A Message to Shareholders

Understanding and Responding to Change

Through the ANSHIN Platform, a service infrastructure designed
to provide peace of mind to people in their everyday lives,
as well as to society as a whole, we continue working to addressincreasingly diverse and sophisticated social imperatives,
as well as to ensure sustainable growth and enhance
corporate value.

Operating in an environment characterized by dramatic change and mounting uncertainty, we
recognize that ensuring sustainable growth and accelerating the realization of our Social System
Industry vision will depend on encouraging a managerial mindset among all employees, thatis, on fostering employees who share SECOM’s Philosophy and have the ability to form
judgments and act independently. To bolster the functioning of this managerial mindset, we
continue to promote a fair and impartial organization that ensures a free and open corporate
culture. We are also working to maximize employees’ latent capabilities and inspiring themto fulfill their professional ambitions by creating a virtuous circle rooted in employee job
satisfaction, understanding that motivating employees to create and provide superior offerings
enables us to extend services that exceed the expectations of customers, which in turnConsolidated Operating Results

enhances customer satisfaction and society’s trust of SECOM as a company. This, in turn, drives

In the fiscal year ended March 31, 2018, the Japanese economy remained on a gentle upward

employees’ efforts to create and provide even better services.

trend, sustained by improved corporate earnings and employment levels, as well as by aMakoto IidaFounder

the SECOM Group through 2030, and set forth the ANSHIN Platform, a service infrastructure

policy shifts in the United States, the economic outlook for the People’s Republic of China

designed to provide peace of mind to people in their everyday lives, as well as to society as(PRC) and emerging economies, a lack of clarity around the United Kingdom’s exit from thea whole. This infrastructure seeks to alleviate problems and resolve concerns by responding

European Union, and the impact of geopolitical risk. These factors, together with the influence

to the increasingly diverse needs of individual customers through the seamless provisionof fluctuations in the financial and capital markets, continued to warrant caution.

of services that deliver enduring peace of mind whenever and wherever necessary. Guided

Against this backdrop, we continued to press forward toward the realization of our Social

partners in industry, government and academia that have the same mission to advanceas making life more comfortable and convenient, whenever and wherever necessary. Efforts

initiatives aimed at addressing social imperatives and creating new services and systems.

continued to concentrate on responding to the needs of customers through the provision

In the fiscal year ended March 31, 2018, employees in our seven businesses—securityof high-grade services and systems in our security services, fire protection services, medicalservices, fire protection services, medical services, insurance services, geographic informationservices, insurance services, geographic information services, BPO and ICT services, and realservices, BPO and ICT services, and real estate and other services—promoted a variety ofestate and other services businesses.

ambitious efforts, working with diligence and a high sense of purpose, as well as withsegments and the addition of results for new subsidiary TMJ, Inc., consolidated on October 2,President and Representative Director

by our vision of a society free from concerns, over the past year we have collaborated withSystem Industry vision, in line with our goal of providing safety and peace of mind, as well

Bolstered by a solid performance in the security services and fire protection services

Yasuo Nakayama

In May 2017, we formulated the SECOM Group’s Vision for 2030, a long-term plan to guiderecovery in consumer spending. However, uncertainties persisted regarding, among others,autonomy and a common understanding of the vision we have outlined for SECOM in 2030.
In our commercial security services business, we reported an increase in contracts for our2017, consolidated net sales and operating revenue in the period under review rose 5.0%, or

on-line security systems, as well as for static guard, cash collection and delivery, and other¥51.5 billion, to ¥1,082.8 billion. Operating income increased 9.7%, or ¥12.7 billion, to ¥142.8

services, reflecting our ability to respond effectively to customer needs. SECOM LX, whichbillion, bolstered by higher net sales and operating revenue in six segments, including security

combines on-line security with access control functions to help customers manage personnelservices. Despite a decline in gain on private equity investments, the increase in operating

efficiently, thereby reducing costs, helps companies objectively ascertain employees’ working

income pushed net income attributable to SECOM CO., LTD., up 5.7%, or ¥5.2 billion, tohours and address the issue of overwork, a key social imperative in Japan. Demand remained¥96.6 billion.

firm for SECOM LX, as well as for SECOM AX, a remote imaging on-line security system
featuring advanced image recognition technologies, and SECOM FX, which combines on-line

Enhancing Returns to Shareholders
Seeing the provision of a fair return to shareholders as a crucial management task, we4

SECOM Annual Report 2018security with facility control functions.
In the area of security services for large-scale events, we recently commenced the full-scale

determine our consolidated dividend payout ratio based on an overall assessment of efforts

provision of 3-Dimensional Security. This service begins with SECOM 3D Security Planning,

to expand our operations and trends in our consolidated operating performance, in line withwhich uses high-precision 3D maps to support the formulation of an optimal security plan,

our policy of ensuring a consistent and stable distribution of profits. At the Ordinary Generaland encompasses the latest security services—including surveillance from above using

Meeting of Shareholders held on June 26, 2018, the payment of a year-end dividend of ¥80.00

the SECOM Airship or SECOM Aerostat dirigible and on the ground using temporarily installedper share was approved. As a consequence, dividends for the full term, which also include an

security cameras, wearable cameras and the SECOM Drone Detection System—combined withinterim dividend of ¥75.00, amounted to ¥155.00, up ¥10.00 from the previous fiscal year.

security guards. These various services are coordinated by a vehicle-mounted On-Site Center,

SECOM Annual Report 2018

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A Message to Shareholdersa mobile monitoring base that gathers and disseminates information, thereby supporting thesafe and secure staging of large-scale events.
In April 2018, we concluded an agreement to acquire 80.1% of the outstanding shares ofcommon stock of Toshiba Security Guard Corporation (TOSEC) from Toshiba Corporation.
Going forward, we will endeavor to leverage TOSEC’s wealth of experience and extensive

In our insurance services businesses, sales of distinctive non-life insurance policies
expanded favorably. These include MEDCOM, an unrestricted cancer treatment policy thatcovers all treatment costs, and fire insurance policies that extend discounts to subscribers who
have installed on-line security systems, recognizing this as a risk-mitigating factor.
Our geographic information services business centers on the collection of geographic dataknow-how in the provision of static guard services for plants and other large-scale facilities tofrom commercial satellite images, aerial photography, and vehicle/ground and other types offurther grow our commercial security services business by developing and extending high-surveying, which we integrate, process and analyze to provide geospatial information services

value-added services that go beyond static guards to underpin the safety and security ofto public sector entities—including national and local governments—and customers in thecustomers’ production capabilities.

private sector. We also offer these services to government agencies in emerging economies. InIn the home security services market, in July 2017 we launched SECOM Home Security

the period under review, Group company Pasco Corporation continued working to fortify its

NEO, a flexible system suited to diverse modern lifestyles that can be connected to various

data collection capabilities to further enhance the quality of the services we provide to address

devices. Concurrently, we released the SECOM My Doctor Watch, an emergency medical alert

increasingly diverse and sophisticated domestic and overseas needs associated with, amongand health management service centered on a wearable wristband tracker, which can be usedothers, the construction and maintenance of critical infrastructure and the prevention andwith SECOM Home Security NEO. In December 2017, we commenced sales of a second new

mitigation of risks and disasters.

service, SECOM Anshin Home Delivery Box, which facilitates the safe delivery of packages

BPO and ICT services business encompasses the provision of data center, business

whether the recipients are at home or not, an offering developed to respond to the rising need

continuity planning (BCP) support, information security, cloud-based services and BPO

for redelivery to recipients who were not at home to collect their packages the first time, whichservices. In October 2017, we acquired all shares in TMJ, which boasts extensive experience andhas become somewhat of an issue in Japan.

know-how in the provision of high-grade contact center and other BPO services to a wide

Overseas, we continued working to expand the provision of SECOM-style security services,

range of major companies. The addition of this company, now a consolidated subsidiary, willa term we use to describe comprehensive on-line security systems that encompass everything

assist our efforts to fortify our capabilities in this area by, among others, enabling us to expand

from the installation of security equipment at the subscriber’s premises to the prompt

our safe and secure business support services.

dispatch of emergency response personnel when needed. In the period under review, ourOur real estate and other services business continued to emphasize the development andefforts concentrated on the growing economies of Southeast Asia and the PRC. Achievements

sale of condominiums equipped with distinctive security and disaster preparedness features.

included the formation of a strategic partnership with a major electric appliances manufacturer

Other services include real estate leasing, construction and installation.

in the PRC aimed at cultivating the local market for home security services. Elsewhere,
subsidiary Secom plc in the United Kingdom won the CCTV System of the Year Award in theCharting Sustainable GrowthInternational Fire and Security Conference (IFSEC) Security and Fire Excellence Awards 2017,

Operating in a constantly changing environment, we remain committed to continuouslygarnering praise for the quality of the system’s products and services.

reevaluating what SECOM must do to ensure our actions are just and beneficial, as well as toIn fire protection services, SECOM Group companies Nohmi Bosai Ltd. and Nittan Co., Ltd.,

communicating our intentions to our stakeholders, as we work toward the achievement of

two of Japan’s leading names in this field, continued to earn consistently high marks fromour Vision for 2030. To this end, in May 2018 we formulated the SECOM Group Road Map 2022.

customers for their superior automatic fire alarm, fire extinguishing and other fire protection

Having identified technological advances and a declining labor force as priority issues, we will

systems, which they provide for a variety of applications, including office buildings, plants,

continue striving to address social imperatives and increase corporate value by anticipating thetunnels, structures designated as cultural properties, ships and homes. In the period underevolving needs of society. We believe that doing so will lead to major business opportunities,

review, the two companies continued to leverage their respective business foundations andallowing us to contribute to improved social productivity.

product development capabilities to address the needs of diverse customers, bolstering orders
for fire protection systems.

Technological advances have brought an increase in the variety of connected devices. Thisis driving a variety of profound changes, including the realization of connected vehicles, moves

Efforts in our medical services business continued to focus on Home Medical Services,

toward unattended retail facilities and the expanded use of robots. In such an environment,

which comprise home nursing and pharmaceutical dispensing services, as well as on thesafety and peace of mind are critical issues. We expect this to push up demand related to theoperation of residences for seniors, the provision of electronic medical reporting systems, sales

need for security in a connected society. Owing to a declining labor force, we are seeing risingof medical equipment and pharmaceuticals, personal care services and support for associateddemand underpinned by the need to be able to rely on others. For companies, the need tohospitals.

reduce labor requirements is prompting an increase in the outsourcing of noncore functions,while for families the growing prevalence of two-income households is propelling demand
related to care for children and seniors.

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SECOM Annual Report 2018

SECOM Annual Report 20187

A Message to Shareholders

Over the next two years, which we have positioned as an investment phase, we will
endeavor to reinforce our management foundation by making substantial systems investments
aimed at, among others, upgrading core systems, and by promoting investments in humanresources designed to strengthen our human capital. Through such forward-looking, focusedinvestments, we will endeavor to leverage the latest technologies to derive maximum benefits,
as well as to attract people who are adaptable to change, creative and keen to contribute tosociety. Human resources who share SECOM’s Philosophy and thrive in a free and open corporate culture are priceless intangible assets and a vital source of our competitiveness. We will continue to capitalize on advanced technologies to maximize the capabilities of our employees,
positioning us to drive bold service innovation and grow together with society. We will also
­promote forward-looking, focused investments in people and systems, thereby increasing ourability to make effective use of these intangible assets and positioning us to drive bold ­service
innovation and cement our competitive edge.
In addition to focused investments, we will advance a personnel and organizational strategy, a business strategy that encompasses operations both in Japan and overseas, and a capital strategy. On the personnel and organizational front, we will step up efforts to hire and train
human resources with outstanding expertise and experience, as well as to allocate humanresources to growth businesses, to ensure a robust organization.
Our business strategy centers on hastening the implementation of measures in linewith four concepts crucial to creating the ANSHIN Platform: “ALL SECOM,” “Collaboration,”“Connection” and “Enhanced value.” In Japan, we will offer high-grade services that respondto growing demand related to security in a connected society and the need to rely on others.
Overseas, we will expand operations in countries and territories where we have establisheda presence, as well as enter promising new markets. Our capital strategy includes allocating¥200 billion for mergers and acquisitions (M&A) over the next five years, which we will use toinvest in growth businesses. We will also seek to maintain return on equity (ROE) and to provide a stable and consistent return to shareholders, in line with our basic policy of ensuring aconsistent and stable distribution of profits. In addition, we will work to maximize shareholder
value and take steps to fortify and expand constructive and healthy dialogue with shareholders.
Through our efforts to realize the ANSHIN Platform, we remain committed to further
strengthening our bond with society and to addressing diverse social imperatives. By
thus reinforcing our relationship with society, we will continue seeking to move forwardwith society and achieve sustainable growth. We look forward to the ongoing support ofshareholders in all of our endeavors.
June 26, 2018

Makoto Iida
Founder8

SECOM Annual Report 2018

Yasuo Nakayama
President and Representative Director