Internet Disclosure Accompanying
the Notice of the Convocation of
The 60th Ordinary General Meeting of
Shareholders

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

1
22

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

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

Scope of Consolidation(1) Number of Consolidated Subsidiaries: 165
Names of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Asahi Security Co., Ltd., Nohmi Bosai Ltd.,
Nittan Co., Ltd., Secom Medical System Co., Ltd., Secom General
Insurance Co., Ltd., Pasco Corporation, Secom Trust Systems Co., Ltd., At
Tokyo Corporation, TMJ, Inc., The Westec Security Group, Inc., SecomPlc(2) Descriptions of Non-Consolidated Subsidiaries:
Eishin Denshi Co., Ltd., Kyoudou Setubi Ltd. and 5 other companies(The reason for exclusion from scope of consolidation)
All of these 7 non-consolidated subsidiaries are of a small size, so that theaggregate amounts of total assets, revenue, net income/loss (an amountprorated to ownership) and retained earnings (an amount prorated toownership) and others do not have a significant effect on the consolidated
financial statements.
(3) Names of other companies owing majority of voting rights not regarded as
subsidiaries:
Katzkin Holdings, LLC, United Tactical Systems Holdings, LLC, CLP
Legal Services, LLC, CLP Landscape Services, LLC, PF Holdco, LLC,
Austin Fitness Holdings, LLC, Handel’s Holdco, LLC, CLP ICS Holdings,
LLC, Genea Energy Partners, Inc.
(The reason for not regarded as subsidiaries)
These companies were acquired by subsidiaries of The Westec Security
Group, Inc. through normal course of business with the objective ofinvestment, not with the objective of control.
2.

Equity Method(1) Number of equity method affiliates: 16
Names of major affiliates accounted for under the equity method:
S1 Corporation, Toyo Tec Co., Ltd., Taiwan Secom Co., Ltd.
(2) Number of non-equity method affiliates: 8(The reason for not applying the equity method)
These 8 companies are not accounted for under the equity method because
their effect on net income/loss (an amount prorated to ownership) andretained earnings (an amount prorated to ownership) is insignificant andimmaterial as a whole.

[English Translation]
1

3.

Changes in Scope of Consolidation and Companies Accounted for under the
Equity Method
Consolidation
Newly consolidated subsidiaries: 5
ADT SERVICES (M) SDN. BHD. and 4 other companies(Acquisition)
Excluded from consolidation: 6
Secom Home Life Co., Ltd. and 2 other companies (Divesture)
Nittan Electronic Co., Ltd. (Merger)
Kurashi-TEL Co., Ltd. and 1 other company (Liquidation)
Equity Method: None

4.

Closing Dates of Consolidated Subsidiaries and Equity Method Affiliates
With respect to overseas consolidated subsidiaries, 6 U.S. subsidiaries suchas The Westec Security Group Inc., 8 Australia and New Zealandsubsidiaries such as Secom Australia Pty., Ltd., , 5 U.K. subsidiaries such as
Secom Plc, 17 Chinese subsidiaries such as Secom (China) Co., Ltd., 6
Vietnam subsidiaries such as Secom Vietnam Security Service JSC,
Secom (Singapore) Pte. Ltd., Secom Medical System (Singapore) Pte. Ltd.,D’Garde Security Pte. Ltd., Takshasila Hospitals Operating Pvt. Ltd.,
Takshasila Healthcare and Research Service Pvt. Ltd., PT. Nusantara Secom
Infotech, PT. Secom Indonesia, PT. Secom Bhayangkara, PT. Secom Realty
Indonesia, Pasco Thailand Co., Ltd., Thai Secom Security Co., Ltd., Pasco
Philippines Corp., Nohmi Taiwan Ltd., PASCO DO BRASIL
CONSULTORIA TECNICA LTDA., TMJP BPO SERVICES, INC., Secom
Aktif Güvenlik Yatirim A.S., and Secom Aktif Elektronik GüvenlikÇözümleri A.S. close their book as of December 31 each year, and thefinancial statements as of this date are used for preparation of theconsolidated financial statements. While ADT SERVICES (M) SDN.
BHD. and ADT INTEGRATED SECURITY SOLUTIONS PTE. LTD.
close their book as of September 30, the financial statements preparedpursuant to the provisional closing of books conducted as of December 31
are used for preparation of the consolidated financial statements. Also,
while ADT Alarm Monitoring Hong Kong Limited closes its book as of
September 30, the financial statements prepared pursuant to the provisional
closing of books conducted as of March 31 are used.
With respect to domestic consolidated subsidiaries, while Zao Urbane
Properties Co., Ltd. closes its book as of December 31 each year, thefinancial statements prepared pursuant to the provisional closing of books
conducted as of March 31 are used for preparation of the consolidated
financial statements.
With respect to equity method affiliates, 6 companies such as S1
Corporation and Taiwan Secom Co., Ltd. close their book as of December
31 each year, and the financial statements as of this date are used for
preparation of the consolidated financial statements. While Koatsu Co., Ltd.
closes its book as of September 30 each year, the financial statements
prepared pursuant to the provisional closing of books conducted as of March
31 are used for preparation of the consolidated financial statements.
The necessary adjustments related to the consolidation are made for any
major transactions which arise between the consolidated closing dates. The
closing dates of other consolidated subsidiaries and equity method affiliates
are the same as the consolidated closing date.

[English Translation]
2

5.

Significant Accounting Policies(1) Valuation policies and methods for significant assets
1) Securities
a. Held-to-maturity debt securities are carried at amortized cost.
b. Available-for-sale
Securities with fair value
Stock and beneficiary securities: At fair value based on the
average market price one month prior to the fiscal year-end
Others: At fair value based on market price at fiscal year-end
Net unrealized gains and losses of securities are primarily
reported directly in net assets. The cost of securities sold isprimarily calculated by the moving average method.
Securities with no fair value
At cost, principally based on the moving average method
2) Derivatives
Derivatives are stated at fair value.
3) Inventories
Inventories are principally stated at cost based on the moving
average method (or at the net realizable value (NRV) calculated
by writing down the book value to reflect a decrease in the NRV).
4) Real estate for saleStated at cost by the specific cost method (or at the NRV
calculated by writing down the book value to reflect a decrease in
the NRV).
(2) Depreciation and Amortization of Depreciable and Amortizable Fixed
Assets1) Tangible Assets (except for leased assets)a. Security equipment and control stations
Security equipment and control stations are depreciated overtheir average estimated useful lives (5-8 years) by the
declining-balance method.
b. Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line
method.
Their main useful lives are as follows:
Buildings and improvements: 33-50 years
Tools and equipment: 2-20 years
2) Intangible Assets (except for leased assets)
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by thestraight-line method based on the useful lives within the Company(5 years).

[English Translation]33) Leased Assets
a. Leased assets related to ownership-transfer finance leasetransactions
Depreciated, using the same depreciation method applied to
fixed assets in possession.
b. Leased assets related to non-ownership-transfer finance leasetransactions
Depreciated, using the straight-line method over a useful life
equal to the lease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into
on or before March 31, 2008 are treated using the method
applicable to operating lease transactions.
4) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line
method. With respect to the installation costs related to security
equipment at the customer premises, any portion exceeding theamount received from the customer is included in “long-term
prepaid expenses” and amortized by the straight-line method overthe contract period (5 years).
(3) Basis for Significant Allowances
1) Allowance for Doubtful Accounts
To prepare for losses from bad debts such as losses on tradereceivables and loans, the allowance for doubtful accounts
provides an estimated amount of uncollectables. It is determinedbased on the historical loss rate with respect to ordinary accounts,
and an estimate of uncollectable amounts respectively determinedby reference to specific doubtful accounts from customers whoare experiencing financial difficulties.
2) Accrued Bonuses
The accrued bonuses are provided for the bonus payments toemployees, at an amount incurred during the current fiscal year.
3) Provision for Loss on Construction Contracts
To prepare for future losses on construction contracts etc., an
accrual is provided based on the estimated losses on construction
contracts etc. that are undelivered at the end of the current fiscal
year.
4) Accrued Retirement Benefits for Directors and Audit &Supervisory Board Members
To prepare for payment for retirement benefits of Directors andAudit & Supervisory Board Members of domestic consolidated
subsidiaries, a necessary amount at the end of the current fiscal
year is accrued based on the rules of the Directors and Audit &Supervisory Board Members’ retirement benefits.
(4) Revenue and Cost Recognition Policies
1) Revenue Recognition Policies for Construction Contracts and Costof Completed Work
Percentage-of-completion method is applied to construction
contracts whose outcomes are deemed certain for progress until[English Translation]4

the end of the current fiscal year, and the completed-contract
method is applied to other construction contracts. The percentage
of costs incurred to the estimated total cost is used for estimating
the percentage of completion.
2) Recognition Policies for Revenue and Costs of Finance Leases
Revenue and cost are recognized upon receipt of lease payments.
(5) Other Significant Items for Preparation of Consolidated Financial
Statements
1) Accounting for Major Hedge
a. Hedge Accounting Policy
The Company principally applies deferred hedging accounting.
The interest rate swaps that fulfill requirements for exceptional
treatments permitted for interest rate swaps are accounted forusing exceptional treatments.
b. Hedging Instruments and Hedged Items
Hedging instruments:
Hedged items:
Interest rate swap
Loans payablec. Hedging Policy
The risks for forward interest rate fluctuations are to be hedged
principally pursuant to the risk management policy of theCompany.
d. Assessment of Hedge EffectivenessHedge effectiveness is assessed by comparing the cumulative
totals of price fluctuations of the hedged items and hedging
instruments from the beginning of hedging to the effective pointof assessment, taking the changes of both the hedged items andhedging instruments into account. However, when an item isjudged to fulfill requirements for exceptional treatments, theassessment of hedge effectiveness is omitted.
2) Accounting for Retirement Benefit
To prepare for the retirement benefits of employees, the Company
and its domestic consolidated subsidiaries recognize a net defined
benefit asset and a net defined benefit liability for the amountcalculated by deducting plan assets from retirement benefit
obligations, based on the estimated amount of these items at theend of the current fiscal year.
Prior service cost is recognized as profit or loss in the year ofoccurrence.
Actuarial gains and losses are amortized from the following fiscal
year of occurrence, using the straight-line method over certain
years within the average remaining service period (mainly 10
years).
Unrecognized actuarial gains and losses are included in the line
item “Remeasurements of defined benefit plans, net of taxes” ofaccumulated other comprehensive income in the net assets
section.
3) Amortization of Goodwill and Negative Goodwill
Goodwill is amortized by the straight-line method over 5-20
years.

[English Translation]54) Accounting for Consumption Tax etc.
Tax-exclusive method is adopted.
6. Changes in the Presentation(Change resulting from the application of “Accounting Standards on
Disclosure of Accounting Estimation”)
We have applied “Accounting Standards on Disclosure of Accounting
Estimation” (ASBJ Statement No.31, March 31, 2020) from the current
fiscal year and notes to accounting estimation are stated in the Notes toConsolidated Financial Statements.
7. Notes on accounting estimates(1) Allowance for doubtful accounts
1) Amounts stated in the consolidated financial statements
The Company has recognized short-term loans receivable of YEN
3,053 million, long-term loans receivable of YEN 33,301 million,
an allowance for doubtful accounts of YEN 1,715 million for
current assets, and an allowance for doubtful accounts of YEN
13,538 million for fixed assets in the consolidated balance sheet
for the current fiscal year.
2) Other information to facilitate the understanding of accounting
estimates
As stated in the above 5. (3) 1) Allowance for Doubtful Accounts,
to provide for doubtful accounts such as trade accounts receivableand loans receivable, provisions are recognized as allowance for
doubtful accounts. The amount of such an allowance for general
receivables is determined based on historical default rates and theamount for specific receivables such as delinquent claims isdetermined as the expected non-recoverable amount based on
recoverability assessment on an individual basis.
In identifying specific loans that are required to be assessed forrecoverability on an individual basis, the Company takes into
consideration the status of delinquency in repaying debts as wellas the financial condition, past operating results, and futurebusiness plans of the debtors.
Among these factors, business plans are subject to uncertainty as
they are affected by unforeseeable changes in businessassumptions.
The non-recoverable amount of specific loans identified isestimated based on the debtors’ financial condition and futurebusiness plans and involves significant judgment of the
management on whether the plans for future revenue andexpenses developed as part of the business plans are feasible,
including whether the impact of unforeseeable changes inbusiness assumptions is properly considered in these plans.
(2) Goodwill and other intangible assets
1) Amounts stated in the consolidated financial statements
The Company has recognized goodwill of YEN 65,604 million
and other intangible assets of YEN 31,789 million in the
consolidated balance sheet for the current fiscal year.
2) Other information to facilitate the understanding of accounting
estimates[English Translation]
6

Goodwill and other intangible fixed assets are amortized in a
regular manner. However, if there is an indication of impairment
for the asset group containing these intangible assets, they need to
be tested to determine whether an impairment loss needs to berecognized by comparing the total amount of undiscounted future
cash flows arising from the asset group with their carrying
amount. If it is determined that an impairment loss needs to berecognized as a result of such a test, the Company writes down
the carrying amount to the recoverable amount and recognizes theamount of write-down as an impairment loss.
An indication of impairment is considered to exist, for example,
when operating activities continue to make losses or when there
has been or there is expected to be a significant deterioration in
the business environment.
The carrying amounts of goodwill and other intangible fixed
assets reflect the consolidated subsidiaries’ excess earnings
power, value of their customer base, etc., based on the
expectations for the future growth of their business as at the timeof the acquisition of each consolidated subsidiary. For this reason,in such cases where the business growth expected at the time ofacquisition of each consolidated subsidiary is not achieved orwhere there has been or there is expected to be a significant
deterioration in the business environment on which the businessplan was based, an indication of impairment is considered to exist
and goodwill and other intangible assets may need to be tested forthe recognition of an impairment loss, even if its operating
activities in which the asset group containing these intangible
fixed assets is used are not making continuous losses.
Additional Information(Accounting estimates of the impact of the COVID-19 pandemic)
The Company has developed accounting estimates in such areas as
impairment accounting for fixed assets and allowance for doubtful accounts
based on the assumption that the effect of the COVID-19 pandemic will lastat least for some time, and has determined that it does not have a significant
impact on its consolidated financial statements at this point. However, as theimpact of COVID-19 is subject to a number of uncertain elements, theGroup’s financial condition and operating results from the next year onward
may be significantly affected.
Notes to Consolidated Balance Sheet
1.

Cash on hand and in banks, and “Other” in Investments and others
Under certain provisions on sales agreements for investment securities that
apply to certain consolidated subsidiaries, restrictions are imposed on theuse of part of cash on hand and in banks (YEN 340 million) and other (YEN
10 million) in investments and others.

2.

Cash Deposits for Armored Car Services and Short-term Bank Loans, andDeposits Received for Armored Car Services
For financial institutions, the Company and some of the domestic
consolidated subsidiaries provide cash collection from and cash filling tocash dispensers located outside of financial institution facilities, and cash
collection and delivery. The balance of cash deposits for armored car
services includes cash on hand and cash in banks representing a total of
YEN 20,261 million connected with cash filling services, which is restricted
in use by the Group. The short-term bank loan balance includes YEN 2,767
million financed for the cash filling services.

[English Translation]
7

The balance of cash deposits for armored car services includes YEN 19,314
million connected with cash collection administration services, which is also
restricted in use by the Group. Also, the short-term bank loan balance
includes YEN 16,749 million financed for the cash collection administration
services.
The balance of cash deposits for armored car services includes cash on handand cash in banks representing a total of YEN 99,313 million connectedwith cash collection and delivery services, which is restricted in use by theGroup and also the balance of deposits received for armored car services
includes deposits received representing a total of YEN 99,295 million
connected with cash collection and delivery services.
3. Assets Pledged as Collateral and Collateral-related Liabilities:(1) Assets Pledged as Collateral(Millions of Yen)

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

1,356
35
707
18,66423,980
818
1,579
594
47,737(2) Collateral-related Liabilities(Millions of Yen)

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

1,201
398
3,878
7,608
13,087

In addition to the above liabilities, short-term loans receivable, investment
securities and long-term loans receivable are pledged as collateral for the
debts of affiliates and other debts.
4. Change of purpose of owning real estate for sale in process
YEN 5,279 million of real estate for sale in process was transferred to
Buildings and improvements and Land due to change to purpose of owning.
5. Accumulated Depreciation of Tangible Assets
YEN 539,317 million
6.

Investment in Non-Consolidated Subsidiaries and Affiliates:(Fixed assets)
Investment securities (stocks)
YEN 58,761 million

7.

Contingent Liabilities:
Guarantees of liabilities of entities and individuals
YEN 371 million

Notes to Consolidated Statement of Income
1.

Write-down on Real Estate Inventories Included in Cost of Revenue(including write-down on work in process for real estate inventories)
YEN 20 million[English Translation]
8

2. Amortization of Goodwill in Extraordinary losses
Goodwill was amortized pursuant to Paragraph 32 of the “Practical
Guidelines for Capital Consolidation Procedures in Consolidated Financial
Statements” (Japanese Institute of Certified Public Accountants (JICPA),
last revised February 16, 2018, Accounting System Committee Report No.
7)
Notes to Consolidated Statement of Changes in Net Assets
1.

Items Related to Issued Shares and Treasury Stocks

Issued shares
Common stocks
Treasury stocks
Common stocks

Number of shares atthe beginning of the
fiscal year

Increase in thenumber of shares in
the fiscal year

Decrease in thenumber of shares in
the fiscal year

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

233,293,998

1,928

-

233,295,926

15,033,588

977-

15,034,565(Outline of reasons for change)
The increase of 1,928 in the number of common stocks of issued shares isdue to the issuance of restricted shares.
The increase of 977 in the number of common stocks of treasury stocks isdue to the purchase of shares constituting less than one unit.
2. Items Related to Dividends(1) Amount of Dividends Paid
Resolution

Classes ofSharesTotal amount ofcash dividend(Millions of Yen)

Cash dividend pershare(Yen)Record date

Effective dateOrdinary General
Meeting of
Shareholders
on June 25, 2020

Common stock

18,55285

March 31, 2020

June 26, 2020

Board of Directors
Meeting on
November 9, 2020

Common stock

18,55285

September 30,
2020

December 7,
2020(2) Of the dividends whose record date belongs to the current fiscal year, thefollowing are those dividends whose effective date belongs to the next fiscal
year.
The matters planned to be resolved on the general meeting of shareholders
are as follows:
Resolution

Classes ofShares

Source ofdividend

Total amount ofcash dividend(Millions of
Yen)

Cash
dividend per
share
(Yen)

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June25, 2021

Commonstock

Retainedearnings

18,55285

March 31,2021

June 28,
2021

Notes to Financial Instruments
1.

Items Related to Status of Financial Instruments
The Group (excluding its insurance services segment) raises necessary
funds, with the aim of establishing “Social System Industry,” by means ofprocuring funds from markets and borrowing money from financial
institutions. The Group also holds financial instruments for promoting its
business and investment. Derivatives are primarily used for averting market
risks associated with loans, etc., and it is the Group’s policy not to perform
speculative transactions.

[English Translation]
9

The Group’s insurance services segment manages funds using financial
instruments for the purpose of safely and carefully holding and managing
insurance premiums received from policyholders for underwriting insurance
policies as a source of funds for paying for future insurance claims. As thefinancial instruments in which the Group’s insurance services segment
invests are exposed to market risks including interest rate fluctuation risks,
the Group’s insurance services segment performs asset-liability
management (ALM) to prevent any adverse impact of such risks fromarising.
2.

Items Related to Fair Values of Financial Instruments etc.
The amounts recognized on the consolidated balance sheet, fair values andcorresponding differences as of March 31, 2021 are listed below. Items
whose fair value has been deemed extremely difficult to identify are notincluded in the table below. (See Note 2)(Millions of Yen)

(1)Cash on hand and in banks(2)Cash deposits for armored car services(3)Notes and accounts receivable, trade(4)Due from subscribers(5)Short-term investments and investment
securities(i) Held-to-maturity debt securities(ii) Investment securities in affiliates(iii) Available-for-sale securities(6)Lease receivables and investment inleased assets(7)Short-term loans receivable
Allowance for doubtful accounts(8)Long-term loans receivable
Allowance for doubtful accounts (*1)(9)Lease deposits
Total assets(1)Notes and accounts payable, trade(2)Bank loans(3)Payables - other(4)Accrued income taxes(5)Deposits received for armored car
services(6)Straight bonds(7)Long-term loans(8)Guarantee deposits received
Total liabilities
Derivative transactions (*2)(i) Hedge accounting not applied(ii) Hedge accounting applied
Total derivative transactions

Amountrecognized on the
consolidatedbalance sheet

Fair value

Difference

499,247
138,889
132,886
39,980499,247
138,889
132,886
39,980-11,853
48,834
209,989
41,511

13,194
126,842
209,989
41,4981,340
78,007
(13)

3,053
3,053
33,301(12,828)
20,473
16,4581,163,180
42,85833,80642,21523,440
119,334

3,053-

20,525
16,392
1,242,501
42,85833,80642,21523,440
119,334

52(65)
79,320-4,338
10,444
4,102
280,541

4,338
10,442
4,104
280,540

(0)
(1)
1
(0)

-

<0>
<0>

(0)
(0)

[English Translation]10

*1 Allowance for doubtful accounts for loans receivable is deducted.
*2 Net claims and obligations arising from derivative transactions are shown as net values. Items
for which the total is a net obligation are shown in parentheses < >.

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

[English Translation]11

(7) Long-term loans
These items are stated at present value calculated by discounting the sum of
the principal and interest at the interest rate assumed when a new similar debt
is taken on.
(8) Guarantee deposits received
Guarantee deposits received are stated at present value calculated bydiscounting the future cash flow at risk-free interest rate.
Derivative transactions:
Derivatives are stated at the price presented by the financial institution withwhich the Group has concluded an agreement.
(Note 2) Financial instruments whose fair value is deemed extremely difficult to
identify(Millions of Yen)
Amount recognizedon the consolidated balance
sheet

Item
Unlisted stock (*1)

4,326

Unlisted stock of affiliates (*1)

9,927Investments in limited
investment, etc. (*1)

partnerships

for

8,771

Deposit from business activities (*2)

26,592*1 Not included in “(5) Short-term investments and investment securities” due to lack ofmarket price and extreme difficulty in identifying fair value.
*2 Not included in “(8) Guarantee deposits received” because reasonable estimation of cash
flow is deemed extremely difficult due to lack of market price and difficulty in calculating
the effective depositing period.

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

Fair value at theend of the fiscal
year

Office buildings

41,592

2,427

44,02080,412

Medicalfacilities

54,285(1,548)52,73762,428

Other

8,424

4,313

12,73814,120

Total

104,302

5,193

109,495

156,961[English Translation]
12

(Note 1) The amount recognized on the consolidated balance sheet equals the acquisition costless accumulated depreciation and accumulated impairment loss.
(Note 2) A major amount of increase in “Other” item is YEN 5,279 million, which is a transfer
of real estate for sale in process due to change of purpose of owning such real estate.
(Note 3) The fair value at the end of the current fiscal year is, in the case of major properties,
the amount based on real-estate appraisal by an external real-estate appraiser, and in
the case of other properties, the amount calculated in-house based on the Real EstateAppraisal Standard. However, if no significant fluctuations have occurred in a certain
valuation or an index that is deemed to properly reflect the market price since theacquisition of the property from a third party or the most recent external valuation, thefair value is based on such valuation or the amount adjusted by using the index.

Profit or loss on rental properties and other real estate for the fiscal year ended
March 31, 2021 is as follows:

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

Rental income

Rental expenses

Office buildings

3,583

1,542

2,040

(23)

Medicalfacilities

6,960

3,323

3,636

-

Other

457

214

242

97

Total

11,001

5,081

5,920

73

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

Notes to Deferred Income Tax Accounting
1. The Significant Components of Deferred Income Tax Assets and Deferred
Income Tax Liabilities:
Deferred income tax assets:
Investment deposits by policyholders, unearned premiums and other insurance
liabilities
Net defined benefit liability
Eliminations of unrealized gain
Accrued bonuses
Allowance for doubtful accounts
Impairment loss
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Write-down on fixed assets
Operating loss carryforwards
Other
Gross deferred income tax assets
Valuation allowance (*)
Total deferred income tax assets[English Translation]
13(Millions of Yen)
13,822
6,435
6,021
5,654
5,035
4,970
4,767
4,695
2,500
14,254
68,159(15,791)
52,367

Deferred income tax liabilities:
Net defined benefit asset
Unrealized gains on securities
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (intangible assets)
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (other fixed assets)
Other
Total deferred income tax liabilities
Net deferred income tax assets(11,836)(8,491)(7,372)(4,917)(960)(1,017)(34,596)
17,771(*) Valuation allowance declined by YEN 2,682 million. This is mainly because valuation
allowance related to operating loss carryforwards at a consolidated subsidiary fell by YEN
2,253 million.

2. Summary of the Reconciliation between the Statutory Tax Rate and the
Effective Tax Rate after the Application of Deferred Income Tax
Accounting
Statutory tax rate:(Reconciliation )Amortization of goodwill
Unrealized gains on investments in affiliated securities
Per capita levy of corporate inhabitant tax
Utilization of operating loss carryforwards
Research and development tax credits
Difference in tax rate with consolidated companies
Adjustment of loss (gain) on sales of shares of subsidiaries and affiliates
Increase in valuation allowance
Permanently non-taxable expenses such as entertainment expenses
Other
Effective tax rate after the application of deferred income tax accounting

30.5 (%)
2.7
(1.5)
0.8
(0.8)
(0.8)
0.6
0.6
0.5
0.4
0.3
33.3 (%)

Notes to Retirement Benefits
1.

Outline of the Retirement Benefit Plan Adopted:
Employees of the Company and its consolidated domestic subsidiaries
whose services are terminated are, under most circumstances, eligible forlump-sum severance indemnities and/or eligible for pension benefits.
The Company and its domestic consolidated subsidiaries with the sameretirement benefit plan have adopted a severance indemnity plan and adefined contribution pension plan, and have also implemented a matching
contribution plan since July 2012. The method of calculating the severance
indemnity under the severance indemnity plan is to pay out to theemployees an amount equal to a certain percentage of their annual income
over their period of service, plus interest which is calculated as the 3-year
average yield of applicants for 10-year government bonds. The defined
contribution pension plan was established in April 2003, a portion
equivalent to 20 % of the severance indemnity plan so far accumulated wastransferred to the new plan, and a specified percentage of annual income iscontributed thereto. The Company transferred an additional portion of theseverance indemnity plan funds to the defined contribution pension plan in[English Translation]
14

April 2005, and accordingly, the ratio of the accumulated amount in theseverance indemnity plan and the amount of contributions to the defined
contribution pension plan, including the past reserve, changed to 70 % and
30 %, respectively.
The majority of the consolidated overseas subsidiaries have adopted avariety of pension plans that essentially cover all employees. Most of theseplans are defined contribution pension plans.
In defined benefit pension plans and lump-sum severance indemnity plans
for some consolidated subsidiaries, net defined benefit liabilities andretirement benefit expenses are calculated using the simplified method.
2.

Defined Benefit Plans(1) Reconciliation of beginning and ending balances of retirement benefit
obligations (excluding those pertaining to plans to which the simplified
method is applied)
Beginning balance of retirement benefit obligations
Service cost
Interest cost
Actuarial gains and losses incurred
Retirement benefits paid
Ending balance of retirement benefit obligations(Millions of Yen)
99,762
5,825
385
3,184
(4,929)104,227(2) Reconciliation of beginning and ending balances of plan assets (excluding
those pertaining to plans to which the simplified method is applied)(Millions of Yen)
111,355
3,140
8,956
5,300
(3,990)124,762

Beginning balance of plan assets
Expected rate of return
Actuarial gains and losses incurred
Contributions from the employer
Retirement benefits paid
Ending balance of plan assets(3) Reconciliation of beginning and ending balances of net defined benefit
liability pertaining to plans to which the simplified method is applied
Beginning balance of net defined benefit liability
Retirement benefit expenses
Retirement benefits paid
Contributions to the plan
Decrease due to exclusion of subsidiaries fromconsolidation
Other
Ending balance of net defined benefit liability(Millions of Yen)
3,513
543
(256)
(134)
(581)
17
3,102

(4) Reconciliation of ending balances of retirement benefit obligations and plan
assets with net defined benefit liability and net defined benefit asset
recognized in the consolidated balance sheet
Retirement benefit obligations of funded plans
Plan assets
Retirement benefit obligations of non-funded plans
Net amount of assets and liabilities recognized in the
consolidated balance sheet[English Translation]
15(Millions of Yen)
89,445(127,387)(37,941)
20,507(17,433)

Net defined benefit liability
Net defined benefit asset
Net amount of assets and liabilities recognized in the
consolidated balance sheet(Millions of Yen)
22,098(39,532)(17,433)(Note) Including plans to which the simplified method is applied.
(5) Retirement benefit expenses and their breakdown
Service cost
Interest cost
Expected rate of return
Amortization of actuarial gains and losses
Retirement benefit expenses calculated using thesimplified method
Retirement benefit expenses pertaining to defined
benefit plans(Millions of Yen)
5,825
385
(3,140)
(415)
543
3,197

(6) Remeasurements of defined benefit plans
The breakdown of the amount recognized in remeasurements of defined
benefit plans (before the tax effect) is as follows:(Millions of Yen)
(6,690)(6,690)

Unrecognized actuarial gains and losses
Total(7) Matters concerning actuarial assumptions
Major actuarial assumptions applied at the end of the current fiscal year
Discount rateLong-term expected rate of return
3.

Mainly 0.4%
Mainly 3.0%

Defined contribution plans
The amount of contribution required for the Company and its consolidated
subsidiaries is YEN 2,275 million in total.

Notes to Asset Retirement Obligation
1. Asset retirement obligations recognized in consolidated balance sheet
Footnote information of asset retirement obligations recognized in the
consolidated balance sheet is omitted as they are immaterial.
2. Asset retirement obligations not recognized in consolidated balance sheet
A certain building of a consolidated subsidiary must be restored to its
original state under the building lease agreement upon returning the building
at the expiry of the lease. However, the Company does not plan to relocatefrom the building in its business strategies and it is assumed to be used until
the building is demolished through the renewal of the agreement. In cases
where the building is demolished, it is not expected to execute thecontractual obligation to restore the building to its original state. For thisreason, though the Company tried to establish best estimates, considering
evidence available as at the closing date, asset retirement obligations havenot been recognized with respect to such obligations, since it isimpracticable to forecast the probability regarding the scope and the amountof asset retirement obligations.

[English Translation]
16

Notes to Business Combination
Business Combination by Share Acquisition
1. Acquisition of ADT SERVICES (M) SDN. BHD.
1. Outline of Business Combination(i) Name and Business Description of the Acquired Company(a) Name
ADT SERVICES (M) SDN. BHD.
(b) Business Description
Electronic Security Services(ii) Purpose of Acquisition
ADT SERVICES (M) SDN. BHD. provides state-of-the-art security
systems to a wide range of sectors in Malaysia, from homes and small andmedium-sized businesses to banks, government agencies and large
corporations, offering safety and peace of mind to individuals, homes andbusinesses. By leveraging the synergy between SECOM Group companies
and the new subsidiary, we aim to further accelerate the expansion of ouroverseas businesses and enhance our corporate value.
(iii) Date of Business Combination
September 1, 2020(iv) Legal Form of Business Combination
Share acquisition(v) Name of Company after Business Combination
ADT SERVICES (M) SDN. BHD.
(vi) Percentage of Voting Rights Acquired
100%(vii) Principal Reason for Determining Acquiring Company
Since the Company delivered the consideration of the acquired shares
which consisted of cash only, the Company is determined as theacquiring company.
2. Period Included in Consolidated Financial Statements
October 1, 2020 – December 31, 2020
3. Acquisition Cost of Company Subject to Business Combination andBreakdown Thereof
Consideration for Acquisition
Cash on hand and in banks
5,113 million yen
Acquisition Cost
5,113 million yen
4. Details and Amount of Acquisition Related Costs
Advisory fees etc.
15 million yen
5. Amount and Cause of Goodwill, Amortization Method and Period(i) Amount of Goodwill
4,475 million yen(ii) Cause of Goodwill
Estimated future excess earning power being expected based on the futurebusiness operation.
(iii) Amortization Method and Period
Amortization by the straight-line method over 10 years
Parts of goodwill are recognized in extraordinary losses as amortization of
goodwill in accordance with the provisions of Paragraph 32 of the"Practical Guidelines for Capital Consolidation Procedures in[English Translation]
17

Consolidated Financial Statements" (JICPA, last revised February 16,
2018, Accounting System Committee Report No. 7).
6. Amount of Assets Acquired and Liabilities Assumed on the Day of Business
Combination
Current assets
665 million yen
Fixed assets
94 million yen
Total assets
759 million yen
Current liabilities
Long-term liabilities
Total liabilities

105 million yen
15 million yen
121 million yen

2. Acquisition of ADT INTEGRATED SECURITY SOLUTIONS PTE. LTD.
1. Outline of Business Combination(i) Name and Business Description of the Acquired Company(a) Name
ADT INTEGRATED SECURITY SOLUTIONS PTE. LTD.
(b) Business Description
Electronic Security Services(ii) Purpose of Acquisition
ADT INTEGRATED SECURITY SOLUTIONS PTE. LTD. provides
state-of-the-art security systems to a wide range of sectors in Singapore,from homes and small and medium-sized businesses to banks, government
agencies and large corporations, offering safety and peace of mind toindividuals, homes and businesses. By leveraging the synergy between
SECOM Group companies and the new subsidiary, we aim to further
accelerate the expansion of our overseas businesses and enhance ourcorporate value.
(iii) Date of Business Combination
October 1, 2020(iv) Legal Form of Business Combination
Share acquisition(v) Name of Company after Business Combination
ADT INTEGRATED SECURITY SOLUTIONS PTE. LTD.
(vi) Percentage of Voting Rights Acquired
100%(vii) Principal Reason for Determining Acquiring Company
Since the Company delivered the consideration of the acquired shares
which consisted of cash only, the Company is determined as theacquiring company.
2. Period Included in Consolidated Financial Statements
As the deemed acquisition date is December 31, 2020, and the length ofperiod between the acquisition date and the consolidated closing date does
not exceed three months, only the balance sheet is consolidated in thecurrent fiscal period; the business results of the acquired company are notincluded.
3. Acquisition Cost of Company Subject to Business Combination andBreakdown Thereof
Consideration for Acquisition
Cash on hand and in banks
1,717 million yen
Acquisition Cost
1,717 million yen[English Translation]18

4. Details and Amount of Acquisition Related Costs
Advisory fees etc.
11 million yen
5. Amount and Cause of Goodwill, Amortization Method and Period(i) Amount of Goodwill
1,567 million yen(ii) Cause of Goodwill
Estimated future excess earning power being expected based on the futurebusiness operation.
(iii) Amortization Method and Period
Amortization by the straight-line method over 10 years
Parts of goodwill are recognized in extraordinary losses as amortization of
goodwill in accordance with the provisions of Paragraph 32 of the"Practical Guidelines for Capital Consolidation Procedures inConsolidated Financial Statements" (JICPA, last revised February 16,
2018, Accounting System Committee Report No. 7).
6. Amount of Assets Acquired and Liabilities Assumed on the Day of Business
Combination
Current assets
216 million yen
Fixed assets
29 million yen
Total assets
245 million yen
Current liabilities
Total liabilities

95 million yen
95 million yen

3. Acquisition of ADT Alarm Monitoring Hong Kong Limited
1. Outline of Business Combination(i) Name and Business Description of the Acquired Company(a) Name
ADT Alarm Monitoring Hong Kong Limited(b) Business Description
Electronic Security Services(ii) Purpose of Acquisition
ADT Alarm Monitoring Hong Kong Limited provides state-of-the-art
security systems to a wide range of sectors in Hong Kong, from homes andsmall and medium-sized businesses to banks, government agencies andlarge corporations, offering safety and peace of mind to individuals, homes
and businesses. By leveraging the synergy between SECOM Group
companies and the new subsidiary, we aim to further accelerate theexpansion of our overseas businesses and enhance our corporate value.
(iii) Date of Business Combination
February 5, 2021(iv) Legal Form of Business Combination
Share acquisition(v) Name of Company after Business Combination
ADT Alarm Monitoring Hong Kong Limited(vi) Percentage of Voting Rights Acquired
100%(vii) Principal Reason for Determining Acquiring Company
Since the Company delivered the consideration of the acquired shares
which consisted of cash only, the Company is determined as theacquiring company.
2. Period Included in Consolidated Financial Statements[English Translation]
19

As the deemed acquisition date is March 31, 2021, only the balance sheet isconsolidated in the current fiscal period; the business results of the acquiredcompany are not included.
3. Acquisition Cost of Company Subject to Business Combination andBreakdown Thereof
Consideration for Acquisition
Cash on hand and in banks(Payables-other included) 1,377 million yen
Acquisition Cost
1,377 million yen
4. Details and Amount of Acquisition Related Costs
Advisory fees etc.
24 million yen
5. Amount and Cause of Goodwill, Amortization Method and Period(i) Amount of Goodwill
1,263 million yen(ii) Cause of Goodwill
Estimated future excess earning power being expected based on the futurebusiness operation.
(iii) Amortization Method and Period
Amortization by the straight-line method over 10 years
Parts of goodwill are recognized in extraordinary losses as amortization of
goodwill in accordance with the provisions of Paragraph 32 of the"Practical Guidelines for Capital Consolidation Procedures inConsolidated Financial Statements" (JICPA, last revised February 16,
2018, Accounting System Committee Report No. 7).
6. Amount of Assets Acquired and Liabilities Assumed on the Day of Business
Combination
Current assets
225 million yen
Total assets
225 million yen
Current liabilities
Total liabilities

111 million yen
111 million yen

Business Divestiture
We transferred all of the issued shares of our consolidated subsidiary, Secom
Home Life Co., Ltd. (hereinafter “Secom Home Life”), to ANABUKIKOSAN INC. on December 22, 2020.
Accompanying this transfer, Secom Home Life and its subsidiary, Secom
Home Life Kanri Co., Ltd. (hereinafter, “Home Life Kanri”) are excluded
from the consolidated subsidiaries of SECOM CO., LTD.
1. Outline of Business Divestiture(i) Name of the Company Purchasing the Shares
ANABUKI KOSAN INC.
(ii) Description of the Business divested(a) Name
Secom Home Life Co., Ltd.
(b) Business Description
Development, sales, brokerage and renovation of condominiums(iii) Purpose of Divestiture
Since Eclairer Co., Ltd. (presently Secom Home Life) joined the SECOM
group in 1997, with the aim of pursuing safety and peace of mind for living
environment, which is one of the necessities of life, “clothing, food and[English Translation]
20

housing,” we have developed and supplied condominiums placing safety
and peace of mind as the highest priority, capitalizing our group businessnetwork. Also, Home Life Kanri, a subsidiary of Secom Home Life, hasdelivered safety and peace of mind for living environment through theprovision of management services for buildings and condominiums with
“SECOM’s Quality Standard.”
SECOM CO., LTD. concluded the transfer of the businesses of Secom
Home Life and Home Life Kanri to a real estate company is the best option
for further growth of both companies and decided to transfer all of theshares of Secom Home Life to ANABUKI KOSAN INC.
(iv) Date of Divestiture
December 22, 2020(v) Other Matters Concerning the Transaction, including Legal Form
Share transfer in which the consideration received is only cash or otherproperty
2. Outline of Accounting(1) Amount of Gain or Loss on Transfer
Net loss on sales of investment securities in subsidiaries and affiliates
2,767 million yen(2) Book Value of Assets and Liabilities of Divested Business andBreakdown Thereof
Current assets
26,747 million yen
Fixed assets
1,648 million yen
Total assets
28,395 million yen
Current liabilities
Long-term liabilities
Total liabilities

23,511 million yen
644 million yen
24,156 million yen(3) Accounting Process
The difference between the book value of the transferred shares on aconsolidated basis and the transfer price has been recorded as net loss on
sales of investment securities in subsidiaries and affiliates inextraordinary losses.
3. Reportable Segment to which Divested Business was DesignatedNot designated as a reportable segment. Classified in Real estate and otherservices.
4. Approximate Amount of Profit and Loss of Divested Business Recorded in theConsolidated Statement of Income for the Current Fiscal Year
Revenue
13,129 million yen
Operating Profit
327 million yen
Notes to Per-Share Information
Net assets per share:
Net income per share:

YEN
YEN

[English Translation]
21

4,958.18
342.17

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

Valuation Policies and Methods for Assets(1) Valuation Policies and Methods for Securities
1) Held-to-maturity debt securities
Amortized cost method
2) Investment Securities in Subsidiaries and Affiliates
At cost, based on the moving average method
3) Available-for-sale Securities
Securities with fair value
Stock and beneficiary securities: At fair value based on the average
market price in one month prior to the fiscal year-end.
Others: At fair value based on market price at fiscal year-end
Net unrealized gains and losses of securities are reported directly in net
assets. The cost of securities sold is calculated by the moving averagemethod.
Securities with no fair value
At cost, based on the moving average method or amortized cost
method.
(2) Valuation Policies and Methods for Inventories
Merchandise and supplies are stated at cost determined by the moving
average method (or at the net realizable value (NRV) calculated by writing
down the book value to reflect a decrease in the NRV).
2.

Depreciation and Amortization of Depreciable and Amortizable Fixed
Assets(1) Tangible Assets: (except for leased assets)
1) Security equipment and control stations
Security equipment and control stations are depreciated over theiraverage estimated useful lives (5-8 years) by the declining-balancemethod.
2) Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line method.
Their main useful lives are as follows:
Buildings and improvements: 33-50 years(2) Intangible Assets
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by the straight-line
method based on the useful lives within the Company (5 years).
(3) Leased Assets
1) Leased assets related to ownership-transfer finance lease transactions
Depreciated, using the same depreciation method applied to fixed
assets in possession.
2) Leased assets related to non-ownership-transfer finance leasetransactions[English Translation]
22

Depreciated, using the straight-line method over a useful life equal to
the lease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on or
before March 31, 2008 are treated using the method applicable tooperating lease transactions.
(4) Long-term Prepaid Expenses:
Long-term prepaid expenses are amortized by the straight-line method.
With respect to the installation costs related to security equipment at thecustomer premises, any portion exceeding the amount received from thecustomer is included in “long-term prepaid expenses” and amortized by
the straight-line method over the contract period (5 years).
3.

Basis for Significant Allowances(1) Allowance for Doubtful Accounts
To prepare for losses from bad debts such as losses on trade receivables
and loans, the allowance for doubtful accounts provides an estimatedamount of uncollectables. It is determined based on historical loss ratewith respect to ordinary accounts, and an estimate of uncollectableamounts, respectively determined by reference to specific doubtful
accounts from customers who are experiencing financial difficulties.
(2) Accrued Bonuses
Accrued bonuses are provided for the bonus payments to employees, at
an amount incurred during the current fiscal year.
(3) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company
provides an amount of accrued pension and severance costs and prepaid
pension and severance costs at the end of the current fiscal year, based on
the estimated amount of projected benefit obligation and plan assets as ofthe end of the current fiscal year.
In calculating retirement benefit liabilities, the benefit formula basis isadopted to attribute the estimate amount of retirement benefit to thecurrent fiscal year end.
Prior service liability is recognized as profit or loss in the year ofoccurrence.
Actuarial gains and losses are amortized from the following fiscal year ofoccurrence, using the straight-line method over certain years within the
average remaining service period (10 years).
4.

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

5.

Other Significant Accounting Policies(1) Accounting for retirement benefits
The accounting for unrecognized actuarial gains and losses to retirement
benefits is different from the accounting for those items in the consolidated
financial statements.
(2) Accounting for Consumption Tax etc.

[English Translation]23

Tax-exclusive method is adopted.
Notes on Changes in Presentation Method(Changes in relation to the application of the “Accounting Standard forDisclosure of Accounting Estimates”)
The “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ
Statement No. 31, March 31, 2020) has been applied from the current fiscal year,
and Notes on Accounting Estimates are included in the Notes to
Non-Consolidated Financial Statements.
Notes on Accounting Estimates
1. Investment Securities in Subsidiaries and Affiliated Companies(1) Amounts stated in financial statements
The amount of investment securities in subsidiaries and affiliated companies
of YEN 356,243 million stated in the balance sheet for the current fiscal
year includes investments in unlisted subsidiaries that the Company has
acquired through an acquisition transaction.
(2) Other information to facilitate the understanding of accounting estimates
Shares for which market prices are not available acquired throughinvestments in unlisted subsidiaries are stated in the balance sheet atacquisition costs. If the net asset value of an issuer of these shares is judged
to have declined significantly due to the deterioration in the financial
condition of the issuer, a valuation loss on these securities needs to berecognized unless the recoverability of the net asset value is supported bysufficient evidence.
In the case where the Company acquires shares of an investee at a price thatis considerably higher than its net assets per share as per its financial
statements reflecting the excess earnings power and the like of the investee,
if the net asset value subsequently declines significantly due to a decline inexcess earnings power and the like, a valuation loss on the investment in theinvestee needs to be recognized even if there has been no deterioration in its
financial condition.
The acquisition cost of shares pertaining to the investment in unlisted
subsidiaries acquired through an acquisition reflects their excess earnings
power, value of their customer base, etc., based on the expectations for the
future growth of their business as at the time of the acquisition of eachsubsidiary. For this reason, if the excess earnings power and the like has
been impaired because the business growth expected at the time ofacquisition is not achieved and/or there has been or there is expected to be asignificant deterioration in the business environment on which the businessplan was based, a valuation loss may need to be recognized on investmentsin these subsidiaries, even if there has been no deterioration in theirfinancial condition since the acquisition.
Notes to the Non-Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services and Short-term Bank Loans
For financial institutions, the Company provides cash filling to and cash
collection from cash dispensers located outside of financial institution
facilities.
The balance of cash deposits for armored car services includes cash on handand cash in banks of representing a total of YEN 17,981 million connectedwith cash filling services, which is restricted in use by the Company. The[English Translation]
24

short-term bank loan balance includes YEN 2,767 million financed for the
cash filling services.
The balance of cash deposits for armored car services includes YEN 19,292
million connected with cash collection administration services, which is also
restricted in use by the Company. Also, the short-term bank loan balance
includes YEN 16,749 million financed for the cash collection administration
services.
2.

Assets Pledged as Collateral and Collateral-related Liabilities
Assets Pledged as Collateral(Millions of Yen)
Short-term loans receivable
35
Investment securities
1,358
Investment securities in subsidiaries and affiliates
45
Long-term loans receivable
594
Total
2,033
Collateral-related Liabilities
Short-term loans receivables, investment securities, investment securities
in subsidiaries and affiliates, and long-term loans receivable are pledged
as collateral for the debts of subsidiaries and affiliates and other debts.

3.

Accumulated Depreciation of Assets
Accumulated depreciation of tangible assets: YEN 301,865 million

4. Contingent Liabilities(1) Guarantees
Liabilities of the below entities and employees are guaranteed.
Alive Medicare Co., Ltd.
Secom Aktif Güvenlik Yatirim A.S.
Secom Fort West Co., Ltd.
Purchasers of real estate the Company sold
Employees
Purchasers of merchandises by leasingtransactions etc.
Others
Total(Millions of Yen)
1,125
774
238
201
191
34
10
2,575

(2) Net Assets Maintaining Agreement
The Company entered into a net assets maintaining agreement with Secom
General Insurance Co., Ltd., under which the Company is obligated toprovide funds to Secom General Insurance Co., Ltd. if and when the net
assets of Secom General Insurance Co., Ltd. become lower than thespecified amount or its current assets necessary for the payment of its
liabilities are insufficient. The total liabilities of Secom General InsuranceCo., Ltd. at the end of the current fiscal year are YEN 193,154 million,
including YEN 181,604 million of investment deposits by policyholders,
unearned premiums and other insurance liabilities, and the total assets are[English Translation]
25

YEN 228,916 million.
However, this agreement is not construed as the Company’s guarantee withrespect to payment obligations of Secom General Insurance Co., Ltd. Secom
General Insurance Co., Ltd. maintained net assets above the required level,
and its current assets were not insufficient at the end of the current fiscal
year.
5.

Financial Receivables/Payables to Subsidiaries and Affiliates (excluding
those separately presented)(Millions of Yen)
28,739
Short-term receivables
62,646Long-term receivables
7,448
Short-term payables
2,631

Long-term payables
Notes to Non-Consolidated Statement of Income

1. Operating Transactions and Non-operating Transactions with Subsidiaries
and Affiliates(Millions of Yen)
Operating transactions (Revenue)
17,604
Operating transactions (Expense)
43,656
Non-operating transactions (Income)
14,650Notes to Non-Consolidated Statements of Changes in Net Assets
Items Related to Classes and Total Number of Treasury Stocks(Unit: 1 share)
Classes ofsharesCommon stock

Number ofshares at the
beginning of
the fiscal year
15,033,588

Increase in
number ofshares in thefiscal year
977

Decrease in
number ofshares in thefiscal year

Number ofshares at the endof the fiscal year-

15,034,565(Outline of reasons for change)
The increase of 977 in the number of common stocks is due to the purchaseof shares constituting less than one unit.
Notes to Deferred Income Tax Accounting
1. The Significant Components of Deferred Income Tax Assets and Deferred
Income Tax Liabilities:
Deferred income tax assets:(Millions of Yen)
Loss on impairment of investment securities in subsidiaries and affiliates
7,043
Impairment loss
2,263
Accrued bonuses
2,049
Write-down on fixed assets
1,250
Write-down on inventories
723
Allowance for defined benefit
423
Other
2,565
Gross deferred income tax assets
16,320
Valuation allowance(1,264)
Total deferred income tax assets
15,056[English Translation]
26

Deferred income tax liabilities:
Prepaid pension and severance costs
Other
Total deferred income tax liabilities(7,876)(2,770)(10,647)

Net deferred income tax assets (liabilities)
2.

4,408

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

30.5 (%)
(5.0)
(0.8)
0.7
0.1
(0.0)
25.5 (%)

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

[English Translation]
27

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

Type

Name ofCompany

VotingRightsHeld by theCompany(%)

Subsidiary

Secom
Home Life
Co., Ltd.
(Note 3)-

Loan of funds

Subsidiary

SecomCredit Co.,
Ltd.

100.0

Loan of funds

Subsidiary

Secom
MedicalSystem Co.,
Ltd.

100.0

Loan of funds
Concurrent appointment ofofficers

Subsidiary

Pasco
Corporation

72.1

Loan of funds

Subsidiary

Arai & Co.,
Ltd.

92.5

Loan of funds
Concurrent appointment ofofficers

Subsidiary

At Tokyo
Corporation

50.8

Loan of funds
Concurrent appointment ofofficers

Relationship with the Related
Party[English Translation]
28

Name ofCompany

Transactions

Amount ofTransactions(Millions of
Yen)

Secom Home
Life Co., Ltd.
(Note 3)

Execution of loans(Collection of loans)
Receipt of interests (Note 2)
Waiver of debt (Note 3)

7,480(4,955)
9
4,484

Secom Credit
Co., Ltd.

Execution of loans(Collection of loans)
Receipt of interests (Note 2)

41,370(63,920)
98

Secom Medical
System Co.,
Ltd.

Execution of loans(Collection of loans)
Receipt of interests (Note 2)

8,340(12,494)
385

Pasco
Corporation(Collection of loans)
Receipt of interests (Note 2)(10,900)
1

Arai & Co.,
Ltd.

Execution of loans(Collection of loans)
Receipt of interests (Note 2)

5,650(6,264)214(Collection of loans)
Receipt of interests (Note 2)(4,000)47

At Tokyo
Corporation

Account-

1,800

Long-term loans
receivable

13,150

Short-term loans
receivable

13,190Long-term loans
receivable

25,464--

Short-term loans
receivable

5,851

Long-term loans
receivable

7,772

Long-term loans
receivable

8,200

1. Consumption taxes are not included in the amounts listed above.
2. The interest rates for the loans above are determined, referring to market interest ratesetc.
3. The Company transferred all shares of Secom Home Life Co., Ltd. （currently
ANABUKI HOMELIFE Co., Ltd.） and it is no longer a related party. The
amount of transactions stated herein is the one at the time of the disposition. The
debt was waived prior to the sale of Secom Home Life Co., Ltd. In relation to thewaiver, the Company reversed YEN 1,960 million previously recorded as allowanceand recorded YEN 2,524 million as the loss on debt forgiveness of subsidiaries andaffiliates.

29-

Short-term loans
receivable(Notes)[English Translation]

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

Type

Voting Rights
Held by theCompany(%)

Name of Company

Provision of services

Company whose majority

such as security services

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

Relationship with theRelated Party

Watanabe Pipe Co., Ltd.
(Note 2)

Concurrent appointment

relatives (including itsof an officer

subsidiary)Year-end
Amount ofBalance
Name of Company

Transactions

Transactions

Account(Millions of(Millions of Yen)
Yen)

Accruedservice
Watanabe Pipe Co., Ltd.

Electronic security service(Note 2)and maintenancefee
30
Unearned(Note 3)service
fee
Notes:
1. In the table above, the transaction amount is presented exclusive of consumption taxes
and the ending balance is presented inclusive of consumption taxes.
2. A company 100% of whose voting rights are directly held by a company whose majority
voting rights are held by Mr. Hajime Watanabe, a Director of the Company, and his close
relatives.
3. The transactions are carried out under standard terms and conditions similar to those
applied to arms-length transactions.

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

0

YEN
YEN

[English Translation]
30

3,842.01
274.720