Notice of Convocation
The 46th Ordinary General Meeting of Shareholders

The following is an English translation of the Notice of Convocation of the 46th
Ordinary General Meeting of Shareholders of SECOM CO., LTD. to be held on June27, 2007, 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 and convenience only and without
any warranty as to its accuracy or otherwise.

Table of Contents
Notice of Convocation of The 46th Ordinary General Meeting of Shareholders········[Attached Documents]
Business Report ·············································································································I.
Outline of the Group’s Business ·······································································
1. The Current Business Development and Results of Operations ···················
2. Capital Investments ···························································································
3. Fund Raising ······································································································
4. Issues the Group has to cope with ····································································
5. Trends in Earnings and Assets ·········································································
6.
Matters Concerning Principal Subsidiaries and Other Business
Combinations ····································································································
7. Principal Business of the Group ·······································································
8. Principal Offices of the Group ·········································································
9. Matters Concerning Employees of the Group and the Company ·················
10. Primary Lenders ································································································
11. Other Important Matters Concerning the Group ··········································

1
4
4
4
6
6
6
7
10
11
11
12
12
12

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

Matters Concerning 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 in a Trading Unit ·································································
Major Shareholders ···························································································

13
13
13
13
13
13

III.
1.
2.
3.

Directors and Corporate Auditors·····································································
Names and Titles of Directors and Corporate Auditors ··································
Remuneration of Directors and Corporate Auditors·······································
Outside Corporate Auditors ·············································································

14
14
15
15

IV.
1.
2.
3.
4.

Accounting Auditors ···························································································Name of Accounting Auditors ············································································
Remuneration for Accounting Auditors ··························································
Non-auditing Duties·····························································································
Policy for Decision for Dismissal or Non-reappointment ································

17
17
17
17
17

V.

System under which the Company’s Business is Ensured to be Properly
Executed ··············································································································

18[English Translation]

Consolidated Balance Sheet ························································································
Consolidated Statement of Income ············································································
Consolidated Statement of Changes in Net Assets ···················································
Notes to Consolidated Financial Statements ·····························································
Certified Copy of the Accounting Auditors’ Report (Consolidated) ························
Certified Copy of the Board of Corporate Auditors’ Report····································
Non-Consolidated Balance Sheet ···············································································
Non-Consolidated Statement of Income ····································································
Non-Consolidated Statement of Changes in Net Assets ·············································
Notes to Non-Consolidated Financial Statements ····················································
Certified Copy of the Accounting Auditors’ Report ··················································
Reference Document Concerning the General Meeting of Shareholders ··················(Note) This Table of Contents is for this abridged English translation only, and not the same as thatin the original Japanese documents.

[English Translation]

24
25
26
27
42
43
45
46
47
48
57
58

Stock Exchange Code: 9735
June 8, 2007

Notice of Convocation of
The 46th Ordinary General Meeting of Shareholders
Dear Shareholders:
You are cordially invited to attend the 46th Ordinary General Meeting of Shareholders of
SECOM CO., LTD. (the “Company”).
If you are unable to attend the aforesaid meeting, you are respectfully requested to review
the “Reference Document Concerning the General Meeting of Shareholders” below andexercise your voting right on or before 6:00 p.m., Tuesday, June 26, 2007 (Tokyo time), byeither of the methods stated below: 1[By mail]
Please indicate on the Voting Right Exercise Form enclosed herewith your consent or
dissent to the proposals on the agenda, and return the form to the Company by mail, after
affixing your seal impression thereto.
[Via the Internet]
Please access the designated website for exercising voting rights (http://www.evote.jp/)
from your personal computers by using the “log in ID” and “temporary password” statedon the enclosed Voting Right Exercise Form. Then, please indicate your consent or
dissent to the proposals on the agenda by following the instructions on the display screen.
Yours very truly,
SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo, Japan
By: KANEMASA HARAGUCHI
President and Representative Director

1(Note): Please note that shareholders with addresses outside Japan may not themselves use
these voting procedures. For these shareholders please consult their standing proxies within
Japan as to the exercise of voting rights.

[English Translation]
1

PARTICULARS

1.

Date and Time of the Meeting:
Wednesday, June 27, 2007 at 10:00 a.m.

2.

Place of the Meeting:
HARAJUKU QUEST HALL, on the 3rd floor of HARAJUKU QUEST Building
13-14, Jingumae 1-chome, Shibuya-ku, Tokyo, Japan

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 46th
Fiscal Year (from April 1, 2006 to March 31, 2007) and the Results on the Audits
of Consolidated Financial Statements by the Accounting Auditors and the Board of
Corporate Auditors.
2. Report on the Non-Consolidated Financial Statements for the 46th Fiscal Year(from April 1, 2006 to March 31, 2007).
Matters to be Resolved upon :First Item of Business:

Proposed Disposal of Surplus

Second Item of Business:

Election of Twelve (12) Directors

Third Item of Business:

Election of Four (4) Corporate Auditors

Fourth Item of Business:

Presentation of Retirement Allowance toRetiring Directors[English Translation]2

4.

Matters related to Exercise of Voting Rights:(i) Non-uniform Exercise of Voting Rights

When the shares are owned by multiple owners but are registered in the name of asole shareholder, each owner may want to exercise his/her voting rights independently
from other owners. The law permits non-uniform exercise of voting rights by a registeredshareholder in such a situation. In order to exercise non-uniform voting, the registeredshareholder shall notify the Company to make non-uniform voting and the reason thereof 3days before the general meeting of shareholders.
(ii) Validity of the voting in the event of exercise of voting rights by a shareholder both via

return mail (Voting Right Exercise Form) and via the Internet
In the event that a shareholder exercises voting rights both via return mail (Voting
Right Exercise Form) and via the Internet, the Company will consider the exercise of
voting rights via the Internet to be valid.
(iii) Validity of the voting in the event of exercise of voting rights by a shareholder via theInternet more than once.
In the event that a shareholder exercises voting rights via the Internet more than once,
the Company will consider the last exercise of voting rights to be valid.

(Notes)If you plan to attend the meeting, please submit the enclosed Voting Right Exercise
Form to the receptionist at the meeting.
(Notice)
If there occurs any changes in the contents of the Reference Document Concerning theGeneral Meeting of Shareholders, the Business Report, the Consolidated Financial Statements
for the 46th Fiscal Year (from April 1, 2006 to March 31, 2007) , the Results on the Audits ofConsolidated Financial Statements by the Accounting Auditors and the Board of Corporate
Auditors, and the Non-Consolidated Financial Statements for the 46th Fiscal Year (from April
1, 2006 to March 31, 2007), the Company will announce such change on the Company's
website (http://www.secom.co.jp/).

[English Translation]
3

Attached Documents
Business Report (Fiscal Year Ended March 31, 2007)
I. Outline of the Group’s Business1. The Current Business Development and Results of Operations
During the fiscal year ended March 31, 2007, the Japanese economy continued to expand at amoderate pace as evidenced by rising employment and an increase in capital investment
stemming from improved corporate earnings. However, consumer spending lacked robustness.
Meanwhile, the recent years’ declining public safety levels and frequent disasters have
driven society’s safety and security needs more and more diverse and sophisticated.
In this situation, with a view to fully developing the “Social System Industry” vision, we,the SECOM Group (the “Group”) strove to respond to society’s needs for safety and security
by enhancing Security Services with the introduction of new services and products, theopening new offices and the relocation of older facilities, and expanding the scope of our othersegments—Medical Services, Insurance Services, Geographic Information Services,
Information and Communication Related and Other Services and Fire Protection Services. The
last service segment was added to the Group’s business at the end of the third quarter.
Our Security Services mainly cover centralized systems (on-line security systems) for
business customers and private residences, static guard services, armored car services andsales of security products. For business customers, we aimed at increasing subscribers toprovide various on-line security systems, designed to suit the building size or the application,
as well as sales of security products, including access-control systems and surveillancecameras. For residential customers, we reinforced our SECOM Home Security systems to give
users a choice of four types of optimal systems, which are tailored to the size and structure ofresidences. This improved service has enabled us to respond to the requests and needs of abroader customer base than ever. As it will gradually become mandatory to install fire alarms
in residences in accordance with the revised Fire Service Law, we launched a new Home Fire
Sensor.
Furthermore, in October 2006, SECOM Co., Ltd.(the Company) acquired 25.47% of theissued shares of Toyo Tec Co., Ltd. (listed on the Second Section of the Osaka Securities
Exchange), a company engaged in security services mainly in the Kansai area. This will
strengthen our long-standing cooperative relationship with Toyo Tec.
Our Medical Services encompasses home medical services; remote image diagnosis
support services; electronic medical report (EMR) systems; sales of medical equipment anddevices; the operation of nursing homes; personal care services; and real estate leasing for
medical institutions. During the period under review, we focused on enhancing our home
medical services, centered on home nursing services and pharmaceutical delivery services. We
also opened Comfort Garden Azamino in Yokohama, the first nursing home in the SECOM
Fort series, which was developed by combining the healthcare and security related know-how
of the Group.
In Insurance Services, we concentrated on sales of unique insurance products that reflect
the Group’s expertise, including the comprehensive automobile insurance policy New SECOM
Anshin My Car, which includes an on-site emergency services in the event of an accident by
the Group’s emergency response personnel; the Security Discount Fire Policy for businesses;
the comprehensive home fire insurance policy SECOM Anshin My Home; and the MEDCOM,[English Translation]4

an unrestricted medical treatment policy aimed at helping patients overcome cancer by giving
access to the best treatments.
In Geographic Information Services, we engage in GIS (Geographic Information
System)-based operation support services for public and the private sector as well as
surveying and measuring, and construction consulting services. We focused on selling thePasCAL series, an integrated GIS product for regional public organizations, and theMarketPlanner series, a range of marketing tools for private enterprises. We also strove toexpand our GIS to developing markets overseas, particularly in Asia.
Information and Communication Related and Other Services cover information andcommunication related services, and real estate development and sales, as well as real estateleasing. In the field of information and communication related services, we reinforced cybersecurity and network system operation services. The SECOM Safety Confirmation Service is acrisis management service that helps business customers resume operations rapidly in theaftermath of a major disaster by gathering information and confirming the safety of employees
and their families. We extended the SECOM Safety Confirmation Service by adding a service
for workers traveling overseas. In the field of real estate development and sales, efforts weremade to develop and sell the high-security condominium series Glorio.
In December 2006, Nohmi Bosai Ltd. (listed on the First Section of the Tokyo Stock
Exchange), which used to be an affiliated company accounted for under the equity method of
the Group, became a consolidated subsidiary as we acquired its newly offered shares so that it
is now a majority-owned subsidiary of the Company. Thus, beginning with the year ended
March 31, 2007, we decided to add a new segment, Fire Protection Services segment, which
included most notably automatic fire alarm equipment and fire extinguishing equipment for avariety of environments, including office buildings, plants, tunnels, cultural properties, ships
and residences. In the future, we will aim to develop new markets with original new products
by integrating the Group’s security and fire-protection technologies.
The Group also offers security and other services in overseas markets. During the fiscal
year, we put emphasis on expanding our security service business in China, establishing newcompanies and opening new offices.
As a result, consolidated revenue increased by 8.2% to Yen 613.9 billion during the fiscal
year, reflecting the consolidation of Nohmi Bosai Ltd. Operating profit increased by 4.0%
year-on-year to Yen 97.8 billion, consolidated ordinary profit was up 6.3% year-on-year to
Yen 102.7 billion and net income rose 10.0% year-on-year to Yen 58.2 billion.

[English Translation]5

2. Capital Investments
Capital investments for the fiscal year totaled Yen 59.9 billion (a breakdown is given below).
A major portion, Yen 38.9 billion, was in system investment (including those for alarmsystems and equipment) in the Security Services segment.
(Millions of yen)

Business segment

Current fiscal year
38,934
5,813
711
2,386
276
14,837

Security Services
Medical Services
Insurance Services
Geographic Information Services
Fire Protection Services
Information and Communication Related
and Other Services
Subtotal
Eliminations and Corporate items
Total

62,959(3,008)59,951

3. Fund Raising
During the fiscal year, no funds were raised by the Group in capital markets through theissuance of corporate bonds or new shares.

4. Issues the Group has to cope with
As society and people’s values change, society’s needs relating to safety and security are
becoming increasingly varied and sophisticated in the fields of security, medical treatment,
insurance, geographic information and cyber security.
Therefore, by providing various services that bring people security and peace of mind,
particularly security services, the Group is aiming to realize a "Social System Industry" that
can help realize more secure, convenient, and comfortable society. To this end, we are striving
to provide customer-oriented services and high-quality systems that can earn the trust of ourcustomers.
Moreover, we are working to provide comprehensive services, maximizing the Groupcapabilities. We are also continually improving operations throughout the Group to enhance
management efficiency.
We would like to ask all our shareholders for continued support as we continue tostrengthen our Group operation.

[English Translation]
65. Trends in Earnings and Assets(1) Trends in Earnings and Assets of the GroupThe following table gives the business performance and assets of the Group for the current andthe three preceding fiscal years.
(Millions of yen except for net income per share)

Fiscal years
Category
Revenue
Operating profit
Ordinary profit
Net income
Net income per share (yen)Total assets
Net assets

43rd fiscal year
(4/1/2003 3/31/2004)

44th fiscal year
(4/1/2004 3/31/2005)

45th fiscal year
(4/1/2005 3/31/2006)

527,40981,28676,243
41,111
181.401,092,067
403,257

547,230
83,04383,47848,517214.41
1,097,548
441,927

567,315
94,10996,66952,994234.281,149,377
496,164

46th fiscal year
(current fiscal year)(4/1/2006 3/31/2007)
613,976
97,840102,720
58,299259.14
1,169,182
601,116

A breakdown by business segment reveals that Security Services, centered on centralized
systems, performed favorably, with revenue rising 3.7% year-on-year to a total of Yen 408.0
billion and operating profit increasing by 1.3% to Yen 103.3 billion.
Revenues of Medical Services increased by 6.2% year-on-year to Yen 30.8 billion,
following an increase in revenues earned from nursing home operations. Operating profit in
the segment rose 15.9% to Yen 1.3 billion over the previous year.
Revenue of Insurance Services fell by Yen 2.5 billion or 8.9% year-on-year andamounted to Yen 26.6 billion. Income from net premiums written at Secom General InsuranceCo., Ltd. rose by Yen 2.1 billion or 7.4% over the previous year. However, Secom Insurance
Service Co., Ltd., an insurance agency, changed the method of revenue recognition in thecurrent fiscal year. Previously, insurance premiums received were recorded as revenue andpayments to insurance companies as costs. The new method, however, records the amountequivalent to the net commission calculated by offsetting the two items, as revenue. (If thesame revenue recognition had been applied in previous fiscal year, the impact would havebeen a drop in revenue of Yen 4.2 billion). Also, the segment operating loss amounted Yen 3.5
billion compared with an operating loss of Yen 3.1 billion in the previous fiscal year, mainly
due to increase in net claims paid affected by Typhoon No. 13 and increases in net
commissions and brokerage fees paid along with increases in insurance premiums. On accountof the nature of the insurance business, ordinary profit is an important indicator, and Secom
General Insurance, which is the core company in the Insurance Services, recorded an ordinary
profit of Yen 0.3 billion, down 62.4% over the previous term.
Revenue of Geographic Information Services rose 3.3% year-on-year to Yen 36.4 billion,
due to steady orders in services related to urban planning and other services resulting fromsales efforts taking advantage of our technological strengths. However, operating profit fell
72.6% year-on-year to Yen 0.4 billion due to worsening cost to sales ratio caused by pricecompetition between service providers.
At the beginning of the fourth quarter of 46th fiscal year (on January 1, 2007) after
Nohmi Bosai Ltd., its 21 subsidiaries and Shanghai Nohmi Secom Fire Protection Equipment
Co., Ltd. became consolidated subsidiaries of the Group, we added Fire Protection Services asa separate segment. The segment revenue amounted to Yen 27.4 billion, and operating profit
was Yen 2.0 billion.
In Information and Communication Related and Other Services, revenue increased to
Yen 84.4 billion, up 5.3% over the previous term. Operating profit increased by 18.8%[English Translation]7

year-on-year to Yen 7.2 billion as a result of various factors, including a substantial increasein profit from the real estate development and sales business.
Sales by Business Segment (46th Fiscal Year)Business segment
Security Services
Medical Services
Insurance Services
Geographic Information
Services
Fire Protection Services
Information andCommunication-Related andOther Services
Total
Eliminations and Corporate
items
Consolidated revenue(Millions of yen)
Profit (loss)
from operations
103,336
1,325(3,515)462

Customers
408,078
30,85026,66936,437

Revenue
Inter-segment
10,295
232
2,702
138

Total
418,374
31,082
29,371
36,57627,44784,492

944
9,096

28,392
93,588

2,066
7,267

613,976-

23,408(23,408)

637,385(23,408)

110,942(13,102)

613,976-

613,976

97,840(2) Trends in Earnings and Assets of the Company(i) The business performance and assets of the Company for the current and the three

preceding fiscal years are as shown in the table below.
(Millions of yen except for Net Income per share)

Fiscal years
Category

288,493
64,231
62,15634,282

297,782
66,031
66,21937,704

313,096
72,17270,96443,87946th fiscal year
(current fiscal year)(4/1/2006 3/31/2007)
326,076
73,40476,58347,245151.66167.09194.58210.00580,547
397,862598,711426,288643,990
461,646654,791
494,154

43rd fiscal year
(4/1/2003 3/31/2004)

Revenue
Operating profit
Ordinary profit
Net income
Net income per share(yen)
Total assets
Net assets.

44th fiscal year
(4/1/2004 3/31/2005)

45th fiscal year
(4/1/2005 3/31/2006)(ii) Revenue and Profit

In 46th fiscal year, revenue rose 4.1% year-on-year to Yen 326.0 billion, operating profit grew
1.7% to Yen 73.4 billion, ordinary profit increased 7.9% to Yen 76.5 billion, and net income
increased 7.7% to Yen 47.2 billion. Net income per share rose from Yen 194.58 for theprevious fiscal year to Yen 210.00.
A breakdown reveals that contract revenue accounted for 86.6% of total revenue, or Yen
282.2 billion, and product and equipment sales accounted for 13.4% of total revenue, or Yen
43.8 billion.
Revenue from centralized system contracts, which is the core of revenue and profit in thecontract revenue, grew steadily, totaling Yen 231.1 billion and accounting for 70.9% of total
contract revenue. Static guard services generated revenue of Yen 22.5 billion, and revenue
from armored car services came to Yen 17.1 billion. The remaining contract revenue[English Translation]8

amounted to Yen 11.3 billion, of which the majority came from fees paid by subsidiaries andother companies for advisory services.
Product sales totaled Yen 29.5 billion, 9.0% of total revenue, and equipment sales tosubsidiaries and other companies totaled Yen 14.2 billion, 4.4% of total revenue.
We made thorough efforts to reduce operating expenses, and these efforts helped bringabout an operating profit of Yen 73.4 billion.
Non-operating income was Yen 7.9 billion, which included interest and dividends
received, while non-operating expenses, made up of expenses such as interest paid and losseson the sales and disposal of fixed assets, totaled Yen 4.7 billion. Therefore, ordinary profit
was Yen 76.5 billion.
In addition, the Company recorded an extraordinary profit of Yen 1.2 billion, including again of Yen 1.1 billion from the sale of subsidiaries’ and affiliates’ securities. Extraordinary
losses were Yen 1.1 billion, including a loss of Yen 0.6 billion from the sale of subsidiaries’
and affiliates’ securities. As a result, net income came to Yen 47.2 billion.

(iii) Earnings by Business Category

Fiscal years

44th fiscal year
(4/1/2004 -3/31/2005)

Contract revenue
Sales
Total

Centralized
systems
Static guard
services
Armored car
services
Other
Subtotal
Product
Equipment
Subtotal

46th fiscal year
(current fiscal year)(4/1/2006 -3/31/2007)
AmountChange%(millions(%)
of yen)Change(%)

Amount(millionsof yen)

%

72.8

1.8

223,527

71.4

3.2

231,176

70.9

3.4

18,9636.4

3.7

21,8827.0

15.4

22,5616.9

3.1

15,6095.2(0.9)

16,423

5.3

5.2

17,182

5.3

4.6

10,690261,918
24,875
10,98835,863

3.6
88.0
8.3
3.7
12.0

6.6
2.0
13.6
13.2
13.5

11,043272,876
29,036
11,18340,220

3.5
87.2
9.3
3.5
12.8

3.3
4.2
16.7
1.8
12.1

11,326282,247
29,533
14,29543,829

3.5
86.6
9.0
4.4
13.4

2.6
3.4
1.7
27.8
9.0

297,782

100.0

3.2

313,096 100.0

5.1

326,076 100.0

4.1

AmountCategory

45th fiscal year
(4/1/2005 -3/31/2006)(millionsof yen)%216,655[English Translation]
9

Change(%)

6. Matters Concerning Principal Subsidiaries and Other Business Combinations(1) Matters Concerning Principal Subsidiaries

Company name

Percentage ofshareholding

Issuedcapital(percentage ofvoting rights)(Millions ofyen)

Secom Joshinetsu Co., Ltd.

(%)

3,530
(Millions ofyen)

Secom Techno Service Co.,
Ltd.

2,357
(Millions ofyen)

Secom Industries Co., Ltd.

499
(Millions ofyen)

Secom Medical System Co.,
Ltd.

200
(Millions ofyen)

Secom General Insurance Co.,
Ltd.

5,611

8,758
(Millions ofyen)Nohmi Bosai Ltd.

13,302

1,468
(US$)

The Westec Security Group,
Inc.

301
(Thousand of
UK pond)

Secom Plc

Security, safety

67.79(67.85)(%)

Installation and maintenance of
security systems

100.00(100.00)(%)

Manufacture of security systemequipment

100.00(100.00)

Remote image diagnosis support
services and home medical
services

83.33(83.45)(%)
69.84(73.20)Non-life insurance

Surveying, measuring andgeographic information systemservices(%)(Millions ofyen)

Secom Trust Systems Co., Ltd.

50.87
(50.88)(%)(%)(Millions ofyen)

Pasco Corporation

Principal business activity

39,12650.36(50.92)(%)

Comprehensive fire protection
services

100.00(100.00)(%)
100.00(100.00)(%)

Cyber security services andsoftware development

100.00(100.00)

Holding company in the U.S.

Security business in the U.K.

(Notes)1. The percentages of shareholding (percentages of voting rights) is truncated to two decimal places.
2. The percentage of shareholding (percentages of voting rights) for Secom Joshinetsu Co., Ltd.,
Secom Techno Service Co., Ltd. and Nohmi Bosai Ltd. include those owned by the Company's
subsidiaries.

(2) Acquisition or Disposal of Shares, Other Investment, or Stock Acquisition Rights or
the Like in Other Companies[English Translation]
10

The Company acquired shares (18,500,000 common shares through an allocation of
new shares to a third party) in Nohmi Bosai Ltd. on December 8, 2006, and thereby
made Nohmi Bosai a subsidiary of the Group.

7. Principal Business of the GroupThe principal business activities of the Group are as follows: Security Services centering oncontracted security services; Medical Services, including home medical services and remote
image diagnosis support services; Insurance Services consisting mainly of non-life insurance;
Geographic Information Services that mainly entail the provision of geographic information
systems; Fire Protection Services involving the provision of fire protection systems in various
types of facilities; and Information and Communication Related and Other Services including
cyber security services and network services, software development, the development andsales of real estate, real estate leasing and other miscellaneous business activities.
8. 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 (Shibuya-ku, Tokyo),
Kanagawa (Yokohama City), Shizuoka (Shizuoka City ), Chubu (Nagoya City), Osaka(Osaka City), Kansai Static Guard Service (Osaka City), Kinki (Kyoto City), Hyogo(Kobe City), Chugoku (Hiroshima City), Shikoku (Takamatsu City), Kyushu (Fukuoka
City).
(iii) Domestic Subsidiaries
Secom Joshinetsu Co., Ltd. (Niigata City, Niigata), Secom Techno Service Co., Ltd.
(Nakano-ku, Tokyo), Secom Industries Co., Ltd. (Shiroishi City, Miyagi), Pasco
Corporation (Meguro-ku, Tokyo), Secom Medical System Co., Ltd. (Shibuya-ku,
Tokyo), Secom General Insurance Co., Ltd. (Chiyoda-ku, Tokyo), Secom Trust Systems
Co., Ltd. (Shibuya-ku, Tokyo), Secom Home Life Co., Ltd. (Shibuya-ku, Tokyo), Arai
& Co., Ltd. (Shibuya-ku, Tokyo), Nohmi Bosai Ltd. (Chiyoda-ku, Tokyo).
(iv) Overseas Subsidiaries
The Westec Security Group, Inc. (Dover, Delaware, USA), Secom Plc. (Kenley, Surrey,UK), Secom (China) Co., Ltd. (Beijing, China).

[English Translation]
119. Matters Concerning Employees of the Group and the Company(1) Matters Concerning Employees of the Group
Number of employees

Increase from the end of the previous fiscal year

30,9442,720(2) Matters Concerning Employees of the Company
Number of
Increase from the end of
Average age
Average years of service
employees
the previous fiscal year
12,998
198
37.6
11.8
Note: The number of employees refers to the number of full-time employees. Part-time or temporary
employees are not included.

10. Primary Lenders
Closing balance at the endof the fiscal year

Lenders(millions of yen)
48,914(millions of yen)
30,400(millions of yen)
25,905(millions of yen)
25,657The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mitsubishi UFJ Trust and Banking Corp.
Sumitomo Mitsui Banking Corp.
Mizuho Bank, Ltd.

11. Other Important Matters Concerning the GroupIn July 2004, Fujitsu Limited filed a lawsuit against Secom General Insurance Co., Ltd. in theTokyo District Court, claiming compensation for costs related to a systems development orderin the amount of Yen 2,500 million. Secom General Insurance Co., Ltd. is not only contesting
this lawsuit on the grounds that it is without merit, but has also filed a countersuit claiming
damages in the amount of Yen 1,000 million. Both lawsuits are currently pending.
Pasco Corporation filed a lawsuit against Sumitomo Mitsui Banking Corporation for a
confirmatory judgment to the effect that it does not owe an obligation in the amount of Yen
2,010 million to Sumitomo Mitsui Banking Corporation with the Tokyo District Court on
October 31, 2005. Sumitomo Mitsui Banking Corporation alleged that it made a loan to a third
party and acquired from the third party its claim against Pasco Corporation for an alleged saleof equipment to Pasco Corporation as a collateral for the loan, and demanded Pasco
Corporation to pay such claim to Sumitomo Mitsui Banking Corporation. However, upon
carefully investigating the case with counsel, we believe that the alleged transactions are nulland void, and our pleading should be admitted. Furthermore, on December 5, 2005, Sumitomo
Mitsui Banking Corporation brought a cross action against Pasco Corporation in relation to ademand for payment of a transferred receivable. Subsequently, both actions were consolidated
according to a court procedure. The existence of the debt in the above-mentioned sum is still
being disputed in the court.

[English Translation]
12

Ⅱ. Matters Concerning the Company’s Shares and Shareholders
1. Total number of shares to be issued:

900,000,000

2. Total number of issued shares:
233,288,717(including 8,318,910 shares of treasury stock held by the Company)
3. Number of shareholders at the end of the fiscal year:

30,683

4. Number of shares in a trading unit:

100 shares

5. Major shareholders
No shareholder holds 10% or more of the total issued shares (excluding treasury stock). The principal
shareholders and information about their respective shareholdings in the Company are shown in the tablebelow.
Investment in the Company
Percentage ofShareholders
Number of shares held
shareholding(Thousands of(%)
shares)13,495
5.99
The Master Trust Bank of Japan, Ltd.
(Trust Account)
Japan Trustee Services Bank, Ltd.
12,641
5.61(Trust Account)
The State Street Bank and Trust Company
8,934
3.97
Mitsubishi UFJ Trust and Banking Corporation
Trust Account 106
BNP PARIBAS Securities (Japan) Limited

6,153

2.73

5,580

2.48

Makoto Iida

4,320

1.92

SECOM Science and Technology Foundation

4,025

1.78

Japan Trustee Services Bank, Ltd. (Trust Account 4)

3,905

1.73

The State Street Bank and Trust Company 505103

3,598

1.59

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

3,196

1.42

(Notes)1. The percentage of shareholding is calculated on the basis of the total number of shares outstanding
after excluding treasury stock (8,318,910 shares). The percentage of shareholding is truncated to two
decimal places.
2. In the case of the above trust banks, banking business-related shares and trust service-related sharesare registered under different names. Therefore, the number of shares held by each trust bank shown
above represents the shares regarding trust services.

[English Translation]
13

III. Directors and Corporate Auditors
1.

Names and Titles of Directors and Corporate Auditors
Position

Field of responsibility andrepresentative of other companies
Supreme Advisor
Supreme Advisor

Name

Director
Director

Makoto Iida
Juichi Toda

Director

Toshitaka Sugimachi

Chairman and Director

Shohei Kimura

President andRepresentative Director
Senior Executive
Director

AdvisorExecutive officer, Chairman of theTokyo Security Service Association

Kanemasa Haraguchi

Executive officer

Nobuyuki Sasaki

Executive officer

Executive Director

Katsuhisa Kuwahara

Executive officer

Executive Director

Shuji Maeda

Executive officer

Executive Director
Executive Director

Katsuo Akiyama
Shinobu Iida

Director

Fumio Obata

Corporate Auditor

Teruo Ogino

Corporate Auditor

Ken Tsunematsu

Corporate Auditor

Hiroshi Yasuda

Corporate Auditor

Kohei Yamashita

Executive officer
Executive officer
Executive officer, President andRepresentative Director of Secom
Medical System Co., Ltd.
Full-time auditor
Chairman of SECOM Science andTechnology Foundation
President and Director of Yasuda
Shoko Kyoikukai
Advisor and Director of JPMorgan
Asset Management (Japan) Ltd.
President and Representative Directorof Kokyo Tatemono Co., Ltd.
Chairman and Representative Directorof International Ceramic, Inc.
Chairman and Representative Directorof Tozai Building Maintenance Co.,
Ltd

(Notes)1. Messrs. Ken Tsunematsu, Hiroshi Yasuda and Kohei Yamashita are outside corporate auditors as
stipulated in Article 2 Item 16 of the Companies Act.
2. The corporate auditor, Mr. Teruo Ogino has been in charge of the Company's financial affairs for
11 years and is considerably knowledgeable concerning finance and accounting matters.
3. The corporate auditor, Mr. Ken Tsunematsu, has for many years been involved in securities
issuance businesses as a lawyer both domestically and overseas. He has experienced in the analysis
and evaluation of the financial statements of these issuers, and has considerable knowledge offinance and accounting matters.

[English Translation]
14

2.

Remuneration of Directors and Corporate Auditors

Directors

11

Combined total of
remuneration(millions of yen)561

Corporate Auditors

4

45

Total

15

606

Number of
officers(Notes)1. Of the above, the remuneration for the 3 outside corporate auditors' total combined
remuneration is Yen 24 million.
2. Included in the above total remuneration amount are the directors' bonuses of Yen 98
million awarded for the current fiscal year.
3. Total amount of Remuneration of Directors and Corporate Auditors shown above includes
Yen 66 million (for Yen 64 million to Directors and Yen 1 million to Corporate Auditors(including Yen 0.3 million to outside Corporate Auditors), respectively) as accrued
retirement benefits for Directors and Corporate Auditors.

3. Outside Corporate Auditors
1. Mr. Ken Tsunematsu, Corporate Auditor(i) Concurrently holds position as an executive director of another company
Not applicable(ii) Concurrently holds the position of an outside director or an outside corporate
auditor of another company
Not applicable(iii)Has affiliations with executive officers of the Company or its major customers orother specially related business partners
Not applicable(iv) Primary activities carried out during the current fiscal year
Attended all 14 Board of Directors meetings held in the fiscal year, primarily
offering advice and suggestions in order to ascertain the validity or
appropriateness of the Board of Directors' decision from the perspective ofcomplying with law and the articles of incorporation.
Attended all 10 Board of Corporate Auditors meetings convened during the fiscal
year to deliberate critical auditing issues.
2. Mr. Hiroshi Yasuda, Corporate Auditor(i) Concurrently holds position as an executive director of another company
Not applicable(ii) Concurrently holds the position of an outside director or an outside corporate
auditor of another company
Not applicable(iii)Has affiliations with executive officers of the Company or its major customers orother specially related business partners
Not applicable[English Translation]
15

(iv) Primary activities carried out during this fiscal year
Attended 10 out of the 14 Board of Directors meetings held during the fiscal year,
while offering advice and suggestions based on his ample experience of company
management and directorships, gained from previously held positions. He also
asked questions and stated opinions in order to clarify unclear issues.
Attended 8 out of the 10 Board of Corporate Auditors meetings convened during
the fiscal year to deliberate critical auditing issues.
In addition, for the meetings for which he was absent, he received from thefull-time corporate auditor detailed reports on the resolutions of the meetings so as
to remain fully informed.
3. Mr. Kohei Yamashita, Corporate Auditor(i) Concurrently holds position as an executive director of another company
President and Representative Director of Kokyo Tatemono Co., Ltd., Chairman
and Representative Director of International Ceramic, Inc. and Chairman and
Representative Director of Tozai Building Maintenance Co., Ltd. However, there
are no dealings between these companies and the companies within the Group.
(ii) Concurrently holds the position of an outside director or an outside corporate
auditor of another company
Not applicable(iii)Has affiliations with executive officers of the Company or its major customers orother specially related business partners
Not applicable(iv) Primary activities carried out during this fiscal year
Attended 13 out of the 14 Board of Directors meetings held during the fiscal year,
while offering advice and suggestions based on his ample experience of managing
a global business. He also asked questions and stated opinions in order to clarify
unclear issues.
Attended 9 out of the 10 Board of Corporate Auditors meetings convened during
the fiscal year to deliberate critical auditing issues.
In addition, for the meetings for which he was absent, he received from thefull-time corporate auditor detailed reports on the resolutions of the meetings so as
to remain fully informed.

[English Translation]
16

IV. Accounting Auditors
1. Name of Accounting Auditors
KPMG AZSA & Co.
2. Remuneration for Accounting Auditors(1) Remuneration for duties relating to Article 2 Paragraph 1 ofCertified Public Accountants Act(2) Total pecuniary and other proprietary interest to be paid by theCompany and subsidiaries

Yen 89 million
Yen 228 million(Notes)1. Based on the audit contract between the Company and the accounting auditors, theremuneration paid to auditors is not distinguished between those as the auditors under theCompanies Act and those as the auditors under the Securities and Exchange Act, andfurthermore cannot in fact be distinguished, and therefore the amount given in (1) is the
combined total of these functions.
2. Of the major subsidiaries of the Company, Secom Industries Co., Ltd and Secom Trust
Systems Co., Ltd. are audited by Misuzu Audit Corporation, The Westec Security Group Inc.
by PricewaterhouseCoopers LLP and Secom Plc by KPMG LLP.

3. Non-auditing Duties
Not applicable
4. Policy for Decision for Dismissal or Non-reappointment
Whenever there occurs any material event which could be a substantial hazard to theperformance of financial auditing of the Company, such as a case when it is deemedthat the accounting auditors have come to fall within the purview of Article 340
Paragraph 1 of the Companies Act or the accounting auditors or the firm of accounting
auditors is subjected to the disposition of suspension of business by the supervisory
authorities, the Board of Corporate Auditors will examine the situation, and, when all
the corporate auditors have consented thereto, the corporate auditor will takeprocedures for the dismissal of the subject accounting auditors or the subject firm ofaccounting auditors. In such case, the Corporate Auditor selected by the Board of
Corporate Auditors will report the reasons for the dismissal at the general meeting ofshareholders convened for the first time after such dismissal.
Otherwise, when there exits any situation where it is deemed that the accounting
auditors are not fit as accounting auditors, the directors will, with the consent of theBoard of Auditors, submit a proposal to the general meeting of shareholders for thedismissal or non re-appointment of accounting auditors.

[English Translation]
17

V. System under which the Company’s Business is Ensured to be Properly
Executed
The Company, at the meeting of its Board of Directors held on May 9, 2006,
resolved upon the basic policy regarding the internal control system, i.e. “the system
under which execution of duties by Directors is ensured to comply with laws andregulations and the Articles of Incorporation, and the system under which theCompany’s business is ensured to be properly executed” as provided for in Article 362,
Paragraph 4, Item 6 of the Companies Act and Article 100, Paragraphs 1 and 3 of the
Enforcement Order of the Companies Act. The contents of the resolution are set out
below.
PARTICULAR
1.

GeneralThis resolution manifests the basic policy regarding the internal control systemof 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 and improved.

2.

System under which execution of duties by Directors and employees is
ensured to comply with laws and regulations and the Articles ofIncorporation.
(i) The Company has prepared a compliance manual which officers andemployees of the Company are required to follow in order to comply withlaws and regulations, the Articles of Incorporation and the “Constitution of
SECOM’s business and operation” and manuals for the compliance with
important laws. To enforce it to the full extent, Audit and ComplianceDepartment oversees and coordinates the undertaking for compliance of theentire Company horizontally and this department acts as a core vehicle
engaging in education, etc. of officers and employees. Such activities shall bereported to the Board of Directors and the Board of Corporate Auditors.

[English Translation]
18

Furthermore, the Organization Climate Committee chaired by the President
and Representative Director has been set up and deliberates important mattersrelated to compliance.
(ii) In connection with the enforcement of the Whistle Blower Protection Act,we will examine how effective the aforesaid compliance system is under thelaw and will make necessary changes to the systems.
Furthermore, officers in charge will be appointed, who shall control andoversee the conditions of execution of compliance as to each department andshall establish and manage an appropriate training system for employees.
(iii) Any important changes in the compliance manual shall be subject toapproval of the Board of Directors after obtaining opinions of Corporate
Auditors.
3.

System under which information regarding execution of business byDirectors shall be maintained and controlled.
(i) Documents and other information regarding execution of duties such as
those concerned with decision making (hereinafter referred to as the“information on executing duties”) shall be properly maintained, administered(including destruction) pursuant to the Document Administration Regulationof the Company, which will be amended upon reviewing the operating
conditions if necessary.
(ii) Information on executing duties shall be recorded on data base withnecessary information protection measure so that a search system can beestablished to enable quick search as to whether or not the particular
document exists or the condition of storage of the particular document.
(iii) Any business related to the preceding two paragraphs shall be undertaken
by officers in charge, and in particular the status of examination and review of(i) above, and operation and management of the data base of (ii) above shallbe reported to the Board of Directors and the Board of Corporate Auditors.
(iv) Establishment and important amendments of the Regulation regarding(i) above shall be subject to approval of the Board of Directors after obtaining
opinions of Corporate Auditors.

[English Translation]19

4.

Regulation regarding control of risk of loss and other system(i) We will review the Company’s risk control regulations, and eachorganization corresponding to each risk shall constantly monitor the risks to
the full extent and, in addition, an officer in charge of each specified risk shallbe appointed. The officer in charge shall, pursuant to the risk control
regulations, be responsible to: (1) forecast and classify the risk, (2) develop asystem for emergency by which appropriate information shall be transmitted
promptly and appropriately in case of emergency, and (3) in corporation withthe organization guidance department, audit the conditions of daily control ofrisks.
(ii) The officer in charge shall report the President and Representative
Director, the Board of Directors and the Board of Corporate Auditors on
matters related to control of risk.
(iii) Any important changes of the risk control regulations shall be subject toapproval of the Board of Directors after obtaining opinions of Corporate
Auditors.
The Company’s risks shall be classified as follows:z Large scale calamity risk (System risk)z Security accident riskz Accounting treatment and clerical work riskz Compliance riskz Others

5.

System by which efficient execution of duties of Directors shall be ensured(i) All Directors of the Company shall carry out operation and execution ofbusiness on the basis of the “Constitution of SECOM’s business andoperation” so that they may share the idea essential to execution of the duties
such as decision making for management by the Board of Directors, decision
making for execution of duties by the Directors.
(ii) On the basis of the preceding, to implement execution of duties
efficiently, the system of executive officers has been introduced so thatdecision making and execution of business shall be further facilitated.

[English Translation]
20

(iii)In executing duties, in order to unify the power of the entire Company, asystem utilizing IT should be established and thereby, enabling an information
to be immediately disseminated to the entire Company to the fullest extent.
(iv) With respect to particular decision making or execution of duties, asystem utilizing IT should be established to carry out the decision making andexecution immediately and definitely.
(v) The Company will share the medium- and long-term business vision, andfor the purpose of accomplishment thereof, the Board of Directors will design
an annual business plan and deliberate progress of the plan in each month.
6.

System under which the Company and the Company Group consisting of
the parent company and subsidiaries is ensured to properly execute its
business(i) The Company stipulated the “Constitution of SECOM’s business andoperation” and exerts its efforts to properly execute business with unified
force of all officers and employees of the Group. Subsidiaries accept audit andguidance conducted by the Company as their parent company, and exchanges
information with the Company so that they exert efforts to recognize theissues from the viewpoint of compliance.
Furthermore, Corporate Auditors of the Company visits important subsidiaries
and audit the subsidiaries with respect to the internal control system.
(ii)The Company shall establish the Group Management Board chaired by the
President and Representative Director of the Company. The Board engages inadministrating the Group information, gives guidance to management ofsubsidiaries and has their businesses properly executed. The officer in charge
will man the secretarial office of the Board. The officer in charge will reportto the Board of Directors and the Board of Corporate Auditors.
(iii)Upon consultations with the Board of Corporate Auditors, the Group
Corporate Auditors Liaison Conference will be formed to share theinformation.

[English Translation]21

7.

Matters related to employees to assist duties of Corporate Auditors when
Corporate Auditors requests to do so
Corporate Auditors Office will be established and at least two employees will
be manned to assist audit duties of the Corporate Auditors.

8.

Matters related to independence of the employees in the preceding item
concerned from Directors
Transfer and evaluation of assistants in the preceding item shall be subject toapproval of the Board of Corporate Auditors.
The assistants who received necessary instruction on audit duties by Corporate
Auditors shall not be subject to any instruction or order from Directors,
executive officers or employees with respect to the subject audit duties, nor be
obligated to report to them.

9.

System under which Directors and employees report to Corporate
Auditors and system under which any report is made to Corporate
Auditors(i) Regulation providing for matters to be reported to Corporate Auditors shallbe established upon discussion with the Board of Corporate Auditors, andDirectors shall make reports with respect to the following matters: (1) matters
resolved by the Organization Climate Committee; (2) matters likely to bematerially harming the Company; (3) important matters relating to monthly
business conditions; (4) important matters relating to internal audit and risk
control; (5) material violation of laws and regulations or the articles ofincorporation; (6) condition of usage and content of the Hot Help Line; and (7)in addition, important matters from viewpoint of compliance.
(ii) If an employee finds a fact falling within the preceding paragraph, a systemby which the fact may be transmitted directly to the President andRepresentative Director through such means as the Hot Help Line shall bearranged and the President and Representative Director shall report toCorporate Auditors pursuant to the preceding paragraph.

[English Translation]
22

10.

System under which audit by Corporate Auditors is ensured efficiently tobe performed(i) The Board of Corporate Auditors shall regularly hold the meetings with the
President and Representative Director and Accounting Auditors, to exchange
opinions so that audit shall be performed efficiently.
(ii) The Company ensures that the Board of Corporate Auditors may retain
lawyers at its discretion and, if necessary, have opportunities to retain andconsult professional accountants with respect to their audit duties.

[English Translation]
23

Consolidated Balance Sheet(As of March 31, 2007)ITEM
ASSETSAMOUNT

Current Assets:
Cash on hand and in banks
Cash deposits for armored car services
Call loan
Notes and accounts receivable, trade
Due from subscribers
Short-term investments
Inventories
Real estate for sale
Deferred income taxes
Short-term loans receivable

524,484
181,266
75,32815,00083,397
19,217
18,171
25,94571,724
11,597
5,097

Other
Allowance for doubtful accounts

19,660(1,923)Fixed Assets:
Tangible Assets:
Buildings and improvements
Security equipment and control stations
Land
Other

644,478
260,80987,306
63,67580,341
29,485Intangible Assets:

23,294

Software

11,891

Goodwill
Other

5,697
5,704

Investments and Others:

360,374

Investment securities
Long-term loans receivable
Long-term prepaid expenses
Prepaid pension and severance costs
Deferred income taxes
Other
Allowance for doubtful accounts

243,148
55,223
17,202
15,817
15,65428,490(15,161)

Deferred Assets:
Business commencement expenses

219
219

TOTAL ASSETSITEM
LIABILITIESCurrent Liabilities:
Notes and accounts payable, trade
Bank loans
Current portion of straight bonds
Payables - otherAccrued income taxes
Accrued consumption taxes
Accrued expenses
Deferred revenue
Accrued bonuses
Accrued bonuses to directors andcorporate auditors
Other323,766
28,469129,169
3,356
29,88824,9733,366
3,198
31,188
11,409Long-term Liabilities:
Straight bonds
Long-term loans
Guarantee deposits received
Deferred income taxes
Accrued pension and severance costs
Accrued retirement benefits for
directors and corporate auditors
Investment deposits by policyholders,
unearned premiums and otherinsurance liabilities
Other

244,299
13,941
14,36332,164
2,717
17,596[English Translation]
24

80
58,6652,300

160,142
1,073

Total Liabilities
NET ASSETS

568,065

Shareholders’ Equity:
Common Stock
Capital Surplus
Retained Earnings
Common Stock in treasury, at cost
Valuation, Translation Adjustments andOthers:
Unrealized gains on securities
Deferred losses on hedges
Foreign currency translation
adjustments
Minority Interest in Subsidiaries:
Total Net Assets

537,279
66,377
83,056432,696(44,850)
2,853

TOTAL LIABILITIES AND NET
ASSETS

1,169,182(Millions of yen)
AMOUNT

10,157(51)(7,253)60,983
601,116
1,169,182

Consolidated Statement of Income(Fiscal Year from April 1, 2006 to March 31, 2007)(Millions of yen)

ITEM

AMOUNT

Revenue
Costs of revenue
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income:Interest income
Dividends income
Gain on sales of investment securities
Net gains from investment in affiliatedcompanies accounted for under the equity
methodOther
Non-operating expenses:
Interest expenses
Loss on sales and disposal of fixed assets
Loss on sales and revaluation of investment
securities
Other
Ordinary profit
Extraordinary profit:
Gain on sales of fixed assets
Gain on sales of subsidiaries' and affiliates'
securities
Gain on sales of investment securities
Other
Extraordinary loss:
Provision for allowance for doubtful accounts
Provision for retirement benefits for directors andcorporate auditors
Impairment loss on fixed assets
Loss on revaluation of investment securities
Compensation for damage and settlement
Loss on disposal of software
Other
Income before income taxes:
Income taxes – current
Income taxes – deferred
Minority interest in subsidiaries
Net income[English Translation]
25

613,976
388,787
225,189
127,348
97,840
2,465
631
4,488

4,475
3,026

15,087

1,801
1,492
1,484
5,429

10,207102,720

404
1,333
747
116

2,601

1,521
53
173
517
769
103
178

3,317
102,005
39,961(660)
4,404
58,299

Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2006 to March 31, 2007)(Millions of yen)
Shareholders’ equity

Balance as of March 31, 2006
Changes during the period:
Cash dividends *Bonuses to directors and corporate
auditors *Reversal of reserve for tax deferralon asset replacement *Changes in scope of consolidation
Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2007

Retainedearnings

Common stock

Capital surplus

66,377

83,054

388,077

Common stock
in treasury, atcost(44,749)

Total
shareholders’equity492,760(13,499)(13,499)

(168)

(168)

(13)
58,299(13)
58,299
(124)
25

-

(124)
24

1

66,377

1
83,05644,618432,696(100)(44,850)

44,519537,279

Valuation, translation adjustments and others

Balance as of March 31, 2006
Changes during the period:
Cash dividends *Bonuses to directors and corporate
auditors *Reversal of reserve for tax deferralon asset replacement *Changes in scope of consolidation
Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2007

Unrealized
gains (losses)
on securities

Deferred
gains (losses)on hedges

Foreigncurrencytranslation
adjustments

13,230-(9,825)

Total
valuation,translation
adjustments
and others
3,404

Minority
interest in
subsidiaries

Total net
assets35,469531,634(13,499)(168)(13)
58,299(124)
25(3,072)

(51)

2,572

(551)

25,51424,962(3,072)
10,157

(51)
(51)

2,572
(7,253)

(551)
2,853

25,51460,983

69,482
601,116

The items marked with * derive from profit appropriation resolved at the General Shareholders’ Meetings for the previous
fiscal year.

[English Translation]
26

Notes to Consolidated Financial Statements
Notes to Significant Items for Preparation of Consolidated Financial Statements
1. Scope of Consolidation(1) Number of Consolidated Subsidiaries: 161
Names of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Secom Medical System Co., Ltd.,
Secom General Insurance Co., Ltd., Secom Techno Service Co., Ltd.,
Secom Industries Co., Ltd., Secom Trust Systems Co., Ltd.,
Pasco Corporation, Nohmi Bosai Ltd.,
Secom Home Life Co., Ltd., Arai & Co., Ltd., The Westec Security Group, Inc.
(2) Descriptions of Non-consolidated Subsidiaries
Names of major non-consolidated subsidiaries:
FM-International Laos Co., Ltd., Nohmi Kosaku Co., Ltd., Nohmi Facilities Co.,
Ltd., Eishin Denshi Co., Ltd., Nohmi Baoli (Beijing) Intelligent Fire Protection
Co., Ltd., and another company(The reason for exclusion from consolidation)
These companies are of a small size, so that the aggregate amounts of total assets,
net sales, net income (an amount prorated to the equity ratio) and retained earnings(an amount prorated to the equity ratio) and others do not have a significant effecton the consolidated financial statements.
2. Equity Method(1) Thirty one affiliated companies are accounted for under the equity method.
Names of major affiliated companies accounted for under the equity method:
Japan Nuclear Security System Co., Ltd., S1 Corporation, Toyo Tec Co., Ltd.,
Taiwan Secom Co., Ltd.
(2) Two affiliated companies are not accounted for under the equity method because
their effect on net income/loss and retained earnings during the year under review isimmaterial in aggregate.
3. Changes in Scope of Consolidation and Companies Accounted for under the Equity
MethodNewly consolidated companies:43
Pasco Geomatics India Pvt. Ltd. and 3 other companies:(Investments for establishment)
Nohmi Bosai Ltd. and 38 other companies : (Acquisition of stock)
Excluded from consolidation: 7
Secom Information System Co., Ltd. and another company:(Merger by absorption)
Cable Net Niigata Co., Ltd.:(Sale of stock)Westec Finance Company and 3 other companies:(Liquidation)[English Translation]
27

New companies accounted for under the equity method: 6
NAA Narita Airport Secom Co., Ltd. and 2 other companies:(Investments for establishment)
Toyo Tec Co., Ltd. and 2 other companies:(Acquisition of stock)
Exclusion from companies accounted for under the equity method: 5
Sigma First Co., Ltd. and 2 other companies:(Sale of stock)
Nohmi Bosai Ltd. and another company:(Moved to consolidated subsidiary)
4. Items for Closing Date of Consolidated Subsidiaries, etc.
With respect to overseas consolidated subsidiaries, etc., The Westec Securities
Group Inc. and 11 other U.S. subsidiaries, Secom Australia Pty. Ltd. and two other
Australian companies, Secom Plc and three other U.K. subsidiaries, Secom (China)
Co., Ltd. and 15 other Chinese subsidiaries, P.T. Nusantara Secom Infotech, P.T.
Secom IndoPratama, Pasco Thailand Co., Ltd., Thaisecom Pitakkij Co., Ltd.,
Pasco-Certeza Computer Mapping Corporation, Pasco Geomatics India Pvt. Ltd. ,Secom Vietnam Joint Venture Co., and FM-International Oy FINMAP close theiraccounting as of December 31 each year, and the financial statements as of the date
are used for preparation of the consolidated financial statements.
With respect to domestic consolidated subsidiaries, etc., while Ena Urban
Properties, Co., Ltd. and 15 other companies close their accounting as of December
31 each year, the financial statements prepared pursuant to the provisional closing ofaccounts conducted as of March 31 are used for preparation of the consolidated
financial statements. Moreover, GIS Tohoku Co., Ltd., GIS Kanto Co., Ltd., and
GIS Kansai Co., Ltd close accounting as of December 31 each year, and thefinancial statements as of that date are used for preparation of the consolidated
financial statements. Other consolidated subsidiaries, etc. close their accounting asof the same date of the consolidated closing date.
5. Significant Accounting Policies(1) Valuation policies and methods for significant assets
1) Securities
a. Held-to-maturity debt securities are carried at amortized cost.
b. Available-for-sale securities
Securities with fair value
Stock and beneficiary securities: At fair value based on the average market
price during 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, net of the applicable
income taxes, included directly in net assets. The cost of securities sold isprimarily calculated by the moving average method. As for compound financial
instruments, those compound financial instruments that can not be measured bydiscriminating between the fair value of embedded derivatives are evaluated at
overall fair value and treated as unrealized gains and losses in profit and loss.

[English Translation]
28

Securities with no fair value
At cost, based on the moving average method.
2) Derivatives
Stated at fair value.
3) Inventories
Inventories are stated principally at cost based on the moving average method.
However, real estate for sale included in inventories are stated at the lower ofcost or market method based on specific identification method.
(2) Depreciation and Amortization of Depreciable and Amortizable Fixed Assets
1) Tangible Assets
Declining-balance method.
a. Security equipment and control stations
Security equipment and control stations are depreciated over their average
estimated useful service lives (5-8 years).
b. Other tangible assets
Buildings (except facilities attached to buildings) that were acquired after April
1, 1998 are depreciated by the straight-line method.
Their main useful service lives are as follows: Buildings and improvements:
22-50 years
2) Intangible Assets
Intangible assets are amortized by the straight-line method. The software
used in the Company is amortized by the straight-line method based on theuseful service lives within the Company (5 years).
3) 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 the amount received from the customer isstated as “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 andloans, the allowance for doubtful accounts provides an estimated amount of
uncollectables. It is determined based on the historical rate of loss with respect
to ordinary accounts, plus an estimate of uncollectible amounts respectively
determined by reference to specific doubtful accounts from customers who are
suffering from financial difficulties.
2) Accrued Bonuses
The accrued bonuses are provided for the bonus payments to employees, at an
amount to be paid during the fiscal year under review..
3Accrued Bonuses to Directors and Corporate Auditors
To prepare for outlays of bonuses to directors and corporate auditors in certain
domestic consolidated subsidiaries, the accrued bonuses to directors andcorporate auditors is appropriated in the amount estimated to be paid during theconsolidated fiscal year under review.
4) Accrued Pension and Severance Costs[English Translation]29

To prepare for the retirement benefits of employees, the Company and its
domestic consolidated subsidiaries, etc. appropriate an amount of accrued
pension and severance costs and prepaid pension and severance costs that isrecognized to be paid at the end of the consolidated fiscal year under review,
based on the amount of projected benefit obligations and the estimated amountof plan assets as of the end of the consolidated fiscal year under review. Prior
service cost and actuarial gain or loss are amortized in the fiscal year in which
the gain or loss are incurred.
5) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for outlays for retirement benefits of directors and corporate
auditors in the Company and one portion of domestic consolidated subsidiaries,
estimated liabilities under the plan which would be payable if directors andcorporate auditors left on the balance sheet date is accrued in accordance with
the Company’s and those subsidiaries’ regulations.
(4) Revenue Recognition
Revenue from the contract business of Pasco Corporation and its subsidiaries, etc. isrecognized under the percentage of completion method. Revenue from the contract
business of Secom Techno Service Co., Ltd. and its subsidiaries for which theconstruction price per transaction exceeds Yen 500 million is recognized under thepercentage of completion method.
(5) Major Lease Transactions
Finance leases other than those deemed to transfer the ownership of the leased assets
to lessees, are accounted for by a method that is applicable to ordinary operatingleases.
(6) Accounting for Major Hedges
1) Hedge Accounting Method
The Company principally applies deferred hedging accounting. The interest
rate swaps that fulfill requirements for exceptional treatments permitted forinterest rate swaps are accounted for using exceptional treatments.
2) Hedging Instruments and Hedged Items
Hedging instruments: Interest rate swaps
Hedged items:
Bonds and loans payables
3) Hedging Policy
The risks for forward interest rate fluctuation are to be hedged principally
pursuant to the risk management policy of the Company.
4) Assessment of Hedge EffectivenessHedge effectiveness is assessed by comparing the cumulative totals of pricefluctuations of the hedging items and hedging instruments from the beginningof hedging to the effective point of assessment, taking the changes of both thehedging items and hedging instruments into account. However, when an item
is judged to fulfill requirements for exceptional treatments, the assessment ofhedge effectiveness is omitted.
(7) Accounting for Consumption Tax[English Translation]30

In relation to consumption tax and regional consumption tax, the Company has
adopted the tax-exclusive method.
6. Valuation of Assets and Liabilities of Consolidated Subsidiaries
Assets and liabilities of consolidated subsidiaries, etc. are fully carried at fair value.
7. Amortization of Goodwill and Negative Goodwill
Goodwill and negative goodwill are amortized by the straight line method over a 5-10
year period.
8. Changes in Items Related to Important Accounting Policies(1) Accounting standards related to accrued bonuses for directors and corporate auditors"Accounting standards for directors' bonus" (Accounting Standards Board of Japan
Statement No.4, November 29, 2005) are being applied from the consolidated fiscal
year under review.
Under these standards, operating profit, ordinary profit, and net income before taxes
decrease by Yen 215 million, respectively.
(2) Accounting Standards Regarding Presentation of Net Assets in a Balance Sheet
From the consolidated fiscal year under review, "Accounting Standards for
Presentation of Net Assets in the Balance Sheet" (Accounting Standards Board ofJapan Statement No. 5, December 9, 2005) and "Guidance on Accounting Standardsof Net Assets in the Balance Sheet" (Accounting Standards Board of Japan
Guidance No. 8, December 9, 2005) are being applied.
Hitherto, the amount corresponding to conventional total of shareholders' equity has
been Yen 540,184 million. The net assets of the consolidated balance sheet in the
consolidated fiscal year under review was prepared under ”Company Accounting
Rules”(Ministry of Justice Ordinance No. 13, February 7, 2006).
(3) Accounting Standards Related to Business Combination
From the consolidated fiscal year under review, "Accounting Standards Related toBusiness Combinations" (Business Accounting Council October 31, 2003),"Accounting Standard for Business Divestitures and the related Implementation
Guidance" (Accounting Standards Board of Japan Statement No. 7, December 27,
2005 Accounting Standards for Business Committee), and "Guidance on AccountingStandard for Business Combinations and Accounting Standard for Business
Divestitures" (Accounting Standards Board of Japan Guidance No. 10 final revised
December 22, 2006 Accounting Standards for Business) are being applied.
9. Changes of Presentation Methods(Consolidated Balance Sheets)
1) Cash Deposits for Armored Car Services
Until the previous consolidated fiscal year, "Cash deposits for armored car
services" were included in Cash on hand and in banks. However, they are being
presented separately from the consolidated fiscal year under review from theview point of further clarification.
Cash deposits for armored car services, which were included in Cash on handand in banks, of the previous consolidated fiscal year, amounted to Yen 65,187
million.
2) Goodwill
From the consolidated fiscal year under review, the "Consolidated adjustment
account" is presented as "Goodwill."[English Translation]31Notes to Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services, Short-term Bank Loans
For financial institutions, the Company and some of the domestic consolidated
subsidiaries operate cash collection and deposit services for financial institutions relating
to cash dispensers located outside of financial institution facilities and also operates cash
collection services.
The balance of Cash deposits for armored car services includes cash on hand and cash inbanks representing a total of Yen 50,541 million related to cash collection and deposit
services operations, which is restricted as to use by the Company group. The balance ofshort-term bank loans includes an amount of Yen 10,466 million financed for cash
collection and deposit services operations.
Furthermore, the balance of Cash deposits for armored car services includes Yen 24,786
million connected with cash collection services operations, which is also restricted as touse by the Company group. In addition, the short-term bank loans balance includes theamount of Yen 17,201 million financed for cash collection services operations.
2. Asset-related Accumulated Depreciation
Accumulated depreciation of property, plant and equipment amounted to Yen 273,430
million.
3. Assets Pledged as Collateral and Collateral-related Liabilities:(1) Assets Pledged as Collateral(Millions of yen)
Cash on hand and in banks (time deposit)
220
Real estate for sale
61,531
Buildings and improvements
30,016
Land
21,882Other tangible assets
2
Intangible assets (leasehold)
1,593
Long-term loans receivable
164
Investment securities
1,375
Others (long-term deposits)
200
Total
116,985(2) Liabilities Pledged as Collateral(Millions of yen)
80,86815,797
13,460110,126

Bank loans
Straight Bonds
Long-term loans payable
Total

Liabilities Pledged as Collateral
Investment securities, investment securities in subsidiaries and affiliated companies,
long-term loans, and loans to subsidiaries and affiliated companies are pledged ascollaterals for the debts of subsidiaries and affiliated companies and other debts.
4. Shares of Non-consolidated Subsidiaries and Affiliated Companies:(Fixed assets)
Investment in securities (shares) amounted to Yen 38,037 million.
5. Contingent Liabilities:[English Translation]32

(1) The Company has contingent liabilities of Yen 10,741 million as guarantors of theloans payable and amounts payable held for lease, etc. of the affiliated companies, etc.
(2) Lawsuits:
In July 2004, Fujitsu Limited filed a lawsuit against Secom General Insurance Co.,
Ltd. in the Tokyo District Court, claiming compensation for costs related to a systems
development order in the amount of Yen 2,500 million. Secom General InsuranceCo., Ltd. is not only contesting this lawsuit on the grounds that it is without merit, but
has also filed a countersuit claiming damages in the amount of Yen 1,000 million.
Both lawsuits are currently pending.
Pasco Corporation filed a lawsuit against Sumitomo Mitsui Banking Corporation for
a confirmatory judgment to the effect that it does not owe an obligation in the amountof Yen 2,010 million to Sumitomo Mitsui Banking Corporation with the Tokyo
District Court on October 31, 2005. Sumitomo Mitsui Banking Corporation allegedthat it made a loan to a third party and acquired from the third party its claim against
Pasco Corporation for an alleged sale of equipment to Pasco Corporation as acollateral for the loan, and demanded Pasco Corporation to pay such claim to
Sumitomo Mitsui Banking Corporation. However, upon carefully investigating thecase with counsel, we believe that the alleged transactions are null and void, and ourpleading should be admitted. Furthermore, on December 5, 2005, Sumitomo Mitsui
Banking Corporation brought a cross action against Pasco Corporation in relation to ademand for payment of a transferred receivable. Subsequently, both actions wereconsolidated according to a court procedure. The existence of the debt in theabove-mentioned sum is still being disputed in the court.
6. Presentation of Goodwill and Negative Goodwill
Goodwill and negative goodwill are presented in netted amount. Listed below are theamounts before offset.
Goodwill
7,183 million yen
Negative goodwill
1,485
Net amount
5,697
Note to Consolidated Statements of Changes in Net Assets
1.The Classes and Total Number of Issued Shares and Treasury Stocks
Number of shares atthe end of previous
consolidated fiscal
year

Increase in numberof shares in the
consolidated fiscal
year under review

Decrease in
number of sharesin the consolidated
fiscal year underreview(Unit：1 share)
Number of shares atthe end of
consolidated fiscal
year under review

Issued shares
233,288,717――
233,288,717
Common stock
Treasury stock
8,301,997
21,391
4,478
8,318,910
Common stock(Outline of reasons for change)
The increase of 21,391 in the number of common stocks is due to the purchase of sharesconstituting less than one unit.

[English Translation]
33

The decrease of 4,478 in the number or common stocks is due to requests to sell such
number of shares as will constitute, together with the shares constituting less than one
unit of shares already held, one full unit.
2. Items Related to Dividends(1) Amount of Dividend Paid
Resolution
Classes ofSharesGeneral Meetingof Shareholders
on June 27, 2006

Commonstock

Total amount ofcash dividend

Cash dividend per
share(Millions of yen)

(yen)

13,49960

Recorddate

Effective
date

March
31, 2006

June 28,
2006(2) Of the dividends whose record date belongs to the consolidated fiscal year under review,the following are those dividends of which the entry into effect date belongs to the next
consolidated fiscal year.
Resolution
Classes of Source Total amount
Cash
RecordEffective
divideddate
date
Sharesofof cashdividend
dividend
per share(millions of yen)
(yen)

General Meetingof Shareholders
on June 27, 2007

Commonstock

Retainedearnings

17,997[English Translation]
34

80

March
31, 2007June 28,2007

Note to Deferred Tax Accounting
1. The Significant Components of Deferred Tax Assets and Deferred Tax Liabilities
Deferred tax assets:
Eliminations of unrealized gain
Accrued pension and severance costs
Operating loss carried forwards
Write-down on fixed assets
Adjustment of book value of land and buildings ofsubsidiaries, etc. at fair value at the date of
consolidation
Accrued bonuses
Allowance for doubtful accounts
Underwriting funds and funds for outstanding claims
Impairment loss
Losses on devaluation of investment securities
Adjustment of book value of other fixed assets ofsubsidiaries, etc. at fair value at the date of
consolidation
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets(Millions of yen)
9,376
7,076
6,979
5,380

Deferred tax liabilities:
Adjustment of book value of land and buildings ofsubsidiaries, etc. at fair value at the date of
consolidation
Unrealized gains on securities
Prepaid pension and severance costs
Adjustment book value of other fixed assets ofsubsidiaries, etc. at fair value at the date of
consolidation
Other
Total deferred tax liabilities(Millions of yen)

5,144
4,617
4,400
3,600
2,989
2,934
2,580
7,247
62,326(14,491)
47,834(7,550）(7,182)(5,918)(2,522)(126)(23,300)(Millions of yen)
24,533Net deferred tax assets[English Translation]35

2. Summary of the Reconciliation between the Effective Tax Rate Reflected in theConsolidated Financial Statements and the Statutory Tax Rate
Statutory tax rate
(Reconciliation)
Net gains from investment in affiliated companies
accounted for under the equity method
Utilization of tax loss carryforwards
Permanent nondeductible expenses such asentertainment expenses
Per capita rate of corporate inhabitant tax
Amortization of goodwill
Increase in valuation allowance
Unrecognized tax benefits from subsidiaries, etc. in
deficiency
Research and development tax credits
Devaluation losses on the investments and loans ofsubsidiaries and affiliated companies
Adjustment of gains or losses on sales of shares ofsubsidiaries and affiliated companies
Tax rate difference with consolidated subsidiaries
Other
Effective tax rate after the adoption of deferred tax
accounting

40.5 (%)
(1.9)
(1.6)
0.8
0.7
0.5
0.5
0.4
(0.4)
(0.4)
(0.3)
(0.2)
(0.1)
38.5

Notes to Fixed Assets Used under Leases
1. Finance lease transactions other than those deemed to transfer the ownership of the leased
assets to the lessees(1) Lessee1) The amount equivalent to acquisition cost, the amount equivalent to accumulated
depreciation, and the amount equivalent to the year-end balance of leased properties(Millions of yen)Amount equivalent to acquisition cost
Buildings and improvements
5,184
Tangible assets (other)
11,458Intangible assets (software)
143
Total
16,787
Amount equivalent to accumulated depreciation
Buildings and improvements
Tangible assets (other)
Intangible assets (software)
Total

1,912
6,459
90
8,462

Amount equivalent to the year-end balance
Buildings and improvements
Tangible assets (other)
Intangible assets (software)
Total

3,272
4,999
52
8,324

[English Translation]362) The Amount Equivalent to the Year-end Balance of Future Minimum Lease Payments(Millions of yen)
Within 1 year
2,510
Over 1 year
7,014
Total
9,524
3) Lease Payment Expenses, the Amount Equivalent to Depreciation Expenses, and theAmount Equivalent to Interest Expenses(Millions of yen)
Lease payment expenses
3,081
Amount equivalent to depreciation expenses
2,738
Amount equivalent to interest expenses
3864) Calculating Method of the Amount Equivalent to Depreciation Expenses and theAmount Equivalent to Interest Expenses
Calculating method of the amount equivalent to depreciation expenses
Depreciation expenses is calculated using the straight-line method which assumes thatthe period of the lease is the useful service life of the asset and sets the residual value
to zero.
Calculating method of the amount equivalent to interest expenses
The amount equivalent to interest expenses is calculated as the difference between totallease payments and the amount equivalent to acquisition cost of leased properties, andthe interest method is used as the allocation method for each fiscal period.
(2) Lessor
1) The Acquisition Cost, Accumulated Depreciation, and Year-end Balance for Leased
Properties Included in Fixed Assets(Millions of yen)
Acquisition cost
Buildings and improvements
10,803
Tangible assets (other)
21,283
Total
32,086
Accumulated depreciation
Buildings and improvements
Tangible assets (other)
Total

882
10,523
11,405Year-end balance
Buildings and improvements
Tangible assets (other)
Total

9,920
10,76020,680[English Translation]372) The Amount Equivalent to the Year-end Balance of Future Minimum Lease
Payments to Be Received(Millions of yen)
Within 1 year
5,405Over 1 year
23,113
Total
28,5183) Received Lease Payments, Depreciation Expenses, and the Amount Equivalent toReceived Interest(Millions of yen)
Received lease payments
7,059
Depreciation expenses
3,537
Amount equivalent to received interest
2,0624) Calculating Method of the Amount Equivalent to Interest
The amount equivalent to interest is calculated as total lease payments plus total
estimated residual value minus the purchase price of the leased properties, and theinterest method is used as the allocation method for each fiscal period.
2. Operating Leases
1) Lessee
Future minimum lease payments
Within 1 year
Over 1 year
Total

(Millions of yen)

2) Lessor
Future minimum lease payments to be received
Within 1 year
Over 1 year
Total

(Millions of yen)

2,272
31,55433,827

3,402
27,34430,747

Notes to Retirement Benefits
1. Outline of the Retirement Benefit Plans Adopted by the Company:
Employees of the Company and its domestic consolidated subsidiaries whose services
are terminated are, under most circumstances, eligible for lump-sum severance
indemnities and/or eligible for pension benefits.
The Company and those of its domestic consolidated subsidiaries with the sameretirement benefit plan have adopted a severance indemnity plan and a defined
contribution pension plan. The method of calculating the severance indemnity under theseverance indemnity plan is to pay out to the employees 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(interim measures are also provided). The defined contribution pension plan wasestablished in April 2003, a portion equivalent to 20 percent of the severance indemnity
plan so far accumulated was transferred to the new plan, and a specified percentage ofannual income is contributed thereto. The Company transferred an additional portion of
the severance indemnity plan funds to the defined contribution pension plan in April
2005, and accordingly, the ratio of the accumulated amount in the severance indemnity[English Translation]
38

plan and the amount of contributions to the defined contribution pension plan, including
the past reserve, changed to 70 percent and 30 percent, respectively.
The majority of the consolidated overseas subsidiaries have adopted a variety ofpension plans that essentially cover all employees. Most of these plans are defined
contribution pension plans.
2. Items Concerning the Retirement Benefit Obligation (As of March 31, 2007):(Millions of yen)
(1) Projected benefit obligation(70,151)(2) Plan assets *1
68,372(3) Unfunded projected benefit obligation (1)+(2)(1,779)(4) Unappropriated difference at the time of change inaccounting standard(5) Unrecognized actuarial gain or loss
(6) Unrecognized prior service cost(7) Net retirement benefit obligation recognized in the(1,779)consolidated balance sheet ((3)+(4)+(5)+(6))(8) Prepaid pension and severance costs
15,817(9) Accrued pension and severance costs ((7)-(8))(17,596)(Note) *1. Plan assets include the asset of Yen 235 million of the retirement benefit
trust.
3. Components of Pension and Severance Costs (April 1, 2006–March 31, 2007)(Millions of yen)
(1) Service cost *1
3,763(2) Interest cost
1,146(3) Expected return on plan assets(1,714)(4) Amortization of actuarial gain
(2,876)(5) Pension and severance costs ((1)+(2)+(3)+(4))318(6) Other *2
1,392
Total
1,711
(Notes) *1. Pension and severance costs for consolidated subsidiaries, etc. adopting
the simplified method are included in (1) “Service cost.”*2 “Other” represents the amount payable as premiums to the defined
contribution pension plan.
4. Assumptions Used in Accounting for Retirement Benefits(1) Attribution of projected benefit
obligation(2) Discount rates(3) Expected rates of return on plan
assets(4) Amortization period of priorservice cost(5) Amortization period of actuarial
gain or loss

Straight-line method over the estimated years ofservices of the eligible employees
Principally 1.9% at beginning of fiscal year
Principally 2.0% at end of fiscal year
Principally 3.0% for plan assets
0.0% for retirement benefit trust
Prior service cost is amortized in the year in which
the gain or loss is incurred.
Actuarial gain or loss is amortized in the year inwhich the gain or loss is incurred.

[English Translation]
39

Note Concerning Per-Share Information
Net assets per share:
Net income per share:

Yen 2,400.91
Yen 259.14

Notes to the Business Combination
1. Outline of the Business Combination(1) Name and Business Area of the Acquired Company
Nohmi Bosai Ltd. (Nohmi) and its 21 consolidated subsidiaries( Comprehensive fire protection services)(2) Major Reasons for Acquisition
SECOM has always been in an alliance with Nohmi, an affiliated company accounted
for under the equity method, as its largest shareholder, but we have recently acquired
new shares that were issued by Nohmi through an allocation of new shares to a third
party, thereby making Nohmi our consolidated subsidiary. By acquiring these newly
offered shares, SECOM intends to reinforce its alliance with Nohmi by integrating
SECOM’s expertise in security systems with Nohmi’s fire protection technologies. This
will promote the development of highly competitive and original new products that will
enable the Group to cultivate new markets, and concentrate management resources totake advantage of the respective strengths of the two companies. For example, we willconsign production of security systems and products and carry out joint productdevelopment. The strengthened alliance will broaden the capabilities of the Group andcontribute to higher profitability and increased shareholder value.
(3) Date of the Business Combination
December 8, 2006
(4) Legal Form of the Business Combination
An allocation of new shares to a third party(5) Name of the Company after the Combination
Nohmi and its 21 consolidated subsidiaries(6) Percentage of Voting Rights Acquired
30.8%
The percentage of voting rights acquired is calculated by dividing the number of voting
rights assumed through an allocation of new shares to a third party by the total numberof shareholders’ voting rights after the new shares had been issued.
2. Period in which the results of the acquired company have been included in the consolidated
financial statements
From January 1, 2007 to March 31, 2007
3. The Acquisition Cost of the Shares of the Acquired Company(1) The acquisition cost of the shares of the acquired company: Yen 14,060 million
The full amount was paid in cash.
4. Total Value of Goodwill or Negative Goodwill Arising from the Combination(1) Total Value of Negative Goodwill:
Yen 1,137 million(2) Cause of the Negative Goodwill[English Translation]
40

The fair value of the net assets of the acquired company at the time of the businesscombination was greater than the cost of acquisition so this difference is recognized
as negative goodwill.
(3) Amortization Method and Amortization Period
Straight-line method, over ten years
5. Major Components of the Assets Acquired and Liabilities Assumed on the Date of theBusiness Combination(1) Assets
Current assets
Yen 58,957 million
Fixed assets
Yen 19,950 million
Total assets
Yen 78,908 million(2) Liabilities
Current liabilities
Long-term liabilities
Total liabilities

Yen 26,131 million
Yen 7,757 million
Yen 33,888 million[English Translation]
41

Certified Copy of the Accounting Auditors’ Report (Consolidated)[English Translation of the Auditors' Report Originally Issued in the Japanese Language]

Independent Auditors' Report
Date May 23, 2007
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA & Co.
.
Kentaro Onishi (Seal)
Designated and Engagement Partner
Certified Public Accountant
Toshiya Mori (Seal)
Designated and Engagement Partner
Certified Public Accountant
We have audited the consolidated statutory report, comprising the consolidated balance sheet, theconsolidated statement of income, the consolidated statement of changes in net assets and the related notesof SECOM Co., Ltd.as of March 31, 2007 and for the year from April 1, 2006 to March 31, 2007 inaccordance with Article 444(4) of the Companies Act. The consolidated statutory report is the
responsibility of the Company’s management. Our responsibility is to express an opinion on the
consolidated statutory report based on our audit as independent auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those
auditing standards require us to obtain reasonable assurance about whether the consolidated statutory
report is free of material misstatement. An audit is performed on a test basis, and includes assessing theaccounting principles used, the method of their application and estimates made by management, as well as
evaluating the overall presentation of the consolidated statutory report. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the consolidated statutory report referred to above presents fairly, in all material respects,
the financial position and the results of operations of SECOM Co., Ltd. and its consolidated subsidiaries
for the period, for which the consolidated statutory report was prepared, in conformity with accounting
principles generally accepted in Japan.
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 of Japan.

[English Translation]

42

Certified Copy of the Board of Corporate Auditors’ Report[English Translation of the Auditors’ Report Originally Issued in the Japanese Language]

Audit Report
May 24, 2007

Mr. Kanemasa Haraguchi
President and Representative Director
SECOM Co., Ltd.
Board of Corporate Auditors of
SECOM Co., Ltd.
Teruo Ogino (Seal)
Corporate Auditor (full-time)
Ken Tsunematsu (Seal)
Corporate Auditor
Hiroshi Yasuda (Seal)
Corporate Auditor
Kohei Yamashita (Seal)
Corporate Auditor
The Board of Corporate Auditors has received the audit reports of the performance of
duties of the directors during the 46th business term from April 1, 2006 through March 31, 2007
from each of the corporate auditors. After deliberating such reports, we have prepared this Audit
Report and report as follows.
1. Method and Details of Audit Performed by corporate auditors and the Board of Corporate
Auditors
The Board of Corporate Auditors established the audit policy and audit plan for thecurrent fiscal year, received reports on the status and results of audits from each corporate
auditor, received reports on the status of execution of duties from directors and accounting
auditors, and requested explanations when necessary.
Each of the auditors, in accordance with the audit policy of the current fiscal year andaudit plan, etc. set up by the Board of Corporate Auditors, worked to communicate withdirectors, the internal auditing division and other employees, made efforts to gather informationand 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
on their duties, requesting explanations when necessary, inspecting documents concerning
matters such as important decisions, and investigating the conditions of the business andfinancial conditions at the head office and the principal offices. Furthermore, to ensure theexecution of the duties of directors complied with laws and regulations and the Articles ofIncorporation and to ensure appropriate joint-stock company operations, corporate auditors also
monitored and investigated the details of the resolution of the Board of Directors on theestablishment of a system stipulated in Paragraph 1 and Paragraph 3 of Article 100 of theOrdinances for Enforcement of the Companies Act and the status of the system (internal control[English Translation]
43

system) established based on such resolution. We worked to communicate and exchange
information with the directors and corporate auditors of subsidiaries and received reports on
operations from subsidiaries when necessary. The above methods were used to examine thebusiness report and accompanying schedule for the fiscal year under review.
Furthermore, in addition to monitoring and examining whether the accounting auditors
maintained an independent position and performed auditing appropriately, we received reports
from the accounting auditors on the execution of their duties and requested explanations whennecessary. In addition, we received notice from the accounting auditors that “The systems for
ensuring the proper execution of duties” (set forth in each Item of Article 159 of the Ordinancefor Corporate Accounting) is organized in accordance with the “Standers for Quality Control of
Audit” (Business Accounting Council, October 28, 2005) and other relevant standards, andsought explanations whenever necessity arose. Based on the above methods, we examined thefinancial statements (balance sheets, statements of income, statements of changes inshareholder's equity, note to financial statements), accompanying schedules, and theconsolidated financial statements (consolidated balance sheets, consolidated statements ofincome, consolidated statements of changes in shareholder's equity, note to consolidated
financial statements) for the fiscal year under review.
2. Result of audit(1) Result of audit of business report, etc.
i) The Business Report and accompanying schedules fairly represent the condition of thecompany in accordance with laws and regulations and the Articles of Incorporation of theCompany.
ii) We have determined that there were no serious occurrences of unjust activity or
violations of any laws or regulations or the Articles of Incorporation of the Company by
any of the directors in carrying out their duties.
iii) We believe the contents of the resolution of the Board of Directors regarding the internal
control system are appropriate. We found no matters to note regarding the execution ofduties of directors regarding the internal control system.
(2) Result of audit of financial statements and accompanying schedules
In our opinion, the audit procedures and audit results of the accounting auditor KPMG
AZSA & Co. 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 & Co. are appropriate.

[English Translation]
44

Non-Consolidated Balance Sheet(As of March 31, 2007)
AMOUNT

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

191,11171,81867,799667
10,972
6,952
2,218
452
5,991
1,024
2,014
4,750
14,516
2,473(541)

Current Liabilities:
Accounts payable
Bank loans
Payables – otherAccrued income taxes
Accrued consumption taxes
Accrued expenses
Deposits received
Deferred revenue
Payables – construction
Accrued bonuses
Other

135,548
2,573
27,667
12,596
15,7752,029
639
41,60322,735
3,825
5,207
895

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
Intangible Assets:
Telephone rights
Telephone and telegraph utility rights
Software
Other
Investments and Others:
Investment securities
Investment securities and investments in
subsidiaries and affiliates
Long-term loans receivable
Lease deposits

463,680
123,220
22,124136
60,2841,364
4,216
32,092
2,980
22
8,258
0
83
4,755
3,419
332,200
43,165Long-term Liabilities:
Guarantee deposits received
Accrued pension and severance costs
Accrued retirement benefits for
directors and corporate auditors

25,08818,4495,370

167,91471,262
8,973

Long-term prepaid expense
Prepaid pension and severance costs
Deferred income taxes
Fund for insurance

24,855
12,213
5,139
4,893

Other
Allowance for doubtful accounts

983(7,200)TOTAL ASSETSITEM
LIABILITIES(Millions of yen)
AMOUNTITEMASSETS

Total Liabilities
NET ASSETS
Shareholders’ Equity:
Common Stock
Capital Surplus:
Additional paid-in capital
Other capital surplus
Retained Earnings:
Legal reserve
Other retained earnings
Reserve for systems development
General reserve
Accumulated earnings carriedforwardCommon Stock in treasury, at cost
Valuation, Translation Adjustments andOthers:Net Unrealized Gains on Securities

Total Net Assets
TOTAL LIABILITIES AND NET
ASSETS654,791[English Translation]
45

1,268
160,637

489,590
66,377
83,056
83,054
1
385,006
9,028
375,978
800
2,212
372,966(44,850)
4,564
4,564

494,154654,791Non-Consolidated Statement of Income(Fiscal Year from April 1, 2006 to March 31, 2007)(Millions of yen)

ITEM

AMOUNT

Revenue
Costs of revenue
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income:Interest income
Dividends income
Other
Non-operating expenses:
Interest expenses
Loss on disposal of inventories
Loss on sales and disposal of fixed assets
Loss from write-off of prepaid installation cost
Provision for allowance for doubtful accounts
Other
Ordinary profit
Extraordinary profit:
Gain on sales of subsidiaries' and affiliates'
securities
Other
Extraordinary loss:
Loss on sales of subsidiaries' and affiliates'
securities
Loss on revaluation of investment securities
Other
Income before income taxes
Income taxes – current
Income taxes – deferred
Net income[English Translation]
46

326,076
183,341
142,734
69,33073,404
1,370
5,659
912
388
949
1,016
765
286
1,356

1,151
95

606
430
105

7,942

4,763
76,583

1,246

1,141
76,68827,887
1,555
47,245

Non-Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2006 to March 31, 2007)(Millions of yen)
Shareholders’ equity
Retainedearnings

Capital surplus
Common stock
Balance as of March 31, 2006
Changes during the period:
Cash dividends *Bonuses to directors *Reversal of reserve for tax deferralon asset replacement *Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes during the period
Balance as of March 31, 2007

66,377

Additional
paid-in capital
83,054

66,377

Other capitalsurplus

83,054-

Total capitalsurplus
83,054

1

1

1
1

1
83,056

Legal reserve
9,028

9,028

Shareholders’ equity
Retained earnings
Other retained earnings
Reserve forsystems
development
Balance as of March 31, 2006
Changes during the period:
Cash dividends *Bonuses to directors *Reversal of reserve for tax deferralon asset replacement *Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2007

Reserve for tax
deferral on asset
replacement

General reserve

24

2,212

800

(24)

800

(24)
-

Shareholders’ equity

Common stock intreasury, at cost
Balance as of March 31, 2006
Changes during the period:
Cash dividends *Bonuses to directors *Reversal of reserve for tax deferralon asset replacement *Net income
Purchase of treasury stock
Disposal of treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2007

Total
shareholders’equity(44,749)

456,041

(124)
24

(100)
(44,850)

2,212

Accumulated
earnings
carriedforward339,293

Total retained
earnings
351,358(13,499)(98)(13,499)
(98)

24

-

47,24547,24533,672372,966

33,648385,006

Valuation, translation adjustments
and others
Total
Unrealized gains
valuation,(losses) on
translation
securities
adjustments
and others
5,604
5,604

Total net
assets461,646(13,499)(98)(13,499)
(98)

-

-

47,245(124)
25

47,245(124)
25

33,549489,590(1,040)(1,040)(1,040)(1,040)4,564(1,040)4,564

32,508494,154

The items marked with * derive from profit appropriation resolved at the General Shareholders’ Meeting in June 2006.

[English Translation]
47

Notes to Non-Consolidated Financial Statements
Notes to Significant Accounting Policies
1. Valuation Policies and Methods for Securities(1) Investment Securities in Subsidiaries and Affiliated Companies
Valued at cost, based mainly on the moving average method.
(2) Available-For-Sale Securities
Securities with fair value
Stock and beneficiary securities: At fair value based on the average market priceduring 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, net of the applicable
income taxes, included directly in net assets. The cost of securities sold isprimarily calculated by the moving average method.
Securities with no fair value
At cost, based on the moving average method
2. Valuation Policies and Methods for Inventories
Merchandise and supplies are stated at cost determined by the moving average method.
3. Depreciation of Fixed Assets(1) Tangible Assets: Declining-balance method
a. Security Equipment and Control Stations
Depreciating over the average estimated service lives (5-8 years)b. Other Tangible Assets
Buildings (excluding auxiliary facilities attached to buildings) acquired on andafter April 1, 1998 are depreciated by the straight-line method.
Main useful service life is as follows: Buildings and improvements: 22–50 years(2) Intangible Assets: Straight-line method
The software used in the Company amortized by the straight-line method is based on
the useful service lives within the Company (5 years).
(3) Long-term Prepaid Expenses: Straight-line method
Long-term prepaid expenses are amortized by the straight-line method. With
respect to the installation costs related to security equipment at the customer
premises, any portion exceeding the amount received from the customer is stated as“long-term prepaid expenses” and amortized by the straight-line method over thecontract period (5 years).
4. Basis for 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 estimated amount of uncollectibles.
It is determined based on historical rate of loss with respect to ordinary accounts,
and an estimate of uncollectible amounts respectively determined by reference to[English Translation]48

specific doubtful accounts from customers who are suffering from financial
difficulties.

(2) Accrued Bonuses
Accrued bonuses are provided for the bonus payments to employees, at an amountto be paid during the fiscal year under review.
(3) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company appropriates anamount of accrued pension and severance costs and prepaid pension and severance
costs that is recognized to be paid at the end of the term under review, based on theamount of projected benefit obligation and the estimated amount of plan assets as ofthe end of the term under review. Prior service costs and actuarial gains and losses
are amortized in the fiscal year in which the gain or loss is incurred.
(4) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for the retirement benefits of directors and corporate auditors in the
Company, estimated liabilities under the plan which would be payable if directors
and corporate auditors left on the balance sheet date is accrued in accordance with
the Company’s regulations.
5. Other Major Items Concerning Preparation of Non-Consolidated Financial Statements(1) Accounting for Lease Contracts
Finance lease contracts other than those deemed to transfer the ownership of theleased assets to lessees are accounted for by a method that is applicable to ordinary
operating leases.
(2) Consumption Tax
In relation to consumption tax and regional consumption tax, the Company adopts
the tax-exclusive method.
6. Changes in Accounting Policy(1) Accounting Standard for Director Bonuses
From the fiscal year under review, "Accounting standard for directors’ bonus" (theAccounting Standards Board of Japan Statement No. 4, November 29, 2005) arebeing applied. Under these standards, operating profit, ordinary profit, and net
income before taxes respectively decrease by Yen 98 million.
(2) Accounting Standard for Presenting Net Assets in the Balance Sheets
From the fiscal year under review, "Accounting Standards for Presentation of Net
Assets in the Balance Sheet" (Accounting Standards Board of Japan, Statement
No.5, December 9, 2005) and "Guidance on Accounting Standards for Presentationof Net Assets in the Balance Sheet" (Accounting Standards for Board of Japan,
Guidance No.8, December 9, 2005) are being applied. Hitherto, the amountcorresponding to conventional total of shareholders' equity has been Yen 494,154
million.

[English Translation]
49

The net assets in the balance sheets in the fiscal year was prepared under“Company Accounting Rules”(Ministry of Justice Ordinance No.13, February 7,2006).
7. Change of Presentation Method(Balance Sheets)
Until the previous fiscal year, Cash deposits for armored car services were included in
Cash on hand and in banks. However, they are being presented separately from thefiscal year under review.
Meanwhile, Cash deposits for armored car services, which were included in Cash on
hand and in banks in the previous fiscal year, amounted to Yen 59, 410 million.

Notes to Non-Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services, Short-term Bank Loans
The Company operates cash collection and deposit services for financial institutions
relating to cash dispensers located outside of financial institution facilities and also
operates cash collection services.
The balance of Cash deposits for armored car services includes a balance of cash on
hand and cash in banks of Yen 43,012 million related to cash collection and deposit
services operations, which is restricted as to use by the Company. The balance ofshort-term bank loans includes an amount of Yen 10,466 million financed for cash
collection and deposit services operations.
Furthermore, the balance of Cash deposits for armored car services includes Yen 24,786
million connected with cash collection services operations, which is also restricted as touse by the Company. In addition, the short-term bank loans balance includes the amountof Yen 17,201 million financed for cash collection services operations.
2. Assets Pledged as Collateral and Collateral-related Liabilities
Assets pledged as collateral(Millions of yen)
Investment securities
1
Investment securities in subsidiaries andaffiliated companies
40
Long-term loans receivable
164
Total
206
Collateral-related liabilities－
Investment securities, investment securities in subsidiaries and affiliated companies,
and long-term loans are pledged as collateral for the debts of subsidiaries andaffiliated companies and other debts.
3. Asset-related Accumulated Depreciation
Accumulated depreciation on tangible assets[English Translation]
50

Yen 195,769 million

4. Contingent Liabilities(1) Guarantees
Liabilities for the below companies and employees are guaranteed.
(Millions of yen)
Keijinkai (Medical institution)
1,403
Alive Medicare Co., Ltd.
1,389
Seikeikai (Medical institution)
911
Employees
241
Other 7 companies
910
Total
4,856
(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 to provide funds to
Secom General Insurance Co., Ltd. if and when the net assets of Secom General
Insurance Co., Ltd. become lower than the specified amount or its current assets
necessary for the payment of its liabilities are insufficient. The total liabilities ofSecom General Insurance Co., Ltd. at the end of the fiscal year under review are
Yen 170,459 million, including Yen 164,674million of investment deposits bypolicyholders, unearned premiums and other insurance liability and the total assets
are Yen 186,198 million.
However, this agreement is not construed as the Company’s guarantee with respect
to payment obligations of Secom General Insurance Co., Ltd., and Secom General
Insurance Co., Ltd. maintained net assets above the required level and its current
assets were not insufficient at the end of the fiscal year under review.
5. Financial Receivables/Payables from/to Subsidiaries and Affiliated Companies (excluding
those separately presented)(Millions of yen)
Short-term receivables
17,290Long-term receivables
57,407
Short-term payables
10,452Long-term payables
674[English Translation]
51

Notes to Non-Consolidated Statement of Income
Transactions with Subsidiaries and Affiliated Companies
Volume of operating transactions
RevenueAmount of purchased costs and sub-contract costs
Non-operating Transactions(Millions of yen)
16,57758,065
6,112

Notes to Non-Consolidated Statement of Changes in Net Assets
Items Related to the Classes and Number of Treasury StockClasses of
Number of
Increase in
Decrease in
Number ofsharesshares at the
number of
number ofshares at theend of previous shares in fiscal shares in fiscal
end of fiscal
fiscal year
year underyear underyear underreview
review
review
Common stock
8,301,997
21,391
4,478
8,318,910(Outline of reasons for change)
The increase of 21,391 in the number of common stocks is due to the purchase of sharesconstituting less than one unit..
The decrease of 4,478 in the number of common stocks is due to requests to sell such
number of shares as will constitute, together with the shares constituting less than one
unit of shares already held, one full unit.

[English Translation]
52

Notes to Deferred Tax Accounting
1. Significant Components of Deferred Tax Assets and Deferred Tax Liabilities
Deferred Tax Assets(Millions of yen)
Devaluation of Other Investment Securities of Subsidiaries and Affiliated Companies
2,753
Impairment loss
2,495
Accrued Pension and Severance Costs
2,270
Accrued Bonuses
2,109
Loss on revaluation of fixed assets
1,887
Allowance for Doubtful Accounts
1,390
Accrued Business Tax
1,286
Other
3,749
Total Deferred Tax Assets
17,943
Deferred Tax LiabilitiesUnrealized gains on securities
Prepaid Pension and Severance Costs
Total Deferred Tax Liabilities(Millions of yen)
(3,106)(4,946)(8,053)

Net Deferred Tax Assets(Millions of yen)
9,889

2. Summary of the Reconciliation between the Effective Tax Rate Reflected in the Financial
Statements and the Statutory Tax Rate is Summarized as Follows:
Statutory tax rate
(adjustment)
Dividends income and other items never treated as gains
Foreign tax credit
Per capita rate of corporate inhabitant tax
Research and development tax credits
Others
Effective tax rate after the adoption of deferred tax accounting[English Translation]
53

40.5%
(1.5)
(0.5)
0.5
(0.5)
(0.1)
38.4

Notes to Fixed Assets Used under Lease
1. Finance lease transactions other than those deemed to transfer the ownership of the leased
assets to lessee
Other than the fixed assets listed in the balance sheet, non-ownership-transfer financelease contracts are used in the case of certain buildings and improvements, automobiles,
and office equipment and fixtures.
1) The amount equivalent to acquisition cost, the amount equivalent to accumulated
depreciation, and the amount equivalent year-end balance(Millions of yen)Amount equivalent to acquisition cost
Buildings and improvements
5,184
Automobiles
3,147
Tools, furniture and fixtures
3,018
Total
11,351
Amount equivalent to accumulated depreciation
Buildings and improvements
Automobiles
Tools, furniture and fixtures
Total

1,912
1,672
2,158
5,743

Amount equivalent to the year-end balance
Buildings and improvements
Automobiles
Tools, furniture and fixtures
Total

3,272
1,475
860
5,608

2) The amount equivalent to the year-end balance of future minimum lease payments(Millions of yen)
Within 1 year
1,438Over 1 year
5,108
Total
6,546
3) Lease Payment Expenses, the Amount Equivalent to Depreciation Expenses, and theAmount Equivalent to Interest Expenses(Millions of yen)
Lease payment expenses
1,892
Amount equivalent to depreciation expenses
1,651
Amount equivalent to interest expenses
2864) Calculating Method of the Amount of Depreciation Expenses and the Amount ofInterest Expenses
Calculating method of the amount equivalent to depreciation expenses
Depreciation expenses is calculated using the straight-line method which assumes
that the period of the lease is the useful service life of the asset and sets the residual
value to zero.
Calculating method of the amount equivalent to interest expenses
The amount equivalent to interest expenses is calculated as the difference between
total lease payments and the amount equivalent to the acquisition cost of leased[English Translation]
54

properties, and the interest method is used as the allocation method for each fiscal
period.
2. Operating Lease Transactions(1) Lessee
Future minimum lease payments(Millions of yen)
Within 1 year
2,171
Over 1 year
31,456
Total
33,628(2) Lessor
Future minimum lease payment to be received(Millions of yen)
Within 1 year
1,325
Over 1 year
22,787
Total
24,112[English Translation]
55

Notes to Transactions with Related Parties
Type

Name

Address

Subsidiary

Secom
TechnoServiceCo., Ltd.
Nohmi
Bosai
Ltd.

Nakano-ku,
Tokyo

2,357

Installationof security
systems

67.8
(0.0)

Chiyoda-ku
Tokyo

13,302Comprehensive

50.9
(0.0)

1 person-

Secom
MedicalSystemCo., Ltd.

Shibuya-ku,
Tokyo

200

100.0

3 persons

Loan offunds

Subsidiary

Subsidiary

Transactions

Secom Techno
Service Co.,
Ltd.
Nohmi Bosai
Ltd.
Secom Medical
System Co.,Ltd.

Installation costs(Note 2)

Capital(Millionsofyen)Business
content

VotingRights HeldbyCompany(Indirect)
(%)

fire
protection
serviceHome
medicalservices,, etc.

Amount ofTransactions(Millions of yen)
40,172

Underwriting ofshare allotment(Note 3)
Execution ofloans(Collection of
Loan)

Relationship
Additional
Business
posts ofrelationshipdirectors
andcorporate
auditors
Construction
subcontractor

Account

Accounts payable
Payable-construction

Year-end Balance(Millions of yen
3,700
1,227

14,060-15,519

Short-term loan receivable(11,169)

Long-term loan receivable

7,933
21,218(Notes)1. Consumption taxes are not included in the transaction amounts listed above.
However, consumption taxes are included in the year-end balances.
2. The installation costs are determined by price negotiations, taking market prices into
consideration.
3. The allocation of new shares to third parties undertaken by Nohmi Bosai Ltd. wasunderwritten at Yen 760 per share.

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

Yen 2,196.54
Yen 210.00[English Translation]
56

Certified Copy of the Accounting Auditors’ Report[English Translation of the Auditors' Report Originally Issued in the Japanese Language]

Independent Auditors' Report
Date May 23, 2007
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA & Co.
.
Kentaro Onishi (Seal)
Designated and Engagement Partner
Certified Public Accountant
Toshiya Mori (Seal)
Designated and Engagement Partner
Certified Public Accountant
We have audited the statutory report, comprising the balance sheet, the statement of income, the statementof changes in net assets and the related notes, and its supporting schedules of SECOM Co., Ltd. as ofMarch 31, 2007 and for the 46th business year from April 1, 2006 to March 31, 2007 in accordance with
Article 436(2)①of the Companies Act. The statutory report and supporting schedules are theresponsibility of the Company’s management. Our responsibility is to express an opinion on the statutory
report and supporting schedules based on our audit as independent auditors.
We conducted our audit in accordance with auditing standards generally accepted in Japan. Those
auditing standards require us to obtain reasonable assurance about whether the statutory report andsupporting schedules are free of material misstatement. An audit is performed on a test basis, and includes
assessing the accounting principles used, the method of their application and estimates made bymanagement, as well as evaluating the overall presentation of the statutory report and supporting
schedules. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statutory report and supporting schedules referred to above present fairly, in allmaterial respects, the financial position and the results of operations of SECOM Co., Ltd. for the period,
for which the statutory report and supporting schedules were prepared, in conformity with accounting
principles generally accepted in Japan.
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 of Japan.

[English Translation]

57

Reference Document Concerning the General Meeting of Shareholders

First Item of Business:

Proposed Disposal of Surplus

Matters related to the year-end dividend:
The Company considers the return of profit to shareholders as one of the important
issues, and the Company has determined a dividend payout ratio and level of internal reserves
after making an overall judgment on the expansion of the Company’s business and movements
for future sales and profits of the Company while considering the Company’s basic policy that
ensures the payment of continual and steady dividends. The Company will utilize internal
reserves for investments required for increased new contractors, research and development
and an investment and the like for strategic businesses so that the Company will exert its
efforts to strengthen the corporate structure and to expand its business.
Furthermore, in order to return profits to shareholders to reflect the financial
conditions of the Company more accurately, the Company changed the basis of the dividend
from the non-consolidated basis to the consolidated basis from the fiscal year under review.
It is proposed that based on the aforesaid basic policy cash dividends for the fiscal year
under review be increased by Yen 20 per share from Yen 60 per share for the previous fiscal
year to Yen 80 per share to reward shareholders’ continued support.
(1) Kind of asset distributed:
Cash.
(2) Matter related to distribution of cash and total amount:Yen 80 per share of common stock of the Company.
The total amount: Yen 17,997,584,560.
(3) Effective date for distribution of surplus:
June 28, 2007.

Second Item of Business:

Election of Twelve (12) Directors

The term of office of all of the eleven (11) Directors will expire at the close of thismeeting. Therefore, it is proposed to elect twelve (12) Directors, including four (4) new
Directors.
The candidates are as follows:1

Name(Date of Birth)
Makoto Iida
(April 1, 1933)

2

Juichi Toda
(March 7, 1932)

3

Shohei Kimura(May 2, 1943)*

Profile(Title, Responsibility, and Representatives for Other Companies)

Jul 1962
Feb 1976
Jun 1997
Jul 1962
Feb 1976
Jun 1997
Apr 1967
Feb 1985
Feb 1988
Jun 1995
Apr 2002

President and Representative Director (Founder)
Chairman and Representative Director
Supreme Advisor and Director (currently)
Senior Executive Director (Co-founder)
Executive Vice Chairman and Representative
Director
Supreme Advisor and Director (currently)
Joined SECOM Co., Ltd.
Director
Executive Director
Senior Executive Director
President and Representative Director
58

The number of
Shares Held
4,320,500

3,152,216

36,500Name(Date of Birth)

Profile(Title, Responsibility, and Representatives for Other Companies)

Jun 2004

4

Kanemasa Haraguchi(August 7, 1950)*

5

Katsuhisa Kuwahara(May 9, 1948)*

6

Shuji Maeda(September 27, 1952)*

7

Shinobu Iida
(May 27, 1945)*

8

Fumio Obata(July 6, 1946)*

9

Seiichiro Kobayashi(October 30, 1947)*

10

Yasuo Nakayama(November 1, 1952)

President and Representative Director andExecutive Officer
Apr 2005
Chairman and Director (currently)(Representatives for other companies, etc.)
Chairman, Tokyo Security Service Association
Apr 1974
Joined SECOM Co., Ltd.
Jun 1990
Director
Jun 1995
Executive Director
Jun 1997
Senior Executive Director
Jun 2002
Director and Executive Vice President
Jun 2004
Director and Executive Vice President andExecutive Officer
Apr 2005
President
andRepresentative
Director(currently)
Apr 1971
Joined SECOM Co., Ltd.
Jun 1990
Director
Jun 1995
Executive Director
Jun 2004
Director and Managing Executive Officer
Apr 2005
Executive 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 (currently)
Jun 1995
Executive Director, Foundation for Ambulance
Service Development
Nov 1996
Advisor, Office of Chairman, SECOM Co., Ltd.
Jun 1997
Director (up to Jun 2004)
Jun 2004
Executive Officer (currently)
Jun 2005
Executive Director (currently)
Apr 1996
General Manager, Business Development
Department, The Mitsubishi Bank, Ltd.
(Presently The Bank of Tokyo-Mitsubishi UFJ,Ltd.)
Nov 1998
Senior Executive Director, The Long-Term Credit
Bank of Japan (under state control then; presently
The Shinsei Bank, Ltd.)Mar 2000
Associate Manager, Strategic Planning Division,
SECOM Co., Ltd.
Jun 2000
General Manager, Medical Services Department
Jun 2000
Director (currently)
Mar 2002
President and Representative Director, Secom
Medical System Co., Ltd. (currently)
Jun 2004
Executive Officer (currently)
Apr 1970
Joined SECOM Co., Ltd.
Feb 1988
Director
Jun 1997
Executive Director (up to Jun 2004)
Jun 2004
Managing Executive Officer (currently)
Jun 2004
President and Representative Director, Secom
Home Life Co., Ltd. (currently)
Jul 1998
Branch Manager, Oita Branch, The Bank of Japan
Jul 2001
Advisor to the Governor, Secretariat of the Policy
Board, The Bank of Japan
Jul 2003
Branch Manager, Nagoya Branch, The Bank ofJapan
Jul 2005
Director-General, Secretariat of the Policy Board,

The number of
Shares Held[English Translation]

59

9,144

3,300

4,500

6,500

2,000

8,028

0

Name
(Date of Birth)

Profile(Title, Responsibility, and Representatives for Other Companies)

The number of
Shares Held

The Bank of Japan
Personnel and Corporate Affairs Department, The
Bank of JapanMay 2007 Advisor, SECOM Co., Ltd.
11 Koichi SatoApr 1976
Joined SECOM Co., Ltd.
(February 5, 1953)
Apr 1994
General Manager, Planning Department
Sep 1998
Region General Manager, Shizuoka Regional*
Headquarters
Mar 2001
General Manager, COCO-SECOM Department
Apr 2004
General Manager, Operations Department(currently)
Jun 2004
Executive Officer
Jun 2005
Managing Executive Officer (currently)
Jun 2000
Branch Manager, Hibiya Branch, The Sanwa
12 Takayuki Ito(January 2, 1954)
Bank, Ltd. (Presently The Bank of*Tokyo-Mitsubishi UFJ, Ltd.)Jul 2002
Branch Manager, Muromachi Branch, and General
Manager, Corporate Sales Department, UFJ Bank,
Ltd. (Presently The Bank of Tokyo-Mitsubishi
UFJ, Ltd.)May 2004 Director, The Daiei, Inc.
Jun 2005
Advisor, SECOM Co., Ltd.
Jun 2006
Executive Officer (Assistant to President, incharge of control of the Group) (currently)(Notes) 1. There is no particular interest between the Company and each of the said candidates.
2. Asterisk marks (*) indicate incumbent Executive Officer of the Company.
Apr 2007Third Item of Business:

788

0Election of Four (4) Corporate Auditors

The term of office of all of the four (4) Corporate Auditors will expire at the close of thismeeting. Therefore, it is proposed to elect four (4) Corporate Auditors.
Furthermore, the Board of Corporate Auditors has consented to submission of this itemof business.
The candidates are as follows:
1

2

Name
(Date of Birth)
Teruo Ogino(September 25, 1938)

Ken Tsunematsu(March 30, 1932)

Profile(Title, Responsibility, and Representatives for Other Companies)

May 1989

Feb 1990
Feb 1990
Jun 1996
Jun 2003
Apr 1968
Apr 1968
Mar 1979
Jan 1988
Jan 2000
Jun 2002
Jan 2003[English Translation]

General Manager, Inspection Department, The
Mitsubishi Bank, Ltd. (presently The Bank ofTokyo-Mitsubishi UFJ, Ltd.)
Advisor, SECOM Co., Ltd.
Director
Executive Director
Full-time Corporate Auditor (currently)
Registered as Attorney-at-Law (Daini Tokyo Bar
Association)
Joined Blakemore & Mitsui
Auditor, SECOM Science and Technology
Foundation
Founded Tsunematsu Yanase & Sekine
Founded Nagashima Ohno & Tsunematsu, by themerger with Nagashima & Ohno
Corporate Auditor, SECOM Co., Ltd. (currently)
Advisor, Nagashima Ohno & Tsunematsu

60

The number of
Shares Held
7,900

0

Name
(Date of Birth)

Profile(Title, Responsibility, and Representatives for Other Companies)(currently)
Chairman, SECOM Science and Technology
Foundation (currently)
Jan 1979
Director, Jardine Matheson & Company (Japan)Ltd.
Feb 1986
President and Representative Director, Jardine
Matheson K.K.
Apr 1989
Chairman and Representative Director, Jardine
Matheson K.K.
Jun 1993
Advisor, YASUDA Real Estate Co., Ltd.
(currently)
Jan 1999
Representative, Japan Jardine Fleming GroupJan 1999
Chairman and Director, J.P. Morgan Fleming
Asset Management (Japan) Ltd. (presently
JPMorgan Asset Management (Japan) Ltd.)Jan 2002
Advisor and Director, J.P. Morgan Fleming AssetManagement (Japan) Ltd. (presently JPMorgan
Asset Management (Japan) Ltd.) (currently)
Jun 2003
Corporate Auditor, SECOM Co., Ltd. (currently)
Sep 2004
Chairman and Representative Director, Mandarin
Oriental Tokyo Co., Ltd.
Oct 2005
Senior Advisor and Director, Mandarin Oriental
Tokyo Co., Ltd. (currently)(Representatives for other companies, etc.)
President and Director, Yasuda Shoko Kyoikukai
Apr 1988
President and Representative Director, Kokyo
Tatemono Co., Ltd. (currently)
Nov 1990
Chairman and Representative Director,
International Ceramic, Inc. (currently)
Jun 1993
Chairman and Representative Director, ImperialEnterprises Inc.
Jul 1995
Chairman and Representative Director, Dalian
Building Maintenance Co., Ltd. (currently)
Jan 1997
Chairman and Representative Director, Tozai
Building Maintenance Co., Ltd. (currently)
Jun 1998
Director, General Lasertronics Corporation(currently)
Jun 2003
Corporate Auditor, SECOM Co., Ltd. (currently)

The number of
Shares Held

Mar 2004

3

Hiroshi Yasuda(March 8, 1933)

4

Kohei Yamashita(January 26, 1938)

800

800

(Notes)1. There is no particular interest between the Company and each of the said candidates.
2. Messrs. Ken Tsunematsu, Hiroshi Yasuda and Kohei Yamashita are candidates for outside
Corporate Auditors.
3. Reasons for appointment of the candidates for outside Corporate Auditors.
(1) Since Mr. Ken Tsunematsu can serve the Company with his experiences and knowledge
as a lawyer in the light of strengthening the audit system of the Company, we ask you toelect him as outside Corporate Auditor.
(2) Since Mr. Hiroshi Yasuda can serve the Company with his long-term experiences andknowledge as a management person and director of many companies, organizations, andthe like in the light of strengthening the audit system of the Company, we ask you toelect him as outside Corporate Auditor.
(3) Since Mr. Kohei Yamashita can serve the Company with his long-term experiences andknowledge as a management person of global companies in the light of strengthening theaudit system of the Company, we ask you to elect him as outside Corporate Auditor.
4. Reasons why it is determined that the candidates for outside Corporate Auditors will duly
discharge their duties.

[English Translation]

61

Although Mr. Ken Tsunematsu has not been directly engaged in corporate management, since
he is acquainted with corporate legal practices and has extended knowledge about
management, it is determined that he will duly discharge his duties as outside Corporate
Auditor.
5. The number of years of the term of Mr. Ken Tsunematsu, as an outside Corporate Auditor, will
have been five years at the close of this general meeting of shareholders. The number of yearsof the term each of Mr. Hiroshi Yasuda and Mr. Kohei Yamashita will have been four years at
the close of this general meeting of shareholders.

Fourth Item of Business:

Presentation of Retirement Allowance to Retiring Directors

It is proposed that retirement allowance be paid to each of Messrs. Toshitaka
Sugimachi, Nobuyuki Sasaki and Katsuo Akiyama who will resign as Directors upon the
expiration of the term at the close of this general meeting of shareholders, in reasonableamounts determined in accordance with the specified standards of the Company to reward
their meritorious service to the Company. It is also proposed that the determination of theamounts, the date of payment thereof, the methods and other matters in relation thereto be
entrusted to the Board of Directors.
Furthermore, since Mr. Katsuo Akiyama is scheduled to assume the office ofexecutive officer of the Company following the close of the general meeting of shareholders,
the retirement allowance payable for the period during which he served as Director shall be
paid when he resigns as executive officer, together with a retirement allowance payable for theperiod during which he serves as executive officer.
The profiles of the retiring Directors are as follows:
Name
Toshitaka Sugimachi

Nobuyuki Sasaki

Katsuo Akiyama

Feb 1979
Feb 1986
Jun 1994
Jun 1995
Apr 2002
Apr 2005
Jun 1991
Jun 1997
Jun 2004
Apr 2005
Jun 1995
Jun 2002
Jun 2004
Apr 2005

ProfileDirector
Executive Director
Senior Executive Director
President and Representative Director
Chairman and Director
Advisor and Director (currently)
Executive Director
Senior Executive Director
Director and Senior Managing Executive Officer
Senior Executive Director (currently)
Director
Executive Director
Director and Managing Executive Officer
Executive Director (currently)-End-[English Translation]

62