Notice of Convocation
The 50th Ordinary General Meeting of Shareholders

The following is an English translation of the Notice of Convocation of the 50th
Ordinary General Meeting of Shareholders of SECOM CO., LTD. to be held on
June 24, 2011, except for the translation of the INSTRUCTION ON ONLINE
VOTING and the ACCESS MAP FOR THE PLACE OF THE MEETING in the
Notice. The Company provides this translation for your reference andconvenience only and without any warranty as to its accuracy or otherwise.

Table of Contents
Notice of Convocation of The 50th 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. Issues the Group Has to Cope with ··································································
3. Capital Investments ···························································································
4. Fund Raising ······································································································
5. Trends in Earnings and Assets ·········································································
6. Matters Concerning Principal Subsidiaries ····················································
7. Principal Business of the Group ·······································································
8. Principal Offices of the Group ·········································································
9. Matters Concerning Employees of the Group and the Company ·················
10. Principal Lenders ······························································································
11. Other Important Matters Concerning the Group ··········································

4
7
7
7
10
10
11
11
14
15
15
16
16
16

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

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

17
17
17
17
17
17

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 ·············································································

18
18
20
21

IV.
1.
2.
3.
4.

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

22
22
22
22
22

V.

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

23
23
29

1.
2.

[English Translation]2

Consolidated Financial Statements
Consolidated Balance Sheet ·························································································
Consolidated Statement of Income ·············································································
Consolidated Statement of Changes in Net Assets ····················································
Notes to Consolidated Financial Statements ······························································
Non-Consolidated Financial Statements
Non-Consolidated Balance Sheet ················································································
Non-Consolidated Statement of Income ·····································································
Non-Consolidated Statement of Changes in Net Assets ············································
Notes to Non-Consolidated Financial Statements ·····················································
Auditors’ Reports
Certified Copy of the Accounting Auditors’ Report (Consolidated) ·······················
Certified Copy of the Accounting Auditors’ Report (Non-Consolidated) ··············
Certified Copy of the Board of Corporate 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 sameas that in the original Japanese documents.

[English Translation]
3

31
32
33
34
53
54
55
57
65
66
67
69

Stock Exchange Code: 9735
June 3, 2011

Notice of Convocation of
The 50th Ordinary General Meeting of Shareholders
Dear Shareholders:
We would like to express our heartfelt sympathies and condolences forpeople who suffered from the Great East Japan Earthquake in March 2011.
You are cordially invited to attend the 50th Ordinary General Meeting of
Shareholders of SECOM CO., LTD. (the “Company”).
If you are unable to attend the aforesaid meeting, you can exercise yourvotes through either of the methods stated below. The Company respectfully
requests you to study the “Reference Document Concerning the General Meeting of
Shareholders” below and exercise your voting right on or before 6:00 p.m. (JST)June 23, 2011 (Thursday):[Exercising voting right by mail]Please indicate on the Voting Right Exercise Form enclosed herewith
your approval or disapproval of the proposals on the agenda, andreturn the form to the Company by mail so as to arrive us before theaforesaid deadline.
[Exercising voting right via the Internet]
Please access the website for the exercise of voting rights(http://www.evote.jp/), using the log-in ID and temporary password
which are shown on the Voting Right Exercise Form. After logging in,please indicate whether you approve or disapprove the items on theagenda by following the instructions on the display screen before theaforesaid deadline.
Yours very truly,
SECOM CO., LTD.
5-1, Jingumae 1-chome, Shibuya-ku,
Tokyo, Japan
By: SHUJI MAEDA
President and Representative Director(Note) Please note that shareholders with addresses outside Japan may notthemselves use these voting procedures. For these shareholders please consult theirstanding agents within Japan as to the exercise of voting rights.

[English Translation]
4

PARTICULARS
1.

Date and Time of the Meeting:
Friday, June 24, 2011 at 10:00 a.m.

2.

Place of the Meeting:Bersarle Hanzomon, Sumitomo Fudosan Hanzomon-Ekimae
Building 2F, 6-4 Koujimachi 1-chome, Chiyoda-ku, Tokyo(Since the place of meeting is different from the previous
meeting, reference is made to the map showing the way to theplace of meeting at the end hereof. )3.

Matters to be dealt with at the Meeting:
Matters to be Reported:
1.

2.

Report on the Business Report, the Consolidated Financial
Statements for the 50th Fiscal Year (from April 1, 2010 toMarch 31, 2011) and the Results on the Audits ofConsolidated Financial Statements by the Accounting
Auditors and the Board of Corporate Auditors.
Report on the Non-Consolidated Financial Statements forthe 50th Fiscal Year (April 1, 2010 to March 31, 2011).

Matters to be Resolved upon:First Item of Business:

Proposed Distribution of Surplus

Second Item of Business: Partial Amendments to the
Articles of Incorporation
Third Item of Business:

Election of Eleven (11)Directors

Fourth Item of Business: Election of Five (5) Corporate
Auditors
Fifth Item of Business:

4.

Revision of Remuneration to
Corporate Auditors as a Group

Matters related to Exercise of Voting Rights:
1) In the event that a shareholder wants to exercise non-uniform
voting, he/she shall notify the Company to make non-uniform
voting and the reason thereof in writing three (3) days prior to theGeneral Meeting of Shareholders.
2) In the event that a shareholder exercises voting rights both via
return mail (Voting Right Exercise Form) and the Internet, the[English Translation]
5

Company will consider the exercise of voting rights via theInternet to be valid.
3) In the event that a shareholder exercises voting rights via theInternet more than once, the Company will consider the last
exercise of voting rights to be valid.
(Note)
If you plan to attend the Meeting, please submit the enclosed Voting
Rights Exercise Form to the receptionist at the Meeting.
(Notice)
If there occurs any amendment to the contents of the Reference
Document Concerning the General Meeting of Shareholders and theBusiness Report, the Consolidated Financial Statements, or the
Non-Consolidated Financial Statements, the Company will announce
such amendment on the Company’s website (http://www.secom.co.jp/).

[English Translation]
6

[Attached Documents]

Business Report (Fiscal Year Ended March 31, 2011)
I. Outline of the Group’s Business1. The Current Business Development and Results of Operations
During the consolidated fiscal year ended March 31, 2011 (“the current fiscalyear”), despite uncertainties due to continuous high unemployment rate,
appreciation of Japanese yen, deflation, etc., Japanese economy indicated signs ofrecovery such as improvement of corporate earnings and capital investments,
which were led by trend of recovery in global economy and various economic
stimulus packages. However, the Great East Japan Earthquake on March 11, 2011
has made future Japanese economy uncertain.
We, the Secom Group (“the Group”), continue doing our utmost to assist thoseaffected by the Great East Japan Earthquake in order to enable their prompt
recovery and reconstruction. Just after the earthquake occurred, we donated masks
and hand disinfectant to keep clean sanitary condition in refuges as well as
dispatched special medical teams from affiliated hospitals. We will continue our
supports, corresponding to the progress of the restoration.
In these environments, we have been continuously trying to satisfy theincreasingly diverse and sophisticated needs of our customers for their safety andpeace of mind, with the aim of realizing our vision of the establishment of “Social
System Industry,” a society where everyone can live safe and secure anytime andanywhere. To this end, we have made efforts to develop and provide high-grade
products and services suited to customer needs mainly in our security services
segment, as well as in our fire protection services, medical services, insurance
services, geographic information services, real estate development and sales, andinformation and communication related and other services segments.
As a result, consolidated revenue for the current fiscal year increased by 1.4% toYen 663.8 billion, compared with the previous fiscal year. Consolidated operating
profit also increased by 0.6% to Yen 99.1 billion, and consolidated ordinary profit
went up by 11.5% to Yen 109.6 billion due to gain on private equity investmentsof Yen 5.7 billion (loss of Yen 3.0 billion in the previous fiscal year.). Net income
rose by 27.8% to Yen 60.8 billion.
（Millions of Yen）
Revenue
Current fiscal
year (FY2010)
Previous fiscal
year (FY2009)

Operating profit

Ordinary profit

Net income

663,887

99,141

109,674

60,846654,678

98,53998,32747,611

A breakdown by business segments is as follows:
In the security services segment, we provided customers chiefly with commercial
and residential security services (on-line security systems), as well as static guard
services, armored car services and merchandises.
In the current fiscal year, we strived to improve customer satisfaction byintroducing various distinct systems and merchandises applied with our unique
technologies of image processing and voice processing, visiting not only new
customers but existing customers by our dedicated team, presenting new security
systems and products, and so forth.

[English Translation]
7

Outside Japan, we promoted to make our security services more popular ineconomically developing areas, including People’s Republic of China, Southeast
Asia, etc.
As a result, operating profit in the third quarter (quarterly basis) has shown an
increase over that of the previous corresponding period, an improving trend.
However, due to the effect of the Great East Japan Earthquake, which caused
decrease in revenue by restriction of sales promotion in affected Eastern Japanregions and nation-wide decline in motivation for consumption and capital
investment mainly in the Tokyo metropolitan area, and increase in operating
expenses from restoration works in affected areas and other factors, althoughrevenue increased by Yen 0.1 billion to Yen 414.7 billion, operating profit
decreased by 1.8% to Yen 98.5 billion.
In the fire protection services segment, we provided a broad range of fire
protection systems such as high-quality fire alarm systems and fire extinguishingsystems along with customers’ needs to a wide variety of facilities such as officebuildings, production facilities, tunnels, cultural properties, ships and residences.
Despite our attempt to contribute to create a safe environment of customers andimprove our revenue base by advancing our credibility, renovating ourtechnologies and production, and enriching productive function, revenue
decreased by 6.2% to Yen 75.1 billion and operating profit decreased by 31.5% to
Yen 3.0 billion due to the shrinkage of market caused by prolonged recession.
In the medical services segment, we provided various medical services such as ourcore home medical services, including home nursing services and pharmaceuticaldispensing and home delivery services, operation of residences for seniors, salesof electronic medical report systems, sales of medical equipment, personal careservices, and the leasing of real estate for medical institutions.
Revenue increased by 5.9% to Yen 39.9 billion and operating profit increased by
10.9% to Yen 2.7 billion. These results were attributable to brisk revenue fromhome medical services and sales of medical equipment.
In the insurance services segment, we expanded marketing efforts for our uniquenon-life insurance offerings, including Security Discount Fire Policy forcommercial facilities and the comprehensive fire insurance policy, SECOM
Anshin My Home, for residences, which offer discounts on premiums tocustomers who have installed on-line security systems, recognizing such systems
as a risk-mitigating factor; New SECOM Anshin My Car, a comprehensive
automobile insurance policy that offers on-site support services provided by our
emergency response personnel in the event of an accident; and MEDCOM, anunrestricted cancer treatment policy aiming at helping patients overcome cancer
by giving access to the best treatments. Also, we improved the competitiveness of
SECOM Anshin My Home by detailing the compensation plan and enriching its
discount policy. Strong sales increased revenue by 1.2% to Yen 32.0 billion,
although operating loss was Yen 0.9 billion compared to Yen 36 million in theprevious fiscal year, owing to increase in provision for reserve for outstanding
claims, resulting from the Great East Japan Earthquake.
In the geographic information services segment, by exploiting up-to-datemeasuring machine and technologies, we provided geospatial data services fordomestic national and local governmental agencies, private sectors, and foreign
governmental agencies including emerging and developing countries. Bycollecting high-precision and clear geospatial photo data and utilizing our dataprocessing technologies, we also strived to provide a variety of services suited toour customers’ needs, including mapping arrangement, environmental monitoring,fire protection, and measures to deal with natural calamities. We also contributed
to provide a variety of information related to the Great East Japan Earthquake.
Revenue increased by 3.9% to Yen 43.5 billion owing to increase in revenue of[English Translation]8

overseas operations and acquisition of a surveying company, Tobu Keikaku Co.,
Ltd. Operating profit also increased by 37.4% to Yen 3.3 billion, as a result of
promotion of in-house production and strict process control.
In the real estate development and sales segment, we devoted our best efforts todeveloping and selling condominiums equipped with advanced security andcontingency planning features. Amid a slump in the market for condominiums, we
actively promoted to sell to customers not approached in the past, as well as madeappropriate price revision along the market continuing from the previous fiscal
year. Revenue went up by 87.0% to Yen 24.8 billion owing to increase in sales oflarge-scale condominiums etc. and operating loss of Yen 3.1 billion in theprevious fiscal year turned into operating profit of Yen 0.4 billion.
The information and communication related and other services segment covers
information and communication related services, real estate leasing, etc. In theinformation and communication related services, we have continued striving toprovide comprehensive information network services, focusing on information
security, development and management of business systems and major-disaster
response services. We enhanced our information and communication related
services by establishing a new “Secure Data Center,” which combined our
know-how and responded to increasing demands for data centers, and presenting“Initial Response Operations Service” and “SECOM Emergency Contact Network
Service,” the lineup of services offered utilizing the service base of the “SECOM
Safety Confirmation Service.” Due to the divestiture of Japan Image
Communications Co., Ltd. in August 2009, which earned Yen 1.9 billion ofrevenue in the previous fiscal year, revenue decreased by 4.9% to Yen 33.6 billion
and operating profit decreased by 12.3% to Yen 3.4 billion.
Results by Business Segment (50th Fiscal Year – current fiscal year)(Millions of Yen)
Revenue
Business segment
Security services
Fire protection services
Medical services
Insurance services
Geographic information
services
Real estate development
and sales
Information andcommunication related
and other services
Total
Eliminations andcorporate items
Consolidated revenue

Total

Operatingprofit (loss)

Customers

Inter-segment

414,745
75,17639,96732,030

9,408
4,886
150
2,634

424,154
80,063
40,117
34,66598,575
3,055
2,722
(977)

43,539167

43,706

3,343

24,81695

24,911

444

33,612

6,363

39,975

3,483

663,887

23,706

687,594

110,646-(23,706)(23,706)(11,504)

663,887-

663,887

99,141

With respect to the results by geographical segments, in Japan, revenue increased
by 0.8% to Yen 638.4 billion. Overseas revenue increased by 19.4% to Yen 25.4
billion due to promoting our security services in regions and countries such as
Southeast Asia and China, whose economies are continuously expanding.

[English Translation]
9

2. Issues the Group Has to Cope with
As society undergoes constant change, people’s demand for security and safety
increases, and such demand shows diversification and sophistication.
In view of this situation, the Group is aiming to realize a “Social System Industry”
through providing various services and products, mainly in our core security
services, and also in fire protection services, medical services, insurance services,
geographic information services, real estate development and sales, andinformation and communication related and other services, that can help realize
more secured, convenient, and comfortable society. Moreover, by combining
these services and products, the Group endeavors to create and supply uniqueservices and products, which would not be able to realize without suchcombination. To this end, we are striving to develop and provide
customer-oriented services and high-quality systems that can earn the trust of ourcustomers. Simultaneously we are working to provide comprehensive services by
maximizing the Group’s capabilities. In November 2010, the Group declared theslogan, “ALL SECOM.” With the basic message to “Further rally all of theGroup’s strength,” each and every employee of the Group has been actively
working in order to maximize the strength of the Group by promoting greater
cooperation than ever among the various businesses it has developed.
Additionally, the Group aims to further instigate growth by leveraging its
know-how accumulated through its business in Japan and using it to aggressively
develop businesses overseas. The Group is also uncompromising in its efforts topursue business efficiency through unremitting business improvements. The
Company and Secom Techno Service Co., Ltd., at their respective meetings of theBoard of Directors held on May 11, 2011, resolved to conduct an absorption-typemerger, with the Company being the surviving company and Secom Techno
Service Co., Ltd. being the absorbed company, to be effective July 1, 2011
(scheduled). Through this merger, the Company seeks to enhance the security
service business, which is the core of the Group, as well as further improve thequality of the installation business and the building maintenance business.
We look forward to the support of our shareholders in these and all of ourendeavors.
3. Capital Investments
Capital investment for the current fiscal year totaled Yen 43.9 billion (abreakdown is given below). A major portion was for system investments(including those for security equipment and control stations) etc. in the security
services segment, which totaled to Yen 29.8 billion.

[English Translation]10

Amount

Business segment(Millions of Yen)

Security services

29,882

Fire protection services

4,011

Medical services

2,899

Insurance services

1,048

Geographic information services

3,108Real estate development and sales

18

Information and communication related

3,479

and other services
Subtotal

44,449Eliminations and corporate items

(527)

Total

43,921

4. Fund Raising
During the current fiscal year, no funds were raised by the Group in capital
markets through the issuance of corporate bonds or new shares.
5. Trends in Earnings and Assets(1) Trends in Earnings and Assets of the Group (Consolidated)(Millions of Yen except for net income per share)
50th fiscal year

47th fiscal year

48th fiscal year

49th fiscal year

(4/1/2007–(4/1/2008–(4/1/2009–

3/31/2008)

3/31/2009)

3/31/2010)

Revenue

682,619

678,400

654,678

663,887

Operating profit

104,706

87,634

98,53999,141

Ordinary profit

114,278

90,924

98,327

109,674

Net income

61,506

21,502

47,61160,846273.4096.69

218.37279.07

Total assets

1,202,840

1,090,483

1,081,679

1,094,400

Net assets

630,274582,608

625,153654,055

Fiscal years

CategoryNet

incomepershare (Yen)[English Translation]
11(current fiscal year)(4/1/2010–
3/31/2011)

(2) Trends in Earnings and Assets of the Company (Non-Consolidated)(Millions of Yen except for net income per share)
50th fiscal year

47th fiscal year

48th fiscal year

49th fiscal year

(4/1/2007–(4/1/2008–(4/1/2009–

3/31/2008)

3/31/2009)

3/31/2010)

Revenue

337,611

336,893

328,773

329,297

Operating profit

74,15572,616

71,527

68,688

Ordinary profit

79,18778,346

77,46274,501

Net income

50,04632,41445,80645,023222.46145.76210.09206.50Total assets

673,043

679,858

668,207694,656

Net assets

521,529504,932

532,931558,417

Fiscal years
Category

Net income per share(Yen)(current fiscal year)(4/1/2010–
3/31/2011)

In the current fiscal year, the Company’s revenue increased by 0.2% to Yen 329.2
billion, operating profit fell by 4.0% to Yen 68.6 billion, ordinary profit decreasedby 3.8% to Yen 74.5 billion, and net income decreased by 1.7% to Yen 45.0
billion. Net income per share decreased to Yen 206.50 compared to Yen 210.09 in
the previous fiscal year.
Contract revenue accounted for 88.1% of total revenue, or Yen 290.2 billion, andsale of products and equipment accounted for 11.9% of total revenue, or Yen 39.0
billion.
Revenue from centralized system contracts, which is the core of revenue andprofit in contract revenue, recorded Yen 239.3 billion and accounted for 72.7% of
total revenue. Static guard contracts generated revenue of Yen 24.8 billion, andrevenue from armored car services came to Yen 16.9 billion. The remaining
revenue amounted to Yen 9.1 billion, the majority of which came from fees paidby subsidiaries and other companies for advisory services.
Product sales totaled Yen 27.8 billion, 8.5% of total revenue, and equipment sales
to subsidiaries and other companies totaled Yen 11.2 billion, 3.4% of total
revenue.
Sales and general administrative expenses were Yen 69.3 billion and operating
profit was Yen 68.6 billion.
Non-operating income was Yen 8.8 billion, which included interest and dividends
received, while non-operating expenses, including interest paid and losses on sales
and disposal of fixed assets, totaled Yen 3.0 billion. As a result, ordinary profit
was Yen 74.5 billion.
In the current fiscal year, extraordinary losses were Yen 2.6 billion, including
the effect of adoption of accounting standard for asset retirement obligationsof Yen 0.8 billion. As a result, net income came to Yen 45.0 billion.

[English Translation]
12

Revenue by Business Category of the Company

Fiscal years

Amount(Millionsof Yen)

%

71.7

1.3

240,417

73.1

(0.5)

25,8097.7

1.3

24,781

7.5

17,456

5.2

4.6

17,0409,502
294,386
30,987
11,518

2.8
87.4
9.2
3.4

(11.0)
1.0(2.9)(19.8)

Subtotal

42,506

12.6

Total

336,893 100.0

Contract revenue

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

Amount(Millionsof Yen)%241,618

49th fiscal year
(4/1/2009–3/31/2010)

Change(%)

Category

Sales

48th fiscal year
(4/1/2008–3/31/2009)

50th fiscal year
(Current fiscal year)(4/1/2010–3/31/2011)

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

239,311

72.7

(0.5)

(4.0)

24,815

7.5

0.1

5.2

(2.4)

16,973

5.1

(0.4)

9,086
291,325
26,78810,659

2.8
88.6
8.2
3.2

(4.4)
(1.0)
(13.6)(7.5)

9,151
290,252
27,808
11,236

2.8
88.1
8.5
3.4

0.7
(0.4)
3.8
5.4

(8.1)

37,447

11.4(11.9)

39,045

11.9

4.3

(0.2)

328,773

100.0

(2.4)

329,297 100.0

0.2[English Translation]
13

6. Matters Concerning Principal Subsidiaries

Company name

Issued capital(Millions of Yen)

Secom Joshinetsu Co., Ltd.

3,530
(Millions of Yen)

Secom Techno Service Co., Ltd.

2,357
(Millions of Yen)

Nohmi Bosai Ltd.

13,302(Millions of Yen)

Secom Medical System Co., Ltd.

Secom General Insurance Co.,
Ltd.

6,545
(Millions of Yen)

16,808(Millions of Yen)

Pasco Corporation

8,758(Millions of Yen)

Secom Home Life Co., Ltd.

3,700
(Millions of Yen)

Secom Trust Systems Co., Ltd.

1,468
(US$)

The Westec Security Group, Inc.

301
(Thousands ofSecom Plc

UK Pounds)

39,126Percentage ofownership(Percentage
of votingrights)(%)
50.87(50.88)(%)
97.09(97.14)(%)
50.36(50.93)(%)
100.00(100.00)(%)
97.11(97.82)(%)
69.84(72.95)(%)
99.94(99.95)(%)
100.00(100.00)(%)
100.00(100.00)

Principal business activities

Security and safety services

Installation and maintenance of
security systems
Comprehensive fire protection
services
Home medical services andremote image diagnosis support
services
Non-life insurance
Surveying, measuring andgeographic information systemservices
Development and sales of real estate

Information security services andsoftware development

Holding company in the U.S.

(%)
100.00(100.00)

Security business in the U.K.

(Notes)1.

The percentages of ownership (percentages of voting rights) are truncated to two decimal
places.

2.

The percentages of ownership (percentages of voting rights) for Secom Joshinetsu Co.,
Ltd. and Nohmi Bosai Ltd. include those owned by the Company’s subsidiaries.

3.

The Company conducted a tender offer for the shares of common stock issued by Secom
Techno Service Co., Ltd. from February 9, 2011 to March 24, 2011. As a result, theCompany’s ownership percentage of Secom Techno Service Co., Ltd. increased from67.79% to 97.09%.

[English Translation]
14

The Company and Secom Techno Service Co., Ltd. will conduct an absorption-typemerger to be effective on July 1, 2011 (scheduled), with the Company being the surviving
company and Secom Techno Service Co., Ltd. being the absorbed company.

7. Principal Business of the GroupThe Group consists of the Company, 166 consolidated subsidiaries and 26
affiliates accounted for under the equity method. The principal business activitiesof the Group are as follows: Security Services centering on contracted security
services; Fire Protection Services centering on comprehensive fire protection
services; Medical Services, focusing on home medical services and managementof residence for seniors; Insurance Services consisting mainly of non-life
insurance; Geographic Information Services that mainly entails the provision ofsurveying and measuring operations; Real Estate Development and Sales
centering on development and sales of condominiums; and Information andCommunication Related and Other Services, including security network services,development and operation of business systems and information security services.
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), Kinki (Kyoto City),Osaka (Osaka City), Kansai
Static Guard Service (Osaka City), Hyogo (Kobe City), Chugoku (HiroshimaCity), Shikoku (Takamatsu City), Kyushu (Fukuoka City).
(iii) Domestic Subsidiaries:
Secom Joshinetsu Co., Ltd. (Niigata City), Secom Techno Service Co., Ltd.
(Nakano-ku, Tokyo), Nohmi Bosai Ltd. (Chiyoda-ku, Tokyo), Secom
Medical System Co., Ltd. (Shibuya-ku, Tokyo), Secom General InsuranceCo., Ltd. (Chiyoda-ku, Tokyo), Pasco Corporation (Meguro-ku, Tokyo),
Secom Home Life Co., Ltd. (Shibuya-ku, Tokyo), Secom Trust Systems Co.,
Ltd. (Shibuya-ku, Tokyo), Arai & Co., Ltd. (Shibuya-ku, Tokyo).
(iv) Overseas Subsidiaries:
The Westec Security Group, Inc. (Dover, Delaware, USA), Secom Plc(Kenley, Surrey, UK), Secom (China) Co., Ltd. (Beijing, China).

[English Translation]
15

9. Matters Concerning Employees of the Group and the Company(1) Matters Concerning Employees of the Group
Increase from the end of the previous

Number of employees

fiscal year

33,807122(2) Matters Concerning Employees of the Company
Number of
employees

Decrease from the end of theprevious fiscal year

Average age

Average years of service

13,651

114

40.4

13.6

(Note) The number of employees refers to the number of full-time employees.

10. Principal Lenders(Millions of Yen)
Lenders

Balance

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

14,918Mizuho Bank, Ltd.

11,768

Sumitomo Mitsui Banking Corp.

10,295

Mitsubishi UFJ Trust and Banking Corp.

8,993

11. Other Important Matters Concerning the GroupThe Company and Secom Techno Service Co., Ltd. (“Secom Techno”), a
consolidated subsidiary of the Company, resolved at their respective meetings ofthe Board of Directors held on February 8, 2011, that the Company would acquire
shares of Secom Techno through a tender offer for the purpose of enhancing thecorporate value of Secom Techno and the entire Group through the realization of
maximum synergy and the acceleration of efforts toward the establishment of the“Social System Industry,” by means of conducting the management integration.;and conducted a tender offer for the shares of common stock issued by Secom
Techno during the period from February 9, 2011 through March 24, 2011.
As a result of the above tender offer, the Company’s ownership percentage ofvoting rights out of the total number of issued shares of Secom Techno (excluding
the treasury stocks held by Secom Techno) increased from 67.85% (as of March
31, 2010) to 97.14%.
Additionally, the Company and Secom Techno resolved at their respective
meetings of the Board of Directors held on May 11, 2011, to conduct anabsorption-type merger, with the Company being the surviving company and
Secom Techno being the absorbed company; and entered into a merger agreement
as of the same date. The scheduled effective date of the merger is July 1, 2011.

[English Translation]
16

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

1. Total Number of Shares to be Issued:
2. Total Number of Issued Shares:(including 15,258,553 shares of treasury stock held by the Company)

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

Number of shares held(Thousands of Shares)

30,338100 shares
Percentage ofownership(%)

The State Street Bank and Trust Company

24,431

11.20

Japan Trustee Services Bank, Ltd.
(Trust Account)

12,653

5.80

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

12,495

5.73

The Nomura Trust and Banking Co., Ltd.
(Trust Account 2052098)

6,153

2.82

Makoto Iida

4,320

1.98

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

4,148

1.90

Secom Science and Technology Foundation

4,025

1.84

SSBT OD05 OMNIBUS
ACCOUNT-TREATY CLIENTS

3,997

1.83

JPMorgan Securities Japan Co., Ltd.

3,791

1.73

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

3,196

1.46

(Notes)1.

The Company holds treasury stock of 15,258,553 shares although it is not included in thetable above. The percentage of ownership is calculated on the basis of the total number ofshares outstanding after excluding treasury stock. The percentage of ownership is truncatedto two decimal places.

2.

In the case of the trust banks listed above, banking business-related shares and trust
service-related shares are registered under different register names. Therefore, the numberof shares held under the register name of banking business is registered separately.

[English Translation]
17

III. Directors and Corporate Auditors
1.

Names and Titles of Directors and Corporate Auditors(As of March 31, 2011)
Position

Field of responsibility and important
position of other organization
concurrently assumed

Name

Director

Makoto Iida

Supreme Advisor

Director

Juichi Toda

Supreme Advisor

Chairman and Director

Shohei Kimura

Executive Vice Chairman
and Director

Kanemasa Haraguchi

President andRepresentative Director

Shuji Maeda

Chairman of All Japan Security Service
Association, Outside Corporate Auditorof Secom General Insurance Co., Ltd.
Outside Director of Secom Joshinetsu
Co., Ltd., Outside Director of Toyo Tec
Co., Ltd.
Executive Officer

Executive Vice President
and Director

Koichi Sato

Senior Executive Director

Fumio Obata

Executive Director

Katsuhisa Kuwahara

Executive Director

Yasuo Nakayama

Executive Director

Hiroshi Ito

Director

Takayuki Ito

Corporate Auditor

Teruo Ogino

Corporate Auditor

Ken Tsunematsu

Corporate Auditor

Hiroshi Yasuda

Corporate Auditor

Kohei Yamashita

Executive Officer (general manager ofsales division, corporate sales division,in charge of sales), Outside Director of
Nohmi Bosai Ltd.
Executive Officer (general manager ofinternational business division)
Executive Officer (general manager offinance division)
Executive Officer (general manager ofgeneral affairs division)
Executive Officer (general manager ofhuman resources division, in charge of
information systems and liaison),President and Representative Director of
Secom Trust Systems Co., Ltd.
Executive Officer (general manager ofreal estate division), President andRepresentative Director of Secom Home
Life Co., Ltd., Outside Corporate
Auditor of Secom Joshinetsu Co., Ltd.
Full-time Corporate Auditor
Attorney-at-law, Managing Director of
Secom Science and Technology
Foundation
President and Director of Yasuda
Gakuen Kyoikukai
President and Representative Director of
Kokyo Tatemono Co., Ltd.

[English Translation]
18

(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 had been in charge of the Company’s financial
affairs for 11 years and has considerable knowledge of finance and accounting matters.
3. The Corporate Auditor, Mr. Ken Tsunematsu, has for many years been involved insecurities issuance businesses for domestic and overseas companies, public institutions,organizations, etc. as an attorney-at-law. He has experienced in the analysis andevaluation of the financial statements of these issuers, and has considerable knowledgeof finance and accounting matters.
4. There are no special interests between the Company and other corporations employing
Outside Corporate Auditors Messrs. Ken Tsunematsu, Hiroshi Yasuda and Kohei
Yamashita.
5. The notice of Outside Corporate Auditor, Mr. Ken Tsunematsu being an independent
officer was submitted to Tokyo Stock Exchange, Inc. and Osaka Securities ExchangeCo., Ltd.

〈Reference〉
Executive Officers who are not Directors are as follows:(As of June 1, 2011)
Title
Managing Executive
Officer

Name
Shunji Ogahara, Naohide Nakamura
Minoru Takaoka, Hideo Morishita, Tsuneo Komatsuzaki, Ryohei

Executive Officer

Komatsu, Yukio Tsunoda, Masahiro Takeda, Teruhisa Yoshimura,
Keitaro Arai, Yasuyuki Yoshida, Tatsuro Fuse, Hiromichi Sonoda(Notes)
1. Executive Officer Mr. Naohide Nakamura was appointed to Managing Executive Officer
as of April 1, 2011.
2. Senior Managing Executive Officer Mr. Katsuo Akiyama and Executive Officer
Mr.Teruo Kano were retired from Executive Officer, respectively, as of March 31, 2011.
3. Managing Executive Officer Mr. Seiichi Mori was retired from Executive Officer as of
May 31, 2011.
4. Mr. Hiromichi Sonoda was appointed to Executive Officer as of June 1, 2011.

[English Translation]
19

2. Remuneration of Directors and Corporate Auditors
Number of
Recipients

Combined total of
remuneration(Millions of Yen)

Directors

11471

Corporate Auditors

4

44

Total

15

516

(Notes)
1. In the table shown above, the total combined remuneration for the 3 Outside Corporate
Auditors is Yen 24 million.
2. The Directors’ bonuses of Yen 63 million paid for the current fiscal year are included in the
total amount of remunerations of Directors shown above.
3. The total amount of remunerations of Directors and Corporate Auditors shown above
includes Yen 57 million (Yen 56 million to Directors and Yen 1 million to Corporate
Auditors (Yen 0 to Outside Corporate Auditors), respectively) which is accrued toretirement benefits for Directors and Corporate Auditors, which were appropriated in thecurrent fiscal year.

[English Translation]20

3. Outside Corporate Auditors

Name

Attendanceof theMeetings ofthe Board of
Directors

Attendanceof theMeetings ofthe Board of
Corporate
Auditors

Main Activities

He has high level of insight to corporate
legal matters and knowledge about
management and interests between
stakeholders through many domestic andinternational securities issuing projects and

Ken Tsunematsu

abundance of experience in the area of

13

12(out of 13)(out of 12)

finance and accounting, which were
cultivated in many years as
attorney-at-law. He primarily offeredadvice and suggestions at the Board of
Directors Meeting in order to ascertain thevalidity and/or appropriateness ofoperations and management.
He offered advice and suggestions at theBoard of Directors Meeting based on his
ample experience and insights of company
management and directorships gained
from previously held positions. He also

Hiroshi Yasuda

910

asked questions and stated opinions in(out of 13)(out of 12)

order to clarify unclear issues.
In addition, with respect to the meetings
for which he was absent, he received fromthe full-time Corporate Auditor detailed
reports on the resolutions of the meetings
so as to remain fully informed.
He offered advice and suggestions at theBoard of Directors Meeting based on his

Kohei Yamashita

13

12

ample experience and insights of(out of 13)(out of 12)

managing a global corporation. He also
asked questions and stated opinions inorder to clarify unclear issues.

[English Translation]
21

IV. Accounting Auditors
1. Name of Accounting Auditors
KPMG AZSA LLC
Effective July 1, 2010, KPMG AZSA & Co. became KPMG AZSA LLC.
2. Remuneration of Accounting Auditors(1) Remuneration for duties relating to Article 2 Paragraph 1of Certified Public Accountants Act to be paid by theCompany

Yen 172 million(2) Total cash and other remuneration to be paid by theCompany and subsidiaries to the Accounting Auditors

Yen 504 million(Notes)1. Based on the audit contract between the Company and the Accounting Auditors, theremuneration paid to auditors is not distinguished between that as the audits under theCompanies Act and that as the audits under Financial Instruments and Exchange Act
and furthermore they cannot in fact be distinguished. Therefore the amount given in(1) shown above is the combined total of these amounts.
2. Of the major subsidiaries of the Company, The Westec Security Group Inc. is auditedby PricewaterhouseCoopers LLP and Secom Plc by KPMG LLP.

3. Non-Audit 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
the performance of audit duties 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 thesituation, and, when all Corporate Auditors have consented thereto, the Corporate
Auditor will take action for the dismissal of the subject Accounting Auditors or
the subject firm of Accounting Auditors. In such case, the Corporate Auditor
selected by the Board of Corporate Auditors will report the reasons for thedismissal at the general meeting of shareholders convened for the first time after
such dismissal.
In any other case, when there exists any situation where it is acknowledged that
the Accounting Auditors are not fit to act as Accounting Auditors, a proposal will,with the consent of the Board of Corporate Auditors, be submitted to the general
meeting of shareholders for the dismissal or non-reappointment of the Accounting
Auditors.

[English Translation]
22

V. System under which the Company’s Business is Ensured to be Properly
Executed
1. Basic Policy Regarding Internal Control System
The Company’s 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” resolved on andapproved by the Board of Directors is set out below. (Last revised on April 7,
2010)
(1)

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

(2)

System under which execution of duties by Directors and employees is
ensured to comply with laws and regulations and the Articles ofIncorporation(i) In order to ensure even more thorough compliance with laws andregulations and the Articles of Incorporation in the execution of duties,
the Company has integrated its compliance manual with SECOM Group
Code of Employee Conduct, which sets key ethical standards to befollowed, and at the same time, it has conducted a review of manuals on
critical laws. SECOM Group Code of Employee Conduct is based on thephilosophy of SECOM, which we have followed since the establishmentof the business. These ethical guidelines prescribe ideals covering theofficial and private affairs of all executives and employees and action
standards (including the blocking relationships with anti-social forces) tobe followed in the execution of specific daily duties. As such, theseguidelines provide the basis of all actions. The compliance management
system is as follows:[English Translation]
23

(Ensuring compliance)
From the start, the compliance of laws and regulations has been an
indispensable requirement of our business, and we have always
sought to operate in strict adherence to this spirit. Therefore,
compliance is a part of the Company’s daily routines, which should
not require a system in which a specific section or manager is
responsible for implementation. Each and every employee is at thefront line of promoting the code of conduct, including legal
compliance. The implementation of guidelines is carried out by theline managers of the organization. Further control is provided by the
executive officers in charge of departments under their control, with
the President and Representative Director providing companywide
control.
(Executive officers in charge)
The executive officers in charge of each area are responsible forhaving thorough knowledge particularly of regulations related totheir duties and the relationships of such regulations with their own
operations. They are responsible for proposing responses to any
revisions of laws to the President and Representative Director. The
Legal Affairs Department supports them, providing
cross-organizational coordination.
(Inspection)
Following the orders of the President and Representative Director,
the Audit and Compliance Department provides cross-organizational
inspection in a timely manner, indicating how to improve morale
through observance and at the same time pointing out matters thatneed correction. The findings of the inspection are reported promptly
to the President and Representative Director.
(Whistleblower System)
When executives and employees of the Company become aware ofunethical actions, they have the obligation to report such actions to
the proper superior without hesitation. A “Hot Helpline” has been
established to facilitate contact with the Audit and ComplianceDepartment if corrective actions are not taken even after reporting tosuperiors or it is difficult to report. Such reports will remain strictly
confidential, preventing any harm to the reporter and any necessary
investigation and appropriate measures will be taken promptly.
(Organizational Culture Committee)
The Company establishes a standing, active Organizational Culture
Committee, chaired by the President and Representative Director.
The Organizational Culture Committee examines importantorganizational culture-related issues (including compliance-related
matters), which are the cornerstone of developing and maintaining
the corporate organization, and determines important official
commendations and punishments.
(ii)

Revisions of SECOM Group Code of Employee Conduct and/or
critical compliance-related matters are undertaken after discussion with
the Organizational Culture Committee and subject to the approval of
the Board of Directors after obtaining opinions of the Corporate
Auditors.

(iii) Basic plans and policies concerning internal controls related tofinancial reporting are determined in accordance with the standards of
the Business Accounting Council. Furthermore, an internal control[English Translation]24

system is being developed by reinforcing information security andthrough other steps.
(3)

System under which information regarding execution of business byDirectors shall be maintained and controlled(i) Documents and other information regarding execution of duties suchas 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 Regulation of the Company, which will be amended
upon reviewing the operating conditions if necessary.
(ii) Information on executing duties shall be recorded on database withnecessary information protection measure so that a search system canbe established to enable quick search as to whether or not theparticular document exists or the condition of storage of theparticular 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 managementof the database of (ii) above shall be reported to the President andRepresentative Director, 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 the Corporate Auditors.

(4)

Regulation regarding control of risk of loss and other system(i) The Company’s approach to risk management is embedded in
day-to-day business activities, with acknowledgement that risk
management itself is the Company’s business. Executive officers incharge, under the direction of the President and Representative
Director, analyze and assess business risk and fraud risk in theoperational areas for which they are responsible, and revise
established rules and manuals as conditions change. Rules andmanuals are based on risk analysis and assessment, and stipulate
preventive measures, prompt and appropriate communication andemergency preparedness when incidents occur, daily risk monitoringand other systems.
(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 system shall be subject toapproval of the Board of Directors after obtaining opinions of the
Corporate Auditors.

[English Translation]
25

Risk Category
Large scale calamity(1)Large

scale

Examplecalamityrisk

Earthquake,wind,flood,

volcanic

disasters, radiation leakage, etc.
NoncomplianceBusiness

and

with

“SECOM’s

Operation,”“SECOM

Group Code of Employee Conduct,”other internal rules and guidelines, etc.,(2)Compliance risk

risk accompanied by establishment orchanges in regulations (in the area of tax
system, medical system, etc.), breach oflaw, etc.
Information system shut down, electronic
data(3)System risk

extinguishment,

large

scale

blackout, wide area circuit disturbance,
ICT (information and communication
technology) related risk, etc.

Ordinary times

Risk incurred when providing services(4)Service providing risk

(Accidents related security, fire alarm orequipment maintenance businesses, etc.)(5)Administrativework

and accounting treatment
risk

Input

error

or

input

omissioninadministrative or account processing,estimation error for allowance amount,
etc.
Offencefromoutsiders(groundlessrumor, calumniation, theft, terror, etc.),
risk related to M&A, risk related to new(6)Others

system development, other risk related tobusiness infrastructure (fire on the
Company’s

premises,pandemic

influenza, disease epidemic, etc.), etc.

[English Translation]
26

(5)

System by which efficient execution of duties of Directors shall beensured(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 theduties 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.
(iii)In executing duties, in order to unify the power of the entire Company, asystem utilizing IT should be established and thereby, enabling
information to be immediately disseminated to the entire Company tothe 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 and execution immediately and definitely.
(v) The Company will share the medium- and long-term business vision,and for the purpose of accomplishment thereof, the Board of Directors
will design an annual business plan and deliberate progress of the planeach month.

(6)

System under which the Company and the Company Group consistingof the parent company and subsidiaries is ensured to properly executeits business(i) Abiding by the “Constitution of SECOM’s Business and Operation,”each of the companies of the SECOM Group shares SECOM Group
Code of Employee Conduct, which applies to all executives andemployees. United by these guidelines, the executives and employees
work to accomplish the corporate goals in an appropriate manner.
(ii) The “Basic Rules for SECOM Group Corporate Management” provide
guidelines to enhance Group synergy, leading to the achievement of thebusiness vision by the entire SECOM Group. Covering criticaldecision-making by the companies, these basic rules clarify thecoordination of items to be approved in prior consultation with theparent company and ensure the acknowledgement of such important
items.
(iii)Each of the companies of the SECOM Group carries out IT controls
covering administration and management information in conformancewith the “Basic Policy of the SECOM Group for Information Security.”
The Company’s IT executive officers conduct timely inspections
covering the IT management of major subsidiaries.
(iv) The “SECOM Group Management Committee,” which is chaired by theCompany’s President and Representative Director and whose members
are composed of the presidents of subsidiaries and other parties
appointed by the chairperson, works to ensure that appropriate
operations are carried out. It accomplishes this goal by conducting
discussions of issues related to the Group’s internal controls in an effort
to share Group information and operating philosophy. The President andRepresentative Director reports the results of the Group Management
Committee to the Board of Directors and the Board of Corporate[English Translation]
27

Auditors.
(v) The President and Representative Director issues orders to the Audit andCompliance Department and the supervising executive officers at Group
companies to inspect subsidiaries, if necessary. The subsidiaries accept
the inspection by the Company, which is the parent company, and at thesame time promote the understanding of compliance-related issues byexchanging information with the Company.
(vi) The Corporate Auditors of the Company visit important subsidiaries andconduct audits regarding internal controls.
(vii) A liaison meeting with Group Corporate Auditors is established after
discussion with the Board of Corporate Auditors in an attempt to share
information.
(7)

Matters related to employees to assist duties of Corporate Auditors
when Corporate Auditors requests to do so
The Office of Corporate Auditors 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 tothe approval 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
shall be established upon discussion with the Board of Corporate
Auditors, and Directors shall make reports with respect to the following
matters: (1) matters resolved by the Organization Culture Committee andother committees; (2) matters likely to be materially harming theCompany; (3) important matters relating to monthly business conditions;(4) important matters relating to internal audit and risk management; (5)material violation of laws and regulations or the Articles ofIncorporation; (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, asystem by which the fact may be transmitted directly to the President
and Representative Director through such means as the Hot Help Lineshall be arranged and the President and Representative Director shallreport to Corporate Auditors pursuant to the preceding paragraph.

(10) System under which audit by Corporate Auditors is ensured to be
performed efficiently(i) The Board of Corporate Auditors shall regularly hold the meetings with
the President and Representative Director and Accounting Auditors, toexchange opinions so that audit shall be performed efficiently.

[English Translation]
28

(ii) The Company ensures that the Board of Corporate Auditors may retain
attorneys-at-law at its discretion and, if necessary, have opportunities toretain and consult professional accountants with respect to their audit
duties.
2.

Organizations etc. Relating to Internal Control System (as of May 1,
2011)

The Company’s governance system is as follows: The Board of Directors makes
decisions on business execution and other company matters; executive officers
led by President and Representative Director execute business; and Corporate
Auditors, including 3 Outside Corporate Auditors, and the Board of Directors,
coordinating with internal audit departments etc. audit and oversee Directors
and executive officers in the execution of their duties. More details are provided
below.
(1)

Organizations etc. involved in business execution, auditing andsupervision of the Company(i)Directors and Board of Directors
The Board of Directors consists of 11 Directors and is attended by 4
Corporate Auditors (including 3 Outside Corporate Auditors). It isconvened once a month as a general rule. The Board of Directors
determines management policies and business execution policies inrelation to business in general, oversees the execution of duties byDirectors, actively exchanges opinions and endeavors to make decisions in
a precise and speedy fashion.
7 out of 11 Directors are involved in business execution, and 4 Directors(2 Supreme Advisors, Chairman and Executive Vice Chairman) do not
engage in business execution.
(ii) Executive Officers
The Company has an executive officer system by which decisions are
made by the President and Representative Director or the Board of
Directors, and business is executed by the Executive Officers. The systemstrengthens field divisions and enhances the service system for customers
by expediting business execution and clarifying responsibilities andauthority.
There are 20 Executive Officers, including 7 Directors.
(iii) Corporate Auditors and Board of Corporate Auditors
The Board of Corporate Auditors consists of 4 Corporate Auditors,
consisting of 1 full-time Corporate Auditor and 3 Outside Corporate
Auditors. It is convened once a month as a general rule.
For the office of full-time Corporate Auditor, the Company appoints
persons who are well versed in the Company’s business, internal affairs
and finance. For the office of Outside Corporate Auditors, the Company
appoints persons who are independent from the management, haveconsiderable knowledge of management, legal matters, finance and otherfields and are capable of providing appropriate oversight and supervisionof management.
Corporate Auditors attend almost every meeting of the Board of Directors
in addition to other important conferences, exchange opinions relating tocorporate management in general, receive reports on the status ofexecution of duties from Directors etc. and conduct audits focusing onwhether there are any facts of violations of laws, regulations, the Articles
of Incorporation or shareholders’ interests.

[English Translation]
29

The Board of Corporate Auditors also conducts audits on operations ingeneral within the Company as well as its subsidiaries and affiliates
according to the audit plan.
Major Activities in the current fiscal year(i) Corporate Auditors’ attendance rate at meetings of the Board of
Directors: 92.3%(ii) Corporate Auditors’ attendance rate at meetings of the Board of
Corporate Auditors: 95.8%(iii) Conducted interviews with Directors etc. of the Company andits subsidiaries and affiliates: 46 times(iv) Conducted on-site audits at business locations of the Company,
its subsidiaries, affiliates, etc.: 145 locations(2)

Coordination among Organizations and Business Units(i) Periodic Meetings among Representative Director etc. and Corporate
Auditors:
Corporate Auditors hold meetings with the President &Representative Director with the presence of Chairman & Directorand Executive Vice Chairman & Director periodically (once amonth). At the meeting, Corporate Auditors report the results ofaudits etc. and exchange opinions on important issues regarding
management, to share mutual recognition.
(ii) Conferences etc. among Corporate Auditors and Accounting
Auditors:
Corporate Auditors hold periodical meetings with Accounting
Auditors 6 times a year and have ones additionally as necessary, andexchange opinions and information. Corporate Auditors and theBoard of Corporate Auditors receive explanation and exchange
opinions regarding the audit plan and audit results* from the
Accounting Auditors. In addition, Corporate Auditors present
themselves as a witness during visiting audits and audit review
conducted by the Accounting Auditors as necessary. (Witness
frequency: 32 times in the current fiscal year)* including the results of quarterly reviews and the result of annual
audit.
(iii) Cooperation with Internal Audit Division etc.:
Corporate Auditors hold conferences with the Audit and ComplianceDepartment periodically (once a month), are reported to on audit
results and exchange opinions with them. And Corporate Auditors
endeavor to conduct audits in an efficient manner such as requesting
the internal audit division etc. to conduct an investigation asnecessary.

[English Translation]
30

Consolidated Balance Sheet(As of March 31, 2011)(Millions of Yen)ITEM

AMOUNTASSETS486,284
172,958
56,546
29,50073,95622,754
7,313
15,43321,057
59,778
12,216
3,908
12,566(1,704)

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

607,998
282,715
102,855
63,49097,73018,638Intangible assets:
Software
Goodwill
Other

25,553
14,828
7,095
3,629

Deferred assets:
Other

Current liabilities:
Notes and accounts payable, trade
Bank loans
Current portion of straight bonds
Lease obligations
Payables – otherAccrued income taxes
Accrued consumption taxes
Accrued expenses
Deferred revenue
Accrued bonuses
Reserve for losses on construction
contracts
Other

202,074
25,95947,4262,914
354
22,857
19,3532,850
3,792
30,582
11,925Long-term liabilities:
Straight bonds
Long-term loans
Lease obligations
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

238,270
14,091
21,586
3,080
38,091
8,909
13,097299,729

Total liabilities

188,001
47,57618,48918,73020,11024,932(18,111)NET ASSETS

117
117

TOTAL ASSETSAMOUNT

LIABILITIESCurrent assets:
Cash on hand and in banks
Cash deposits for armored car services
Call loans
Notes and accounts receivable, trade
Due from subscribers
Short-term investments
Lease receivables and investment in leased assets
Inventories
Real estate inventories
Deferred income taxes
Short-term loans receivable
Other
Allowance for doubtful accounts

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

ITEM

1,094,400[English Translation]
31

Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Common stock in treasury, at cost
Accumulated other comprehensive
income:Unrealized gains on securities
Deferred losses on hedges

530
33,527

2,433
135,498
1,481
440,344624,255
66,377
83,054
549,747(74,923)(32,010)
2,192
(35)

Foreign currency translation
adjustments(34,166)

Minority interests in subsidiaries:

61,810Total net assets

654,055

TOTAL LIABILITIES AND
NET ASSETS

1,094,400

Consolidated Statement of Income(Fiscal Year from April 1, 2010 to March 31, 2011)(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 affiliates accounted for under theequity method
Gain on private equity investments
Other
Non-operating expenses:
Interest expenses
Loss on sales of investment securities
Loss on sales and disposal of fixed assets
Write-off of long-term prepaid expenses
Other
Ordinary profit
Extraordinary profit:
Gain on redemptions of investment securities
Gain on negative goodwill
Gain on sales of investment securities
Gain on sales of fixed assets
Other
Extraordinary losses:
Loss on impairment of investment securities
The effect of adoption of accounting standard for asset
retirement obligations
Loss related to disasters
Loss on sales of investment securities in subsidiaries andaffiliates
Loss on sales of fixed assets
Loss on disposal of software
Impairment losses on fixed assets
Other
Income before income taxes
Income taxes – current
Income taxes – deferred
Net income before minority interests in subsidiaries
Minority interests in subsidiaries
Net income[English Translation]
32

663,887
423,983
239,904
140,762
99,141
841
345
1,324
4,638
5,779
4,498
1,186
1,488
1,464
867
1,887

1,164
172
149
54
177

17,4286,895
109,674

1,717

1,317
1,184
1,048
954
45
23
2
1,174
37,303
1,383

5,749
105,642
38,686
66,955
6,109
60,846

Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2010 to March 31, 2011)(Millions of Yen)
Shareholders’ equity
CommonTotal
CommonCapitalRetainedstock instock

surplusearnings

treasury, atshareholders’equitycost
66,377

Balance as of March 31, 2010

83,054507,434(74,907)581,959

Changes during the period:
Cash dividends
Net income(18,532)(18,532)

60,846

60,846

Purchase of treasury stock

(16)

(16)

0

0

(0)

Disposal of treasury stock
Transfer of losses on disposal of

－

0

(0)

－

－

42,313(16)

42,296

66,377

83,054

549,747(74,923)624,255

treasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2011

Accumulated other comprehensive income
Total
Unrealized
DeferredForeignaccumulated
gains
gains
currency
other(losses) on(losses) on
translation
comprehensive
securities
hedgesadjustments
incomeBalance as of March 31, 2010

4,521

(17)

(27,871)(23,367)

Minority
interests in
subsidiaries

Total
net
assets66,562625,153

Changes during the period:(18,532)

Cash dividends

60,846

Net income
Purchase of treasury stock(16)

Disposal of treasury stock0

Transfer of losses on disposal of－treasury stock
Net changes of items other than

(2,329)(18)(6,294)(8,642)(4,752)(13,395)

Total changes during the period(2,329)(18)(6,294)(8,642)(4,752)

28,901

Balance as of March 31, 2011

2,192

(35)

(34,166)(32,010)

61,810654,055

shareholders’ equity[English Translation]
33

Notes to Consolidated Financial Statements
Notes to Significant Items for Preparation of Consolidated Financial Statements
1. Scope of Consolidation(1)

Number of Consolidated Subsidiaries: 166
Names of major consolidated subsidiaries:
Secom Joshinetsu Co., Ltd., Nohmi Bosai 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, Secom Home Life Co., Ltd., Arai & Co., Ltd., The
Westec Security Group, Inc.

(2)

Descriptions of Non-Consolidated Subsidiaries:
FM-International Laos Co., Ltd., Nohmi Kosaku Co., Ltd., Nohmi
Facilities Co., Ltd., Nohmi Baoli (Beijing) Intelligent Fire Protection Co.,
Ltd., Eishin Denshi Co., Ltd. and 7 other companies(The reason for exclusion from scope of consolidation)
All of these 12 non-consolidated subsidiaries are of a small size, so thatthe aggregate amounts of total assets, revenue, net income/loss (anamount prorated to ownership) and retained earnings (an amount prorated
to ownership) and others do not have a significant effect on the
consolidated financial statements.

(3)

Names of other companies owing majority of voting rights not regarded as
subsidiaries:
US Collections, Inc., Switchcraft Holdco, Inc., Global Sales Training,Inc., CLP Auto Interior Corp., US Juice Partners, LLC, Gold Canyon
Mining & Construction, LLC, US Water, LLC(The reason for not regarded as subsidiaries)
These companies were acquired by subsidiaries of The Westec Security
Group, Inc. through normal course of business with the objective ofinvestment, not with the objective of control.

2. Equity Method(1)

Number of equity method affiliates: 26
Names of major affiliates accounted for under the equity method:
Japan Nuclear Security System Co., Ltd., S1 Corporation, Toyo Tec Co.,
Ltd., Taiwan Secom Co., Ltd.

(2)

Number of non-equity method affiliates: 8(The reason for not applying the equity method)
These 8 companies are not accounted for under the equity method
because their effect on net income/loss (an amount prorated toownership) and retained earnings (an amount prorated to ownership)
during the current fiscal year is insignificant and immaterial as a whole.

(3)

Names of other companies owing between 20% and 50% of voting rights
not regarded as affiliates:
Global T&M Holdings, LLC[English Translation]
34

(The reason for not regarded as an affiliate)This company was acquired by a subsidiary of The Westec Security
Group, Inc. through normal course of business with the objective ofinvestment, not with the objective of control.
3. Changes in Scope of Consolidation and Companies Accounted for under the
Equity Method
Consolidation
Newly consolidated subsidiaries: 9
Tobu Keikaku Co., Ltd. and 7 other companies (Acquisition)
Secom Business Plus Co., Ltd. (Newly establishment)
Excluded from consolidation: 8
Koyu Co., Ltd. and 6 other companies (Liquidation)
Kyushu Nohmi Engineering Co., Ltd. (Merger)
Equity Method
Exclusion from affiliates accounted for under the equity method: 4
IPC Pasco Lingtu Corporation and 1 other company (Liquidation)
Tokyo Biso Kogyo Corporation (Divestiture)
Wuhan Permanent Digit-all Development Co., Ltd. (Significancedecreased due to dormancy)
4. Closing Dates of Consolidated Subsidiaries and Equity Method Affiliates
With respect to overseas consolidated subsidiaries, 8 U.S. subsidiaries
such as The Westec Security Group Inc., 5 Australian subsidiaries suchas Secom Australia Pty. Ltd., 4 U.K. subsidiaries such as Secom Plc, 15
Chinese subsidiaries such as Secom (China) Co., Ltd., P.T. Nusantara
Secom Infotech, P.T. Secom Indopratama, Pasco Thailand Co., Ltd.,
Thaisecom Pitakkij Co., Ltd., Secom Vietnam Co., Ltd., Pasco
Philippines Corp., FM-International Oy, Nohmi Taiwan Ltd., Base
Aerofotogrametria E Projetos S.A., Pasco Do Brasil Participacoes Ltda.,
Aerodata International Surveys BVBA and Pasco International Europe
B.V. close their book as of December 31 each year, and the financial
statements as of this date are used for preparation of the consolidated
financial statements.
With respect to domestic consolidated subsidiaries, while 15 companies
such as Ena Urbane Properties Co., Ltd. close their book as of December
31 each year, the financial statements prepared pursuant to theprovisional closing of books conducted as of March 31 are used for
preparation of the consolidated financial statements.
With respect to equity method affiliates, 10 companies such as S1
Corporation and Taiwan Secom Co., Ltd. close their book as ofDecember 31 each year, and the financial statements as of this date areused for preparation of the consolidated financial statements. While
Koatsu Co., Ltd. closes its book as of September 30 each year, thefinancial statements prepared pursuant to the provisional closing of books
conducted as of March 31 are used for preparation of the consolidated
financial statements.
The necessary adjustments related to the consolidation are made for any
major transactions which arise between the consolidated closing dates.
The closing dates of other consolidated subsidiaries and equity method
affiliates are the same as the consolidated closing date.

[English Translation]35

5. Significant Accounting Policies(1)Valuation policies and methods for significant assets
1) Securities
a. Held-to-maturity debt securities are carried at amortized cost.
b. Available-for-sale
Securities with fair value
Stock and beneficiary securities: At fair value based on the average
market price one month prior to the fiscal year-end
Others: At fair value based on market price at fiscal year-end
Net unrealized gains and losses of securities are primarily reported,
net of applicable income taxes, directly in net assets. The cost of
securities sold is primarily calculated by the moving averagemethod.
Securities with no fair value
At cost, principally based on the moving average method
2) Derivatives
Derivatives are stated at fair value.
3) Inventories
Inventories are principally stated at cost based on the moving
average method (or at the net realizable value (NRV) calculated bywriting down the book value to reflect a decrease in the NRV).
4) Real estate for saleStated at cost by the specific cost method (or at the net realizablevalue calculated by writing down the book value to reflect a
decrease in the NRV).
(2)Depreciation and Amortization of Depreciable and Amortizable Fixed Assets
1) Tangible Assets (except for leased assets)a. Security equipment and control stations
Security equipment and control stations are depreciated over theiraverage estimated useful service lives (5–8 years) by the
declining-balance method.
b. Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line
method.
Their main useful service lives are as follows:
Buildings and improvements: 22–50 years
Tools and equipment: 2–20 years
2) Intangible Assets (except for leased assets)
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by the straight-line
method based on the useful service lives within the Company (5years).
3) Leased Assets
a. Leased assets related to ownership-transfer finance leasetransactions[English Translation]36

Depreciated, using the same depreciation method applied to fixed
assets in possession.
b. Leased assets related to non-ownership-transfer finance leasetransactions
Depreciated, using the straight-line method over a useful life equal
to the lease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on
or before March 31, 2008 are treated using the method applicable
to operating lease transactions.
4) Long-term Prepaid Expenses
Long-term prepaid expenses are amortized by the straight-line
method. With respect to the installation costs related to security
equipment at the customer premises, any portion exceeding theamount received from the customer is included in “long-term prepaid
expenses” and amortized by the straight-line method 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 tradereceivables and loans, the allowance for doubtful accounts provides anestimated amount of uncollectables. It is determined based on thehistorical loss rate with respect to ordinary accounts, plus an estimateof uncollectable amounts respectively determined by reference tospecific doubtful accounts from customers who are experiencing
financial difficulties.
2) Accrued Bonuses
The accrued bonuses are provided for the bonus payments toemployees, at an amount incurred during the current fiscal year.
3) Reserve for Losses on Construction Contracts
To prepare for future losses on construction contracts etc., an accrualis provided based on the estimated losses on construction contracts
etc. that are undelivered at the end of the current fiscal year.
4) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company andits domestic consolidated subsidiaries provide an amount of accrued
pension and severance costs and prepaid pension and severance costsat the end of the current fiscal year, based on the estimated amount ofprojected retirement benefit obligations and plan assets as of the endof the current fiscal year.
Prior service liability is recognized as profit or loss in the year ofoccurrence.
Actuarial gains and losses are amortized from the following fiscal yearof occurrence, using the straight-line method over certain years within
the average remaining service period (mainly 10 years).
5) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for outlays for retirement benefits of Directors andCorporate Auditors of the Company and certain domestic consolidated
subsidiaries, a necessary amount at the end of the current fiscal year isappropriated based on the rules of the Directors and Corporate
Auditors’ retirement benefits.

[English Translation]
37

(4)Revenue and Cost Recognition Policies
1) Revenue Recognition Policies for Construction Contracts
Percentage-of-completion method is applied to construction contracts
whose outcomes are deemed certain for progress until the end of thecurrent fiscal year, and applies the completed-contract method to otherconstruction contracts. The percentage of costs incurred to theestimated total cost is used for estimating the percentage ofcompletion.
2) Recognition Policies for Revenue and Costs of Finance Leases
Revenue and cost are recognized upon receipt of lease payments.
(5)Accounting for Major Hedges
1) Hedge Accounting Policy
The Company principally applies deferred hedging accounting. The
foreign currency denominated time deposits with forward exchange
contract that fulfill requirements for appropriation treatment are
accounted for using appropriation treatments. 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:
Hedged items:
Forward exchange contract
Foreign currency denominated time
deposits
Interest rate swap
Loans payable3) Hedging Policy
The risks for forward currency rate and forward interest rate
fluctuations 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
price fluctuations of the hedged items and hedging instruments fromthe beginning of hedging to the effective point of assessment, taking
the changes of both the hedged items and hedging instruments into
account. However, when an item is judged to fulfill requirements for
exceptional treatments or appropriation treatments, the assessment ofhedge effectiveness is omitted.
(6)Amortization of Goodwill and Negative Goodwill
Goodwill, and negative goodwill incurred before March 31, 2010 are
amortized by the straight-line method over a 5–10 year period.

[English Translation]38

(7) Accounting for Consumption Tax etc.
Tax-exclusive method is adopted.
6. Changes in Significant Items for Preparation of Consolidated Financial
Statements(1) Accounting Standard for Asset Retirement Obligations
From the current fiscal year, the Company applied the “AccountingStandard for Asset Retirement Obligations” (ASBJ Statement No.18, issued
on March 31, 2008) and “Guidance on Accounting Standard for Asset
Retirement Obligations” (ASBJ Guidance No. 21, issue on March 31,2008).
This change resulted in a decrease in operating profit and ordinary profit by
Yen 112 million, respectively, and in income before income taxes by Yen
1,297 million.
(2) Accounting Standard for Business Combinations and Others
From the current fiscal year, the Company applied the “AccountingStandard for Business Combinations” (ASBJ Statement No. 21, issued on
December 26, 2008), “Accounting Standard for Consolidated Financial
Statements” (ASBJ Statement No. 22, issued on December 26, 2008),“Partial Amendments to Accounting Standard for Research andDevelopment Costs” (ASBJ Statement No. 23, issued on December 26,2008), “Accounting Standard for Business Divestitures” (ASBJ Statement
No. 7, revised on December 26, 2008), “Accounting Standard for Equity
Method of Accounting for Investments” (ASBJ Statement No. 16, revisedon December 26, 2008), and “Guidance on Accounting Standard forBusiness Combinations and Accounting Standards for Business
Divestitures” (ASBJ Guidance No. 10, revised on December 26, 2008).
7. Changes of Presentations(Consolidated Balance Sheet and Consolidated Statement of Changes in Net
Assets)From the current fiscal year, “Valuation, translation adjustments and others” in the
consolidated balance sheet and the consolidated statement of changes in net assets
is presented as “Accumulated other comprehensive income,” in accordance withthe amendment of the Ordinance on Accounting for Companies.
(Consolidated Statement of Income)(i) From the current fiscal year, “Net income before minority interests” ispresented in the consolidated statement of income in accordance with theamendment of the Ordinance on Accounting for Companies.
(ii) “Loss on sales of investment securities,” which had been included in “Other”
of non-operating expenses until the previous fiscal year, is listed separately inthe current fiscal year as it exceeded 10% of the total non-operating expenses.
“Loss on sales of investment securities” included in “Other” of non-operating
expenses in the previous fiscal year was Yen 166 million.
Notes to Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services and Short-term Bank Loans
For financial institutions, the Company and some of the domestic
consolidated subsidiaries provide cash collection from and cash filling tocash dispensers located outside of financial institution facilities. The balanceof cash deposits for armored car services includes cash on hand and cash inbanks representing a total of Yen 34,184 million connected with cash filling
services, which is restricted in use by the Group. The short-term bank loanbalance includes Yen 10,871 million financed for the cash filling services.

[English Translation]
39

Furthermore, the balance of cash deposits for armored car services includes
Yen 22,361 million connected with cash collection administration services,which is also restricted in use by the Group. Also, the short-term bank loanbalance includes Yen 18,514 million financed for the cash collection
administration services.
2. Accumulated Depreciation of Tangible Assets
Accumulated Depreciation of Tangible Assets: Yen 316,984 million
3. Assets Pledged as Collateral and Collateral-related Liabilities:(1) Assets Pledged as Collateral(Millions of Yen)

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

1,793
19
673
28,62825,537
818
605
806
200
59,082(2) Collateral-related Liabilities(Millions of Yen)

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

5,932
2,914
14,091
21,11044,049In addition to the above liabilities, investment securities and long-termloans receivable are pledged as collateral for the debts of affiliates and otherdebts.
4. Change in Holding Purpose of Real Estate Inventories
Yen 1,852 million was transferred from real estate inventories to land, due toa change in holding purpose.
5. Investment in Non-Consolidated Subsidiaries and Affiliates:(Fixed assets)
Investment securities (stocks)
Yen 36,986 million
6. Contingent Liabilities:
Guarantees of liabilities
for companies and individuals

Yen 2,834 million

7. Presentation of Goodwill and Negative Goodwill
Goodwill and negative goodwill are presented in netted amount. Listed
below are the amounts before the offset. (In millions of Yen)
Goodwill
8,629
Negative goodwill
1,533
Net amount
7,095[English Translation]40

Notes to Consolidated Statement of Income
1. Write-down on Real Estate Inventories
Included in Cost of Revenue

Yen 1,481 million

Notes to Consolidated Statement of Changes in Net Assets
1. Items Related to Issued Shares and Treasury Stocks(Unit：1 share)
Number of shares atthe end of theprevious fiscal year

Increase in thenumber of shares in
the current fiscal year

Decrease in thenumber of shares in
the current fiscal
year

233,288,717－－

233,288,717

15,254,334

4,307

88

15,258,553

Number of sharesat the end of thecurrent fiscal year

Issued shares
Common stocks
Treasury stocks
Common stocks(Outline of reasons for change)
The increase of 4,307 in the number of common stocks is due to thepurchase of shares constituting less than one unit.
The decrease of 88 in the number of common stocks is due to requests tosell such number of shares as will constitute, together with the sharesconstituting less than one unit of shares already held, one full unit.

[English Translation]41

2. Items Related to Dividends(1) Amount of Dividends Paid
Resolution

Classes ofSharesTotal amount ofcash dividend(Millions of Yen)

Cash dividend per
share
(Yen)

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June25, 2010

Common stock

18,53285

March 31, 2010

June 28, 2010

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

Resolution

Classes ofShares

Source ofdividend

Total amount ofcash dividend(Millions of
Yen)

Cash
dividend per
share
(Yen)

Record date

Effective dateOrdinary General
Meeting of
Shareholders on June24, 2011

Commonstock

Retainedearnings

19,62290

March 31,2011

June 27,2011[English Translation]
42

Notes to Financial Instruments
1. Items Related to Status of Financial Instruments
The Group (excluding its insurance services segment) raises necessary funds,
with the aim of establishing a “Social System Industry,” by means of procuring
funds from markets and borrowing money from financial institutions. The
Group, except for its insurance services segment, also holds financial
instruments for promoting its business and investment. Derivatives areprimarily used for averting market risks associated with financial instruments,
loans, etc., and it is the Group’s policy not to perform speculative transactions.
The Group’s insurance services segment manages funds using financial
instruments for the purpose of safely and carefully holding and managing
insurance premiums received from policyholders for underwriting insurance
policies as a source of funds for paying for future insurance claims. As thefinancial instruments in which the Group invests are exposed to market risks
including interest rate fluctuation risks, the Group performs asset-liability
management (ALM) to prevent any adverse impact of such risks from arising.
2. Items Related to Fair Values of Financial Instruments etc.
The amounts recognized on the consolidated balance sheet, fair values andcorresponding differences as of March 31, 2011 are listed below. Items whose
fair value has been deemed extremely difficult to identify are not included in
the table below. (See Note 2)[English Translation]
43

(Millions of Yen)

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

Amountrecognized ontheconsolidatedbalance sheet
172,958
56,546
29,50073,95622,754

8,010
25,105
139,966
15,433
3,908
3,908
47,576(16,819)30,757
578,896
25,95947,42622,857
19,35317,006
21,586
5,069
159,259(9)Long-term loans receivable
Allowance for doubtful accounts (*1)

Fair value

Difference

172,958
56,546
29,50073,95622,754-

7,454
61,259139,966
15,858(555)
36,154
425

3,908

-

31,262505
Total assets
615,426
36,529(1)Notes and accounts payable, trade25,959(2)Bank loans
47,426(3)Payables - other
22,857(4)Accrued income taxes
19,353(5)Straight bonds
17,05145(6)Long-term loans
21,62438(7)Guarantee deposits received
4,945
(124)
Total liabilities
159,218(40)
Derivative transactions (*2)(i) Hedge accounting not applied(ii) Hedge accounting applied
(8)
(156)
(148)
Total derivative transactions
(8)
(156)
(148)
*1 Excludes allowance for doubtful accounts for loans receivable.
*2 Net claims and obligations arising from derivative transactions are shown as net values. Items
for which the total is a net obligation are shown in parentheses.

(Note 1) Calculation method of fair value of financial instruments and mattersconcerning securities and derivative transactions
Assets:(1) Cash on hand and in banks, (2) Cash deposits for armored car services, (3)Call loans, (4) Notes and accounts receivable, trade, (5) Due from subscribersand (8) Short-term loans receivable
These items are stated at their book value, as these items are mainly settled in ashort period of time and their fair value approximates their book value.
(6) Short-term investments and investment securities[English Translation]
44

The fair value of stocks is based on the price quoted on the exchange whereas
the fair value of straight bonds etc. is based on the price quoted on theexchange or the price presented by the corresponding financial institution.
(7) Lease receivables and investment in leased assets
These items are stated at present value calculated by discounting the sum of theprincipal and interest at the interest rate assumed when a new similar leasetransaction is performed.
(9) Long-term loans receivable
These items are stated at present value calculated by discounting the sum of theprincipal and interest at the interest rate assumed when a new similar loantransaction is performed with respect to each category based on type, internalrating and period of the loans receivable. The fair value of doubtful accounts isapproximately the same as the value on the balance sheet as of the fiscal
year-end less the current estimated loan loss, as the estimated loan loss iscalculated based on the discounted present value of estimated cash flow or the
expected recoverable amount with collateral and guarantee etc.; therefore, thesaid value is stated as fair value. Certain consolidated subsidiaries calculate thepresent value of future cash flow by discounting the future cash flow at aninterest rate equal to an appropriate index such as the yield of government
bonds plus the credit spread according to the residual period.
Liabilities:(1) Notes and accounts payable, trade, (2) Bank loans, (3) Payables - other and(4) Accrued income taxes
These items are stated at their book value, as these items are mainly settled in ashort period of time and their fair value approximates their book value.
(5) Straight bonds
These items are stated at present value calculated by discounting the sum of theprincipal and interest at the interest rate assumed when new similar straightbonds are issued, according to the residual period of the straight bonds.
(6) Long-term loans
These items are stated at present value calculated by discounting the sum of theprincipal and interest at the interest rate assumed when a new similar debt istaken on.
(7) Guarantee deposits received
Guarantee deposits received are stated at present value calculated bydiscounting the future cash flow at risk-free interest rate.
Derivative transactions:
Derivatives are stated at the price presented by the financial institution with which
the Group has concluded an agreement.
For hybrid instruments which do not separate the fair value of the embedded
derivatives, the fair value of the hybrid instruments is calculated as a whole, andincluded in “(i) held-to-maturity debt securities” in “(6) Short-term investments
and investment securities.” Since forward exchange contracts that have been
appropriated are accounted for together with hedged time deposits, the fair value
thereof is included in that of said time deposits.

[English Translation]
45

(Note 2) Financial instruments whose fair value is deemed extremely difficult to
identify(Millions of Yen)
Amount recognizedon the consolidated balance
sheet
4,834
11,881

Item

Unlisted stock (*1)
Unlisted stock of affiliates (*1)
Investments in limited partnerships for
5,517
investment etc. (*1)
Deposit from business activities (*2)
33,021*1 Not included in “(6) Short-term investments and investment securities” due to lack ofmarket price and extreme difficulty in identifying fair value.
*2 Not included in “(7) Guarantee deposits received” because reasonable estimation of cash
flow is deemed extremely difficult due to lack of market price and difficulty in calculating
the effective depositing period.

Notes to Leased Property and Other Real Estate
The Company and some of its consolidated subsidiaries own rental officebuildings and medical facilities such as hospitals, in addition to rental housing etc.
mainly in Tokyo and other major cities across the country.
The amount recognized on the consolidated balance sheet, the amount of
increase/decrease during the current fiscal year and the fair value of such leased
properties are as follows:(Millions of Yen)
Amount recognized on the consolidated balance sheet
Fair value at end
Balance at end of Increase/decrease Balance at end ofof the current
the previous
during the current the current fiscal
fiscal year
fiscal year
fiscal year
year
Office buildings
36,279(325)
35,95346,556
Medical facilities
45,831(963)
44,86839,604
Other
8,896
(89)
8,807
7,885
Total
91,007(1,378)89,62994,046(Note 1) The amount recognized on the consolidated balance sheet equals the acquisition costless accumulated depreciation and accumulated impairment loss.
(Note 2) The fair value at end of the current fiscal year is, in the case of major properties, theamount based on real-estate appraisal by an external real-estate appraiser, and in thecase of other properties, the amount calculated in-house based on the Real EstateAppraisal Standard. However, if no significant fluctuations have occurred in a certain
valuation or an index that is deemed to properly reflect the market price since theacquisition of the property from a third party or the most recent external valuation, thefair value is based on such valuation or the amount adjusted by using the index.

Profit or loss on leased properties and other real estate for the fiscal year ended
March 31, 2011 is as follows:[English Translation]
46

(Millions of Yen)
Other (gain/loss
Rental income
Rental expenses
Differenceon sale etc.)
Office buildings
3,335
1,475
1,859
12
Medical facilities
4,945
2,164
2,781
3
Other
545
191
354
16
Total
8,826
3,831
4,995
32
(Note) The rental expenses include depreciation, repair costs, insurance premium, taxes andpublic imposts, etc.

Notes to Deferred Tax Accounting
1. The Significant Components of Deferred Tax Assets and Deferred Tax
Liabilities:
Deferred tax assets:
Operating loss carry-forwards
Eliminations of unrealized gain
Allowance for doubtful accounts
Investment deposits by policyholders, unearned premiums and other insurance
liabilities and provision for outstanding claims
Adjustment of book value of fixed assets of subsidiaries at fair value at thedate of consolidation (land and buildings)
Accrued pension and severance costs
Accrued bonuses
Write-down on fixed assets
Impairment loss
Write-down on real estate inventories
Loss on impairment of investment securities
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets(Millions of Yen)
14,743
10,255
7,757
7,489
6,657
4,898
4,842
3,743
2,810
1,822
1,440
7,505
73,968(31,116)
42,851

Deferred tax liabilities:
Adjustment of book value of land and buildings of subsidiaries at fair value atthe date of consolidation
Prepaid pension and severance costs
Adjustment of book value of other fixed assets of subsidiaries at fair value atthe date of consolidation
Unrealized gains on securities
Other
Total deferred tax liabilities
Net deferred tax assets[English Translation]
47(7,515)(7,481)(2,522)(709)(1,204)(19,433)
23,418

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

40.5(%)
(1.9)
(1.8)
0.8
(0.7)
(0.5)
(0.5)
0.4
0.4
(0.1)
36.6(%)

Notes to Retirement Benefits
1. Outline of the Retirement Benefit Plan Adopted:
Employees of the Company and its consolidated domestic subsidiaries whose
services are terminated are, under most circumstances, eligible for lump-sum
severance indemnities and/or eligible for pension benefits.
The Company and those of its domestic consolidated subsidiaries with thesame retirement benefit plan have adopted a severance indemnity plan and adefined contribution pension plan. The method of calculating the severance
indemnity under the severance indemnity plan is to pay out to the employees
an amount equal to a certain percentage of their annual income over theirperiod of service, plus interest which is calculated as the 3-year average yieldof applicants for 10-year government bonds. The defined contribution pension
plan was established in April 2003, a portion equivalent to 20 percent of theseverance indemnity plan so far accumulated was transferred to the new plan,
and a specified percentage of annual income is contributed thereto. The
Company transferred an additional portion of the severance indemnity plan
funds to the defined contribution pension plan in April 2005, and accordingly,
the ratio of the accumulated amount in the severance indemnity plan and theamount of contributions to the defined contribution pension plan, including thepast reserve, changed to 70 % and 30 %, respectively.
The majority of the consolidated overseas subsidiaries have adopted a varietyof pension plans that essentially cover all employees. Most of these plans aredefined contribution pension plans.

[English Translation]48

2. Items Concerning the Retirement Benefit Obligation (As of March 31, 2011):(Millions of Yen)
(1) Projected benefit obligation(2) Plan assets(3) Unfunded projected benefit obligation ((1)+(2))(4) Unappropriated difference at the time of change inaccounting standard(5) Unrecognized actuarial gains or losses(6) Unrecognized prior service liability(7) Net retirement benefit obligation recognized in the
consolidated balance sheet((3)+(4)+(5)+(6))(8) Prepaid pension and severance costs(9) Accrued pension and severance costs ((7)-(8))(74,727)
65,518(9,209)14,841
5,632
18,730(13,097)

3. Components of Pension and Severance Costs (from April 1, 2010 to March 31,
2011)(Millions of Yen)
(1) Service cost *1
4,521(2) Interest cost
1,539(3) Expected return on plan assets(1,756)(4) Amortization of actuarial gains or losses
1,959(5) Amortization of prior service benefit(263)(6) Pension and severance costs ((1)+(2)+(3)+(4)+(5))5,999(7) Other *2
1,595
Total
7,595
(Notes) *1. Pension and severance costs for consolidated subsidiaries adopting thesimplified 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 prior service
liability(5) Amortization period of actuarial
gains or losses

Straight-line method over the estimated years ofservices of the eligible employees
Principally 2.2% at beginning of fiscal year
Principally 2.1% at end of fiscal year
Principally 3.0% for plan assets
Prior service liability is amortized in the year
incurred.
Amortizing actuarial gains and losses from thefollowing fiscal year of occurrence, using thestraight-line method over certain years within the
average remaining service period (mainly 10 years).

[English Translation]
49

Notes to Business Combination
Transactions under Common Control etc.
1. Name and Business Description of Company Subject to Business Combination,
Legal Format of Business Combination, Name of Company Following
Combination and Outline of Transaction Including Its Purpose(1) Name and Business Description of Company Subject to Business
Combination
Name of Company: Secom Techno Service Co., Ltd. (hereinafter“Secom Techno”), a consolidated subsidiary of the Company
Description of Business: Installation of online security systems,
maintenance of building equipment, design to installation and maintenanceof various architectural equipment and sales and installation of security
systems for condominiums(2) Legal Format of Business Combination
Tender offer(3) Name of Company Following Combination
There was no change in the name of the company subject to businesscombination.
(4) Outline of Transaction Including Its Purpose
The Company and Secom Techno resolved at their respective meetings ofthe Board of Directors held on February 8, 2011, that the Company would
acquire shares of Secom Techno through a tender offer for the purpose ofenhancing the corporate value of Secom Techno and the entire SECOM
Group through the realization of maximum synergy and the acceleration ofefforts toward the establishment of the “Social System Industry,” bymeans of conducting the management integration; and conducted a tender
offer for the shares of common stock issued by Secom Techno during theperiod from February 9, 2011 through March 24, 2011.
As a result of the above tender offer, the Company’s ownership percentage
out of the total number of issued shares of Secom Techno (excluding thetreasury stocks held by Secom Techno) increased from 67.78% (as ofFebruary 8, 2011) to 97.12%.The Company and Secom Techno arescheduled to conduct an absorption-type merger, with Secom being thesurviving company and Secom Techno being the absorbed company.
2. Outline of Accounting Treatment
Pursuant to “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, issued on December 26, 2008) and “Guidance on
Accounting Standard for Business Combinations and Accounting Standards for
Business Divestitures” (ASBJ Guidance No. 10, revised on December 26,2008), the transaction was accounted for as transaction with minority
shareholders of transactions under common control etc.
3. Matters Related to Additional Acquisition of Investment Securities in
Subsidiaries(1) Acquisition Cost and Breakdown Thereof
Consideration for Acquisition
Common stock of Secom Techno
Yen 13,315 million
Costs Directly Associated with Acquisition
Advisory fees etc.
Yen 110 million
Acquisition Cost
Yen 13,425 million(2) Amount of Goodwill, Cause of Goodwill, Amortization Method andPeriod(i) Amount of Goodwill: Yen 4,959 million(ii) Cause of Goodwill:
The goodwill is attributable to acquisition cost relating to theadditional acquisition of Secom Techno shares by the Company[English Translation]
50

(3)

exceeding the decrease in minority interest caused by the additional
acquisition.
(iii) Amortization Method and Period:
Amortization by the straight-line method over a 10-year period
Details of Contingent Considerations Stipulated in Business Combination
Agreement and Accounting Treatment for the Current and SubsequentFiscal years
Not applicable.

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

Yen 2,716.35
Yen 279.07

Notes to Significant Subsequent Events
The Company and its consolidated subsidiary Secom Techno Service Co., Ltd.
(hereinafter “Secom Techno”) resolved, at their respective meetings of the Boardof Directors held on May 11, 2011, to conduct an absorption-type merger(hereinafter “Merger”), with the Company being the surviving company and
Secom Techno being the absorbed company, and the two companies entered into amerger agreement in relation to the Merger.
The shares of Secom Techno are schedule to be delisted as of June 28, 2011 (thelast trading date of the shares is scheduled to be June 27, 2011), which precedes
the scheduled effective date (July 1, 2011) of the Merger.
1. Name and Business Description of Company Subject to Business Combination,
Date of Business Combination, Legal Format of Business Combination, Nameof Company Following Combination and Outline of Transaction Including Its
Purpose(1) Name and Business Description of Company Subject to Business
Combination(i) Company Subject to Business Combination
Secom Techno, a consolidated subsidiary of the Company(ii) Description of Business
Installation of online security systems, maintenance of building
equipment, design to installation and maintenance of various
architectural equipment and sales and installation of security systems
for condominiums(2) Date of Business Combination
July 1, 2011 (scheduled)(3) Legal Format of Business Combination
The Company will absorb Secom Techno and become the surviving
company; Secom Techno will subsequently be dissolved.
With respect to the Company, the Merger is scheduled to be conducted in
the form of a simplified merger, pursuant to the provisions of Article 796,
Paragraph 3 of the Companies Act. With respect to Secom Techno, theMerger is scheduled to be conducted in the form of a short-form merger,
pursuant to the provision of Article 784, Paragraph 1 of the Companies
Act. Both companies will conduct the Merger without obtaining approvalat their respective shareholders’ meeting.
(4) Name of Company Following Combination
There will be no change in the name of the company following businesscombination.
(5) Outline of Transaction Including Its Purpose
The Company decided to conduct an absorption-type merger for the
purpose of increasing the corporate values of Secom Techno, as well as theentire Secom Group, by accelerating the Group’s efforts to establish a“Social System Industry” through maximization of synergy, which wasachieved by means of operational integration with Secom Techno through[English Translation]
51

the tender offer conducted for the shares of common stock of Secom
Techno from February 9, 2011 to March 24, 2011.
As regards share allotment relating to the Merger, 0.85 shares of common
stock of the Company will be allotted and delivered in exchange for eachshare of common stock of Secom Techno; provided, however, that noshares will be allotted in the Merger for the shares of common stock ofSecom Techno held by the Company and treasury stocks held by Secom
Techno.
All of the shares to be delivered by the Company are scheduled to besourced from the treasury stocks held by the Company, and the Company
does not plan to issue new shares upon the allotment in the Merger.
2. Outline of Accounting Treatment
Pursuant to “Accounting Standard for Business Combinations” (ASBJ
Statement No. 21, issued on December 26, 2008) and “Guidance on
Accounting Standard for Business Combinations and Accounting Standards for
Business Divestitures” (ASBJ Guidance No. 10, revised on December 26,2008), the transaction is scheduled to be accounted for as a transaction undercommon control.

[English Translation]52

Non-Consolidated Balance Sheet(As of March 31, 2011)(Millions of Yen)ITEM
ASSETSAMOUNT

Current assets:
Cash on hand and in banks
Cash deposits for armored car services
Notes receivable
Due from subscribers
Accounts receivable, trade
Receivables – other
Short-term investments
Merchandise
Supplies
Prepaid expenses
Deferred income taxes
Short-term loans receivable
Other
Allowance for doubtful accounts

168,428
74,68054,641
221
11,563
6,074
2,385
456
4,279
1,167
2,051
4,938
4,356
1,818
(206)

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

110,439
1,672
29,38671
10,824
12,4501,422
722
20,362
22,229
3,719
5,468
2,107

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:
Software
Other
Investments and others:
Investment securities
Investment securities and investments
in subsidiaries and affiliates
Long-term loans receivable
Lease deposits
Long-term prepaid expense
Prepaid pension and severance costs
Deferred income taxes
Insurance funds
Other
Allowance for doubtful accounts

526,227
118,379
22,310243

Long-term liabilities:
Lease obligations
Guarantee deposits received
Accrued pension and severance costs
Accrued retirement benefits for
directors and corporate auditors
Other
Total liabilities
NET ASSETS

25,7992,253
18,262
4,040

TOTAL ASSETS

61,461565
3,151
28,390
1,743
513
7,566
6,751
815
400,281
20,969204,910
118,276
8,047
25,872
14,321
13,865
4,181
2,831(12,995)

694,656[English Translation]
53

ITEM
LIABILITIESShareholders’ equity:
Common stock
Capital surplus:
Additional paid-in capital
Retained earnings:
Legal reserve
Other retained earnings
Reserve for system developments
General reserve
Accumulated earnings carried forward
Common stock in treasury, at cost
Valuation, translation adjustments andothers:
Unrealized losses on securities

Total net assets
TOTAL LIABILITIES AND
NET ASSETSAMOUNT

1,232
11
136,238

558,619
66,377
83,054
83,054484,1109,028
475,082800
2,212
472,070(74,923)
(201)
(201)

558,417694,656

Non-Consolidated Statement of Income(Fiscal Year from April 1, 2010 to March 31, 2011)(Millions of Yen)ITEM

AMOUNT

Revenue329,297

Costs of revenue

191,284

Gross profit

138,013

Selling, general and administrative expenses

69,324

Operating profit

68,688Non-operating income:Interest income

2,023

Dividends income

6,492

Other

347

8,863

Non-operating expenses:
Interest expenses

286

Loss on sales and disposal of fixed assets

1,189

Write-off of long-term prepaid expenses

805

Other

768

Ordinary profit

3,050
74,501

Extraordinary profit:
Gain on sales of investment securities

81

Gain on refund of lease deposits

18

Other

6

Extraordinary losses:
The effect of adoption of accounting standard for asset
retirement obligations
Provision for allowance for doubtful accounts

106

838
805

Loss on impairment of investment securities

450

Loss related to disasters

431

Other

112

Income before income taxes

2,637
71,970

Income taxes – current

26,258

Income taxes – deferred

688

Net income

26,94645,023[English Translation]54

Non-Consolidated Statement of Changes in Net Assets(Fiscal Year from April 1, 2010 to March 31, 2011)(Millions of Yen)
Shareholders’ equity
Capital surplus
CommonAdditional

Other capital

Total capital

paid-in capitalsurplussurplusstock

Balance as of March 31, 2010

66,377

83,054－

83,054

(0)

(0)

0

0

Changes during the period:
Cash dividends
Net income
Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal oftreasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period
Balance as of March 31, 2011

－

－

－

－

66,377

83,054－

83,054(Millions of Yen)
Shareholders’ equity
Retained earnings
Other retained earnings
Legal

Reserve forreservesystemdevelopments

Balance as of March 31, 2010

9,028

800

Generalreserve
2,212

Total

Accumulated

retainedearnings carriedearnings

forward445,579

457,620

Cash dividends(18,532)(18,532)

Net income

45,02345,023(0)(0)

Changes during the period:

Purchase of treasury stock
Disposal of treasury stock
Transfer of loss on disposal oftreasury stock
Net changes of items other thanshareholders’ equity
Total changes during the period

－

－

－

26,49026,490

Balance as of March 31, 2011

9,028

800

2,212

472,070

484,110[English Translation]
55

(Millions of Yen)
Valuation, translation

Shareholders’ equity

Total

Commonstock intreasury, atcost
Balance as of March 31, 2010

adjustments and others

Total

Unrealized

valuation,

shareholders’gains (losses)

translation

equityon securities

adjustments

Total net
assetsand others(74,907)532,145786

786

532,931

Changes during the period:
Cash dividends(18,532)(18,532)

Net income

45,02345,023Purchase of treasury stock

(16)

(16)

(16)

Disposal of treasury stock

0

0

0

－

－

Transfer of loss on disposalof treasury stock
Net changes of items otherthan shareholders’ equity

(987)

(987)

(987)

Total changes during the(16)

26,474

(987)

(987)

25,486(74,923)558,619

(201)

(201)

558,417

periodBalance as of March 31, 2011[English Translation]
56

Notes to Non-Consolidated Financial Statements
Notes to Significant Accounting Policies
1. Valuation Policies and Methods for Securities(1) Held-to-maturity debt securities
Amortized cost method(2) Investment Securities in Subsidiaries and Affiliates
At cost, based on the moving average method(3) Available-for-sale Securities
Securities with fair value
Stock and beneficiary securities: At fair value based on the average market
price in one month prior to the fiscal year-end.
Others: At fair value based on market price at fiscal year-end
Net unrealized gains and losses of securities are reported directly in net
assets. The cost of securities sold is calculated by the moving averagemethod.
Securities with no fair value
At cost, based on the moving average method or amortized cost method.
2. Valuation Policies and Methods for Inventories
Merchandise and supplies are stated at cost determined by the moving averagemethod (or at the net realizable value (NRV) calculated by writing down the bookvalue to reflect a decrease in the NRV).
3. Depreciation and Amortization of Depreciable and Amortizable Fixed Assets(1) Tangible Assets: (except for leased assets)
1) Security equipment and control stations
Security equipment and control stations are depreciated over their average
estimated useful service lives (5–8 years) by the declining-balance method.
2) Other tangible fixed assets
Other tangible fixed assets are depreciated by the straight-line method.
Their main useful service lives are as follows:
Buildings and improvements: 22–50 years(2) Intangible Assets
Intangible fixed assets are amortized by the straight-line method.
The software used in the Company is amortized by the straight-line method
based on the useful service lives within the Company (5 years).
(3) Leased Assets
1) Leased assets related to ownership-transfer finance lease transactions
Depreciated, using the same depreciation method applied to fixed assets inpossession.
2) Leased assets related to non-ownership-transfer finance lease transactions
Depreciated, using the straight-line method over a useful life equal to thelease period with a residual value of zero.
In addition, non-ownership-transfer finance leases entered into on or before
March 31, 2008 are treated using the method applicable to operating leasetransactions.

[English Translation]57

(4) Long-term Prepaid Expenses: Straight-line method
Long-term prepaid expenses are amortized by the straight-line method. With
respect to the installation costs related to security equipment at the customer
premises, any portion exceeding the amount received from the customer is
included in “long-term prepaid expenses” and amortized by the straight-line
method over the contract period (5 years).
4. 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 historical loss rate with respect toordinary accounts, and an estimate of uncollectable amounts, respectively
determined by reference to specific doubtful accounts from customers whoare experiencing financial difficulties.
(2) Accrued Bonuses
Accrued bonuses are provided for the bonus payments to employees, at an
amount incurred during the current fiscal year.
(3) Accrued Pension and Severance Costs
To prepare for the retirement benefits of employees, the Company provides
an amount of accrued pension and severance costs and prepaid pension andseverance costs at the end of the current fiscal year, based on the estimatedamount of projected benefit obligation and plan assets as of the end of thecurrent fiscal year.
Prior service liability is recognized as profit or loss in the year of occurrence.
Actuarial gains and losses are amortized from the following fiscal year ofoccurrence, using the straight-line method over certain years within the
average remaining service period (mainly 10 years).
(4) Accrued Retirement Benefits for Directors and Corporate Auditors
To prepare for outlays for retirement benefits of Directors and Corporate
Auditors of the Company, a necessary amount at the end of the current fiscal
year is appropriated based on the rules of the Directors and Corporate
Auditors’ retirement benefits.
5. Revenue and Cost Recognition Policies
Revenue Recognition Policies for Construction Contracts
Percentage-of-completion method is applied to construction contracts whose
outcomes are deemed certain for progress until the end of the current fiscal
year, and applies the completed-contract method to other construction
contracts. The percentage of costs incurred to the estimated total cost is used
for estimating the percentage of completion.
6. Hedge Accounting Policy(1) Hedge Accounting Policy
The foreign currency denominated time deposits with forward exchange
contract that fulfill requirements for appropriation treatment are accounted forusing appropriation treatments.
(2) Hedging Instruments and Hedged Items
Hedging instruments:
Forward exchange contract[English Translation]
58

Hedged items:
Foreign currency denominated time
deposits

(3) Hedging Policy
The risks for forward currency rate fluctuation are to be hedged pursuant to therisk management policy of the Company.
(4) Assessment of Hedge EffectivenessHedge effectiveness is assessed by comparing the cumulative totals of pricefluctuations of the hedged items and hedging instruments from the beginning ofhedging to the effective point of assessment, taking the changes of both thehedged items and hedging instruments into account. However, when an item isjudged to fulfill requirements for appropriation treatments, the assessment ofhedge effectiveness is omitted.
7. Other Significant Accounting Policies
In relation to consumption tax and regional consumption tax, tax-exclusive
method is adopted.
8. Changes of Accounting Policies(1) Accounting Standard for Asset Retirement Obligations
From the current fiscal year, the Company applied the “Accounting Standard
for Asset Retirement Obligations” (ASBJ Statement No.18, issued on March
31, 2008) and “Guidance on Accounting Standard for Asset Retirement
Obligations” (ASBJ Guidance No. 21, issue on March 31, 2008).
This change resulted in a decrease in operating profit and ordinary profit by
Yen 22 million, respectively, and in income before income taxes by Yen 861
million.
(2) Accounting Standard for Business Combinations and Others
From the current fiscal year, the Company applied the “Accounting Standard
for Business Combinations” (ASBJ Statement No. 21, issued on December 26,2008), “Partial Amendments to Accounting Standard for Research andDevelopment Costs” (ASBJ Statement No. 23, issued on December 26, 2008),“Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
revised on December 26, 2008), and “Guidance on Accounting Standard forBusiness Combinations and Accounting Standards for Business Divestitures”(ASBJ Guidance No. 10, revised on December 26, 2008).
9. Changes of Presentation Methods(Non-Consolidated Statement of Income)“Gain on sales of investment securities,” which had been included in “Other”
of extraordinary profit until the previous fiscal year, is listed separately in thecurrent fiscal year as it exceeded 10% of the total extraordinary profit.
“Gain on sales of investment securities” included in “Other” of extraordinary
profit in the previous fiscal year was Yen 8 million.
Notes to the Non-Consolidated Balance Sheet
1. Cash Deposits for Armored Car Services and Short-term Bank Loans
For financial institutions, the Company provides cash filling to and cash
collection from cash dispensers located outside of financial institution
facilities.
The balance of cash deposits for armored car services includes cash on handand cash in banks of representing a total of Yen 32,279 million connected withcash filling services, which is restricted in use by the Company. The
short-term bank loan balance includes Yen 10,871 million financed for the
cash filling services.

[English Translation]
59

The balance of cash deposits for armored car services includes Yen 22,361
million connected with cash collection administration services, which is also
restricted in use by the Company. Also, the short-term bank loan balance
includes Yen 18,514 million financed for the cash collection administration
services.
2. Assets Pledged as Collateral and Collateral-related Liabilities
Assets Pledged as Collateral(Millions of Yen)
Short-term loans receivable
19
Investment securities
277
Investment securities in subsidiaries and45
affiliates
Long-term loans receivable
806
Total
1,149
Collateral-related Liabilities
Nil
Short-term loans receivables, investment securities, investment securities
in subsidiaries and affiliates, and long-term loans receivable are pledged ascollateral for the debts of subsidiaries and affiliates and other debts.
3. Accumulated Depreciation of Assets
Accumulated depreciation of tangible assets:

Yen 234,673 million

4. Contingent Liabilities(1) Guarantees
Liabilities for the below entities and employees are guaranteed.
(Millions of Yen)
Alive Medicare Co., Ltd.
1,882
Secom Fort West Co., Ltd.
525
Secom Home Life Co., Ltd.
520
Prime Stage Co., Ltd.
150
Sanwakai (Medical institution)
142
Other
181
Employees
198
Purchaser of merchandises by leasing
1,003
transactions etc.
Total
4,604
(2) Net Assets Maintaining Agreement
The Company entered into a net assets maintaining agreement with Secom
General Insurance Co., Ltd., under which the Company is obligated toprovide funds to Secom General Insurance Co., Ltd. if and when the net
assets of Secom General Insurance Co., Ltd. become lower than thespecified amount or its current assets necessary for the payment of its
liabilities are insufficient. The total liabilities of Secom General InsuranceCo., Ltd. at the end of the current fiscal year are Yen 144,055 million,
including Yen 139,543 million of investment deposits by policyholders,
unearned premiums and other insurance liabilities, and the total assets are
Yen 165,333 million.

[English Translation]
60

However, this agreement is not construed as the Company’s guaranteewith respect to payment obligations of Secom General Insurance Co., Ltd.,
Secom General Insurance Co., Ltd. maintained net assets above therequired level, and its current assets were not insufficient at the end of thecurrent fiscal year.
5. Financial Receivables/Payables to Subsidiaries and Affiliates (excluding thoseseparately presented)(Millions of Yen)
8,476
Short-term receivables
119,575
Long-term receivables
8,413
Short-term payables
750
Long-term payables
Notes to Non-Consolidated Statement of Income
Transactions with Subsidiaries and Affiliates
Operating transactions(Millions of Yen)
Revenue
15,468Amount of purchased costs and sub-contract costs
66,404Non-operating transactions
8,159
Notes to Non-Consolidated Statements of Changes in Net Assets
Items Related to Classes and Total Number of Treasury Stocks

Classes ofsharesNumber ofshares at theend of theprevious fiscal
year

Increase in
number ofshares in thecurrent fiscal
year

Decrease in
number ofshares in thecurrent fiscal
year(Unit: 1 share)
Number ofshares at theend of thecurrent fiscal
year

Commonstock

15,254,334

4,307

88

15,258,553(Outline of reasons for change)
The increase of 4,307 in the number of common stocks is due to the purchase ofshares constituting less than one unit.
The decrease of 88 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]
61

Notes to Deferred Tax Accounting
1. The Significant Components of Deferred Tax Assets and Deferred Tax
Liabilities:
Deferred tax assets:(Millions of Yen)
Loss on impairment of investment securities in subsidiaries and6,534
affiliates
Allowance for doubtful accounts
5,212
Accrued bonuses
2,214
Impairment loss
2,190
Write-down on fixed assets
1,839
Accrued pension and severance costs
1,636
Other
4,976
Total deferred tax assets
24,603
Deferred tax liabilities:
Prepaid pension and severance costs
Total deferred tax liabilities
Net deferred tax assets(5,800)(5,800)18,803

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

40.5 (%)
(3.2)
0.5
(0.5)
0.1
37.4(%)

Notes to Fixed Assets under Leases
Besides the ones booked as fixed assets on the balance sheet of the Company,
some of buildings, automobiles and tools, furniture and fixtures are used based on
the finance lease contracts other than those deemed to transfer the ownership ofthe leased assets to the lessees.

[English Translation]
62

Notes to Transactions with Related Parties

Type

Name ofCompany

Subsidiary

Secom
TechnoService Co.,Ltd.

Subsidiary

Secom
Home Life
Co., Ltd.

Subsidiary

SecomCredit Co.,Ltd.

Subsidiary

Secom
MedicalSystem Co.,
Ltd.

AddressNakano-ku,
TokyoShibuya-ku,
TokyoShibuya-ku,
TokyoShibuya-ku,
Tokyo

Capital(Millionsof
Yen)

Business
content

2,357

Installationof security
systems

3,700

Real estatedevelopment
and sales

400

6,545

Transactions

Relationship
Concurrent
posts ofDirectors
Businessandrelationship
Corporate
Auditors

VotingRights Heldby theCompany
(%)

97.1

-

Construction
subcontractor

99.9

1 personLoan
andinvestmentof funds

Lease

100.0

1 personLoan
andinvestmentof funds

Medicalservice100.0

1 personLoan
andinvestmentof funds

Amount ofTransactions(Millions ofYen)

Account

Installation costs etc.
(Note 2)
Execution of loans(Collection of loans)
Receipt of interests (Note 3)

38,851

Payables-other
Payables-construction

15,810(28,855)
805

Long-term
loans
receivable (Note 4)

SecomCreditCo., Ltd.

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

8,600(9,000)320

Secom Medical
System Co., Ltd.

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

6,067(6,285)
560

Secom Techno
Service Co., Ltd.
Secom
Home
Life Co., Ltd.

Short-term
receivable
Long-term
receivable
Short-term
receivable
Long-term
receivable

loans
loans
loans
loans

(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, by taking market prices into
consideration.
3. The interest rates for the loans above are determined, referring to market interest rates etc.
4. The amount of Yen 4,893 million has been accrued as allowance for doubtful accounts forthe long-term loans receivable to Secom Home Life Co., Ltd. in the current fiscal year.

[English Translation]
63

Year-end
Balance(Millions of
Yen)
3,136
1,186
47,389500
18,0003,322
35,809

Notes to Business Combination
The Company additionally acquired shares of Secom Techno Service Co., Ltd.
through a tender offer. Please refer to “Notes to Business Combination” in the“Notes to Consolidated Financial Statements.”
Notes to Per-Share Information
Net assets per share:
Net income per share:

Yen 2,561.19
Yen 206.50

Notes to Significant Subsequent Events
Please refer to “Notes to Significant Subsequent Events” in the “Notes toConsolidated Financial Statements.”[English Translation]
64

Certified Copy of the Accounting Auditors’ Report (Consolidated)[English Translation of the Accounting Auditors’ Report Originally Issued in theJapanese Language]
Independent Auditors’ Report
May 18, 2011
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA LLC
Toshiya Mori (Seal)
Designated Limited Liability Partner
Certified Public Accountant
Hiroaki Sugiura (Seal)
Designated Limited Liability Partner
Certified Public Accountant
Kentaro Maruta (Seal)
Designated Limited Liability Partner
Certified Public Accountant
We have audited the consolidated statutory report, comprising the consolidated balance
sheet, the consolidated statement of income, the consolidated statement of changes in net
assets and the related notes of SECOM Co., Ltd. as of March 31, 2011 and for the year
from April 1, 2010 to March 31, 2011 in accordance with Article 444(4) of theCompanies 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 inJapan. 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 the accounting principles used, the method of theirapplication and estimates made by management, as well as evaluating the overall
presentation of the consolidated statutory report. We believe that our audit provides areasonable basis for our opinion.
In our opinion, the consolidated statutory report referred to above presents fairly, in allmaterial 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 inJapan.
Note
As discussed in Notes to Significant Subsequent Events in Notes to Consolidated
Financial Statements, the Company entered into a merger agreement with Secom Techno
Service Co., Ltd., its consolidated subsidiary, on May 11, 2011.
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]
65

Certified Copy of the Accounting Auditors’ Report(Non-Consolidated)[English Translation of the Accounting Auditors’ Report Originally Issued in theJapanese Language]
Independent Auditors’ Report
May 18, 2011
The Board of Directors
SECOM Co., Ltd.
KPMG AZSA LLC
Toshiya Mori (Seal)
Designated Limited Liability Partner
Certified Public Accountant
Hiroaki Sugiura (Seal)
Designated Limited Liability Partner
Certified Public Accountant
Kentaro Maruta (Seal)
Designated Limited Liability Partner
Certified Public Accountant
We have audited the statutory report, comprising the balance sheet, the statement ofincome, the statement of changes in net assets and the related notes, and its supporting
schedules of SECOM Co., Ltd. as of March 31, 2011 and for the 50th business year from
April 1, 2010 to March 31, 2011 in accordance with Article 436(2)(i)of the Companies
Act. The statutory report and supporting schedules are the responsibility of theCompany’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 inJapan. Those auditing standards require us to obtain reasonable assurance about whether
the statutory report and supporting schedules are free of material misstatement. An audit
is performed on a test basis, and includes assessing the accounting principles used, themethod of their application and estimates made by management, as well as evaluating theoverall 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 all material 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.
Note
As discussed in Notes to Significant Subsequent Events in Notes to Non-Consolidated
Financial Statements, the Company entered into a merger agreement with Secom Techno
Service Co., Ltd., its consolidated subsidiary, on May 11, 2011.
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]
66

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

Audit Report
May 19, 2011

Mr. Shuji Maeda
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)
Outside Corporate Auditor
Hiroshi Yasuda (Seal)
Outside Corporate Auditor
Kohei Yamashita (Seal)
Outside Corporate Auditor
The Board of Corporate Auditors has received the audit reports of the performanceof duties of the Directors during the 50th business term from April 1, 2010 throughMarch 31, 2011 from each of the Corporate Auditors. After deliberating such reports, wehave 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 has established the audit policy and audit plan forthe current 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 Corporate Auditors, in accordance with the audit policy, audit plan, etc.
of the current fiscal year set up by the Board of Corporate Auditors, worked tocommunicate with Directors, the internal audit division and other employees, madeefforts to gather information and establish the audit environment, in addition to attending
the meetings of the Board of Directors and other important meetings, receiving reports
from the Directors and other managers on their duties, requesting explanations whennecessary, inspecting documents concerning matters such as important decisions, andinvestigating the conditions of the business and financial conditions at the head office andthe principal offices. Furthermore, to ensure the execution of the duties of Directors
complied with laws and regulations and the Articles of Incorporation and to ensure
appropriate joint-stock company operations, Corporate Auditors also monitored andinvestigated the details of the resolution of the Board of Directors on the establishment ofa system stipulated in Paragraph 1 and Paragraph 3 of Article 100 of the Companies Act
Enforcement Order and the status of the system (internal control system) establishedbased on such resolution. We worked to communicate and exchange information with the
Directors and Corporate Auditors of subsidiaries and received reports on operations fromsubsidiaries when necessary. The above methods were used to examine the business
report and accompanying schedule for the current fiscal year.
The Board of Corporate Auditors received reports on internal control regarding[English Translation]
67

financial reports from Directors and KPMG AZSA LLC about discussion between
Directors and the Accounting Auditors, evaluation of internal control of the Company andaudit circumstance, also requested explanations when necessary. With respect tosubsidiaries, Corporate Auditors have endeavored to exchange information and promote
understanding and, obtained reports from Directors and Corporate Auditors ofsubsidiaries.
On the basis of the forgoing procedures, the Board of Corporate Auditors has
considered the Business Report and accompanying schedules.
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 andrequested explanations when necessary. In addition, we received notice from the
Accounting Auditors that “The systems for ensuring the proper execution of duties” (setforth in each Item of Article 131 of the Ordinance for Corporate Accounting) is organizedin accordance with the “Standards for Quality Control of Audit” (Business Accounting
Council, October 28, 2005) and other relevant standards, and sought explanations
whenever necessity arose. Based on the above methods, we examined the financial
statements (balance sheet, statement of income, statement of changes in net assets, notes
to financial statements), supporting schedules, and the consolidated financial statements(consolidated balance sheet, consolidated statement of income, consolidated statement ofchanges in net assets, notes to consolidated financial statements) for the current fiscal
year.
2. Result of audit(1) Result of audit of business report etc.
i) The Business Report and accompanying schedules fairly represent the condition of
the Company in accordance with laws and regulations and the Articles ofIncorporation of the Company.
ii) We have determined that there were no serious occurrences of unjust activity or
violations of any laws or regulations or the Articles of Incorporation of theCompany by any of the Directors in carrying out their duties.
iii) We believe the contents of the resolution of the Board of Directors regarding theinternal control system are appropriate. We found no matters to note regarding theexecution of duties of Directors regarding the internal control system, as well as theinternal control system regarding financial reporting.
(2) Result of audit of financial statements and accompanying schedules
In our opinion, the audit procedures and audit results of the Accounting Auditors
KPMG AZSA LLC are appropriate.
(3) Result of audit of consolidated financial statements
In our opinion, the audit procedures and audit results of the Accounting Auditors
KPMG AZSA LLC are appropriate.

End[English Translation]
68

Reference Document Concerning the General Meeting of Shareholders
Proposals and Reference Items
First Item of Business:

Proposed Distribution of Surplus

The Company considers the return of profit to shareholders as one of theimportant managerial issues, and the Company has determined a dividend payout
ratio on a consolidated basis and the level of internal reserves after making an
overall judgment on the expansion of the Company’s business and trend of future
revenues and profits of the Group while considering the Company’s basic policythat ensures the payment of continual and steady dividends. The Company has
made it a basic rule to distribute a dividend once a year as the year-end dividend,
which is determined by the General Meeting of Shareholders. Furthermore, theCompany will utilize internal reserves for investment required for increased newcontractors, research and development and investments and the like for strategic
businesses so that the Company will exert its efforts to strengthen the corporate
structure and to expand its business.
It is proposed that, based on the aforesaid basic policy, cash dividends forthe fiscal year under review be increased by Yen 5 per share from Yen 85 pershare for the previous fiscal year to Yen 90 per share to reward shareholders’continued support.
Matters related to the year-end dividend:(1)
Kind of assets distributed:
Cash(2)Matter related to distribution of cash and total amount:Yen 90 per share of common stock of the Company
The total amount:Yen 19,622,714,760(3)Effective date for distribution of surplus:
June 27, 2011
Second Item of Business:

1.

Partial Amendments to the Articles ofIncorporation

Reasons for amendments(1)
Amendments of Purpose
Prior to the merger (the effective date planned to be July 1, 2011)
with Secom Techno Service Co., Ltd., in order to clearly stipulate
construction business in the purpose clause of the Company’s Articles ofIncorporation to reflect the addition of Secom Techno’s business,
proposed amendments will be made to Article 2, Item 6 in the Articles ofIncorporation.
(2)Entering into contracts to limit Outside Corporate Auditors’
liabilities
Since the Company deems it one of the important managerial
issues to strengthen corporate governance, three (3) Outside Corporate
Auditors have been elected. With a view to making it easier for the[English Translation]
69

Company to invite capable talents who are independent and professional
as Outside Corporate Auditors, a new provision to enable the Company
to enter into contracts for limitation of liability with Outside Corporate
Auditors will be added to the Articles of Incorporation pursuant to
Article 427 of the Companies Act related to contracts for limitation of
liability.
(3)
Change of the number of Corporate Auditors
With a view to strengthening and enforcing the Corporate
Auditor system, the maximum number of Corporate Auditors is to be
increased to five (5) from four (4) in Article 33 of the current Articles ofIncorporation.
2.

Details of amendments
The details of amendments are as follows:(The underlined parts are changed parts.)
Current Articles of Incorporation
Proposed changes(Purpose)(Purpose)
Article 2 The purpose of the Company Article 2 The purpose of the Company
shall be to engage in theshall be to engage in the following
following business:business:
1. Business relating to contracting
to provide security protection andensuring such protection;
2. Business relating to inspection,
guidance, advice and publishingconcerning security protection
and safety;
Item 1 to Item 5 are the same as current.
3. Business relating todevelopment, manufacture,leasing, sales and operation ofequipment, devices and security
systems etc., related to preventionof crimes and fire, protection
from disasters, emergency aid andsafety;4. Business of escorted
transportation of cash andvaluables, and groundtransportation business for such
purpose;5. Business relating to contracting
for management and security ofbuildings, facilities and vehicles,
and maintenance and repair
thereof;
6. Business of contracting for
6. Business of designing,
administrating, executing andgeneral electric installation work,
telecommunications installation
maintaining of electric installation
work and any work appurtenantwork, telecommunications
to general and maintenanceinstallation work, construction work,[English Translation]70

business thereof;
fire extinguishing facilities work and7. Business relating toother works;
information processing, data baseand other information services,and loans;
8. Business relating totelecommunications andbroadcasting;
9. Business relating toinvestigation, research, consulting
and guidance in business
management;
10. Business relating to life
insurance and non-life insurance
agency services;
11. Business relating todevelopment, manufacture,leasing, and sales of appliancesfor education, medical treatment
and health;12. Business relating to nursing
services and home care service
Item 7 to Item 20 are the same asoutside of hospital, andmanagement of pharmacies;
current.
13. Business relating todevelopment, manufacture,leasing, and sales of water
purification and gas exhaust
filtering equipment;
14. Business relating to the
management of hotels, food andbeverage establishments, sports
facilities as well as rest centersand other welfare facilities, andbusiness related to travel;
15. Business relating to sales andpurchasing, rental, brokering, andmanagement of real estate;
16. Business relating to aerial
surveying and mapping services;
17. Business relating to
mail-order;
18. The processing, planning, andsale of agricultural products;
19. Banking agent business; and20. Any and all business incidental
or related to the foregoing items.
(Number of Corporate Auditors)
Article 33 The Company shall have notmore than four (4) Corporate(Number of Corporate Auditors)
Article 33 The Company shall have notmore than five (5) Corporate Auditors.

[English Translation]
71

Auditors.
(Contracts for limitation of liability
with Outside Corporate Auditors)
Article 41 The Company may,pursuant to the provisions of Article
427, Paragraph 1 of the Companies Act,
enter into an agreement with Outside
Corporate Auditor to limit liabilities tocompensate damages provided for in
Article 423, Paragraph 1 of theCompanies Act; provided, however,that the maximum of the amount ofcompensation liable under theagreement shall be the amount provided
for in the laws and regulations.

(Newly established)

Article 42 ~ Article 48(The numerical numbers of all the
Articles hereafter shall be increased by
one (1), and the contents of the Articles
are unaffected.)

Article 41 ~ Article 47(The contents of the Articles areintentionally omitted.)

Third Item of Business:

Election of Eleven (11) Directors

The term of office of all of the eleven (11) Directors will expire at theclose of this meeting. Therefore, it is proposed to reelect eleven (11) Directors.
The candidates are as follows:

No.
1

2

3

Name
(Date of Birth)
Makoto Iida
(April 1, 1933)
Juichi Toda
(March 7, 1932)

Shohei Kimura(May 2, 1943)

Summary of career, title and responsibility, and important
position of other organization concurrently assumed
Jul 1962
Feb 1976
Jun 1997
Jul 1962
Feb 1976

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
Jun 1997
Supreme Advisor and Director (currently)
Apr 1967
Joined SECOM Co., Ltd.
Feb 1985
Director
Feb 1988
Executive Director
Jun 1995
Senior Executive Director
Apr 2002
President and Representative Director
Jun 2004
President and Representative Director andExecutive Officer
Apr 2005
Chairman and Director (currently)(Important position of other organization concurrently assumed)
Chairman, All Japan Security Service Association
Outside Corporate Auditor, Secom General Insurance Co., Ltd.

[English Translation]
72

The number of
Shares Held
4,320,500

3,152,216

38,100

No.
4

5

6

7

8

Name
(Date of Birth)
Kanemasa Haraguchi(August 7, 1950)

Shuji Maeda(September 27,
1952)*

Koichi Sato
(February 5, 1953)*

Fumio Obata(July 6, 1946)*

Katsuhisa Kuwahara(May 9, 1948)*

Summary of career, title and responsibility, and important
position of other organization concurrently assumed
Apr 1974
Jun 1990
Jun 1995
Jun 1997
Jun 2002
Jun 2004

Joined SECOM Co., Ltd.
Director
Executive Director
Senior Executive Director
Director and Executive Vice President
Director and Executive Vice President andExecutive Officer
Apr 2005
President and Representative Director
Jan 2010
Executive Vice Chairman and Director (currently)(Important position of other organization concurrently assumed)
Outside Director, Secom Joshinetsu Co., Ltd.
Outside Director, Toyo Tec Co., Ltd.
Jan 1981
Joined SECOM Co., Ltd.
Jun 1997
Director
Jun 2000
Executive Director
Jun 2004
Director and Managing Executive Officer
Apr 2005
Executive Director
Jun 2009
Executive Vice President and Director
Jan 2010
President and Representative Director (currently)
Apr 1976
Joined SECOM Co., Ltd.
Jun 2004
Executive Officer
Jun 2005
Managing Executive Officer
Jun 2007
Executive Director
Jun 2008
President and Representative Director, Secom
Joshinetsu Co., Ltd.
Jun 2009
Chairman and Director, Secom Joshinetsu Co.,Ltd.
Jun 2009
Executive Vice President and Director (currently)(Important position of other organization concurrently assumed)
Outside Director, Nohmi Bosai Ltd.
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 (presently The Shinsei Bank, Ltd.)Mar 2000
Associate Manager, Strategic Planning Division,
SECOM Co., Ltd.
Jun 2000
Director
Mar 2002
President and Representative Director, Secom
Medical System Co., Ltd.
Jun 2004
Executive Officer
Jun 2009
Senior Executive 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)[English Translation]
73

The number of
Shares Held

11,344

6,100

2,588

2,900

3,700

No.
9

10

11

Name
(Date of Birth)
Yasuo Nakayama(November 1, 1952)*

Hiroshi Ito(February 7, 1952)*

Takayuki Ito(January 2, 1954)*

Summary of career, title and responsibility, and important
position of other organization concurrently assumed
Branch Manager, Nagoya Branch, The Bank ofJapan
Jul 2005
Director-General, Secretariat of the Policy Board,
The Bank of JapanApr 2007
Personnel and Corporate Affairs Department, The
Bank of JapanMay 2007 Advisor, SECOM Co., Ltd.
Jun 2007
Executive Director (currently)
Feb 1979
Joined SECOM Co., Ltd.
May 1989 Executive Director, Secom Mie Co., Ltd.
Jun 2000
Director (up to Jun 2004)
Jun 2003
President and Representative Director, Secom
Information System Co., Ltd. (presently Secom
Trust Systems Co., Ltd.) (currently)
Jun 2004
Executive Officer
Jun 2009
Executive Director (currently)(Important position of other organization concurrently assumed)
President and Representative Director, Secom Trust Systems
Co., Ltd.
Jun 2000
General Manager, Hibiya Branch, The Sanwa
Bank, Ltd. (presently The Bank ofTokyo-Mitsubishi UFJ, Ltd.)Jul 2002
General Manager, Muromachi Branch andCorporate Sales Department, UFJ Bank Limited.
(presently The Bank of Tokyo-Mitsubishi UFJ,Ltd.)
Jun 2005
Advisor, SECOM Co., Ltd.
Jun 2006
Executive Officer
Jun 2007
Director (currently)
Jun 2009
General Manager, Corporate Sales Division
Jul 2010
Executive Vice President and Representative
Director, Secom Home Life Co., Ltd.
Sep 2010
President and Representative Director, Secom
Home Life Co., Ltd.
(Important position of other organization concurrently assumed)
President and Representative Director, Secom Home Life Co.,Ltd.
Outside Corporate Auditor, Secom Joshinetsu Co., Ltd.

The number of
Shares Held

Jul 2003(Notes)1. There is no particular interest between the Company and each of the said
candidates.
2. Candidates with * are Executive Officers currently in office.
Fourth Item of Business:

Election of Five (5) Corporate Auditors

The term of office of all of the four (4) current Corporate Auditors will
expire at the close of this Meeting. With a view to strengthening and enforcing the
Corporate Auditors system, it is proposed to reelect the four (4) Corporate
Auditors and newly elect one (1) Corporate Auditor.
Furthermore, this Item of Business is on condition that the Second Item ofBusiness will have been approved at the Meeting.

[English Translation]
74

2,800

3,900

1,200

Moreover, this Item of Business has been consented by the Board of
Corporate Auditors.
The candidates are as follows:
No.
1

2

3

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

Ken Tsunematsu(March 30, 1932)

Hiroshi Yasuda(March 8,1933)

Summary of career, title and responsibility, and important
position of other organization concurrently assumed
General Manager, Inspection Department, The
Bank of Mitsubishi, Ltd. (presently the Bank ofTokyo-Mitsubishi UFJ, Ltd.)Feb 1990
Advisor, SECOM Co., Ltd.
Feb 1990
Director
Jun 1996
Executive Director
Jun 2003
Full-time Corporate Auditor (currently)
Apr 1968
Registered as Attorney-at-Law (Daini Tokyo Bar
Association)
Apr 1968
Joined Blakemore & Mitsuki
Mar 1979
Auditor, Secom Science and Technology
Foundation
Jan 1988
Founded Tsunematsu Yanase & Sekine
Jan 2000
Founded Nagashima Ohno & Tsunematsu, by themerger with Nagashima & Ohno
Jun 2002
Corporate Auditor, Secom Co., Ltd. (currently)
Jan 2003
Advisor, Nagashima Ohno & Tsunematsu(currently)
Mar 2004
Managing Director, Secom Science andTechnology Foundation (currently)(Important position of other organization concurrently assumed)
Managing Director, Secom Science and Technology Foundation
Jan 1979
Director, Jardin Matheson and Company (Japan)Ltd.
Feb 1986
President and Representative Director, Jardin
Matheson Ltd.
Apr 1989
Chairman and Representative Director, Jardin
Matheson Ltd.
Jun 1993
Advisor, YASUDA Real Estate Co., Ltd.
(currently)
Jan 1999
Representative, Japan Jardin Fleming GroupJan 1999
Chairman and Director, JPMorgan Fleming AssetManagement (Japan) Ltd. (presently JPMorgan
Asset Management (Japan) Ltd.)Jan 2002
Advisor and Director, JPMorgan Fleming AssetManagement (Japan) Ltd. (presently JPMorgan
Asset Management (Japan) Ltd.) (currently)
Jun 2003
Corporate Auditor, Secom Co., Ltd. (currently)
Sep 2004
Representative Director, Mandarin Oriental Tokyo
Co., Ltd.
Oct 2005
Senior Advisor and Director, Mandarin Oriental
Tokyo Co., Ltd. (currently)(Important position of other organization concurrently assumed)
President and Director, Yasuda Gakuen Kyoikukai

The number of
Shares Held

May 1989[English Translation]
75

10,100

0

2,000

No.
4

Name
(Date of Birth)
Kohei Yamashita(January 26, 1938)

5

Seiji Sakamoto(January 7, 1947) *Summary of career, title and responsibility, and important
position of other organization concurrently assumed

The number of
Shares HeldApr 1988

President and Representative Director, Kokyo
Tatemono Co., Ltd. (currently)
Nov 1990
Chairman and Representative Director,
International Ceramic, Inc.
Jun 1993
Chairman and Representative Director, ImperialEnterprises Inc.
Jul 1995
Chairman and Representative Director, Dalian
Building Maintenance Investment Co., Ltd.
(currently)
Jan 1997
Chairman and Representative Director, Tozai
Building Maintenance Co., Ltd.
Jun 1998
Director, General Lasertronics Corporation(currently)
Jun 2003
Corporate Auditor, Secom Co., Ltd. (currently)(Important position of other organization concurrently assumed)
President and Representative Director, Kokyo Tatemono Co.,Ltd.
Apr 1970
Joined The Bank of Mitsubishi, Ltd. (presently the
Bank of Tokyo-Mitsubishi UFJ, Ltd.)Aug 2000
Joined SECOM Co., Ltd.
Aug 2000
Director, Secom General Insurance Co., Ltd.
Jun 2001
Executive Director, Secom General Insurance Co.,Ltd.
Jun 2006
Executive Officer, SECOM Co., Ltd.
Apr 2007Managing Executive Officer, SECOM Co., Ltd.
Jun 2009
Retired from Managing Executive Officer,
SECOM Co., Ltd.
Jun 2009
President and Representative Director, Secom
Techno Service Co., Ltd. (currently)(Important position of other organization concurrently assumed)
President and Representative Director, Secom Techno Service
Co., Ltd.

(Notes)

1.

2.
3.
4.

A candidate with * is a candidate for new Corporate Auditor. He isscheduled to resign as Director of Secom Techno Service Co., Ltd. on
June 22, 2011.
There is no special interest between the Company and each of thecandidates.
Messrs. Ken Tsunematsu, Hiroshi Yasuda and Kohei Yamashita are
candidates for Outside Corporate Auditors.
Reason for election of candidates for Outside Corporate Auditors:(1) Mr. Ken Tsunematsu has profound knowledge relating tomanagement and interests between stakeholders, understanding andinformation for finance and accounting which he accumulated
through engagement as an attorney-at-law in corporate legal issues
and securities issuances and offering in and outside Japan. We deem
it advisable and possible that he may promote to strengthen the
Corporate Auditors system of the Company through his knowledge
and practical experience so that we ask shareholders to elect him as
Outside Corporate Auditor.

[English Translation]
76

2,000

2,300

5.

6.

7.

8.

(2) Mr. Hiroshi Yasuda has profound experience and knowledge throughengagement in management and director of a number of companies
and organizations. We deem it advisable and possible that he will
promote to strengthen the Corporate Auditors system of theCompany through his experience and knowledge so that we ask
shareholders to elect him as Outside Corporate Auditor.
(3) Mr. Kohei Yamashita has profound experience and knowledge
through engagement in global companies. We deem it advisable andpossible that he will promote to strengthen the Corporate Auditors
system of the Company through his experience and knowledge sothat we ask shareholders to elect him as Outside Corporate Auditor.
Reason why the Company made judgment that the candidate may duly
discharge duties as Outside Corporate Auditor
Mr. Ken Tsunematsu has not engaged directly in management ofcompanies but is acquainted fully with corporate legal affairs andknowledge on management so that we deem him to be able to discharge
duties as Outside Corporate Auditor.
Mr. Ken Tsunematsu will have been in office of Outside Corporate
Auditor for nine (9) years at the close of this General Meeting of
Shareholders. Messrs. Hiroshi Yasuda and Kohei Yamashita will havebeen in office of Outside Corporate Auditor for eight (8) years at theclose of this General Meeting of Shareholders.
Mr. Ken Tsunematsu was notified as Independent Officer to the Tokyo
Stock Exchange and Osaka Securities Exchange. In case he is reelected
as Corporate Auditor, he will continue to be an Independent Officer.
In the event that partial amendments to the Articles of Incorporation in
the Second Item of Business is approved at the General Meeting of
Shareholders and Messrs. Ken Tsunematsu, Hiroshi Yasuda and Kohei
Yamashita are appointed as Outside Corporate Auditors, the Company isscheduled, based on Article 427, Paragraph 1 of the Companies Act, toenter into contracts for limitation of liability with each of the three
Outside Corporate Auditors, which could limit their liabilities pursuant
to Article 423, Paragraph 1 of the Companies Act. The contents of the
proposed contracts are as follows:i) In case the Outside Corporate Auditors incur liability to compensate
damages due to their negligence of their duties, it will incur the
responsibility up to the minimum amount of limit of the responsibility
pursuant to Article 427, Paragraph 1 of the Companies Act.
ii) The limitation of the responsibility above will come into forth only
when each of the Outside Corporate Auditors has good intentions and nogross negligence in discharging their duties causing the ground for their
liabilities.

Fifth Item of Business: Revision of Remuneration to Corporate Auditors as aGroup
An amount of remuneration to Corporate Auditors as a group was resolved
upon Yen 60 million or less per year at the 37th General Meeting of Shareholders
held on June 26, 1998 and is currently still in effect. Taking into consideration theincrease of the number of Corporate Auditors proposed at this General Meeting of[English Translation]
77

Shareholders, it is proposed to increase the amount of remuneration to Corporate
Auditors as a group to Yen 80 million or less per year.
The number of Corporate Auditors is currently four (4) but in the eventthat the Fourth Item of Business is approved as originally proposed, the number ofCorporate Auditors will be five (5).
- End -[English Translation]78