ continued support, it is proposed that the year-end dividend for the
fiscal year under review is Yen 65 per share. A total amount of dividend per share,
together with the interim dividend of Yen 60 per share, will be Yen 125, anincrease of Yen 10 per share from the previous fiscal year in which dividend wasYen 115 per share.
Matters related to the year-end dividend:(1)
Kind of assets distributed:
Cash(2)Matter related to distribution of cash and total amount:
YEN 65 per share of common stock of the Company
The total amount:
YEN 14,187,153,825(3)Effective date for distribution of surplus:
June 26, 2015

[English Translation]
7

Second Item of Business:

Election of Eleven (11) Directors

The term of office of all of the eleven (11) Directors will expire at theclose of this Meeting. Eleven (11) Directors are proposed to be elected.
The candidates are as follows:
Name(Date of Birth)

1

2

3

4

5

Makoto Iida
(April 1, 1933)

Shuji Maeda(September 27, 1952)*

Hiroshi Ito(February 7, 1952)*

Yasuo Nakayama(November 1, 1952)*

Kazuaki Anzai(January 14, 1952)*

Profile(Brief history, Position, Responsibility, and Important
Position of Other Organizations Concurrently Assumed , ifany)Jul 1962
President and Representative Director(Founder)Feb 1976
Chairman and Representative Director
Jun 1997
Supreme Advisor and Director (currently)
Jan 1981
Joined SECOM Co., Ltd.
Jun 1997
Director
Jun 2000
Executive Director
Jun 2004
Director and Managing Executive Officer
Apr 2005
Executive Director
Jun 2009
Executive Vice President and Director
Jan 2010
President and Representative Director
Jun 2014
Chairman and Representative Director(currently)
Feb 1979
Joined SECOM Co., Ltd.
May 1989
Executive Director, Secom Mie Co., Ltd.
Jun 2000
Director (up to Jun 2004)
Jun 2003
President and Representative Director, Secom
Information System Co., Ltd. (presently
Secom Trust Systems Co., Ltd.)Jun 2004
Executive Officer
Jun 2009
Executive Director
Jun 2014
President and Representative Director(currently)
Jul 2003
Branch Manager, Nagoya Branch, The Bankof JapanJul 2005
Director-General, Secretariat of the Policy
Board, The Bank of JapanApr 2007
Personnel and Corporate Affairs Department,
The Bank of JapanMay 2007
Advisor, SECOM Co., Ltd.
Jun 2007
Executive Director (currently)
May 2003
Branch Manager, Kanda Branch, Mizuho Bank,Ltd.
Jul 2005
Associate General Manager, Tokyo Regional
Headquarter, SECOM Co., Ltd.
Jun 2006
Executive Officer (up to Jun 2008)
Mar 2008
Executive Director, Secom Alpha Co., Ltd.
Jun 2011
Senior Executive Director, Secom Alpha Co.,Ltd.
Sep 2011
Assistant to President in charge of special
tasks
Jan 2012
Managing Executive Officer
Jun 2012
Executive Director (currently)(Important position of other organization concurrently
assumed)Outside Director, Nohmi Bosai Ltd.
Outside Director, Toyo Tec Co., Ltd.

[English Translation]
8

The Numberof Shares
Held

4,320,500

13,800

5,500

3,600

584

Name
(Date of Birth)

6

7

8

9

Junzo Nakayama(February 24, 1958)*

Kenichi Furukawa(March 17, 1959)*

Yasuyuki Yoshida(March 28, 1958)*

Tatsuro Fuse
(September 9, 1957)*

Profile(Brief history, Position, Responsibility, and Important
Position of Other Organizations Concurrently Assumed , ifany)
Mar 1980
Joined SECOM Co., Ltd.
Nov 1999
President and Representative Director, Japan
Image Communications Co., Ltd. (currently
Turner Japan K. K.)
Dec 2009
Associate General Manager, Strategic
Planning OfficeJun 2010
Associate General Manager, Assistant to
President in charge of special tasks
Jan 2011
Deputy General Manager, Finance DivisionJun 2012
Director and General Manager, Finance
Division
Jun 2014
Executive Director (currently)
Mar 1982
Joined SECOM Co., Ltd.
Apr 2006
General Manager, Development Strategic
Group, Development Center
Jan 2010
General Manager, Planning Department
Jan 2012
Executive Officer
Jun 2013
Director
Jun 2014
Executive Director (currently)
Apr 2015
President and Representative Director,
Secom Industries Co., Ltd. (currently)(Important position of other organization concurrently
assumed)President and Representative Director, Secom Industries
Co., Ltd.
Mar 1980
Joined SECOM Co., Ltd.
Feb 1997
Associate General Manager, Strategic
Planning DivisionSep 1998
Director, Toyo Fire and Marine InsuranceCo., Ltd. (presently Secom General InsuranceCo., Ltd.)Jun 2002
President and Representative Director,
Secom General Insurance Co., Ltd.
Apr 2010
Executive Officer (Strategic Planning
Office), SECOM Co., Ltd.
Jun 2010
Outside Audit & Supervisory Board
Member, Secom Joshinetsu Co., Ltd.
Jun 2010
Group companies supervisor (currently)
Jun 2012
Director (currently)
Mar 1982
Joined SECOM Co., Ltd.
Apr 2001
Manager, Project Development Department,
Medical Division
Mar 2002
Director, Secom Medical System Co., Ltd.
May 2005
Executive Director, Secom Medical System
Co., Ltd.
Jun 2008
Senior Executive Director, Secom Medical
System Co., Ltd.
Jun 2009
President and Representative Director,
Secom Medical System Co., Ltd. (currently)
Apr 2010
Executive Officer in charge of medical
business
Jun 2013
Director (currently)(Important position of other organization concurrently
assumed)President and Representative Director,
Secom Medical System Co., Ltd.

[English Translation]
9

The Numberof Shares
Held

1,200

1,100

2,000

2,400

Name
(Date of Birth)

10

Takaharu Hirose(October 25, 1944)
Outside Director

11

Takashi Sawada(July 12, 1957)
Outside Director

Profile(Brief history, Position, Responsibility, and Important
Position of Other Organizations Concurrently Assumed , ifany)
Sep 1965
Founded Fuji Vending Co., Ltd., andassumed Representative Director
Apr 1972
Founded Food & Beverage Vending
Association, and assumed Chairman
Apr 1987
Founded Japan Automatic Merchandising
Association and assumed Chairman
Apr 2003
Advisor and Director, GAIN Inc.
May 2008
President and Representative Director,
GAIN Inc.
May 2011
Chairman and Representative Director,
GAIN Inc. (currently)
Jun 2013
Director (currently)(Important position of other organization concurrently
assumed)Chairman and Representative Director, GAIN Inc.
Apr 1981
Joined ITOCHU Corporation
May 1997
Joined FAST RETAILING CO., LTD.
Nov 1997
Executive Director, FAST RETAILING CO.,LTD.
Nov 1998
Executive Vice President and Director,
FAST RETAILING CO., LTD.
Jan 2003
President and Representative Director,
KIACON Corporation
Oct 2005
Representative Director, Revamp
Corporation
Feb 2011
President and Representative Director,
Revamp Corporation (currently)
Jun 2013
Director (currently)(Important position of other organization concurrently
assumed)President and Representative Director, Revamp Corporation
Outside Director, Nomura Research Institute, Ltd.
Outside Director, K’s Holdings Corp.
Outside Director, Link and Motivation Inc.

The Numberof Shares
Held(Notes)1.
There is no particular interest between the Company and each of the said
candidates.
2.
Candidates with * are Executive Officers currently in office.
3.
Mr. Takaharu Hirose and Mr. Takashi Sawada are candidates for Outside
Directors. The designation of Mr. Takaharu Hirose and Mr. Takashi
Sawada as Independent Officers has been filed with Tokyo Stock
Exchange, Inc.
4.
Reasons for Election of Candidates for Outside Directors(1)
Mr. Takaharu Hirose set up a venture business engaging in soft drink
vending machine industry during his college period, exerted effort toestablish and manage the industry organization and contributed todevelop the business and industry. He transferred to a researchservices company for the Internet in 2003 and has been pursuingbusiness opportunities by activating research of enterprises by theInternet. The Company deems his rich experience accumulated
through his career on corporate management and a high level of his
insight to be reflected on the enforcement of management andenhancement of corporate governance of the Company. Accordingly,[English Translation]
10

0

500

5.

6.

the Company proposes to the shareholders to elect him as Outside
Director continuously.
(2)
Mr. Takashi Sawada engaged in management of Fast Retailing Co.,
Ltd., and then established Revamp Corporation in 2005, since which
he promoted various kinds of new businesses to be established andgave assistance and the like for management of enterprises. The
Company deems his rich experience accumulated through his career
on corporate management and a high level of his insight to bereflected on the enforcement of management and enhancement ofcorporate governance of the Company. Accordingly, the Company
proposes to the shareholders to elect him as Outside Director
continuously.
The number of years during which Mr. Takaharu Hirose and Mr. Takashi
Sawada are in the office of Outside Directors of the Company will havebeen two (2) years at the close of this General Meeting of shareholders.
Pursuant to Article 427, Paragraph 1 of the Companies Act, the Company
has entered into a liability limit agreement limiting a compensation
liability provided for in Article 423, Paragraph 1 of the Companies Act
with each of Mr. Takaharu Hirose and Mr. Takashi Sawada. If Mr.
Takaharu Hirose and Mr. Takashi Sawada are re-elected and assume
office as Outside Directors, the Company is scheduled to continue theagreement.
The maximum amount of the liabilities under this agreement which they
incur is equal to the lowest amount of liabilities stipulated in Article 425,
Paragraph 1 of the Companies Act.

[English Translation]
11

Third Item of Business:
Members

Election of Five (5) Audit & Supervisory Board

The term of office of all of the five (5) Audit & Supervisory Board
Members will expire at the close of this Meeting. Two (2) Audit & Supervisory
Board Members are proposed to be re-elected and Three (3) new Audit &Supervisory Board Members to be elected.
Furthermore, the Audit & Supervisory Board has consented to this itemof business.
The candidates for Audit & Supervisory Board Members are as follows:
No.
1

2

Name
(Date of Birth)
Hideki Kato
(January 5, 1950)
Candidate for
Outside Audit &Supervisory Board
MemberKenichi Sekiya(March 5, 1938)
Candidate for
Outside Audit &Supervisory Board
MemberSummary of Career, Title and Responsibility, and Important
Position of Other Organization Concurrently Assumed
Joined the Ministry of FinanceDirector, Planning Office, Secretariat, the Fair
Trade Commission
Sep 1996
Retired the Ministry of FinanceApr 1997
Founded Japan Initiative, a policy think tank,(presently a general incorporated association) andbecame Representative (currently)
Apr 2006
Chairman, the Tokyo Foundation, an incorporated
foundation (presently a public interest
incorporated foundation)
Jun 2006
President, Shikoku Minka Museum, anincorporated foundation (presently a public
interest incorporated foundation) (currently)
Oct 2009
Member and Director-General, Government
Revitalization Unit
Apr 2010
President, the Tokyo Foundation, a public interest
incorporated foundation
May 2012 Member, Advisory Committee for Administrative
ReformJun 2012
Audit & Supervisory Board Member, SECOM
Co., Ltd. (Currently)
Apr 1960
Joined Dai-ichi Seitosho Co., Ltd. (presently
DISCO Corporation)
Mar 1963
Director, Dai-ichi Seitosho Co., Ltd.
May 1964 Executive Director, Dai-ichi Seitosho Co., Ltd.
Apr 1970
Executive Vice President and Director, Dai-ichi
Seitosho Co., Ltd.
Mar 1985
President and Representative Director, DISCO
Corporation
Jul 1998
Chairman, President and Representative Director,
DISCO Corporation
Jun 2001
Chairman and Representative Director, DISCO
Corporation
Jul 2008
Resigned the post and became Director Emeritus,
DISCO Corporation (Currently)
Jun 2013
Audit & Supervisory Board Member, SECOM
Co., Ltd. (Currently)(Important position of other organization concurrently assumed)
Director Emeritus, DISCO Corporation

The Numberof Shares HeldApr 1973
Jul 1990[English Translation]
12

0

2,000

No.
3

4

5

Name

Summary of Career, Title and Responsibility, and Important(Date of Birth)
Takayuki Ito(January 2, 1954)*
New Candidate

Ryohei Komatsu(February 6, 1954)*
New Candidate

Makoto Yasuda(November 7, 1937)
New Candidate for
Outside Audit &Supervisory Board
MemberPosition of Other Organization Concurrently Assumed

The Numberof Shares Held

Jul 2002

Branch Manager and General Manager, Corporate
Sales Department, Muromachi Branch, UFJ Bank,
Ltd. (presently The Bank of Tokyo-Mitsubishi
UFJ, Ltd)Jun 2005
Advisor, SECOM Co., Ltd.
Jun 2006
Executive Officer
Jun 2007
Director (up to Jun 2012)
Jul 2010
Executive Vice President and Representative
Director, Secom Home Life Co., Ltd.
Sep 2010
President and Representative Director, Secom
Home Life Co., Ltd. (Currently)(Important position of other organization concurrently assumed)
President and Representative Director, Secom Home Life Co.,Ltd.
Apr 1976
Joined SECOM Co., Ltd.
Sep 1997
General Manager, The First Sales Development
Department
Jun 2006
Executive officer and Deputy General Manager, SI
Business Division
Oct 2006
Executive officer and General Manager, SI
Business Division
Feb 2007
Executive officer and General Manager, Chubu
Regional Headquarters
Jun 2009
President and Representative Director, Secom
Joshinetsu Co., Ltd. (Currently)(Important position of other organization concurrently assumed)
President and Representative Director, Secom Joshinetsu Co.,Ltd.
Apr 1960
Joined Yamatake Corporation (presently Azbil
Corporation)
Aug 1968
Resigned Yamatake Corporation (presently Azbil
Corporation)
Feb 1969
Joined Private Investment Company for Asia
(PICA) S.A.
Feb 1977
Executive Vice President and Director, PICA S.A.
May 1987 President and Representative Director, Elders andYasuda (presently Yasuda Makoto & Co., Ltd.)(Currently)
Jun 2000
Audit & Supervisory Board Member, Azbil
Corporation
May 2001 Director, Li & Fung Ltd.
Jun 2006
Director, Azbil Corporation
Jun 2014
Outside Director, Sanwa Holdings Corporation(Currently)(Important position of other organization concurrently assumed)
President and Representative Director, Yasuda Makoto & Co.,Ltd.
Outside Director, Sanwa Holdings Corporation(Notes)1. The Company pays a membership fee to forums that are held by Japan
Initiative (a general incorporated association), a non-profit independent policy[English Translation]
13

1,600

3,000

0

2.
3.

4.

5.

6.

7.

think tank, the president of which is Mr. Hideki Kato. There is no particularinterest between the Company and the other candidates.
Candidates placed with an asterisk (*) are Executive Officers currently in
office.
Messrs. Hideki Kato, Kenichi Sekiya and Makoto Yasuda are candidates for
Outside Audit & Supervisory Board Member. The designation of Mr. Hideki
Kato and Mr. Kenichi Sekiya as Independent Officers has been filed with
Tokyo Stock Exchange, Inc. Mr. Makoto Yasuda is planned to be notified as
Independent Officer to Tokyo Stock Exchange, Inc.
Reasons for Election of the Candidates for Outside Audit & Supervisory
Board Member:(1) Mr. Hideki Kato has experienced engagement in the execution of national
policies while in office of the Ministry of Finance, the Fair Trade
Commission, etc., as well as in the realization of a number of projects at
Japan Initiative, a policy think tank. Based on such engagement andexperience, the Company expects that he will superintend the overallmanagement of the Company and provide useful advice to the Company
from a wide range of his views. Accordingly, the Company proposes its
shareholders to elect him as Outside Audit & Supervisory Board Member
continuously.
(2) Mr. Kenichi Sekiya, as the founder and executive, strived to contribute to
the advance of DISCO Corporation for a long time. He was also, for a longtime, in the office of Representative and Director of SEMI, Semiconductor
Equipment and Materials International, which is an international industrial
association for semiconductor production equipment and material, muchcontributing to global advance of the industry. Based on such wealth ofexperience and considerable international discernment of business
management cultivated through his career, the Company expects that hewill superintend the overall management of the Company and provide
useful advice to the Company from a wide range of his views.
Accordingly, the Company proposes its shareholders to elect him as
Outside Audit & Supervisory Board Member continuously.
(3) Mr. Makoto Yasuda, as an executive of global companies, has a long-term
experience and knowledge. The Company expects that he will makeconsiderable contribution to strengthen the audit structure.
Accordingly, the Company proposes its shareholders to elect him as
Outside Audit & Supervisory Board Member.
Reasons why it is determined that the candidates for Outside Audit &Supervisory Board Member will duly discharge their duties.
Mr. Hideki Kato has not engaged directly in management of companies, but isacquainted with knowledge on finance and accounting to the reasonable extent
through the engagement in finance while in office of the Ministry of Finance,
as well as through presentations with respect to the public accounting systemreviewing administrative services from the viewpoint of balance sheets as oneof activities of the aforesaid think tank. Accordingly, the Company deems him
to be able to duly discharge duties as Outside Audit & Supervisory Board
Member.
Mr. Hideki Kato and Mr. Kenichi Sekiya will have been in office of Outside
Audit & Supervisory Board Member for three (3) years and two (2) years,
respectively, at the close of this General Meeting of Shareholders.
The Company has entered into, with each of Mr. Hideki Kato and Mr. Kenichi
Sekiya, an agreement limiting their liabilities as prescribed by Article 423,

[English Translation]
14

Paragraph 1 of the Companies Act, pursuant to the provisions of Article 427,
Paragraph 1 of the Companies Act. If they are re-elected and assumes office as
Audit & Supervisory Board Member, the Company is scheduled to continue
their agreements for limitation of liability with them. If Mr. Makoto Yasuda iselected and assumes office as Audit & Supervisory Board Member, theCompany is scheduled to enter into the same agreement as those for Mr.
Hideki Kato and Mr. Kenichi Sekiya.
The maximum amount of the liabilities under this agreement which they incuris equal to the lowest amount of liabilities stipulated in Article 425, Paragraph
1 of the Companies Act.

[English Translation]
15

[Attached Documents]

Business Report (Fiscal Year Ended March 31, 2015)
I. Outline of the Group’s Business1. The Current Business Development and Results of Operations
During the fiscal year ended March 31, 2015 (“the current fiscal year”), despite
slow recovery in consumer spending after consumption tax rising, Japanese
economy has been in moderate upward trend as shown in some signs ofimprovement of the corporate earnings, employment and individual income
environment amid the yen depreciation and stock price rise.
In this environment, we have been continuously trying to satisfy the increasingly
diversified and sophisticated needs of our customers for their safety and peace ofmind, with the aim of realizing our vision of the establishment of “Social System
Industry”, a society where everyone can live safe and secure anytime andanywhere. To this end, we have made efforts to develop and provide high-grade
products and services suited to customer needs in our security services segment,
as well as in our fire protection services, medical services, insurance services,
geographic information services, information and communication related services,and real estate and other services segment. We also pressed forward with efforts
to apply the ALL SECOM concept, which emphasizes cooperation among ourvarious independent businesses to strengthen the bond of the Group as a wholewith a view to hastening our advance to growth. Furthermore, preparing for future
Japanese society, we promote the effort to develop innovative services through
ALL SECOM concept, in terms of key themes: super-aged society and disaster
preparedness/business continuity planning (BCP)/environmental preservation,
based on a foundation of our security services. In December 2014, we opened“SECOM Medical Support Center” where specialized staff such as nurses,
public health nurses, dietitians provide one-stop consultation services addressing
any inquiries of health care, medical services, nursing care or personal care. By
strengthening cooperation among “SECOM Medical Support Center” forsuper-aged society, “ SECOM Control Center” for Security services and“SECOM Anshin Information Center” for disaster Preparedness/
BCP/environmental preservation, we accelerated our efforts to realize a bright
future which is safe with peace of mind, comfortable, and convenient, guided by
the ALL SECOM concept.
As a result, consolidated revenue for the current fiscal year increased by 2.2% toYEN 840.7 billion, compared with the previous fiscal year. Consolidated
operating profit went up by 3.0% to YEN 123.6 billion. Consolidated ordinary
profit increased by 7.9% to YEN 136.6 billion, mainly due to contribution by
YEN 9.2 billion of net gains on private equity investment in the U.S., improvingfrom YEN 4.0 billion in the previous fiscal year. Consolidated net income
increased by 7.9% to YEN 75.3 billion. Consolidated revenue, consolidated
operating profit, consolidated ordinary profit and consolidated net income reacheda record-high.
（Millions of Yen）
Revenue
Current fiscal
year (FY2014)
Previous fiscal
year (FY2013)

Operating profit

Ordinary profit

840,722

123,615

136,688

75,392822,228

120,018

126,677

69,876[English Translation]
16

Net income

In the security services segment, we provided customers chiefly with commercial
and residential security services (on-line security systems), as well as static guard
services, armored car services and merchandises. In the current fiscal year, wehave strived to catch the customers’ needs precisely and propose the most suitable
services from our extensive lineup so that we can make our customer relationshipmore solid and provide the customers with the long-term safety, peace of mind,
comfort, and convenience.
For our commercial security services, we have made an effort to market highvalue added on-line security systems, such as “SECOM AX,” which is
high-quality on-line security systems supported by imaging technology, “SECOM
LX,” which has an access control function for the promotion of labor management
and cost reduction, and “SECOM FX,” which has a facility control function. Also,
we introduced next-generation security camera, “SECOM NVR System.” torespond to the needs of customers, where concerns regarding food safety andincidents involving personal information leakage have increased demand for
security and internal controls. Options available include access to the “SECOM
Image Archive Service,” which enables customers to store camera images
remotely at SECOM’s Secure Data Center facility.
For our residential security services, the demand for SECOM Home Security,
which delivers safety and peace of mind, as well as comfort and convenience, hasbeen solid and the number of subscribers has topped one million in June 2014. In
this circumstance, we have been promoting “SECOM Home Security G-Custom”,
home security controller with the function to provide services close to customers’
daily life.
Outside Japan, we promoted our “SECOM-style” security services, which has
specialty in emergency response services, in economically developing areas, such
as People’s Republic of China, and Southeast Asia including Myanmar, where we
newly started to provide services. We also strengthened offer to Japanesecompanies setting up overseas operations.
As a result, mainly due to brisk sales of centralized systems, i.e., on-line security
systems, for commercial and residential use, security merchandise including
security camera systems, and large-scale security systems, revenue increased by
2.1% to YEN 468.8 billion and operating profit increased by 2.0% to YEN 107.9
billion.
In the fire protection services segment, we provided a broad range of fire
protection systems such as high-quality fire alarm systems and fire extinguishingsystems along with customers’ needs to a wide variety of facilities such as officebuildings, production facilities, tunnels, cultural properties, ships and residences.
In the current fiscal year, two major fire protection companies, Nohmi Bosai Ltd.
and Nittan Co., Ltd., promoted various fire protection systems based on eachcompany’s business infrastructure and product development expertise, andstrengthened and grew overseas operations by marketing new products anddeveloping further cooperation with security services business in Southeast Asia
region.
Despite revenue decreased by 0.7% to YEN 121.1 billion, operating profit
increased by 14.3% to YEN 11.9 billion, mainly owing to decreases in cost ofrevenue and selling, general and administrative expenses ascribed to theimprovement of business efficiency.
In the medical services segment, we provided various medical services such as
our core home medical services, including home nursing services andpharmaceutical dispensing and home delivery services, operation of residences forseniors, sales of electronic medical report systems, sales of medical equipments
and pharmaceutical products, personal care services, and the leasing of real estate
for medical institutions.

[English Translation]17

In the current fiscal year, we opened SECOM Home Health Care Center
Kamakura, a comprehensive senior care facility that offers home nursing, home
based personal care, day care services and home care support services. We
launched “Alive Shinagawa-Oi,” a nursing home with nursing care services,
associated with local medical institutions, commercial facilities and aged person
welfare facilities.
Revenue increased by 11.9% to YEN 60.1 billion, mainly owing to the firm
increase in sales of pharmaceutical products and medical equipment. Operating
profit decreased by 3.4% to YEN 4.4 billion chiefly owing to the increase in cost
ratio.
In the insurance services segment, we expanded marketing efforts for our uniquenon-life insurance offerings, including Security Discount Fire Policy forcommercial facilities that offers discounts on premiums to customers who haveinstalled on-line security systems, recognizing such systems as a risk-mitigating
factor; SECOM Anshin My Home, the comprehensive fire insurance policy forresidences that offers a variety of compensation plans and discount policies;
MEDCOM, an unrestricted cancer treatment policy that offers compensation of
actual cost of medical treatment; and SECOM Anshin My Car, a comprehensive
automobile insurance policy that offers on-site support services provided by our
emergency response personnel in the event of an accident.
Revenue increased by 5.4% to YEN 37.7 billion, mainly due to the firm increasein sales of MEDCOM and fire insurance policy. Operating profit amounted to
YEN 1.9 billion, improving from operating loss of YEN 0.4 billion in the previous
fiscal year, mainly owing to the decrease in losses incurred from damage ofnatural disasters, etc.
In the geographic information services segment, we collected geographic datafrom aerial photography, vehicle/ground surveying systems and satellite images,
and by integrating, processing, and analyzing the geographic data, provided thegeospatial data services for domestic national and local governmental agencies,
private sectors, and foreign governmental agencies including emerging anddeveloping countries. In the current fiscal year, we responded to heightened needs
for geospatial information to assist in the development and maintenance of criticalinfrastructure and assisting with disaster recovery in Japan and overseas.
Revenue decreased by 3.5% to YEN 52.7 billion, reflecting the decrease inrevenue in public division and international division. Operating profit decreasedby 46.4% to YEN 2.2 billion, mainly owing to the increase in cost ratio.
In the information and communication related services segment, our distinctive
portfolio includes the core data center services, as well as BCP support,
information security services and a variety of cloud-based services. In the current
fiscal year, we marketed “SECOM Premium Net,” a system designed to protect
against on line banking scams, including those involving illegal transfers of funds,
and “SECOM Minutes Digitization Service” which enables subscribers todigitalize and store minutes of board of directors' meetings at SECOM’s Secure
Data Center facility under rigorous security.
Revenue increased by 0.1% to YEN 47.7 billion. Operating profit decreased by
14.8% to YEN 4.7 billion, chiefly owing to increase in operation costs relating todata center facilities.
Real estate and other services segment comprises developing and selling
condominiums equipped with advanced security and disaster prevention systems,
real estate leasing, and construction and installation services.
Revenue increased by 6.5% to YEN 52.2 billion and operating profit went up by
12.9% to YEN 4.8 billion, chiefly owing to contribution by Toko Create Co., Ltd.,
newly consolidated from March 31, 2014, although revenue declined in the realestate development and sales business.

[English Translation]
18

Results by Business Segment (54th Fiscal Year – current fiscal year)(Millions of Yen)
Revenue
Business segment

Inter-segment

Security services

468,817

12,887

481,705

107,988

Fire protection services

121,187

5,127

126,314

11,918

Medical services

60,194152

60,347

4,412

Insurance services

37,716

3,229

40,946

1,912

52,760176

52,9372,240

47,754

6,244

53,9984,779

52,2902,245

54,535

4,836

840,72230,063870,785

138,088-(30,063)(30,063)(14,472)

840,722-840,722

123,615

Geographic information
services
Information andcommunication related
services
Real estate and otherservices
Total
Eliminations andcorporate items
Consolidated revenue

Total

OperatingprofitCustomers

With respect to the results by geographical segments, in Japan, revenue increasedby 1.7% to YEN 796.5billion. Overseas revenue increased by 12.2% to YEN 44.1
billion.
2. Issues the Group Has to Cope with
As society undergoes constant change, people’s demand for security and safety
increases and becomes diverse and sophisticated.
In view of this situation, the Group is aiming to realize “Social System Industry”
by providing various services and products leading to people’s “safety, security,
comfort, and convenience,” including not only our security services, but also ourfire protection services, medical services, insurance services, geographic
information services, information and communication related services, real estatedevelopment and sales and other services. Moreover, by combining these services
and products, the Group endeavors to create and supply distinctive services andproducts. To this end, the Group declared the slogan, “ALL SECOM,” to further
rally cooperation among the Group’s various businesses, and each and every
employee of the Group has been actively working to maximize the strength of theGroup as a whole. We place high value on the data center business handling ourcustomers’ classified information as one of our business bases. Furthermore, we
promote aggressively the creation of highly-value-added services only the Group
could provide, from the viewpoint of key words like security, super-aging society,and disaster preparedness/BCP/environmental preservation.
We will continue our efforts to develop high-quality systems that can earn thetrust of our customers and provide services that accurately respond to their needs,
while working to provide comprehensive services by maximizing the Group’s
capabilities. Through these efforts, we ultimately seek to establish a more secured,safe, comfortable and convenient society. Additionally, the Group aims to further
instigate growth by leveraging its know-how accumulated through its business inJapan and using it to aggressively develop businesses overseas.

[English Translation]
19

Furthermore, based on the business strategies described above, we will deal withvarious issues related to ESG (E: Environment, S: Society, G: Governance) in aproper manner, including the realization of effective corporate governance.
We look forward to the support from our shareholders in these and all of ourendeavors.

[English Translation]20

3. Capital Expenditures
Capital expenditures for the current fiscal year totaled YEN 62.0 billion (abreakdown is given below). A major portion was for system investments(including those for security equipment and control stations) etc. in the security
services segment, which totaled to YEN 37.9 billion.
AmountBusiness segment(Millions of Yen)

Security services

37,910Fire protection services

3,608

Medical services

10,547

Insurance services

1,963

Geographic information services

3,317

Information and communication related services

4,159

Real estate and other services

257
Subtotal

61,763Eliminations and corporate items

305
Total

62,0694. Fund Raising
During the current fiscal year, no funds were raised by the Group in capital
markets through the issuance of corporate bonds or new shares.
5. Trends in Earnings and Assets of the Group(Millions of Yen except for net income per share)
54th fiscal year

51st fiscal year

52nd fiscal year

53rd fiscal year

(4/1/2011–(4/1/2012–(4/1/2013–

3/31/2012)

3/31/2013)

3/31/2014)

Revenue

679,173765,635

822,228

840,722

Operating profit

81,078108,370

120,018

123,615

Ordinary profit

87,839113,618

126,677

136,688

Net income

35,48963,65869,87675,392

162.63291.65320.14345.42

5.9%

10.0%

10.0%

9.9%

Total assets

1,101,884

1,249,110

1,328,226

1,410,715

Net assets

671,517764,139

830,369

907,341

Fiscal years

Category

Net income pershare (Yen)
Return on Equity[English Translation]
21(current fiscal year)(4/1/2014–
3/31/2015)

6. Trends in Earnings and Assets of the Company(Millions of Yen except for net income per share)
54th fiscal year

51st fiscal year

52nd fiscal year

53rd fiscal year

(4/1/2011–(4/1/2012–(4/1/2013–

3/31/2012)

3/31/2013)

3/31/2014)

Revenue

345,476355,393364,280

370,663

Operating profit

70,196

69,952

72,90973,174

Ordinary profit

75,212

76,33678,884

81,572

Net income

26,81849,12851,49757,492

122.90225.08235.94263.41

4.8%

8.4%

8.4%

9.0%

Total assets

699,448

749,317772,910795,778

Net assets

567,758

599,112627,242

650,132

Fiscal years
Category

Net income per share(Yen)
Return on Equity(current fiscal year)(4/1/2014–
3/31/2015)

In the current fiscal year, the Company’s non-consolidated revenue increased by
1.8% to YEN 370.6 billion, operating profit increased by 0.4% to YEN
73.1billion, ordinary profit increased by 3.4% to YEN 81.5 billion, and net
income increased by 11.6% to YEN 57.4 billion. Net income per share increased
to YEN 263.41 compared to YEN 235.94 in the previous fiscal year.
Contract revenue accounted for 84.7% of total revenue, or YEN 314.0 billion, andsales of products and equipment accounted for 15.3% of total revenue, or YEN
56.5 billion.
Revenue from centralized systems, which is the core of revenue and profit,
recorded YEN 263.3 billion and accounted for 71.0% of total revenue. Static
guard contracts generated revenue of YEN 25.5 billion, and revenue from armoredcar services came to YEN 17.3 billion. The remaining revenue amounted to YEN
7.8 billion, the majority of which came from management fees paid bysubsidiaries and other companies.
Product sales totaled YEN 37.6 billion, 10.2% of total revenue, and equipment
sales to subsidiaries and other companies totaled YEN 18.9 billion, 5.1% of total
revenue.
Costs of service and sales were YEN 221.4 billion, and sales and generaladministrative expenses were YEN 76.0 billion. As a result, operating profit
recorded YEN 73.1 billion.
Non-operating income was YEN 11.7 billion, which included interest anddividends received, while non-operating expenses, including interest paid and loss
on sales and disposal of fixed assets, totaled YEN 3.3 billion.
For the fiscal year under review, the Company posted net income of YEN 57.4
billion, having recorded an extraordinary profit of YEN 1.6 billion including thegain on sales of tangible assets etc., and an extraordinary loss of YEN 2.8 billion
including the impairment losses on fixed assets etc.

[English Translation]
22

Revenue by Business Category of the Company

Fiscal years

Contract revenue%

256,025

54th fiscal year
(Current fiscal year)(4/1/2014–3/31/2015)

Amount(Millionsof Yen)

%

72.0

2.5

259,249

71.2

1.3

263,39771.0

1.6

25,223

7.1

1.2

25,0016.9(0.9)

25,5046.9

2.0

17,0734.8(1.2)

17,2234.7

0.9

17,313

4.7

0.5

Other

6,977

2.0

(7.0)

8,023

2.2

15.0

7,853

2.1

(2.1)

Subtotal

305,30085.9

1.9

309,49985.0

1.4

314,068

84.7

1.5

Products

29,3898.3

4.8

33,3289.1

13.4

37,66510.2

13.0

Equipment

20,7035.8

15.5

21,4535.9

3.6

18,9295.1(11.8)

Subtotal

50,092

14.1

9.0

54,781

15.0

9.4

56,594

15.3

3.3

Total

355,393 100.0

2.9364,280

100.0

2.5

370,663 100.0

1.8Centralized
systems
Static guard
services
Armored car
servicesAmount(Millionsof Yen)53rd fiscal year
(4/1/2013–3/31/2014)

Change(%)

Category

Sales

52nd fiscal year
(4/1/2012–3/31/2013)[English Translation]
23

AmountChange(Millions(%)
of Yen)%Change(%)

7. Matters Concerning Principal Subsidiaries

Company name

Issued capital(Millions of Yen)

Secom Joshinetsu Co., Ltd.

3,530
(Millions of Yen)

Nohmi Bosai Ltd.

13,302(Millions of Yen)

Nittan Co., Ltd.

2,302
(Millions of Yen)

Secom Medical System Co., Ltd.

Secom General Insurance Co.,
Ltd.

6,650
(Millions of Yen)

16,808(Millions of Yen)

Pasco Corporation

8,758(Millions of Yen)

Secom Trust Systems Co., Ltd.

1,468
(Millions of Yen)

At Tokyo Corporation

13,378(Millions of Yen)

Secom Home Life Co., Ltd.

3,700
(US$)

The Westec Security Group, Inc.

301
(Thousands ofSecom Plc

UK Pounds)

44,126Percentage ofownership(Percentage
of votingrights)(%)
50.87(50.88)(%)
50.36(50.71)(%)
100.00(100.00)(%)
100.00(100.00)(%)
97.11(97.82)(%)
69.84(72.75)(%)
100.00(100.00)(%)
50.88(50.88)(%)
99.94(99.95)(%)
100.00(100.00)

Principal business activities

Security and safety services

Comprehensive fire protection
services
Comprehensive fire protection
services
Home medical services andremote image diagnosis support
services
Non-life insurance
Surveying, measuring andgeographic information systemservices
Information security services andsoftware development

Data center business

Development and sales of real estate

Holding company in the U.S.

(%)
100.00(100.00)

Security business in the U.K.

(Notes)1. The percentages of ownership (percentages of voting rights) are truncated to two decimal
places.
2. The percentages of ownership (percentages of voting rights) for Secom Joshinetsu Co.,
Ltd. and Nohmi Bosai Ltd. include those owned by the Company’s subsidiaries.

[English Translation]24

8. Principal Business of the GroupThe Group consists of the Company, 169 consolidated subsidiaries and 25
affiliates accounted for under the equity method. The principal business activitiesof the Group are as follows: Security Services centering on contracted security
services; Fire Protection Services centering on comprehensive fire protection
services; Medical Services, focusing on home medical services and managementof residences for seniors; Insurance Services consisting mainly of non-life
insurance; Geographic Information Services that mainly entails the provision ofsurveying and measuring operations; Information and Communication Related
Services including security network services, development and operation ofbusiness systems and information security services; and Real Estate and Other
Services centering on development and sales of condominiums and Other
Services.
9. Principal Offices of the Group(i) Headquarters of the Company:
5-1, Jingumae 1-chome, Shibuya-ku, Tokyo(ii) Regional Headquarters:
Hokkaido (Sapporo City), Tohoku (Sendai City), West Kanto (Saitama City),
East Kanto (Chiba City), Tokyo (Bunkyo-ku, Tokyo), Metropolitan Static
Guard Service (Shinjuku-ku, Tokyo), Metropolitan Armored Car Service(Saitama City), Kanagawa (Yokohama City), Shizuoka (Shizuoka City),
Chubu (Nagoya City), Kinki (Kyoto City),Osaka (Osaka City), Kansai Static
Guard Service (Osaka City), Hyogo (Kobe City), Chugoku (Hiroshima City),
Shikoku (Takamatsu City), Kyushu (Fukuoka City).
(iii) Domestic Subsidiaries:
Secom Joshinetsu Co., Ltd. (Niigata City), Nohmi Bosai Ltd. (Chiyoda-ku,
Tokyo), Nittan Co., Ltd.(Shibuya-ku, Tokyo), Secom Medical System Co.,
Ltd. (Shibuya-ku, Tokyo), Secom General Insurance Co., Ltd. (Chiyoda-ku,
Tokyo), Pasco Corporation (Meguro-ku, Tokyo), Secom Trust Systems Co.,
Ltd. (Shibuya-ku, Tokyo), At Tokyo Corporation (Koto-ku, Tokyo), Secom
Home Life Co., Ltd. (Shibuya-ku, Tokyo), Arai & Co., Ltd. (Shibuya-ku,
Tokyo).
(iv) Overseas Subsidiaries:
The Westec Security Group, Inc. (Dover, Delaware, USA), Secom Plc(Kenley, Surrey, UK), Secom (China) Co., Ltd. (Beijing, China).
10. Matters Concerning Employees of the Group and the Company(1) Matters Concerning Employees of the Group
Increase from the end of the previous

Number of employees

fiscal year

37,943702(2) Matters Concerning Employees of the Company
Number of
employees

Increase from the end of theprevious fiscal year

Average age

Average years of service

15,196
101
41.8
15.3
(Note)The number of employees refers to the number of full-time employees.

[English Translation]25

11. Principal Lenders(Millions of Yen)
Lenders

Balance

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

13,984

Mizuho Bank, Ltd.

13,690Sumitomo Mitsui Banking Corp.

10,495

Mitsubishi UFJ Trust and Banking Corp.

4,009

12. Other Important Matters Concerning the Group
There is no matter applicable.

[English Translation]
26

II. Matters Concerning the Company’s Shares and Shareholders
900,000,000
233,288,717

1. Total Number of Shares to be Issued:
2. Total Number of Issued Shares:(including 15,024,812 shares of treasury stock held by the Company)

3. Number of Shareholders at the End of the Fiscal Year:
4. Number of Shares Constituting a Unit of Shares:
5. Major Shareholders (Top 10)
Name of Shareholders

Number of shares held(Thousands of Shares)

24,852100 shares
Percentage ofownership(%)

The Master Trust Bank of Japan, Ltd.
(Trust Account)

19,520

8.94

STATE STREET BANK AND TRUSTCOMPANY

17,069

7.82

Japan Trustee Services Bank, Ltd.
(Trust Account)

11,928

5.46

Naruo Toda

5,503

2.52

Makoto Iida

4,320

1.97

The Nomura Trust and Banking Co., Ltd.
(Trust Account 2052088)

4,148

1.90

Secom Science and Technology Foundation

4,025

1.84

BNP Paribas Securities (Japan) Ltd.

3,633

1.66

THE BANK OF NEW YORK MELLON
SA/NV 10

3,530

1.61

STATE STREET BANK WEST CLIENT –TREATY 505234

2,996

1.37

(Note)
Although the Company holds treasury stock of 15,024,812 shares, it is not included in thetable above. The percentage of ownership is calculated on the basis of the total number ofshares outstanding excluding treasury stock. The percentage of ownership is truncated totwo decimal places.

[English Translation]
27

III. Directors and Audit & Supervisory Board Members
1.

Names and Titles of Directors and Audit & Supervisory Board Members(As of March 31, 2015)
Position

Director
Chairman and
Representative Director
President andRepresentative Director

Makoto Iida

Supreme Advisor

Shuji Maeda

Executive Officer

Hiroshi Ito

Executive Officer

Executive Director

Yasuo Nakayama

Executive Director

Kazuaki Anzai

Executive Director

Junzo Nakayama

Executive Director

Kenichi Furukawa

Director

Yasuyuki Yoshida

Director

Tatsuro Fuse

Director

Takaharu Hirose

Director

Takashi Sawada

Audit & Supervisory
Board Member
Audit & Supervisory
Board Member
Audit & Supervisory
Board Member
Audit & Supervisory
Board Member
Audit & Supervisory
Board Member

Field of responsibility and important
position of other organization
concurrently assumed

Name

Seiji Sakamoto
Katsuhisa Kuwahara

Ken Tsunematsu

Executive Officer (general manager ofgeneral affairs division)
Executive Officer (general manager ofsales division, in charge of sales
administration, general manager ofcorporate sales division), Outside
Director of Nohmi Bosai Ltd., Outside
Director of Toyo Tec Co., Ltd.
Executive Officer (general manager offinance division)
Executive Officer (general manager ofplanning department)
Executive Officer (in charge of strategicplanning office and in charge of groupcompanies supervisor)
Executive Officer (in charge of medical
business), President and Representative
Director of Secom Medical System Co.,
Ltd.
Chairman and Representative Director of
GAIN Inc.
President and Representative Director of
Revamp Corporation, Outside Directorof Nomura Research Institute, Ltd.,
Outside Director of K'S Holdings Corp.,
Outside Director of Link and Motivation
Inc.
Full-time Audit & Supervisory Board
MemberFull-time Audit & Supervisory Board
MemberAttorney-at-law, Managing Director of
Secom Science and Technology
Foundation

Hideki Kato
Kenichi Sekiya

Director Emeritus of DISCO Corporation[English Translation]
28

(Notes)
1. Messrs. Takaharu Hirose and Takashi Sawada are Outside Directors as stipulated in
Article 2, Item 15 of the Companies Act.
2. Messrs. Ken Tsunematsu, Hideki Kato and Kenichi Sekiya are Outside Audit &Supervisory Board Members as stipulated in Article 2, Item 16 of the Companies Act.
3. The Audit & Supervisory Board Member, Mr. Seiji Sakamoto has a long-term
experience by working at a financial institution and has considerable knowledge offinance and accounting matters.
4. The Audit & Supervisory Board Member, Mr. Katsuhisa Kuwahara had been in chargeof the Company’s financial affairs for 27 years and has considerable knowledge offinance and accounting matters.
5. The Audit & Supervisory Board Member, Mr. Ken Tsunematsu, has for many years been
involved in securities issuance businesses for domestic and overseas companies, public
institutions, organizations, etc. as an attorney-at-law. He has experienced in the analysis
and evaluation of the financial statements of these issuers, and has considerable
knowledge of finance and accounting matters.
6. There are no particular interests between the Company and other corporations employing
Outside Director, Messrs. Takaharu Hirose and Takashi Sawada.
7. There are no particular interests between the Company and other corporations employing
Audit & Supervisory Board Members, Messrs. Ken Tsunematsu and Kenichi Sekiya.
8. The notice of Outside Directors, Messrs. Takaharu Hirose and Takashi Sawada being
independent officers was submitted to Tokyo Stock Exchange, Inc.
9. The notice of Outside Audit & Supervisory Board Members, Messrs. Ken Tsunematsu,
Hideki Kato and Kenichi Sekiya being independent officers was submitted to Tokyo
Stock Exchange, Inc.
10. Changes in Directors during the current fiscal year
1) President and Representative Director Mr. Shuji Maeda assumed the Chairman and
Representative Director on June 1, 2014.
2) Executive Director Mr. Hiroshi Ito assumed the President and Representative Director
on June 1, 2014.
3) Director Mr. Junzo Nakayama assumed Executive Director on June 1, 2014.
4) Director Mr. Kenichi Furukawa assumed Executive Director on June 1, 2014.

〈Reference〉
Executive Officers who are not Directors are as follows:(As of May 1, 2015)
Title

Name

Managing Executive

Toshiyuki Mukai, Masahiro Takeda, Teruhisa Yoshimura, Hideo

OfficerMorishita, Tsuneo Komatsuzaki, Toshiaki Mizuno
Takayuki Ito, Ryohei Komatsu, Keitaro Arai, Hiromichi Sonoda,

Executive Officer

Hiroshi Ishikawa, Yoichi Sugimoto, Tatsuya Izumida, Shokichi
Ishimura, Sumiyuki Fukumitsu, Kensuke Shindo, Ichiro Ozeki,
Yasufumi Kuwahara(Notes)1. Managing Executive Officer Mr. Naohide Nakamura and Executive Officer Mr. Minoru
Takaoka were resigned from Managing Executive Officer and Executive Officer,
respectively, as of May 31, 2014.
2. Executive Officer Mr. Tsuneo Komatsuzaki was appointed to Managing Executive
Officer as of Jun. 1, 2014.
3. Mr. Sumiyuki Fukumitsu was appointed to Executive Officer as of Jun. 1, 2014.
4. Executive Officer Mr. Toshiaki Mizuno was appointed to Managing Executive Officer asof Jan. 1, 2015.
5. Mr. Kensuke Shindo, Mr. Ichiro Ozeki and Mr. Yasufumi Kuwahara were appointed to
Executive Officer as of Apr. 1, 2015.

[English Translation]29

2. Remuneration of Directors and Audit & Supervisory Board Members
Number of
Recipients

Combined total of
remuneration etc.
(Millions of Yen)

Directors

11426(of which Outside Directors)

(2)

(16)

5

71

(3)

(27)

16

498

Audit & Supervisory Board Members(of which Outside Audit & Supervisory
Board Members)
Total(Notes)Combined total of remuneration etc. for Directors in the above table includes YEN 61
million bonuses to directors for the current fiscal year.

3. Policy for Determining the Amount of Remuneration of Directors andAudit & Supervisory Board Members(1) Remuneration of Directors
The remuneration of Directors is determined by the resolution of Chairman and
Representative Director and President and Representative Director—who are
authorized by the Board of Directors—based on the duties and performance of
Directors on an individual basis, within the limit of the amount of remuneration
resolved at the General Meeting of Shareholders.
(2) Remuneration of Audit & Supervisory Board Members
The remuneration of Audit & Supervisory Board Members is determined by
the resolution among Audit & Supervisory Board Members, the amount of
which is commensurate with the duties of Audit & Supervisory Board
Members on an individual basis, within the limit of the amount of
remuneration resolved at the General Meeting of Shareholders.

[English Translation]30

4. Outside Directors and Outside Audit & Supervisory Board Members(1) Activities of Outside Directors and Outside Audit & Supervisory Board
Members during the current fiscal year

Category

Name

Attendance ofAttendance of thethe Meetings ofMeetings of thethe Board ofAudit &
Directors
Supervisory Board

Main Activities
He offered advice and suggestions at
the meetings of the Board of Directors
by making use of his experience andinsight gained through the foundationand the management of many
enterprises and organizations. He also

OutsideDirector

Takaharu Hirose

12-(out of 13)

asked questions and stated opinions inorder to clarify unclear issues.
He also makes efforts to understand thecontents of the meetings of the Boardof Directors which he had missed byreceiving reports on resolutions andsuch from an operating chief of theBoard.
He offered advice and suggestions at
the meetings of the Board of Directors
by making use of his experience andOutsideDirector

Takashi Sawada

13-(out of 13)

insight gained through the foundationand the management of manyorganizations. He also asked questions
and stated opinions in order to clarify
unclear issues.

[English Translation]
31

Category

Name

Attendance ofAttendance of thethe Meetings ofMeetings of thethe Board ofAudit &
Directors
Supervisory Board

Main Activities

He has high level of insight tocorporate legal matters and knowledge
about management and interests
between stakeholders through many
domestic and international securities
issuing projects and abundance ofexperience in the area of finance andaccounting, which were cultivated in
Outsidemany years as attorney-at-law. He

Audit &
Supervisory

Ken Tsunematsu

Board

13

11

(out of 13)(out of 12)

primarily offered advice andsuggestions at the meetings of theBoard of Directors in order to ascertain

Memberthe validity and/or appropriateness ofoperations and management.
He also makes efforts to understand thecontents of the meetings of the Audit &Supervisory Board which he had
missed by being given an explanation
about resolutions and such from
Full-time Audit & Supervisory Board
Members.
He offered advice and suggestions at
the meetings of the Board of Directors

Outsideby making use of his experience in the

Audit &
Supervisory

Hideki Kato

Board

13

12

(out of 13)(out of 12)

execution of national policies andinsight gained through many
accomplishments at a policy think tank.

MemberHe also asked questions and statedopinions in order to clarify unclear
issues.

[English Translation]
32

Category

Name

Attendance ofAttendance of thethe Meetings ofMeetings of thethe Board ofAudit &
Directors
Supervisory Board

Main Activities

He offered advice and suggestions at
the meetings of the Board of Directors
by making use of his experience andinsight gained through serving as afounding manager and as a
Outsiderepresentative and chairman of global

Audit &
Supervisory

Kenichi Sekiya

Board

12

12

(out of 13)(out of 12)

organizations. He also asked questions
and stated opinions in order to clarify
unclear issues.

MemberHe also makes efforts to understand thecontents of the meetings of the Boardof Directors which he had missed bybeing given an explanation about
resolutions and such from Full-time
Audit & Supervisory Board Members.

(2) Description of the agreement limiting liabilities
The Company has entered into with each of the Outside Directors and each of
the Outside Audit & Supervisory Board Members an agreement limiting their
liabilities as prescribed by Article 423, Paragraph 1 of the Companies Act,
pursuant to the provisions of Article 427, Paragraph 1 of the Companies Act.
The maximum amount of the liabilities under this agreement which each of
the Outside Directors and each of the Outside Audit & Supervisory Board
Members incurs is equal to the lowest amount of liabilities stipulated in
Article 425, Paragraph 1 of the Companies Act.

[English Translation]
33

IV. Accounting Auditor
1. Name of Accounting Auditor
KPMG AZSA LLC
2. Remuneration of Accounting Auditor(1) Remuneration for duties relating to Article 2, Paragraph
1 of the Certified Public Accountants Act to be paid by theCompany(2) Total cash and other remuneration to be paid by theCompany and subsidiaries to the Accounting Auditor

YEN 222 million
YEN 607 million(Notes)1. Based on the audit contract between the Company and the Accounting Auditor, theremuneration paid to the auditor is not distinguished between that which relates to theaudits under the Companies Act and that which relates to the audits under Financial
Instruments and Exchange Act as they cannot be distinguished. Therefore, the amountgiven in (1) shown above is the combined total of these amounts.
2. Of the major subsidiaries of the Company, the Westec Security Group Inc. is audited by
McGladrey LLP and Secom Plc by KPMG LLP.

3. Non-Audit Duties
The Company pays consideration to the Accounting Auditor for services,
including work for financial due dilligence, in addition to the services provided
for in Article 2, Paragraph 1 of the Certified Public Accountants Act.
4. Policy for Decision for Dismissal or Non-reappointment
Whenever there occurs any material event which could be a substantial hazard to
the performance of audit duties of the Company, such as a case when it is deemedthat the Accounting Auditor has come to fall within the purview of Article 340,
Paragraph 1 of the Companies Act or the Accounting Auditor or the firm of the
Accounting Auditor is subjected to the disposition of suspension of business by
the supervisory authorities, the Audit & Supervisory Board will hold Meeting ofAudit & Supervisory Board Members, and, when all Audit & Supervisory Board
Members have consented thereto, the Audit & Supervisory Board Member willtake action for the dismissal of the subject Accounting Auditor or the subject firmof the Accounting Auditor. In such case, the Audit & Supervisory Board Member
selected by the Audit & Supervisory Board will report the reasons for thedismissal at the general meeting of shareholders convened for the first time after
such dismissal.
Aside from the above, when there exists any situation where it is acknowledgedthat the Accounting Auditor is not fit to act as Accounting Auditor, a proposal
will, with the consent of the Audit & Supervisory Board, be submitted to thegeneral meeting of shareholders for the dismissal or non-reappointment of the
Accounting Auditor.

[English Translation]
34

V. System under which the Company’s Business is Ensured to be Properly
Executed
1. Basic Policy Regarding Internal Control System
At the Board of Directors’ Meeting held on April 8, 2015, the Company has
resolved to change the “system under which the execution of duties by Directors
is ensured to comply with laws and regulations and the Articles of Incorporation,and the system under which the Company’s business and the group of enterprises
consisting of the Company and subsidiaries is ensured to properly execute its
business” (basic policy regarding the internal control system) defined in item(6),paragraph 4,Article 362 of the Companies Act. The content of the resolution isset out below.
(1)

GeneralThis resolution manifests the basic policy regarding the internal control
system of the Company to be specifically established by the President andRepresentative Director based on Article 362, Paragraph 5 of the Companies
Act.
The internal control system based on this resolution shall be establishedurgently by officers in charge, and shall be constantly reviewed andimproved.

(2)

System under which the execution of duties by Directors and employees
is ensured to comply with laws and regulations and the Articles ofIncorporation
Directors and employees are required to act in accordance with the SECOM
Group Code of Employee Conduct, which sets behavioral standards for the
execution of duties, including compliance with laws and regulations, and the
Article of Incorporation. The SECOM Group Code of Employee Conduct isbased on the philosophy of SECOM, which we have followed since theestablishment of the business. These ethical guidelines prescribe ideals
covering the official and private affairs of all executives and employees andaction standards (including the blocking relationships with anti-social
forces) to be followed in the execution of specific daily duties. As such,these guidelines provide the basis of all actions. The compliancemanagement system is as follows:(i) From the start, compliance with laws and regulations and the Articles ofIncorporation has been an indispensable requirement of our business, andwe have always sought to operate in strict adherence to this spirit.
Therefore, compliance is a part of the Company’s daily routines, whichshould not require a system in which a specific section or manager is
responsible for implementation. Each and every employee is at the frontline of promoting the code of conduct, including legal compliance. The
implementation of guidelines is carried out by the line managers of theorganization. Further control is provided by the executive officers incharge of departments under their control, with the President andRepresentative Director providing companywide control.
(ii) The executive officers in charge of each area are responsible for having

thorough knowledge particularly of regulations related to their duties andthe relationships of such regulations with their own operations. They are
responsible for proposing responses to any revisions of laws to the
President and Representative Director. The Legal Affairs Department andother relevant departments and sections support them, providing
cross-organization coordination.

[English Translation]
35

(iii) Following the orders of the President and Representative Director, theAudit and Compliance Department provides cross-organizational
inspection in a timely manner over the execution of duties, indicating
how to improve morale through the observance of laws and regulations
and the Company’s regulations and at the same time pointing out mattersthat need correction. The Audit and Compliance Department willpromptly report the findings of the inspection to the President andRepresentative Director.
(iv) When executives and employees of the Company become aware ofunethical actions, they have the obligation to report such actions to theproper superior without hesitation. A “Hot Helpline” is established tofacilitate direct contact with the Audit and Compliance Department if
corrective actions are not taken even after reporting to superiors or it isdifficult to report. Pursuant to the “Basic Policy of the SECOM Group
for Compliance,” the Company will keep the reported mattersconfidential, and promptly take necessary investigation and appropriate
measures. The reporter will suffer no disadvantage on the grounds ofsuch report.
(v) The Company establishes a standing Organizational Culture Committee,

chaired by the President and Representative Director. The Organizational
Culture Committee examines important organizational culture-related
issues (including compliance-related matters), which are the cornerstoneof developing and maintaining the corporate organization, anddetermines important official commendations and punishments.
(vi) Revisions of the SECOM Group Code of Employee Conduct and/or

critical compliance-related matters are undertaken after discussion with
the Organizational Culture Committee and subject to the approval of theBoard of Directors after obtaining the opinions of the Audit &Supervisory Board Members.
(vii) Basic plans and policies concerning internal controls related to financial

reporting are determined and evaluated in accordance with the standardsof the Business Accounting Council.
(3)

System under which information regarding execution of business byDirectors shall be maintained and controlled
Information regarding the execution of duties of Directors (minutes of the
Meetings of the Board of Directors and decision-making documents), etc.
shall be properly maintained, administered (including destruction)
pursuant to the regulations of the Company, which will be amended upon
reviewing the operating conditions if necessary.

(4)Regulation regarding control of risk of loss and other system(i) The Company’s approach to risk management is embedded in
day-to-day business activities, with acknowledgement that risk
management itself is the Company’s business. Executive officers incharge, under the direction of the President and Representative
Director, analyze and assess business risk and fraud risk in theoperational areas for which they are responsible, and revise
established rules and manuals as conditions change. Rules andmanuals are based on risk analysis and assessment, and stipulate
preventive measures, prompt and appropriate communication and[English Translation]
36

emergency preparedness when incidents occur, daily risk monitoringand other systems.
(ii) The Executive officer in charge shall report to the President andRepresentative Director and the Audit & Supervisory Board on the
results of risk analysis and assessment.
(iii)Any important changes of the Company’s risk control system shall be
subject to the approval of the Board of Directors after obtaining theopinions of the Audit & Supervisory Board Members. The risks attimes of large scale calamities and at ordinary times are as follows.
Risk Category
Large scale calamity

Example(1) Large scale calamity
risk(2) Compliance risk

(3) System risk

Ordinary times(4) Service providing risk
(5) Administrative workand accounting risk(6) Others(5)

Earthquake, wind, flood, volcanic
disasters, radiation leakage, etc.
Noncompliance with “Constitution of
SECOM’s Business and Operation,”“SECOM Group Code of Employee
Conduct,” other internal rules andguidelines, etc., risk accompanied byestablishment or changes in regulations(in the area of tax system, medical
system, etc.), breach of law, etc.
Information system shut down, electronic
data
extinguishment,
large
scale
blackout, wide area circuit disturbance,
ICT (information and communication
technology) related risk, etc.
Risk incurred when providing services(Accidents related to security, fire alarmor equipment maintenance businesses,
etc.)
Input error or input omission inadministrative or account processing,estimation error for allowance, etc.
Offence from outsiders (groundlessrumor, calumniation, theft, terror, etc.),
risk related to M&A, risk related to new
system development, other risk related tobusiness infrastructure (fire on the
Company’s
premises,pandemic
influenza, disease epidemic, etc.), etc.

System by which efficient execution of duties of Directors shall beensured(i) All Directors shall carry out the operation and execution of business on
the basis of the “Constitution of SECOM’s Business and Operation” sothat they may share the ideas essential to the execution of the duties suchas decision making for management by the Board of Directors anddecision making for the execution of duties by the Directors.
(ii) On the basis of the preceding item, the Company, aiming to implement
the execution of duties efficiently, introduces the system of executive
officers so that decision making and the execution of business shall befurther facilitated.

[English Translation]
37

(iii)The Company develops the IT system for dissemination of notices, etc.,
and decision making by managerial decision requests, and maintains thesystem for swiftly enabling full introduction and implementation.
(iv) The Company will share the medium and long term business vision, andfor the purpose of the accomplishment thereof, the Board of Directors
will design an annual business plan and deliberate the progress of the
plan.
(6)

System under which the group of enterprises consisting of the Company
and subsidiaries is ensured to properly execute its business(6-1) System under which the execution of duties by Directors, etc. andemployees of subsidiaries is ensured to comply with laws and regulations
and the Articles of Incorporation(i) Abiding by the “Constitution of SECOM’s Business and Operation,”each of the subsidiaries shares the SECOM Group Code of Employee
Conduct, which applies to all executives and employees. United by theseguidelines, the executives and employees work to accomplish thecorporate goals in an appropriate manner.
(ii) Each of the subsidiaries carries out IT controls in conformance with the“Basic Policy of the SECOM Group for Information Security.” The
Company’s IT executive officers conduct timely inspections covering
the IT management of major subsidiaries.
(iii)The “SECOM Group Management Committee,” which is chaired by theCompany’s President and Representative Director and whose members
are composed of the presidents of major subsidiaries and other parties
appointed by the chairperson, works to ensure that appropriate
operations are carried out. It accomplishes this goal by conducting
discussions of issues related to the Group’s internal controls in an effort
to share Group information and operating philosophy. Where necessary,
the President and Representative Director reports the results to the Boardof Directors and the Audit & Supervisory Board.
(iv) The President and Representative Director of the Company issues orders
to the internal audit departments (Audit and Compliance Department andGroup Governance Division) to inspect subsidiaries, if necessary. The
subsidiaries accept the inspection by the Company, and at the same time
promote the understanding and improvement of compliance-related
issues by exchanging information with the Company. Furthermore, theCompany establishes the whistle-blowing system “Hot Help Line”
which enables executives and employees of subsidiaries to directly
report to the Company’s Group Governance Division, whenever they
become aware of any non-compliance. Pursuant to the “Basic Policy of
the SECOM Group for Compliance,” the Company will keep thereported maters confidential, and promptly take necessary investigation
and appropriate measures. The reporter will suffer no disadvantage on
the grounds of such report.
(v) The Audit & Supervisory Board Members of the Company visit major
subsidiaries and conduct audits regarding internal controls.
(vi) The Company establishes a liaison meeting with Group Audit &Supervisory Board Members after discussion with its Audit &Supervisory Board in an attempt to share information.

[English Translation]38

(6-2) System under which the matters related to the execution of duties byDirectors, etc., of subsidiaries are reported to the Company
In order to enhance Group synergy leading to the achievement of thebusiness vision by the entire SECOM Group, the Company establishes andimplements the “Basic Rules for SECOM Group Corporate Management,”
which clarify the guidelines for the reporting of the important items, theitems to be coordinated in advance with the Company and the items to beapproved by the Company.
(6-3) Regulations and other systems for controlling risks of loss of
subsidiaries
Pursuant to the “Meaning of the Risk Control and Risk Control Basic Policy
for SECOM and SECOM Group,” the subsidiaries develop risk control
systems. Furthermore, upon the occurrence of important events, thesubsidiaries will take appropriate measures under the Company’s control.
(6-4) System which ensures that Directors, etc., of the subsidiaries execute
their duties efficiently(i) All Directors of the subsidiaries will efficiently carry out the operationand execution of business on the basis of the “Constitution of SECOM’s
Business and Operation.”(ii)The Company and the subsidiaries will formulate the business plans forthe next year based on the business vision by the entire SECOM Group,and confirm the progress of the plans.
(7)

Matters related to employees to assist duties of Audit & Supervisory
Board Members when Audit & Supervisory Board Members requests to
do so(i) The Company establishes the system to assist audit duties, by
establishing the Office of Audit & Supervisory Board manned by at least
two employees who are fully familiarized with the exclusive duties andinternal situations.
(ii)The assistants for the Audit & Supervisory Board Members may conduct
investigations necessary for the audit by the Audit & Supervisory Board
Members, following the instructions of the Audit & Supervisory Board
Members.

(8)Matters related to the independence of the employees in item (7) from
Directors and ensuring the effectiveness of the instructions of the Audit& Supervisory Board Members
Transfer and evaluation of the assistants for the Audit & Supervisory
Board Members shall be subject to the approval of the Audit &Supervisory Board. The assistants who received necessary instruction on
audit duties by Audit & Supervisory Board Members shall not be subject
to any instruction or order from Directors and executive officers andemployees with respect to the subject audit duties, nor be obligated toreport to them.

(9)

The following systems and other systems under which any report ismade to Audit & Supervisory Board Members(9-1) System under which Directors and Accounting Advisors and employees
make any reports to the Audit & Supervisory Board Members(i) Upon discussion with the Audit & Supervisory Board, the following
matters shall be considered as the matters to be reported by Directors to
the Audit & Supervisory Board Members.
(1) matters resolved by the Organization Culture Committee and[English Translation]39

other committees;(2) matters likely to be materially harming the Company;(3) important matters relating to monthly business conditions;(4) important matters relating to internal audit and risk management;(5) material violation of laws and regulations or the Articles ofIncorporation; and(6) important matters from viewpoint of compliance.
(ii) Notwithstanding (i) above, the Audit & Supervisory Board Members
may, where necessary and in a timely manner, request that Directors
and employees make a report.
(iii) The matters reported to the “Hot Help Line” will be reported to the
Audit & Supervisory Board Members from the Audit and ComplianceDepartment.
(9-2)

System under which persons executing duties as the subsidiary’s
Directors, Accounting Advisors, Audit & Supervisory Board
Members, Executive Officers, members who execute the business,
etc., other persons equivalent to such persons, and employees, or any
persons receiving reports from these persons, make reports to the
Audit & Supervisory Board Members
The matters reported to the “Hot Help Line” will be reported to the
Audit & Supervisory Board Members from the Group Governance
Division.

(10)

System which ensures that the persons who made the reports under(9) above will not be treated disadvantageously on the grounds ofsuch reports
Pursuant to the “Basic Policy of the SECOM Group for Compliance,”
the Company will keep the reported matters confidential, and promptly
take necessary investigation and appropriate measures, while the reporter
will suffer no disadvantage on the grounds of such report.

(11)

Matters regarding the policies for the procedures of the advancepayment or reimbursement of expenses incurred for the execution ofduties by the Audit & Supervisory Board Members and otherprocessing of expenses or debts incurred for the execution of suchdutiesThe Company bears the expenses incurred for the execution of duties by
the Audit & Supervisory Board Members.

(12) System under which audit by Audit & Supervisory Board Members is
ensured to be performed efficiently(i) The Company establishes the system under which the Audit &Supervisory Board shall regularly hold meetings with the President andRepresentative Director and the Accounting Auditor, to exchange
opinions so that audits shall be performed efficiently.
(ii) The Audit & Supervisory Board Members attend the meetings of theBoard of Directors, attend important meetings to exchange opinions
regarding overall management-related matters if necessary, and conductperiodical interviews with Directors and employees of the Company andthe subsidiaries.
(iii)The Company ensures that the Audit & Supervisory Board may retain
attorneys-at-law at its discretion and, if necessary, have opportunities toretain and consult professional accountants with respect to their audit
duties.
(Note) Under the revision dated April 8, 2015, expressions are changed to more
specific ones, mainly with respect to the system under which the group of[English Translation]40

enterprises consisting of the Company and subsidiaries is ensured toproperly execute its business and the systems to support audits, in linewith the enforcement of the “Act for Partial Revision of the Companies
Act” and the “Ministerial Ordinance for Partial Revision of the Ordinancefor Enforcement of the Companies Act” on May 1, 2015.
2.

Organizations etc. Relating to Internal Control System (as of May 1,
2015)

The Company’s governance system is as follows: The Board of Directors makes
decisions on business execution and other company matters; executive officers
led by the Representative Directors execute business; and Audit & Supervisory
Board Members, including 3 Outside Audit & Supervisory Board Members, andthe Board of Directors, coordinating with internal audit departments etc. audit
and oversee Directors and executive officers in the execution of their duties.
Under such structure, the Company has appointed 2 Outside Directors for the
purpose of introducing outsider’s viewpoint to secure legality and objectivity ofmanagement. More details are provided below.
(1)

Organizations etc. involved in business execution, auditing andsupervision of the Company(i) Directors and Board of Directors
The Board of Directors consists of 11 Directors (including 2 Outside
Directors) and is attended by 5 Audit & Supervisory Board Members(including 3 Outside Audit & Supervisory Board Members). It is convened
once a month as a general rule. The Board of Directors determines
management policies and business execution policies in relation tobusiness in general, oversees the execution of duties by Directors, actively
exchanges opinions and endeavors to make decisions in a precise andspeedy fashion.
8 out of 11 Directors are involved in business execution, and 3 Directors(1 Supreme Advisor, 2 Outside Directors) do not engage in businessexecution.
(ii) Executive Officers
The Company has an executive officer system by which decisions are
made by the Board of Directors, and business is executed by the Executive
Officers. The system strengthens field divisions and enhances the service
system for customers by expediting business execution and clarifying
responsibilities and authority.
There are 26 Executive Officers, including 8 Directors.
(iii) Audit & Supervisory Board Members and Audit & Supervisory Board
The Audit & Supervisory Board consists of 5 Audit & Supervisory Board
Members, consisting of 2 Full-time Audit & Supervisory Board Members
and 3 Outside Audit & Supervisory Board Members. It is convened once amonth as a general rule.
For the office of Full-time Audit & Supervisory Board Member, theCompany appoints persons who are well versed in the Company’sbusiness, internal affairs and finance. For the office of Outside Audit &Supervisory Board Members, the Company appoints persons who are
independent from the management, have considerable knowledge ofmanagement, legal matters, finance and other fields and are capable ofproviding appropriate oversight and supervision of management.
Audit & Supervisory Board Members attend almost every meeting of theBoard of Directors in addition to other important conferences, exchange
opinions relating to corporate management in general, receive reports on
the status of execution of duties from Directors etc. and conduct audits[English Translation]
41

focusing on whether there are any facts of violations of laws, regulations,
the Articles of Incorporation or shareholders’ interests.
The Audit & Supervisory Board also conducts audits on operations ingeneral within the Company as well as its subsidiaries and affiliates
according to the audit plan.
Major Activities in the current fiscal year(i) Audit & Supervisory Board Members’ attendance rate at
meetings of the Board of Directors: 98.4%(ii) Audit & Supervisory Board Members’ attendance rate at
meetings of the Audit & Supervisory Board: 98.3%(iii) Conducted interviews with Directors etc. of the Company andits subsidiaries and affiliates: 56 times(iv) Conducted on-site audits at business locations of the Company,
its subsidiaries, affiliates, etc.: 180 locations(2)

Coordination among Organizations and Business Units(i) Periodic Meetings among Representative Director, etc. and Audit &Supervisory Board Members:
Audit & Supervisory Board Members hold meetings with the
Representative Directors, etc. with the presence of Chairman and Director
periodically (once a month). At the meeting, Audit & Supervisory Board
Members report the results of audits etc. and exchange opinions onimportant issues regarding management, to share mutual recognition.
(ii) Conferences etc. among Audit & Supervisory Board Members and the
Accounting Auditor:
Audit & Supervisory Board Members hold periodical meetings with the
Accounting Auditor 6 times a year and have ones additionally asnecessary, and exchange opinions and information. Audit & Supervisory
Board Members and the Audit & Supervisory Board receive explanationand exchange opinions regarding the audit plan and audit results* from the
Accounting Auditor. In addition, Audit & Supervisory Board Memberspresent themselves as a witness during visiting audits and audit review
conducted by the Accounting Auditor as necessary. (Attended 17 times in
the current fiscal year)* including the result of quarterly reviews and audit under the CompaniesAct.
(iii) Cooperation with Internal Audit Division etc.:
Audit & Supervisory Board Members hold conferences with the Audit andCompliance Department periodically (once a month), are reported to on
audit results and exchange opinions with them. Audit & Supervisory
Board Members endeavor to conduct audits in an efficient manner such as
requesting the internal audit division etc. to conduct an investigation asnecessary.

[English Translation]
42

Consolidated Balance Sheet(As of March 31, 2015)(Millions of Yen)ITEM

AMOUNTASSETS
Current assets:
Cash on hand and in banks
Cash deposits for armored car services
Call loans
Notes and accounts receivable, trade
Due from subscribers
Short-term investments
Lease receivables and investment in leased assets
Inventories
Real estate inventories
Deferred income taxes
Short-term loans receivable
Other(600,146)
232,22150,395
15,500114,071
26,31628,517
39,24235,56824,122
12,8082,268
21,111

Allowance for doubtful accounts(1,997)

Fixed assets:
Tangible assets:
Buildings and improvements
Security equipment and control stations
Land
Other

(810,541)(362,161)
148,375
70,478
119,604
23,702Intangible assets:
Software
Goodwill
Other(49,411)
14,356
14,564
20,489Investments and others:
Investment securities
Long-term loans receivable
Long-term prepaid expenses
Net defined benefit asset
Deferred income taxes
Other
Allowance for doubtful accounts(398,969)
284,32242,90425,28635,0104,874
24,096(17,525)

Deferred assets:
Other

(26)
26

TOTAL ASSETSITEMAMOUNT

LIABILITIES

1,410,715[English Translation]
43

Current liabilities:
Notes and accounts payable, trade
Bank loans
Current portion of straight bonds
Lease obligations
Payables – otherAccrued income taxes
Accrued consumption taxes
Accrued expenses
Deferred revenue
Accrued bonuses
Reserve for losses on construction
contracts
Other
Long-term liabilities:
Straight bonds
Long-term loans
Lease obligations
Guarantee deposits received
Deferred income taxes
Accrued retirement benefits for
directors and audit & supervisoryboard members
Net defined benefit liability
Investment deposits by policyholders,
unearned premiums and otherinsurance liabilities
Other
Total liabilities
NET ASSETS(247,755)
43,16044,9651,414
503
33,84921,063
12,8784,653
31,34814,652

Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Common stock in treasury, at cost
Accumulated other comprehensive
income:Unrealized gains on securities
Deferred losses on hedges
Foreign currency translation
adjustments
Remeasurements of defined benefit
plans, net of taxes
Minority interests in subsidiaries:
Total net assets
TOTAL LIABILITIES AND
NET ASSETS(767,630)
66,37780,265
694,688(73,701)

1,612
37,653(255,618)
8,413
20,602
3,712
36,00013,554
1,415
18,504150,119
3,295
503,374(32,815)
26,981
(34)
1,477
4,390
(106,895)
907,341
1,410,715

Consolidated Statement of Income(Fiscal Year from April 1, 2014 to March 31, 2015)(Millions of Yen)ITEM

AMOUNT
840,722

Revenue
557,884

Costs of revenue

282,837

Gross profit
159,222

Selling, general and administrative expenses

123,615

Operating profit
Non-operating income:Interest income
Dividends income
Gain on sales of investment securities
Net gains from investment in affiliates accounted for under theequity method
Gain on private equity investments
Other
Non-operating expenses:
Interest expenses
Loss on sales of investment securities
Loss on sales and disposal of fixed assets
Write-off of long-term prepaid expenses
Provision of allowance for doubtful accounts
Other
Ordinary profit
Extraordinary profit:
Gain on sales of fixed assets
Gain on sales of investment securities
Other
Extraordinary losses:
Impairment losses on fixed assets
Loss on valuation of investment in capital
Loss on sales of fixed assets
Loss on revaluation of investment securities
Other
Income before income taxes
Income taxes- current
Income taxes - deferred
Net income before minority interests in subsidiaries
Minority interests in subsidiaries
Net income[English Translation]
44

1,033
653
86
4,812
9,269
2,509
946
0
2,437
651
362
893

1,764
43
154
4,933
3,635
39
21
2,755
43,156(37)

18,366

5,293
136,688

1,962

11,384
127,265
43,11984,146
8,754
75,392

Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2014 to March 31, 2015)(Millions of Yen)
Shareholders’ equity
CommonTotal
CapitalRetainedstock insurplusearnings

treasury, at

Common stock

shareholders’equitycost

Balance at the beginning of the
fiscal year

66,377

Accumulated effect of changes inaccounting policies

83,054656,286(2,762)

1,205

80,291

657,492(73,682)732,036(1,557)

Balance at the beginning of the
fiscal year after changes in

66,377(73,682)

730,479

accounting policies
Changes in the fiscal year:
Cash dividends
Net income(38,196)(38,196)

75,39275,392

Purchase of treasury stock0

Disposal of treasury stock

(19)

(19)

0

0

Changes due to purchase of

(26)

(26)

shares of controlled subsidiaries
Net changes of items other thanshareholders’ equity
Total changes in the fiscal year
Balance at the end of the fiscal year

-

(25)

37,195(18)

37,151

66,37780,265

694,688(73,701)

767,630[English Translation]45

Accumulated other comprehensive income
Remeasurem
Unrealized

Deferred

gains onlosses on

securities

hedgesForeignents ofcurrency

definedtranslation

benefitadjustments

plans, net oftaxes

Balance at the beginning of the
fiscal year

12,504(33)(10,885)(3,506)

Total
accumulated
othercomprehensive

Minority
interests in
subsidiaries

Total net
assetsincome(1,921)

Accumulated effect of changes inaccounting policies

100,253

830,369(115)(1,673)

100,137

828,696

Balance at the beginning of the
fiscal year after changes in

12,504(33)(10,885)(3,506)(1,921)accounting policies
Changes in the fiscal year:
Cash dividends(38,196)

Net income

75,392

Purchase of treasury stock(19)

Disposal of treasury stock0

Changes due to purchase of shares(26)
of controlled subsidiaries
Net changes of items other than
14,476(0)

12,362

7,897

34,736

6,757

41,494

Total changes in the fiscal year

14,476(0)

12,362

7,897

34,736

6,757

78,645

Balance at the end of the fiscal year

26,981

(34)

1,477

4,390

32,815

106,895

907,341

shareholders’ equity[English Translation]46

Non-Consolidated Balance Sheet(As of March 31, 2015)(Millions of Yen)ITEM
ASSETSAMOUNT

Current assets:
Cash on hand and in banks
Cash deposits for armored car services
Notes receivable
Due from subscribers
Accounts receivable, trade
Receivables – other
Short-term investments
Merchandise
Supplies
Prepaid expenses
Deferred income taxes
Short-term loans receivable
Other
Allowance for doubtful accounts(210,048)
93,56948,396640
16,066
11,202
3,054
437
6,694
1,379
2,210
4,415
20,423
1,772(216)

Current liabilities:
Accounts payable
Bank loans
Lease obligations
Payables – otherAccrued income taxes
Accrued consumption taxes
Accrued expenses
Deposits received
Deferred revenue
Payables – construction
Accrued bonuses
Other(118,647)
3,172
29,416
185
15,675
10,826
7,088
800
16,784
21,269
4,480
6,296
2,651

Fixed assets:
Tangible assets:
Buildings and improvements
Automobiles
Security equipment and control
stations
Machinery and equipment
Tools, furniture and fixtures
Land
Construction in progress
Other(585,730)(118,548)
16,458824

Long-term liabilities:
Lease obligations
Guarantee deposits received
Deferred income taxes(26,998)
2,661
17,286
3,400

Intangible assets:
Software
Other

ITEM
LIABILITIES

67,715

Accrued pension and severance costs

192
3,326
28,303
1,714
12

Other

(5,375)
4,644
730

Investments and others:
Investment securities
Investments in subsidiaries andaffiliates
Long-term loans receivable
Lease deposits
Long-term prepaid expense
Prepaid pension and severance costs
Insurance funds
Other
Allowance for doubtful accounts(461,806)
29,725TOTAL ASSETS

795,778

241,058
150,955
7,526
22,126
21,5304,294
2,534(17,946)[English Translation]
47

AMOUNT

3,241
408

Total liabilities
NET ASSETS

145,646

Shareholders’ equity:(643,784)
Common stock(66,377)
Capital surplus:(83,054)
Additional paid-in capital
83,054
Other capital surplus
0
Retained earnings:(568,053)
Legal reserve
9,028
Other retained earnings
559,025
Reserve for system developments
800
General reserve
2,212
Accumulated earnings carried forward
556,013
Common stock in treasury, at cost
(73,701)
Valuation, translation adjustments andothers:
Unrealized gains on securities
Total net assets
TOTAL LIABILITIES AND
NET ASSETS(6,347)(6,347)650,132
795,778

Non-Consolidated Statement of Income(Fiscal Year from April 1, 2014 to March 31, 2015
(Millions of Yen)ITEM

AMOUNT

Revenue

370,663

Costs of revenue

221,441

Gross profit

149,221

Selling, general and administrative expenses

76,046

Operating profit

73,174Non-operating income:Interest income

1,751

Dividends income

9,211

Other

751

11,714Non-operating expenses:
Interest expenses

293

Loss on sales and disposal of fixed assets

2,241

Write-off of long-term prepaid expenses

555

Other

225

Ordinary profit

3,316
81,572Extraordinary profit:
Gain on sales of tangible assets

1,540

Other

130

1,670

Extraordinary losses:
Impairment losses on fixed assets

1,424

Overseas tax related loss

781

Provision for allowance for doubtful accounts

303

Other

295

Income before income taxes

2,805
80,437

Income taxes - current

22,816

Income taxes - deferred

128

Net income

22,94557,492[English Translation]48

Non-Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2014 to March 31, 2015)(Millions of Yen)
Shareholders’ equity
Capital surplus
CommonAdditional

Other capital

Total capital

paid-in capitalsurplussurplusstock
Balance at the beginning of the
fiscal year

66,377

83,0540

Accumulated effect of changes in

83,054-accounting policies
Balance at the beginning of the fiscal
year after changes in accounting

66,377

83,0540

83,05400policies
Changes in the fiscal year:
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes in the fiscal year
Balance at the end of the fiscal
year

-

-

0

0

66,377

83,0540

83,054[English Translation]
49

(Millions of Yen)
Shareholders’ equity
Retained earnings
Other retained earnings
Legal

Reserve forreserve

Generalsystemdevelopments

Balance at the beginning of the800

retainedearnings carriedearnings

forward536,978

549,018

(260)

(260)

536,717

548,757

Cash dividends(38,196)(38,196)

Net income

57,49257,492

fiscal year

9,028

reserve

Total

Accumulated

2,212

Accumulated effect of changes
in accounting policies
Balance at the beginning of the
fiscal year after changes in

9,028

800

2,212

accounting policies
Changes in the fiscal year:

Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes in the fiscal year
Balance at the end of the fiscal
year

-

-

-

19,295

19,295

9,028

800

2,212

556,013568,053[English Translation]
50

(Millions of Yen)
Valuation, translation

Shareholders’ equity

Total

Commonstock intreasury, atcost
Balance at the beginning of
the fiscal year

adjustments and others

Total

Unrealized

valuation,

shareholders’gains ontranslation

equitysecurities

adjustments

Total net
assetsand others(73,682)

624,768

2,473

2,473

627,242

Accumulated effect of(260)

changes in accounting(260)

policies
Balance at the beginning of
the fiscal year after changes in(73,682)

624,507

2,473

2,473

626,981accounting policies
Changes in the fiscal year:
Cash dividends(38,196)(38,196)

Net income

57,49257,492

Purchase of treasury stock

(19)

(19)

(19)

Disposal of treasury stock

0

0

0

Net changes of items otherthan shareholders’ equity

3,873

3,873

3,873

Total changes in the fiscal(18)

19,277

3,873

3,873

23,150(73,701)

643,784

6,347

6,347

650,132

year
Balance at the end of the fiscal
year[English Translation]
51

Certified Copy of the Accounting Auditor’s Report (Consolidated)[English Translation of the Accounting Auditor’s Report Originally Issued in theJapanese Language]
Independent Auditor’s Report
May 15, 2015
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA LLC
Masakazu Hattori (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Hideki Yoshida (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant

We have audited the consolidated financial statements, comprising theconsolidated balance sheet, the consolidated statement of income, theconsolidated statement of changes in net assets and the related notes of SECOM
Co., Ltd. as at March 31, 2015 and for the year from April 1, 2014 to March 31,
2015 in accordance with Article 444, Paragraph 4 of the Companies Act.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of theconsolidated financial statements in accordance with accounting principles
generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatements, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated financial
statements based on our audit as independent auditor. We conducted our audit inaccordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to otain audit evidence about theamounts and disclosures in the consolidated financial statements. The procedures
selected depend on our judgement, including the assessment of the risks ofmaterial misstatement of the consolidated financial statements, whether due tofraud or error. In making those risk assessments, we consider internal control
relevant to the entity’s preparation and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in thecircumstances, while the objective of the financial statement audit is not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of accounting[English Translation]52

policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position and the results of operationsof SECOM Co., Ltd. and its consolidated subsidiaries for the period, for which theconsolidated financial statements were prepared, in accordance with accounting
principles generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should
be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

[English Translation]
53

Certified Copy of the Accounting Auditor’s Report(Non-Consolidated)[English Translation of the Accounting Auditor’s Report Originally Issued in theJapanese Language]
Independent Auditor’s Report
May 15, 2015
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA LLC
Masakazu Hattori (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant
Hideki Yoshida (Seal)
Designated Limited Liability Partner
Engagement Partner
Certified Public Accountant

We have audited the financial statements, comprising the balance sheet, thestatement of income, the statement of changes in net assets and the related notes,
and the supplementary schedules of SECOM Co., Ltd. as at March 31, 2015 andfor the 54th business year from April 1, 2014 to March 31, 2015 in accordancewith Article 436, Paragraph 2, Item 1 of the Companies Act.
Management’s Responsibility for the Financial Statements and Others
Management is responsible for the preparation and fair presentation of thefinancial statements and the supplementary schedules in accordance withaccounting principles generally accepted in Japan, and for such internal control as
management determines is necessary to enable the preparation of financial
statements and the supplementary schedules that are free from material
misstatements, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial statements and the
supplementary schedules based on our audit as independent auditor. We
conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements and the
supplementary schedules are free from material misstatement.
An audit involves performing procedures to otain audit evidence about theamounts and disclosures in the financial statements and the supplementaryschedules. The procedures selected depend on our judgement, including theassessment of the risks of material misstatement of the financial statements andthe supplementary schedules, whether due to fraud or error. In making those risk
assessments, we consider internal control relevant to the entity’s preparation andfair presentation of the financial statements and the supplementary schedules inorder to design audit procedures that are appropriate in the circumstances, while
the objective of the financial statement audit is not for the purpose of expressing[English Translation]54

an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements and the
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our audit opinion.
OpinionIn our opinion, the financial statements and the supplementary schedules referred
to above present fairly, in all material respects, the financial position and theresults of operations of SECOM Co., Ltd. for the period, for which the financial
statements and the supplementary schedules were prepared, in accordance withaccounting principles generally accepted in Japan.
Other Matter
Our firm and engagement partners have no interest in the Company which should
be disclosed pursuant to the provisions of the Certified Public Accountants Act ofJapan.

[English Translation]
55

Certified Copy of the Audit & Supervisory Board’s Report[English Translation of the Audit & Supervisory Board’s Report Originally Issued in theJapanese Language]

Audit Report
May 19, 2015

Mr. Hiroshi Ito
President and Representative Director
SECOM Co., Ltd.
Audit & Supervisory Board of
SECOM Co., Ltd.
Seiji Sakamoto (Seal)
Audit & Supervisory Board
Member (Full-time)
Katsuhisa Kuwahara (Seal)
Audit & Supervisory Board
Member (Full-time)
Ken Tsunematsu (Seal)
Outside Audit & Supervisory
Board Member
Hideki Kato (Seal)
Outside Audit & Supervisory
Board Member
Kenichi Sekiya (Seal)
Outside Audit & Supervisory
Board Member
The Audit & Supervisory Board has received the audit reports of the performanceof duties of the Directors during the 54th business term from April 1, 2014 throughMarch 31, 2015 from each of the Audit & Supervisory Board Members. After
deliberating such reports, we have prepared this Audit Report and report as follows:
1. Method and Details of Audit Performed by Audit & Supervisory Board Members andthe Audit & Supervisory Board
The Audit & Supervisory Board has established the audit policy and audit plan forthe current fiscal year, received reports on the status and results of audits from each Audit& Supervisory Board Member, received reports on the status of execution of duties from
Directors, etc. and the Accounting Auditor, and requested explanations when necessary.
Each of the Audit & Supervisory Board Members, in accordance with the audit
policy, audit plan, etc. of the current fiscal year set up by the Audit & Supervisory Board,
worked to communicate with Directors, the internal audit division and other employees,
etc., and made efforts to gather information and establish the audit environment, in
addition to attending the meetings of the Board of Directors and other important
meetings, receiving reports from the Directors and other managers, etc. on their duties,
requesting explanations when necessary, inspecting documents concerning matters suchas important decisions, and investigating the conditions of the business and financial
conditions at the head office and the principal offices. Also, the Audit & Supervisory
Board Members, on a regular basis, received from Directors and employees, etc. reportson the establishment and operation of the system (internal control system) based on the[English Translation]56

resolution of the Board of Directors as stipulated in Article 100, Paragraph 1 or Paragraph
3 of the Companies Act Enforcement Order to ensure the execution of the duties of
Directors complies with laws and regulations and the Articles of Incorporation and toensure appropriate company operation, obtained explanation from them, and expressed
opinions when necessary.
Furthermore, we received reports from Directors, etc. and the Accounting Auditor
on the status of discussions between them and the status of evaluation and audit of theinternal control on financial reporting, and requested their reports as necessary.
We worked to communicate and exchange information with the Directors andAudit & Supervisory Board Members, etc. of subsidiaries and received reports on
operations from subsidiaries.
On the basis of the forgoing procedures, the Audit & Supervisory Board has
considered the Business Report and supplementary schedules.
Furthermore, in addition to monitoring and examining whether the Accounting
Auditor maintained an independence and performed auditing appropriately, we received
reports from the Accounting Auditor on the execution of their duties and requested
explanations when necessary. In addition, we received notice from the Accounting
Auditor that “The systems for ensuring the proper execution of duties” (set forth in each
Item of Article 131 of the Ordinance for Corporate Accounting) is organized inaccordance with the “Standards for Quality Control of Audit” (Business Accounting
Council, October 28, 2005) and other relevant standards, and sought explanations whennecessary. Based on the above methods, we examined the financial statements (balance
sheet, statement of income, statement of changes in net assets and related notes),
supplementary schedules and the consolidated financial statements (consolidated balance
sheet, consolidated statement of income, consolidated statement of changes in net assets
and related notes) for the current fiscal year.
2. Result of audit(1) Result of audit of business report etc.
i) The Business Report and supplementary schedules fairly represent the condition of
the Company in accordance with laws and regulations and the Articles ofIncorporation of the Company.
ii) We have determined that there were no serious occurrences of misconduct orviolations of any laws or regulations or the Articles of Incorporation of theCompany by any of the Directors in carrying out their duties.
iii) We believe the contents of the resolution of the Board of Directors regarding theinternal control system are appropriate. We found no matters to note regarding theexecution of duties of Directors regarding the internal control system, as well as theinternal control system regarding financial reporting.
(2) Result of audit of financial statements and supplementary schedules
In our opinion, the audit procedures and audit results of the Accounting Auditor
KPMG AZSA LLC are appropriate.
(3) Result of audit of consolidated financial statements
In our opinion, the audit procedures and audit results of the Accounting Auditor
KPMG AZSA LLC are appropriate.

End[English Translation]
57