Stepping
forward
ALSOK REPORT 2016
Fiscal year ended March 31, 2016

SOHGO SECURITY SERVICES CO., LTD.

Securities Code: 2331

ALSOK contributes to the safety andsecurity of society by providing products
and services that address customer needs.
Since its founding in 1965, the ALSOK Group has continued to contribute to the safety andsecurity of customers and society by developing its wide-ranging security services operations
as a leading company in the Japanese security services industry.
Going forward, we will continue to supply products and services that address the diversifying
needs of customers with the aim of forging strong bonds of trust with society and realizing
ongoing improvements in corporate value.

Contents

1	Management Philosophy / Management Policies /Code of Conduct / Contents / Editorial Policy

3	Japanese Security Services Industry and
ALSOK’s Position Therein5	The ALSOK Group’s Business
7	Review of Operations
11	Financial and Non-Financial Highlights
13	Message from the Chairman
15	Conversation with the President
19	Long-Term Vision and Medium-Term
Management Plan Targeting Ongoing
Improvements in Corporate Value1

ALSOK REPORT 201621	OUR STEPS

Initiatives for Accomplishing Goals of Grand
Design 2017 Medium-Term Management Plan

25	Initiatives for Realizing Ongoing Improvement in
Corporate Value

35	Corporate Governance
39	Directors, Audit & Supervisory Board Members,
and Executive Officers

41	Financial Section
56	Corporate Information / Stock Information

Management Philosophy
Based on two core principles exemplified by “arigato no kokoro” (a feeling of gratefulness and gratitude) and “bushi no seishin” (a samurai
spirit), we devote ourselves to protecting the safety and security of our customers and of society as a whole.

Management Policies

1

2

3

4

Fundamental Spirit
Under any condition that weface, we work hard to live by afundamental spirit that reflects
our management philosophy—
as exemplified by a feeling ofgratefulness and gratitude anda samurai spirit based on
toughness, fairness, andgenerosity—to be a highly
principled company.

Priority
Our top priority is to provide
products and services of thefirst rank, while cultivating
the highest levels of
motivation in our employees
and living up to shareholder
expectations throughattractive profit growth.

Basic Strategy
While security services
remain at the heart of ourbusiness, as our basic
strategy, we also seek tooffer a diverse range of
products and services in new
fields to satisfy the needs ofthe ever-changing times.

Contributing to Society
Allying ourselves with publicbodies charged with protecting
public safety and security,
we commit ourselves todeveloping value-adding
products and services,
thereby always contributing
to society.

Code of Conduct
We will devote ourselves to serving our customers and society as a whole in a way that reflects a feeling of gratefulness and gratitude.
We will embody a samurai spirit in everything we do based on toughness, fairness, and generosity, standing firm in the face of adversity
and banding together to embrace success.
We will value autonomy in our actions, empowered by “yacho seishin” (the spirit of a wild bird)—which represents independence,
self-respect, perseverance, acuity, and tenacity—and take responsibility for delivering results.
We will carry out our day-to-day activities based on the principles of sincerity, accuracy, strength, and speed.
We will know no complacency, always marching forward purposefully while growing and refining our business to continue to provide
value to customers and to society as a whole, thereby continuing to be relevant.
We will pursue perpetual self-improvement and remain highly committed to compliance, thereby attracting and nurturing humanresources of the caliber worthy of the industry leader.

Editorial Policy

Information for Shareholders and Other Investors

ALSOK Report 2016 has been constructed as an integrated report that

ALSOK’s corporate website includes detailed information on thecompiles information on the Company’s performance, business operations,Company’s management policies, financial position, businessfuture strategies, and financial information as well as non-financial information

performance, and stock as well as an assortment of investor

on its corporate social responsibility (CSR) activities and other topics. We haverelations (IR) materials.

positioned this report as an important tool for disclosing management
information to all of our stakeholders.

IR website: http://www.alsok.co.jp/en/ir/

This report has been designed to provide an easy-to-understand overview of
the ALSOK Group’s business activities. This overview is meant to illustrate how
the Group goes beyond simply pursuing its own interests to earnestly address

CSR and Social Contribution Activities

environmental, social, and governance (ESG) concerns and contribute to the

Detailed information on the CSR and social contribution activities

realization of a sustainable society.

that ALSOK is advancing as part of its business activities based

We hope that this report will help readers gain a deeper understanding of
the ALSOK Group.
For more comprehensive and detailed information, please also refer to theCompany’s corporate website.

on ISO 26000 can be found on its corporate website (available inJapanese only).
CSR website: http://www.alsok.co.jp/en/csr/

ALSOK REPORT 20162

Japanese Security Services Industry and ALSOK’s Position Therein

Security Services Operating Environment
In 2015, the number of reported crimes declined for the 13th consecutive year, coming to 1.10 million, less than half the level in 2002 when the number of reported crimes peaked at 2.85 million.
One reason behind this ongoing decline came from security services companies becoming
widely viewed as providers of services contributing to social safety and security. As a result, theuse of various security services became more commonplace, causing the number of applicablefacilities equipped with electronic security services to more than double from the level of 1.16 million
seen in 2002 to roughly 3.00 million in 2015. Conversely, there seems to be no end to crimes that
impact our daily lives, such as those targeting women and children and special-case scams preying
on senior citizens. At the same time, the threats facing society are growing increasingly diverse, as
seen in occurrences of cyberattacks, information leaks, natural disasters, and frequent incidents
of international terrorism. As such, an exceptionally large portion of the population is filled withconcern, perceiving that public safety is deteriorating.

Number of consultations

Up
50%

Crimes TargetingChildren

Source: The White Paper on Police, 2016

Source: Special Public Perception

Survey on
Public Safety, Cabinet Office(2012)

People stating thatpublic safety is deteriorating
81.1%

20,106Down
33%

Source: The White Paper on Police, 2016

Number of reported scams

Damages of scams

13,824

Special-Case
Scams Targeting
Senior Citizens

Worsening Perceptionof Public Safety

Number of crimes

21,968Consultations
Regarding Stalking

People stating thatpublic safety is improving
15.8%

People stating thatthey are uncertain
3.1%

Up
92%

¥

48.2 billion

Up
136%

Source: The White Paper on Police, 2016

Number of consultations

Number of arrests

128,097

Cybercrimes

8,096

Up
60%

Up
41%

Source: T he situation of the menace around the Cyberspace in 2015, National Police Agency* The increase-decrease rate is relative to 2011.

Number of Reported Cases of Crimes and Buildings Introducing Electronic Security Services

2,853,739

Number of reported cases ofcrimes peaked in 2002

1,164,542

98

99

Reported Cases of Crimes
3

ALSOK REPORT 2016

00
Arrests

01

02

Buildings Introducing Electronic Security Services

03
Arrest Rate

04

05

06

Trends in the Security Services Industry
Total annual sales in the Japanese security services industry exceeded ¥3.3 trillion1 in the fiscal year ended March 31, 2016. Presently,
there are approximately 9,342 1 security services companies in Japan with roughly 540,000 security guards, of which around 40% are over
the age of 60. Moreover, the majority of security services companies mainly offer labor-intensive stationed security services, including
traffic control 2, as their primary service. Only a portion of these companies are capable of offering electronic and transportation security
services, which require a large amount of capital investment. Contrary to the upward trend in the number of security services companies, the number of companies capable of providing electronic security services is on the decline, standing at only 676 as of March 31,
2016, approximately 25% less than the peak of 911 companies seen in 2002. Furthermore, the ratio of households introducing home security services in Japan has been preliminarily calculated as 4%. This ratio is much lower than those seen in Europe and the United States,
and it can thus be said that the Japanese security services market has substantial room for growth.
1. Source: Overview of the Security Industry in 2015, National Police Agency
2. Some countries do not consider traffic control to be part of security services.

ALSOK
4%

9% No. 2

Share of Sales
in the Japanese Security
Services Industry

Ratio of Households
Introducing Home Security
Services in Japan

Calculated based on

Calculated based on Statistics of Japan

Overview of the Security Industry in 2015,2016, Statistics Bureau, Ministry of InternalNational Police Agency

Affairs and Communications

Number of buildings introducing electronic security services doubles* In comparison to 2002

2,994,770 buildings
Arrest rate

32.5%
Number of reported cases of crimes halved* In comparison to peak level 2002

1,098,969
357,484

07

08

09

10

11

12

13

14

15

Numberof
Arrests

ALSOK REPORT 2016

4

The ALSOK Group’s Business
The ALSOK Group has continued to contribute to the development of Japanese society as a leading company in the security services
industry since it was founded in July 1965. These contributions have included providing stationed security services at such historic
events as Expo ’70 in Osaka in 1970 and Olympic Winter Games Sapporo 1972.
Today, the ALSOK Group offers its electronic security services, stationed security services, and transportation security services
throughout Japan. Boasting the advantage of convenient services through which security guards are capable of being dispatched toanywhere in Japan 24 hours a day, 365 days a year, we are providing an important piece of Japan’s economic and social infrastructure.
Furthermore, the ALSOK Group has continued to branch out from its security services operations. Seeking to respond to the various
safety and security needs of individual users and offer multifaceted support for the business activities of corporate clients, we havegreatly broadened our business domain. Today, this domain encompasses not only security services but also building maintenanceand ancillary installation services for corporate clients, as well as safety confirmation, living support, and long-term care services forindividual users.
* ALSOK is a Tokyo 2020 Official Partner (Security Services and Planning).

Long-Term Care Services

Other Services

General Property Management
and Fire Protection Services
El

ec

tr o
nic

Tr an
s

Secu
r it y S er v ice s

p or t ation

Fiscal year ended March 31, 2016

S e cur it y S er v

381.8 billion¥

Security Services

ice s
St

Electronic Security Services Contracts(for Corporate Clients)

Approx.

480,000* As of March 31, 2016

ATMs Managed through Total ATM
Management System

Approx.

60,300* A pprox. 200,000 ATMs in Japan in total (based on
Company estimate)* As of March 31, 2016

5

ALSOK REPORT 2016

at

io

ne

dS

ec

ur i

ty S

er v ices

Home Security Services Contracts

Approx.

380,000

No. 1 Sales of Stationed Security Services

93.9 billion¥* Approx. 920,000 housing units covered when including contracts with housing complexes* As of March 31, 2016

* In the fiscal year ended March 31, 2016

Aggregate AED Sales

Long-Term Care Service Users

Approx.

117,000 units* A pprox. 630,000 AEDs in Japan in total (as of December
31, 2014, based on survey by Ministry of Health, Labourand Welfare research team)* As of March 31, 2016

Approx.

12,000* As of September 30, 2016

General Property Management andFire Protection Services

Security Services

Electronic Security Services

P.9

P.7
Net Sales

Net Sales¥167.1 billion¥54.9 billion
Percentage ofTotal Net Sales

Percentage ofTotal Net Sales

14.4%

43.8%
At the core of ALSOK’s security services is its centralized monitoring
system, which is formed using state-of-the-art information andcommunications technologies (ICT). Through this system, our Guard
Centers are always linked to customer properties, enabling ourhighly trained and experienced staff to monitor the premises 24 hours
a day, 365 days a year and thereby ensuring that customers’ assets
are protected under any circumstances.

Stationed Security Services

P.7

ALSOK offers facility management services spanning from security
to facility installation on a one-stop basis through Japan Facilio Co.,
Ltd.; Nippon Building Maintenance Co., Ltd.; ALSOK Souei Co., Ltd.;HOCHIKI CORPORATION; ALSOK Building Services Co., Ltd.; andNippon Dry-Chemical Co., Ltd.

P.10

Long-Term Care Services

Net Sales

Net Sales¥93.9 billion¥7.5 billion

Percentage ofTotal Net Sales

Percentage ofTotal Net Sales

24.6%

2.0%

ALSOK’s Stationed Security Services segment stations security guards
at office buildings and various other customer facilities. These security
guards administer access control by monitoring or checking the identityof each person who enters or exits designated customer facilities. In
addition, they also conduct patrols to detect irregularities. Furthermore,
we conduct monitoring activities at disaster prevention centers andcentral management centers. We also offer security for events andother crucial security services.

Transportation Security Services

P.8

ALSOK provides various long-term care services through HCM
Corporation; ALSOK Care & Support Co., Ltd.; and Wisnet Co., Ltd.
(joined the Group in May 2016).

P.10

Other Services

Net Sales

Net Sales¥54.6 billion¥3.5 billion

Percentage ofTotal Net Sales

Percentage ofTotal Net Sales

14.3%

0.9%

ALSOK’s Transportation Security Services segment includes its Total
ATM Management System for use by banks and convenience stores,
its Cash Deposit and Dispenser Machine On-line System, in which we
manage the daily sales revenues of business owners, and the CashTransport System service offered to financial institutions.

We also offer such services as MAMOLOOK, a multifunctional mobile
security terminal; information security services, which protect
against cyberattacks and information leakage; and ALSOK DENPO,
a telegraph service.

ALSOK REPORT 2016

6

Review of Operations

Security Services Operations
ALSOK’s various security services operations protect the lives, facilities, and assets of customers. Ourelectronic security services entail installing sensors at contracted premises and dispatching security
guards to the scene should an abnormality be detected. In stationed security services, we post security
guards at office buildings and other facilities to provide services such as access management, patrols,
and monitoring through disaster response centers. ALSOK’s transportation security services include
ATM management services for banks and convenience stores, sales revenue management services forbusiness owners, and cash transportation services for financial institutions.

Electronic
Security Services
Introduction Video(in Japanese only)

ALSOK’s Electronic Security Services segment installs sensors at contracted premises

Net Sales

and then dispatches security guards to the scene should an alarm signal be received by the(Millions of yen)Company’s centralized monitoring centers (Guard Centers). Security guards are able to rush

180,000

to locations throughout Japan, arriving within the time limit stipulated by the Security

150,000

Services Act, from one of approximately 2,400 depots located across the country. In Japan, we
supply electronic security services to approximately 480,000 corporate clients and 380,000
individual users (making for roughly 920,000 housing units if contracts with housing complexes are included), meaning that we hold the No. 2 share of the domestic market. Throughthese services, we protect a wide range of premises, including everything from individual
homes to large-scale buildings and commercial facilities.
In the year under review, we promoted sales of ALSOK-GV (read as “ALSOK G-five”) and¥167,132

million

120,000
90,00060,00030,000
0
FY

12

13

14

15

16

Control System S-860. In addition, October 2015 saw the launch of the new ALSOK Image Cloud
Service. We also deployed initiatives to respond to demand for stronger security to protect
against leakage of confidential information, which included taking steps to address the Social
Security and Tax Number System (“My Number” system). These initiatives resulted in higher
revenues from sales of access management systems, security cameras, and other equipment.
In services for individual users, we witnessed smooth progress in orders for the HOME ALSOKAPARTMENT AND CONDOMINIUM PLAN, a service for housing complexes, as well as services
for protecting the safety of senior citizens provided to municipal governments. Also during theyear under review, we enhanced our product lineup with the launch of Home Security Basic.

Stationed Security Services

Introduction Video(in Japanese only)

The operations of ALSOK’s Stationed Security Services segment have continued since the

Net Sales

Company was founded. These services entail positioning security guards at office buildings(Millions of yen)and other facilities to monitor the premises, conduct access management, offer security and

100,000

patrol facilities, perform monitoring through disaster response centers and management centers,
manage facilities, guide guests, and offer a wide range of other services. ALSOK is No. 1 interms of stationed security service sales, and we provide stationed security services to largescale facilities as well as to international conferences and other major events. Currently,
major contracts include stationed service operations at the head branch of a megabank andat TOKYO SKYTREE TOWN®. In addition, we have supplied security services to the Group of 7,¥93,904

million

14

16

80,00060,00040,00020,000at the G7 Ise-Shima Summit held in 2016, for example.
In the year under review, orders for stationed security at commercial complexes as well asorders for temporary security at events contributed to higher sales. At the same time, we
realized further sales growth by acquiring orders in new fields, such as train station management and wholesale market security.
7

ALSOK REPORT 2016

0
FY

12

13

15

Transportation
Security Services

Introduction Video(in Japanese only)

ALSOK’s Transportation Security Services segment provides security services to guard against

Net Sales

theft and other incidents that may occur during the transportation of precious metals, works of(Millions of yen)art, and other valuables. Services offered since the Company’s founding include cash and check60,000transportation security services for financial institutions as well as transportation services for

50,000marketable securities that use Shinkansen trains. More recent offerings include the Total ATM
Management System, which provides comprehensive ATM management services for financial

30,000owners, we also supply the Cash Deposit and Dispenser Machine On-line System, which offers

20,000

As of March 31, 2016, roughly 18,000 ALSOK cash deposit and dispenser machines were in

14

16

10,0000operation across Japan.

million40,000institutions. We currently manage approximately 60,300 ATMs through this system. For businesssafe and efficient management for the daily sales revenues of restaurants and other businesses.

¥54,694

FY

12

13

15

In the year under review, orders for the Total ATM Management System buoyed sales amida growing trend toward outsourcing operation and management of ATMs installed in financial
institutions and convenience stores.

Reinforcement of Overseas Operations Centered on Southeast Asia
Seoul Representative Office
ALSOK Trading Co., Ltd.
ALSOK India Private Limited

Taiwan Shin Kong Security Co., Ltd.*
Myanmar Office of ALSOK
Consulting (Thailand) Co., Ltd.
Manila Representative Office

ALSOK Thai Security
Services Co., Ltd.

ALSOK (Vietnam) Co., Ltd.
ALSOK MALAYSIA SDN. BHD.

* The Company’s connection with Taiwan Shin Kong Security
Co., Ltd., is limited to investment.

PT. ALSOK INDONESIAALSOK began its first overseas forays in 2007 with the start of operations in Thailand. As of 2016, we operate in seven countries (excluding
those in which we have representative offices). Our overseas operations primarily consist of supporting Japanese companies looking to
expand into other countries through the provision of security consulting, stationed security services, electronic security services, and thesale of security-related equipment. In Thailand, for example, we have a stationed security squad consisting of more than 600 security
guards that provide high-quality stationed security services, and are also offering electronic security services featuring image monitoring
functionality. Looking ahead, we intend to expand the scope of our business in all countries of operation to include products and services
in new fields, such as facility management and other non-security-related management services as well as AED sales. As part of thisprocess, we will broaden our range of targets, continuing to pursue relationships with Japanese companies—our current target—while
seeking to leverage our expertise and technological prowess to make total security proposals to local companies as well.
Moreover, we have been concluding share acquisition agreements with allied security companies in Vietnam and Indonesia with a viewto converting them into consolidated subsidiaries. We thereby aim to further expand our electronic security services, stationed security
services, and other operations in these countries.

ALSOK REPORT 2016

8

Review of Operations

General Property Management and Fire Protection Services
In the General Property Management and Fire Protection Services segment, we leverage the strengthsof Group companies to conduct sales, installation, and inspection of facilities and disaster prevention
equipment at buildings and condominiums and offer a wide range of other facility management services
on a one-stop basis.

Business
Overview and Performance in the Year under Review

Introduction Video(in Japanese only)

In this segment, we offer services that are highly compatible with our security services

Net Sales

operations. These services include inspection of fire prevention and other equipment, cleaning(Millions of yen)services, call center services, and electrical, plumbing, and air-conditioning equipment

70,000installation. With other offerings including the sale of AEDs and the sale, installation, and60,000inspection of disaster prevention equipment, we deliver total support for the management of

50,000buildings, condominiums, and other facilities.

40,000In the year under review, we bolstered intra-Group coordination in order to strengthen oursystem for providing one-stop response to customer needs related to the maintenance, management, and operation of buildings, condominiums, and other facilities, resulting in the smoothacquisition of facility-related orders. In addition, sales were up for ALSOK Aerial Photography
Services, which utilize drones to efficiently manage large-scale solar power installations and¥54,976

million14

16

30,00020,00010,000
0
FY

12

13

15

help maintain high levels of generation efficiency, as well as for fire extinguishing equipment
and charging facilities for electric vehicles. However, revenue from installation work was down.

New Service Utilizing Drones—ALSOK Aerial Photography Services(For Large-Scale Solar Power Installations)
Drones are unmanned aerial robots that are currently being utilized in a wide range of fields due to their ability to perform inspections andother work at high altitudes and over expansive areas. ALSOK has also been taking advantage of drones, using them to confirm the status oferuptions at volcanoes and to perform inspections at large-scale solar power installations, among other applications. For example, ALSOK
Aerial Photography Services for large-scale solar power installations allow the inspection of solar panels to be conducted accurately and withminimal time consumed. These services thus contribute to more efficient facility operation through time and labor savings realized by eliminating the need to inspect panels in-person, which requires walking across sometimes expansive installation sites.

For Large-Scale Solar Power Installations

9

ALSOK REPORT 2016

Long-Term Care Services
Through HCM Corporation, ALSOK Care & Support Co., Ltd., and Wisnet Co., Ltd., ALSOK’s long-term careservices operations provide total support with visitation-based, in-home, and facility-based care services.

Business
Overview and Performance in the Year under Review

Introduction Video(in Japanese only)

ALSOK entered into the long-term care business in 2012 and was successful in acquiring

Net Sales

three companies (HCM Corporation, ALSOK Care & Support Co., Ltd., and Wisnet Co., Ltd.)(Millions of yen)

¥7,5878,000

as of May 2016. With these three companies, we have enhanced our ability to cater to custom-

millioners’ long-term care needs, and currently serve approximately 12,000 people through these
6,000

services*. Our services include operating fee-based, long-term care facilities, group homes,
and day services; providing visit-based care services; and offering rentals of welfare items.

4,000

In the year under review, HCM Corporation and ALSOK Care & Support, which were consolidated in the fiscal year ended March 31, 2015, contributed to improved performance.

2,000* As of September 30, 2016

0
FY

12

13

14

15

16

Other Services
Other services offered by ALSOK include MAMOLOOK, a multifunctional mobile security terminal;
information security services, which protect against cyberattacks and information leakage; and ALSOKDENPO, a telegraph service.

Business Overview and Performance in the Year under Review
Among ALSOK’s other services are MAMOLOOK, a multifunctional mobile security terminal

Net Salesthat offers features for protecting the members of one’s precious family. We also provide(Millions of yen)

5,000

information security-related products, such as the Internet Monitoring Service, which monitors the Internet to detect posts with the potential to damage clients’ reputations; ALSOK¥3,5234,000

Safety Confirmation Service, a crisis management solution; and ALSOK DENPO, a telegraphservice.

million

3,000

In the year under review, orders for ALSOK Safety Confirmation Service were firm.

2,000
1,000
0
FY

12

13

14

15

16

ALSOK REPORT 201610

Financial and Non-Financial Highlights

Net Sales

Ordinary Income / Ordinary Income Margin¥381.8 billion
Up 4.4%¥30.6 billion
Up 24.2%

Ordinary income

YOY¥381,818 million(Millions of yen)

Profit Attributable to Owners of Parent¥17.8 billion
Up 32.0%

YOY(Millions of yen)

(%)

YOY

(Millions of yen)

40,00012.0

20,000300,000

30,000¥30,667million
9.0
8.0 %

15,000200,000

20,000

6.0

10,000100,000

10,0003.0

5,000

400,000

0
FY

12

13

14

15

0

16

12

FY

13

Ordinary Income

Dividends per Share

14

15

16

0

0
FY

¥50.00

14

15

8.5%

Up 1.6 percentage points

(%)

12.0

400,000¥349,561 million
9.0
8.5%

300,000
40.00

ROE

16

YOY

(Millions of yen)(%)

250,000

15.0¥205,622 million

200,000

12.0

9.9%

150,000
200,000

9.9%

Up 2.1 percentage points

YOY(Millions of yen)

60.00

13

Total Net Assets / ROE

ROA

YOY

(Yen)

12

Ordinary Income Ratio

Total Assets / ROA¥50.00Up 31.6%¥17,868 million

9.0

6.0
100,000

6.0

50,0003.0

20.00
100,000

0
FY

12

13

14

15

16

0
As of March 31

3.0

12

13

Total Assets

14

15

16

0

ROA

0
As of March 31

12

13

Total Net Assets

14

15

0

16

ROE

Millions of yen
Fiscal year

2014

2015

2016

Fiscal year

2014

2015

2016

Profit attributable toowners of parent

108.99134.65177.77

Net assets

1,574.74

1,800.15

1,805.09

Dividends

30.00

38.00

50.00

Ordinary income margin

6.3

6.8

8.0

Per share (Yen)Net sales

328,209

365,749

381,818

Ordinary income

20,74524,70030,667

Profit attributable toowners of parent

10,955

13,534

17,868

Capital expenditures

19,617

13,627

14,875

Depreciation and amortization

9,198

11,331

12,109At the end of fiscal year

11

Fiscal year

Ratios (%)

Total assets

342,495

373,863349,561Return on assets (ROA)

6.5

6.9

8.5

Total net assets

180,205

204,363

205,622Return on equity (ROE)

7.0

7.8

9.9

ALSOK REPORT 2016

Number of Employees

Number of Employees by Gender

Average Number of Years of Continuous Service(Non-Consolidated)(Non-Consolidated)

31,446
Up 0.7%15.4 years
Up 0.5%

1,100
Up 2.2%

Number of female employees

YOY

YOY

YOY

(People)(People)(Years)

40,00016,00020.0

31,446

12,29030,00012,00020,0008,000

10,0004,000

15.4 years

15.0

1,100

10.0

5.0
11,1900
As of March 31

12

13

14

15

0

16

As of March 31

12

13

14

Male Employees

Percentage of Employees Returning
to Work after Childcare Leave

80.0

13

14

(Non-Consolidated)

37,390 t-CO2
Down 4.6%15

16

8,911.0 kl
Down 1.3%

YOY

YOY

(t-CO2)(kl)

50,00012,00037,390t-CO

240,00060.0

12Female Employees

Fuel Usage by Vehicles

YOY

93.0%

100.0

As of March 31(Non-Consolidated)

93.0%

Up 3.6 percentage point

0

16

CO2 Emissions Volume(Non-Consolidated, Total for Male and Female Employees)

(%)

15

8,000

15,72530,0008,911.0kl

10,0003,710.5

t-CO2

kl

6,000
40.0

20,0004,000

20.0

10,0000
As of March 31

12

13

14

15

16

0
FY

12

13

(As of April 1, 2016)

3.6

%

14

15

16

Offices and Other Facilities

kl

2,000

t-CO2

Vehicle Usage

Percentage of Administrative
Positions Filled by Women(Non-Consolidated)

5,200.5

21,6650FY

12Gasoline

13

14

15

16

Diesel Oil

Number of Children Participating in
ALSOK ANSHIN KYOSHITSU Classes

Number of Individuals CompletingFirst-Aid Training(As of March 31, 2016)(As of March 31, 2016)

Aggregate total of

1,235,803

16,755

Total of

ALSOK REPORT 201612

Message from the Chairman

Arigato no kokoro and bushi noseishin—We will continue to give
form to ALSOK’s unchanging
philosophy as a principled company
with talented human resources.
Atsushi Murai
Chairman and Representative Director
Chief Executive Officer (CEO)New Role of the ALSOK GroupIn the fiscal year ended March 31, 2016, the ALSOK Group’s operating
environment continued to experience a modest economic recovery
trend. However, conditions in certain sectors proved weak due tosluggish growth in consumer spending and stagnancy in terms ofcapital investment. In regard to public safety in Japan, the numberof reported crimes continued to decrease. Regardless, the incessantmedia coverage of crimes targeting children and senior citizens andacts of international terrorism contributed to a situation in which thisdecrease did not translate to an improvement in perceived safety.
In this environment, demand continues to grow for security
services that can support the safety and security of society, andthese services have come to function as an inseparable component ofsocial infrastructure in such areas as newly constructed buildings andoffice spaces. Meanwhile, labor shortfalls arising from the declining
birthrate and aging of the population have led to diversificationin the types of outsourcing needs requested of security services
companies, which now include operation of financial institutions’ATMs and monitoring of public infrastructure and facilities.
Furthermore, the need for security services to watch over individuals, such as senior citizens and children, is also on the rise.
The ALSOK Group thus recognizes that it is now expected toleverage its nationwide network consisting of roughly 30,000
employees to provide various services that address these needs.

13

ALSOK REPORT 2016

In the year under review, acting based on its policy of “responding
accurately to customers’ various risks and outsourcing needs,”
the ALSOK Group continued working to strengthen and expand
its mainstay security services operations while also growing
businesses in peripheral fields that are highly compatible withsecurity services, such as long-term care and building maintenance. At the same time, we pursued cost reductions throughimproved operational efficiency in security services operations
realized by having human resources handle a broader range offunctions. Through these efforts, we succeeded in achieving
higher sales and income for the sixth consecutive year.

The ALSOK Group’s Vision andManagement Philosophy
Thanks to the support of all of its stakeholders, ALSOK was able
to celebrate the 50th anniversary of its founding in 2015. I view
this accomplish as a testament of the bonds of trust we haveforged with customers as we humbly advanced our business,always staying true to the principles of arigato no kokoro, anever-present feeling of gratefulness and gratitude, and bushi noseishin, a strong and noble samurai spirit, in our ongoing quest
to protect the safety and security of society.
We seek to continue moving forward over the next 50 years. In
pursuing this goal, we will further the expansion and evolution ofour security services operations, an area in which we have steadily
built our track record by advancing these operations as the core ofour business since the Company’s founding. At the same time, we will
forge ahead with the development of new businesses and new services with the potential to support our business, such as long-termcare services and general property management and fire protection
services, both areas from which we anticipate synergies. As we growour business in this manner, we will aggressively expand ourbusiness overseas while still keeping our eye on economic trends
in Japan. Outside of Japan, the focus of our business has previously
been on providing security solutions to support the overseas expansion
efforts of Japanese companies. Looking ahead, however, we willleverage the expertise we have cultivated both inside and outsideof Japan to provide high-quality, “Japanese-style” security services
to local overseas companies and other new customers.
In Japan, it is projected that the birthrate will continue to decline
and that the population will continue to age, a situation that presents
the risk of further exacerbating social issues, such as labor shortages
and market shrinkage. Faced with this realization, the ALSOK Groupremains committed to improving the quality of its security services.
As one approach toward accomplishing this goal, we will provide
new security styles, such as those that utilize artificial intelligence,or AI; the Internet of Things, or IoT; robots; and other new technologies to prevent and predict crimes. Another approach will be thepromotion of labor savings to better position our human resourcesand otherwise realize more efficient management.
Through these efforts, we aim to grow the scale of the ALSOKGroup’s sales to roughly ¥1 trillion over the next decade. This goalentails the ongoing development of the Company, and therefore will
not be accomplished simply by expanding our business scope andearnings. Furthermore, over the next 50 years there will be nochange to our basic policy of functioning as a form of social infrastructure that supports safety and security. Progressing toward
the future, we will work to become an even more highly principledcompany, always guided by our unchanging management philosophy, as we strive to further improve ALSOK’s corporate value.

Strengths of the ALSOK Group’s Human Resources
If ALSOK is to continue developing, it is crucial for our employees
to be able to feel motivated in their work and always be capable ofexercising their talents. For this reason, it is important for management to possess the appropriate mind-set and stance toward
managing. At the same time, ALSOK must be a highly principledcompany with a just, upright, and open corporate culture. If we
can maintain these characteristics, the daily efforts of ouremployees to learn and succeed will fuel the rapid developmentof the Company. It is in this manner that we aim to make ALSOK
into a company that is truly of the highest caliber.

The ALSOK Group currently offers security services 24 hours a day,365 days a year with a staff of approximately 30,000 located acrossJapan. These faithful employees, who possess the exceptional
skills necessary to continue giving form to our management philosophy, are a precious asset and one of ALSOK’s core strengths.
It goes without saying that providing security services requires
one to acquire specialized knowledge and develop high-level skills.
Moreover, one must see value in protecting the lives, bodies, andassets of people and be able to earn customer trust by going about
their duties in a disciplined manner. To cultivate this type of employee,
ALSOK implements various training programs, including training
for new employees as well as rank-based training. In all of ourtraining programs, we further understanding of and entrench thefundamental spirit that we have adhered to since our foundation,
which is described in our management philosophy, management
policies, and code of conduct. We have thus established a training
system that ensures we put this spirit into practice in all aspectsof our business operations. We also frequently use the Company’s
internal newsletter and the messages from management distributedin the internal email magazine as venues for reiterating theimportance of this spirit. In this way, we are exerting daily effort
to guarantee that all of our employees and the Company itself arehighly principled. The corporate culture fostered through these
efforts places extreme emphasis on both sincerity and integrity
and is yet another strength that we can take pride in.
We provide fine-tuned, long-term development programs andongoing follow-up support that encompass hiring, post-hiring
training, and career development. The aim of these programs is tofoster human resources capable of working in and forming the coreof organizations in a wide range of the Company’s business areas—from strategic businesses related to new businesses, overseas
businesses, and mergers and acquisitions (M&As) through to sales
and frontline operations. Furthermore, ALSOK was named on Tokyo
2020 official Partner (Security Services and Planning) in October 2015.
Aware of the responsibility this position entails, we have enhanced
our human resources development programs from the perspectiveof the global market. This involves not only education on language
proficiency and cultural understanding but also on manners.
As the role of the ALSOK Group grows more expansive, therange of fields in which our female employees can exercise theirskills is also widening.
Looking ahead, we will continue to develop a workplace environment in which each of our talented human resources can fully exert
their individuality and skills. By pushing forward with efforts on thisfront, we aim to ensure that we can always function as a form ofsocial infrastructure that supports safety and security and therefore keep giving form to the basic spirit that we have held since ourfounding, which is our desire to contribute to a safer Japan.
* ALSOK is a Tokyo 2020 Official Partner (Security Services and Planning).

ALSOK REPORT 201614

Conversation with the President

By helping protect the safety and security of society,we will improve ALSOK’s corporate value.

Yukiyasu Aoyama

Takayuki Yamamoto

President and Representative Director
Chief Operating Officer (COO)

Executive Officer
Head of Business Development Department
Development Bank of Japan Inc.

In May 2015, ALSOK received first prize in the 1st Social Value and Capital Formation M&A Awards
sponsored by Development Bank of Japan Inc. This award was presented to the Company out of recognitionof the superior potential for social value and capital to be generated through ALSOK’s acquisition of HCM
Corporation. We invited Takayuki Yamamoto, executive officer and head of the Business Development
Department at Development Bank of Japan, to discuss the type of social value and capital that ALSOK
creates with Company president Yukiyasu Aoyama.

15

ALSOK REPORT 2016

Takayuki Yamamoto
Executive Officer, Head of Business Development Department
Development Bank of Japan Inc.
Mr. Yamamoto joined the Japan Development Bank (currently Development Bankof Japan Inc.) in 1983. There he served as general manager of the International
Strategy & Coordination Department and general manager of the Tokai Branch
before being appointed to his current position in 2014. He now oversees domestic
and overseas M&A advisory services.
He previously graduated from the Faculty of Law at the University of Tokyoand acquired a Master of Laws at Georgetown University in the United States.

Yamamoto: ALSOK acquired HCM Corporation in 2015. As thisacquisition was determined to contribute to improved social
value, Development Bank of Japan chose to present ALSOK with
first prize in the 1st Social Value and Capital Formation M&AAwards. What sort of challenges did you face in acquiring thisbusiness and in working to expand into a new field?
Aoyama: We have been expanding our business scope since 2014
with the acquisition of companies operating long-term care businesses, namely HCM Corporation, ALSOK Care & Support Co., Ltd.,and Wisnet Co., Ltd. These three companies continue to be led by
the individuals that served as their respective presidents prior to
the acquisitions. I also attend their monthly board of directors’
meetings as a director of each company. Furthermore, we provide a forum for the presidents of each company to gather oncea month to talk about common issues they face, such as thoserelated to costs, and their future business development plans.
Currently, the long-term care business remains the center ofconversations. In the future, however, I hope that we will be able tomove on to discuss the creation of hybrid businesses that combine
long-term care services with security services. HCM has numerous
fee-based, long-term care facilities and in-home care service basesin the Tokyo, Nagoya, Osaka, and Tohoku regions. Meanwhile, Wisnet
operates approximately 40 fee-based, long-term care facilities
and around 80 group homes. We therefore plan to begin by
expanding the breadth of these operations. At the same time, wewill gradually branch out into new fields, including those related
to security services, long-term care services, and healthcare.

Yamamoto: ALSOK’s performance is most impressive, with six straightyears of increased sales and income and an ordinary income marginof 8%. What challenges have you faced in achieving this performanceand what are your plans for future business development?
Aoyama: I think we have our customers to thank for our strong
performance, and I am most appreciative of their support. ThroughM&A activities, we were able to incorporate Japan Facilio Co., Ltd.,ALSOK Souei Co., Ltd., and Nippon Building Maintenance Co., Ltd.,
into the Group. As a result, we are now capable of providing services that offer a full line of support including security, equipment,
and installation. These new inclusions to the Group have alsobrought great benefits in allowing us to approach new customers
as the Group grows. In recent years, there has been a trend toward
companies opting to focus as much as possible on their core business,choosing to outsource security and other functions to service providers
that can deliver these functions with high quality. Event security is
one example of such functions that are outsourced to ALSOK. We
also receive outsourcing work from banks and other financial
institutions. While we were previously mainly contracted to manage
ATMs located outside of bank premises, clients are now asking us
to even manage ATMs installed inside of banks. In the future, we alsoplan to develop a comprehensive cash management business thatcaters to demand from retailers for our Cash Deposit and Dispenser
Machine On-line System, point of sales (POS) cash registers, andother such systems. I suspect that such a business would be able
to provide safety and security at an affordable price while contributing to the smoother circulation of cash within Japan. In addition,
we have begun providing new services that target inbound tourists
to Japan, such as supplying foreign currency exchange machines.

ALSOK REPORT 201616

Conversation with the President

Yamamoto: The outlook for the global economy is unclear given thesluggish conditions in the economies of China and other emerging
countries as well as developments such as the United Kingdom’s
decision to withdraw from the European Union and the presidential
election in the United States. This situation has made it even more
important to keep in step with the times. How is ALSOK approaching
this situation?
Aoyama: Economic and political conditions are undergoing greatchange both inside and outside of Japan, necessitating that we prepare solutions to respond to various risks. For example, around 2025
Japan’s post-World War II baby boom generation will be roughly 75
years of age, resulting in the ongoing growth of the long-term caremarket. Meanwhile, the unsustainability of government finances will
create numerous opportunities for private-sector companies to stepin to replace public-sector organizations. At ALSOK, we hope to provide
a unique brand of long-term care services that invigorate users andhelp them live healthily and happily for as long as possible. We expectthat the population decline will lead to labor shortages in both thesecurity services and the long-term care services fields. Even if laboris scarce, we must avoid situations in which services cannot be procured to address people’s needs for safety and security. Preventing
such a situation will require us to make the most of our limited
personnel or, from a broader meaning, require us to further utilizeAI, big data, IoT, robots, and other technologies as well as improvethe capabilities of the security guards that use these technologies.

Yamamoto: Some speak of the concept of creating shared value
or, in other words, finding a way to create social value through a
company’s business. Do you see this concept as being highly
compatible with ALSOK’s business?
Aoyama: As a security services company, we play a complementaryrole in protecting people’s safety and security. For example, shoulda person fall ill, they will, in the end, receive treatment from a
hospital or doctor. However, there are actually a lot of needs to beaddressed before this treatment can be received. To help cater tothese needs, ALSOK takes advantage of its nationwide network,
which allows a security guard to rush to the scene should a reportof an issue be received in some form, whether that be via telephone,camera, or sensor signal. In managing the facilities of buildings
and offices, meanwhile, stationed security guards are able toprovide first-response services by inspecting equipment and our
first-response network can also be utilized to quickly dispatch
security guards to address equipment malfunctions. I believe that
this business model is very closely linked to the concept of creating
shared value.
Yamamoto: ALSOK will celebrate the 55th anniversary of its
founding in the year of Olympic and Paralympic Games Tokyo 2020.
What are your thoughts with regard to the massive undertaking
that will be managing security for this major event?
Aoyama: ALSOK’s founder Jun Murai played a central role in running
Olympic Games Tokyo 1964, and it is now ALSOK’s turn to contributeto the Olympics in a security capacity. The entirety of Japan’s
security services industry is united in their commitment to ensuring
the security of this event, and I hope that we will be able to guarantee
its success. Furthermore, given Japan’s reputation as the safest
country in the world, we aim to deliver services that will make theattendees feel that Japan’s security services are truly a cut above
the rest. In order to accomplish this goal, we will need to further
develop our ALSOK Zone Security Management service, which
guards against terrorist attacks and other crimes by utilizing facerecognition systems to recognize changes in facial expressions andby picking up temperature changes and unusual smells in areas todetect suspicious activity before a crime is committed. Anothertask to be addressed is education. We will thus strive to create
frameworks for developing highly capable human resources.
These frameworks will not only be created and used by ALSOK but
will also be crafted together with affiliates, business partners, andindustry organizations. Furthermore, our relationships with relevant
institutions will also be important. Olympic Games Tokyo 2020 will
span a period of approximately two months, necessitating that we
act effectively while pursuing coordination within the Company andwith external organizations, such as the Tokyo Organising Committeeof the Olympic and Paralympic Games, government agencies, the17

ALSOK REPORT 2016

police, fire departments, and managers of event sites. As we advancethese efforts, we will develop appropriate combinations of education
programs and software to ensure that attendees are impressedwith the impeccable quality of Japanese security services.
Yamamoto: If you are able to develop such skills and expertise,
do you agree that it would be possible to incorporate thesecapacities into a business model that can be exported overseas?
Aoyama: Yes, and while there may be limits with regard to directly
applicable labor, I certainly feel that it should be possible to export
the business model portion of our operations. I would like ALSOK
to become able to make security proposals when large events takeplace overseas. We are also thinking of ways we can help address
aging infrastructure.
Yamamoto: I look forward to seeing those plans become a reality.
In Japan as well, there is a need to provide security and long-termcare for senior citizens, which represent a large portion of the
population in certain regions, and to watch over these individuals.
The need to inspect facilities in relation to aged infrastructure isalso present. In addition, there is a need to support reconstruction
after natural disasters, such as the 2016 Kumamoto earthquake.
Do you feel that such needs will increase the range of fields inwhich ALSOK can contribute?
Aoyama: I believe that this will be the case. Measures for addressing
aging government and private infrastructure are at the core ofnational resilience improvement plans. At the same time, the roleof security guards is not limited to preventing crimes. They can also
be dispatched to perform repairs when machinery malfunctions
and otherwise support the public sphere by helping resolve aging
infrastructure issues. I first hope that we will be able to help ensure
the success of Olympic Games Tokyo 2020 and that our employees
will learn from this experience, growing into the type of humanresources that can think, plan, and propose the next step on theirown. However, this does not free us from the need to think beyond
2020. A recession occurred in the year following Olympic GamesTokyo 1964. Looking past 2020, I feel that it will be important for
ALSOK to be deeply rooted in the regions it serves. For this reason,
we are currently examining means of developing frameworks forcontributing to regional development.
Yamamoto: I suspect that reputation is incredibly important for
a company like ALSOK. What daily measures are you implementing with regard to corporate governance, compliance, and othersuch concerns?

Aoyama: Even if a company adopts the principles of Japan’s Corporate
Governance Code, I feel that these efforts will be pointless if they
are merely formulaic and the company does not put its heart into
them. In ALSOK’s case, I believe that if we maintain our emphasis on
customers and act sincerely while exercising the arigato no kokoro
and bushi no seishin principles described in our management
philosophy, no major problems will occur. We have created a system
to report customer complaints to management in real-time inorder to check operations from the standpoint of customers andbased on outside perspectives. We are also simulating communication between our two outside directors and three outside Audit& Supervisory Board Members and management. Furthermore,
we value an open corporate culture and constant discipline, andmembers of management regularly visit branches and Group
companies throughout Japan to talk with employees and confirm
the workplace environment. In this manner, ALSOK is going
beyond simply constructing systems, working on a daily basis
to truly put its heart into its internal controls.
Yamamoto: It is my hope that ALSOK will continue to proliferate
the arigato no kokoro and bushi no seishin principles described inits management philosophy, which is truly the DNA of the Company,
while growing and succeeding by addressing the ever moredemanding needs of society.
Aoyama: Thank you very much for giving us your time today.
I hope that you will continue to offer ALSOK guidance and advice
in the future.
* ALSOK is a Tokyo 2020 Official Partner (Security Services and Planning).

ALSOK REPORT 201618

Long-Term Vision and Medium-Term
Management Plan Targeting Ongoing
Improvements in Corporate Value

Consolidated
Net Sales

ALSOK will advance initiatives based on four material

TARGETS¥1 trillion

corporate social responsibility (CSR) themes for realizing
ongoing improvements in corporate value as it strives to be

Consolidated
Operating
Incomea company that supports people’s safety, security, andcomfortable living while protecting facilities, people,
and properties.

¥100 billion

Growth Living Up to
Stakeholder Expectations

Customers

Local
Communities

Shareholders
Investors

Stakeholders

Employees

Business
Partners

Medium-Term Management Plan

Grand Design
2017
Material CSR Theme 1
Consumer

Material CSR Theme 2
Labour PracticeMaterial CSR Theme 3
Community

Material CSR Theme 4
Operating Practice

Providing Products andServices that Help Resolve
Social Issues

Cultivating Human Resources
and Building a Comfortable
Workplace Environment

Contributing toLocal Communities throughActive Communication

Providing Trustworthy
Security Services

ALSOK is providing a multifaceted
lineup of products and services
that help resolve the issues facedby customers and society. Thistask is accomplished by leveraging
its security services expertise
based on an accurate under­
standing of ever-changing social
trends, such as aging populations,declining birthrates, and the tendency toward
nuclear families.

The Company strives to help
employees realize their full potential.
To this end, it is enhancing training
systems, actively supporting
career develop­ment, promoting
diversity, and otherwise building a
comfortable workplace environmentand cultivating the human resourcesthat underpin its corporate
activities.

To give form to arigato no kokoro(a feeling of gratefulness andgratitude)—part of ALSOK’s
fundamental spirit—the Company
acts as a good corporate citizen,
diligently working to contributeto the resolution of the various
issues faced by the communities
it serves.

ALSOK is expected to maintain highlevels of social trust while acting
in a highly ethical and disciplinedmanner. We therefore position
compliance and business continuity
as management issues of extreme
importance, and are advancing
various initiatives in relation tothese matters.

P.25

P.27

Corporate Governance
19

ALSOK REPORT 2016

P.29

P.31

P.35

SteppingforwardGrand Design 2017 Medium-Term Management Plan
Basic Policies of Grand Design 2017
Raise consolidated net sales

Build high-profit constitution

1 E
 xpansion of existing business by raising productivity ofsales representatives
2 Expansion of net sales by maximizing intra-Group synergies
 rovision of new products and services that meet customer needs
3 P

1 Improvement of per person labor productivity
2 Utilization of human resources roupwide cost reductions, including managerial side
3 G

Strategies of Grand Design 2017
To the next 50 years ~Developing through cooperation within the ALSOK Group~
Response to various risks and outsourcing needs of customers

Market-specificstrategies

Business
Corporations

Financial
Institutions

PublicInstitutions

Individuals

Overseas• Integrated security services responding to diversifying risks and needs

Initiatives supporting
market-specificstrategies• Construction of facility management business structure• Development of new products and services• Expansion of business scope• Stable securement of human resources and cultivation of human resourceshaving competitive strength

Creation of Social Value through CSR Activities
The ALSOK Group advances CSR activities in accordance with its management philosophy to respond to changing social needs and to help resolve
the issues society faces.
In the fiscal year ended March 31, 2014, we defined four material CSR themes with the aim of fulfilling our social responsibilities and sharing
our social value with shareholders and other stakeholders. These themes are: (1) providing products and services that help resolve social issues;(2) cultivating human resources and building a comfortable workplace environment; (3) contributing to local communities through active
communication; and (4) providing trustworthy security services. Going forward, we will step up initiatives in each of these areas in the pursuitof ongoing improvements in corporate value.

ALSOK REPORT 201620

OUR STEPS
Initiatives for Accomplishing Goals of Grand Design 2017 Medium-Term Management Plan

Response to Growing Outsourcing Needs
Processes traditionally handled within various organizations are increasingly being outsourced to private companies. Established trends
contributing to this situation include companies and financial institutions choosing to concentrate on their core business amidst the laborscarcity resulting from the declining birthrate and aging population as well as an increase in public institutions contracting infrastructureand facility monitoring functions to private companies. In light of this situation, ALSOK is endeavoring to expand its business by providing
accurate responses to the various risks and outsourcing needs to be addressed by customers in different markets. This expansion is being
pursued while fully leveraging the Group’s nationwide network and collaborating with various industries that are highly compatible withsecurity services.
Our policy for addressing the management issue of labor shortages is to improve operational quality and efficiency by promoting
multitasking and utilizing cutting-edge technologies like ICT, IoT, and robots.
At the same time, we are pushing forward with Groupwide cost structure reforms that include utilizing ICT and improving operational
efficiency to boost labor productivity and having employees handle a broader range of functions to more effectively use human resources.
We thereby aim to reinforce earnings foundations. Current cost reduction initiatives include having security guards and technical staff
perform a wider range of functions and consolidating Guard Centers.

Concentration on core business by private companies and financial institutions in response to labor scarcity
Increase in public institutions contracting infrastructure and facility monitoring functions to private companies

Public Institutions• Public infrastructure monitoring• PPP*1, PFI*2

Business Corporations• Stationed security services• Factory and other facility
management

Financial Institutions• Total ATM management• Business center operation

Respond to various outsourcing needs

ALSOK Group• Nationwide network of approximately 30,000 employees• Monitoring system providing nationwide surveillance 24 hours a day, 365 days a year
• Ability to dispatch security guards to anywhere in Japan in 15 minutes on average*1. Public–private partnership: A new form of public–private collaboration in which public- and private-sector entities partner in operating a business*2. Private finance initiative: A scheme for utilizing private-sector management know-how and funds to construct, maintain, manage, and operate public facilities

21

ALSOK REPORT 2016

Measures for Accurately Addressing Diversifying Security Needs
Looking ahead, it can be expected that there will be an increase in demand for large-scale, temporary security services operations with a global
element, such as for the upcoming Olympic and Paralympic Games Tokyo 2020 to be held in Tokyo. At the same time, the rapid drive to build event
stadiums for Olympic Games Tokyo 2020 and otherwise move ahead with the redevelopment of central Tokyo has stimulated a surge in urban
redevelopment on a nationwide scale, generating new demand. ALSOK will seek to remain receptive to the needs of the markets these trends
affect in order to cater to these needs through such means as comprehensive proposals that combine stationed security, facilities, and installation
services. Furthermore, we will strive to expand our business and improve corporate value by providing accurate responses to diversifying security
needs, such as those related to inbound tourists, bridge inspection and other social infrastructure support, and disaster relief.

International conferences and events
Urban redevelopment in major cities
Inbound tourism, social infrastructure support, and disaster relief

Diversification of service needs in conjunction withrising social demand for safety and security

Comprehensive proposals
combining stationed security,
facilities, and installation
services to address urban
redevelopment in major cities

Security
Services
Stationed
Security
Services

Monitoring at important facilities
and event sites using ICT

Transportation
Security
Services
Electronic
Security
Services

Body
Guards

Safe and secure support
for infrastructure crucial
to everyday community life

Response to increased
inbound tourism

ALSOK REPORT 201622

OUR STEPS
Initiatives for Accomplishing Goals of Grand Design 2017 Medium-Term Management Plan

Reinforcement of Long-Term Care Business Structure
The Ministry of Health, Labour and Welfare estimates that the population of individuals over the age of 65 will continue to increase and that
this demographic will represent approximately 30% of the total population by 2025 and 40% of the population by 2055. For this reason, it canbe expected that there will be a serious lack of facilities and staff for providing long-term care to senior citizens in the future.
Looking to address this social issue, ALSOK has been developing a long-term care business centered on visitation-based and in-homecare support services by welcoming new subsidiaries HCM Corporation and ALSOK Care & Support Co., Ltd., into the Group through M&A
activities conducted in 2014 and 2015, respectively. Furthermore, Wisnet Co., Ltd., a company that primarily operates group homes, fee-based,
long-term care facilities, and other in-facility care services, joined the Group in May 2016. Accordingly, our long-term care business structure
now enables us to provide a complete line of care services including in-facility, visitation-based, and in-house long-term care services.
Furthermore, we established the Long-term Care Business Department as a dedicated management organization to oversee efforts to expand
ALSOK’s long-term care business from a sales perspective and control quality from an operational perspective. Going forward, ALSOK will rapidly
grow its long-term care business into a new pillar supporting its operations so that it may respond to social needs quicker and more accurately.

ALSOK
Care &
SupportHCM

Provides emergency response, health consultation, andother health support services in the ANSHIN Care
Center Business and offers visitation-based careservices, operates day services and group homes, andrents welfare items mainly in the Tokyo metropolitan
area under the KATAKURI brand

Offers in-home and in-facility long-term care services
primarily in Tokyo, Nagoya, and Osaka under the brandname amica (an amalgam of the Japanese words akaruku(cheerful), mijikana (close by), and kaigo (care))WisnetOperates group homes, fee-based, long-term care facilities, and otherin-facility care services under the Minna no Ie (Homes for Everyone) brand;
provides day services, visitation-based care services, and other in-homelong-term care services; and develops operations in peripheral fields primarily
in Saitama Prefecture as well as in Tokyo and Kanagawa Prefecture

Three-Company Business Structureamica Villa Inage fee-based, long-term care facility
operated by HCM

23

ALSOK REPORT 2016

ALSOK Care & Support employee picking up senior citizen
for day service

Day service provided by Wisnet

Enhancement of Services for Senior Citizens
The ALSOK Group is working to enhance its lineup of services for senior citizens that are unique due to the fact that they are being provided
by a security services company. Adding to existing offering HOME ALSOK MIMAMORI SUPPORT, a popular emergency report service, in June2015 we launched MAMOLOOK, a mobile security terminal that combines the GPS functionality of mobile phones with ALSOK’s unique crime
prevention system. In addition, we have been conducting verification tests of community-encompassing services for watching over seniorcitizens comprised of positioning systems that utilize communications with special MIMAMORI Tags and smartphones. Such verification tests
were commenced in Sanuki City of Kagawa Prefecture in April 2016 and in Kitakyushu City of Fukuoka Prefecture in August of the same year.
These are just some examples of ALSOK’s efforts to enhance its lineup of services for the aging society.
Furthermore, as ALSOK has formed a business alliance with Sompo Holdings, Inc., we are using this alliance as an opportunity to examine
the possibility of developing a joint business. Through this business, we would strive to create new services that deliver safety, security, andhealthier living.
Security Services

Services for Senior Citizens
Bluetooth®

Community-encompassing
service for watching oversenior citizens using
MIMAMORI Tags
Service for watching over users with MAMOLOOKHOME ALSOKMIMAMORI SUPPORTBusiness alliance

New Form for Security Services Looking Beyond 2020
ALSOK Zone Security Management is a service that combines ALSOK security guards with ICT. This service is being promoted as a solution to
the need to protect urban spaces, such as office buildings and commercial facilities, large-scale event sites, and other areas in which large
numbers of people gather by controlling the spread of damages should a crime or accident occur in such areas and by detecting crimes toprevent their occurrence. ALSOK is collaborating with NEC Corporation, a company boasting face-recognition technologies with impeccablelevels of accuracy, advanced AI technologies, and other cutting-edge technologies, to further build upon this service. By fusing ALSOK’s
expertise in providing security services through the efforts of humans with AI, big data, IoT, robots, and other state-of-the-art technologies,
we aim to develop predictive and preventative functions to complement current damage control functions. We believe that such innovation
will take the role of security services to a new stage.

ALSOK Zone Security Management
ALSOK Hyper Security Guards
Security guards armed with
IT equipment• Wearable cameras• Smartphones, etc.

Video and audio

Control Center(Disaster prevention centers, etc.)

Analysis results• AI • Image analysis

Equipment (sensors, etc.)• Cameras• Entry and exit gates• Baggage inspection devices• Security robots• Drones, etc.

Videos and signals

Control signals

Information
sharing

Partner

Information analysis

Information database
Information analysis and issuance oforders based on analysis results

ALSOK REPORT 201624

Initiatives for Realizing Ongoing Improvement in Corporate Value

Material CSR Theme

1

CONSUMER:
Providing Products and Services that Help Resolve Social Issues

Introduction Video(in Japanese only)

ALSOK is providing a multifaceted lineup of products and services that help resolve the issues faced by customers andsociety. This task is accomplished by leveraging its security services expertise based on an accurate understanding of
ever-changing social trends, such as aging populations, declining birthrates, and the tendency toward nuclear families.

Provision of Products and Services
for Diversifying Lifestyles
Home Security Basic—Watching Over Homes and Families
24 Hours a Day, 365 Days a Year
Home Security Basic is a state-of-the-art security system that protects customer homes 24 hours a day, 365 days a year. This system
responds to a diverse range of customer needs with a lineup of security methods that can be selected based on customer lifestyle. The
control terminals used for this system feature a simple design, canbe accessed with a password or contactless IC cards, and utilize LED
lights with easy-to-distinguish colors for individuals that have a hardtime seeing colors. These innovations make this system easy foranyone to use, which won it a spot in Good Design Award 2015.

HOME ALSOK LADY’S SUPPORT—Protecting Women from Stalking
Stalking of women is a serious social issue, especially given the factthat it can escalate into even more threatening crimes. ALSOK aims
to address this issue by providing HOME ALSOK LADY’S SUPPORT,a service designed to protect women from stalking. Offerings underthe HOME ALSOK LADY’S SUPPORT line include the Concierge
Service, which gives users access to consulting for enhancing security measures 24 hours a day; Mobile Security, which watches overusers with constant vigil via a dedicated terminal; and Security Guard
Dispatch, which allows security guards to be sent to a users’ location
when they are away from home based on GPS data. These various
services respond to the diverse security needs of women to provide
them with safety and security.



Housing Units Equipped withALSOK Home Security Services(As of March 31, 2016)

Approx.

920,000* Includes contracts for individual households in housing complexes

25

ALSOK REPORT 2016

New Products and Services for the Aging Society
HOME ALSOK MIMAMORI SUPPORT—Watching Over
Elderly Family Members Living Separately
HOME ALSOK MIMAMORI SUPPORT is a service that entails installing
control terminals with emergency call buttons that can be pushed tohave a security guard rush to the scene at any time of day. These guards
will confirm the status of the individual in question and contact family
members and also, in the case of an emergency, call paramedics or
perform CPR as necessary. In addition, the control terminal has a
consultation button that can be pushed to consult our staff about one’s
health condition, receive information about medical institutions, or
ask other questions. We provide additional support for watching overfamily members living separately through a robust lineup of options.
One such option is the Life Pattern Monitoring Service, which tracks
user life patterns and automatically informs ALSOK of abnormalities
so that a security guard can be sent to investigate the situation.
ALSOK’s Vision for Long-Term Care Services
ALSOK has been endeavoring to expand
the application of its security services
expertise to watching over senior citizens
in order to grow related businesses.
Our participation in the long-term careservices business is an extension ofthese efforts. By fusing security services
and long-term care services, we are
Employee providing
able to offer services that deliver even visitation-based care services
higher degrees of security.
Society is currently faced with pressing issues regarding individuals
on waiting lists for special-needs long-term care facilities as well as
standard long-term care for senior citizens. ALSOK has been working
to resolve the issues faced by the aging society. With a focus on areasthat are compatible with security services, we have been developing ourlong-term care services business through M&A activities and evolving
our traditional security services for protecting senior citizens in allareas of their lives in order to offer care services that encompass
entire communities.



Number of ALSOK Long-TermCare Services Bases(As of September 30, 2016)391

Collaborative Services for Protecting Society’s
Safety and Security Together with Municipal
Governments and Companies
Multifaceted Support for Responding to Natural Disasters
Earthquakes, volcanic eruptions, and water damages from causes suchas concentrated torrential downpours have recently been occurring inhigh frequencies, posing a very real threat to society. While it may bedifficult to predict natural disasters, appropriate response measures
can be taken to prevent the spread ofdisaster damages. ALSOK provides
services such as its volcanic eruption
countermeasure solutions, Underpass
Monitoring Service, and Flood Prevention
Act response solutions, working incollaboration with municipal governments and companies to protect theDrone filming volcano activity
safety and security of society.
Community Support Offered through Collaboration
with Municipal Governments
The population of Japan is aging to a degree not seen anywhere elsein the world, a trend presenting many issues to be addressed by society.
In light of this situation, the ALSOK Group has deployed services towatch over citizens and thereby address the issues faced by municipal
governments throughout Japan, such as the lack of district welfare
officers and trouble developing emergency reporting systems forresponding to population aging. Furthermore, in April 2016 wecommenced a verification test in Sanuki City of Kagawa Prefecture ofcommunity-encompassing services for watching over senior citizens
comprised of positioning systems that utilize communications withspecial MIMAMORI Tags and smartphones. These services are meant
to support the creation of community-developed networks for watchingover citizens and are part of a greater initiative for supporting local
communities.

Products and Services Fusing Advanced
Technologies and Security Expertise
ALSOK Zone Security Management Supported
by ALSOK Hyper Security Guards
ALSOK Zone Security Management is a service that combines security
guards with ICT to deliver high-quality security services at optimal
costs. This service is supported by ALSOK Hyper Security Guards,
which are security guards armed with IT equipment, and the massive
quantities of information accumulated at disaster prevention centersand other facilities. Security alarms, images, and audio received fromthe field are analyzed at disasterprevention centers, and the information retrieved is quickly relayed backto the highly durable smartphones
and wearable cameras of security
guards. This system ensures swift
and appropriate responses, thereby
helping to prevent the spread of
ALSOK Hyper Security Guard armed
damages should an incident occur.
with IT equipment
Development of Robots for Improving Security
and Operational Efficiency
ALSOK is a pioneer in the field of security robots. We commenced
research and development on robots in 1982 with the aim of compensating for the lack of security guards projected to result from thedeclining birthrate and aging population while
also helping to prevent security guards frombecoming injured on the job. Today, our robot
lineup features such offerings as REBORG®-X,
a communications robot boasting enhanced
security and customer service functions, as wellas An9 Type-S, a robot with receptionist functions
and reinforced security capabilities. These robots
are active in shopping malls, megabank head
REBORG-X robot
branches, science museums, and other facilities.
on patrol

Municipal Governments with which Collaborative
Emergency Reporting Systems Have Been Developed

Number of Highly Durable Smartphones
Used by Security Guards(As of March 31, 2016)(As of March 31, 2016)

485

Approx.

3,700
ALSOK REPORT 201626

Initiatives for Realizing Ongoing Improvement in Corporate Value

Material CSR Theme

2

LABOUR PRACTICE:
Cultivating Human Resources and Building a Comfortable Workplace Environment

The Company strives to help employees realize their full potential. To this end, it is enhancing training systems, actively
supporting career development, promoting diversity, and otherwise building a comfortable workplace environment andcultivating the human resources that underpin its corporate activities.

Characteristics of ALSOK’s Human Resource
Development Systems
Basic Approach to Human Resource Development
The ALSOK Group views employees as the most important resource
underpinning its business activities. Reflecting this basic approach,we conduct various training programs that embody our management
philosophy, which calls on us to “devote ourselves to protecting thesafety and security of our customers and of society as a whole.”
Through these programs, we further understanding of the fundamental
spirit described in our management philosophy, management policies,and code of conduct. We have thus established a training system toensure that we put this spirit into practice in all aspects of our business
operations. Since a television program featured the training we conduct
for new employees, we have received numerous requests from schools
and companies to perform training on their behalf. Catering to thisdemand, we have been holding ALSOK JUKU (ALSOK Workshops)
training sessions since 2011 to help individuals outside of the ALSOKGroup improve their basic skills as members of society.
Proactive Career Development Programs
To invigorate its organization and facilitate human resource development,
ALSOK actively conducts personnel exchanges with entities outsideof the Group by, for example, engaging in public–private personnel
exchanges with central government agencies.
In addition, ALSOK has instituted a multifaceted internal open
application system. Through this system, we seek to discover and develop
human resources capable of working in and forming the core of not only
our mainstay security services operations but also operations in various
other fields, such as long-term care services. Furthermore, we recruit
security solutions staff for providing security services to Japanese
embassies and consulates overseas through open application and areotherwise working to cultivate employees that can function globally.
Going forward, we will continue to support the career developmentof employees to facilitate the growth of human resources throughout
the entire Group.

Aggregate Number of Security Solutions Staff Dispatched toJapanese Embassies and Consulates Overseas(As of March 31, 2016)

Approx.
27

ALSOK REPORT 2016

700

Promotion of Diversity
Support for Contributions of Female Employees
ALSOK has developed a complete lineup of support
systems for its female employees to ensure thatthese employees can work with peace of mind andrealize their full potential. Leave can be taken
during pregnancy and after childbirth, and wehave reemployment systems for employees thathave resigned for childbirth or parenting reasons.
Out of recognition for these systems, the Company“Kurumin” markwas certified by the Tokyo Labour Bureau of theidentifying companies
with supportive childMinistry of Health, Labour and Welfare as araising systems
company having supportive child-raising systems
in 2010. The Company’s rating was later upgraded in 2015. Thesestrong support systems have helped empower female employees ina wide range of fields, including management as well as sales andtechnical divisions and even security services.
Employment of Differently Abled Individuals and Non-Japanese Staff
In 2010, the ALSOK GROUP established ALSOK Business Support Co.,
Ltd., a specially certified subsidiary under the Act on Employment
Promotion of Persons with Disabilities designed to support differently
abled individuals in achieving independence and participating in society.
We have since been promoting the employment of differently abledindividuals. Employees at ALSOK Business Support undertake a wide
range of duties, including creating business cards and envelopes for use
by other ALSOK Group employees, managing contracts, sending out
materials and seasonal magazines for customers, printing pamphlets,and creating novelty items. As of March 31, 2016, the ratio of differently
abled employees at the Company was compliant with the legally
mandated level.
The Group is also actively hiring non-Japanese people. We staff
overseas subsidiaries with local hires and train future management
candidates in Japan. In addition, we implement various training programsfor non-Japanese employees, including programs for facilitating
understanding and entrenching our fundamental spirit that entail
distributing translated versions of ALSOK’s management philosophy.

Number of Female ALSOK Group Employees(Number of effective employees including part-time workers,
as of March 31, 2016)

7,164

Occupational Health and Safety

Communication with Employees

Management of Employee HealthHelping employees maintain sound physical and mental health andensuring occupational health and safety is vital to a security services
company. Accordingly, ALSOK has established occupational health andsafety committees at all offices and formulated targets for preventing
occupational accidents. We are also developing and instituting occupational health and safety education programs. Through these efforts,
we seek to ensure healthy employees and safe workplaces. In addition,
ALSOK is a partner to the Ministry of Health, Labour and Welfare’s
Action Plan for Companies Promoting Cancer Prevention program.
We thus take steps to combat the risk of losing precious humanresources to cancer, including incorporating more extensive tests
into regular health examinations andenabling screenings for multiple
cancer types to be conducted simultaneously. We also hold the Hustle
Weight Loss Game limited-period
event each year to support employees
in managing their health by providingthem with an enjoyable way to address
Regular health examination conducted atlifestyle diseases.
ALSOK’s Healthcare Management Office

Forums for Exchanges with Employees
ALSOK periodically provides opportunities for employees and senior
managers to exchange opinions. In
the fiscal year ended March 31, 2016,a discussion was held between female
managers and President Aoyama,
during which opinions were sharedregarding means of supporting theDiscussion between President
contributions of female employees.
Aoyama and employees
Several ideas put forth were incorporated into diversity promotion efforts.
Moreover, Employee Satisfaction Meetings are convened to provide
further opportunities for frank exchanges of opinions between executives
and other employees. A total of 118 such meetings took place during
the year under review. Suggestions and input received from employees
are incorporated into Company measures, with some described in
the internal newsletter to further invigorate the organization.

ALSOK Support LineTo promote good mental health, the Company has developed its Mental
Health Maintenance Plan in accordance with the guidelines of the
Ministry of Health, Labour and Welfare. We also respond to employee
concerns flexibly through a help desk—the ALSOK Support Line—and
have prepared a manual to help supervisors deal with employees
suffering from poor mental health. In 2012, we expanded the scope ofavailability of the ALSOK Support Line to Group companies, and are
constantly working to further enhance this system. Consultations throughthe ALSOK Support Line may be conducted face-to-face, over the
telephone, through email, or via other means, making this support line
a consultation venue that is easy to use for employees and their families.

Ratio of Full-Time and Part-Time Employees
Over 40 Undergoing Cancer Screenings

Employee Surveys—Gathering Employee Feedback
ALSOK has been conducting annual employee surveys since 1999 asa measure for better understanding the values of frontline employees
and how they view their work so that this information can be incorporated
into measures for building a more vibrant company. These surveys
investigate matters that primarily include employee thoughts regarding
management, work, and workplaces, as well as employee awarenessof the Company’s various internal systems. We use the findings ofthese surveys when formulating new measures, and survey results
are relayed to employees through the internal newsletter.
In the year under review, responses were received from 81% ofsurveyed employees.

Number of Employee Satisfaction Meetings Held
(Fiscal year ended March 31, 2016)(Fiscal year ended March 31, 2016)

99%

118
ALSOK REPORT 201628

Initiatives for Realizing Ongoing Improvement in Corporate Value

Material CSR Theme

3

COMMUNITY:
Contributing to Local Communities through Active Communication

To give form to arigato no kokoro (a feeling of gratefulness and gratitude)—part of ALSOK’s fundamental spirit—the
Company acts as a good corporate citizen, diligently working to contribute to the resolution of the various issues facedby the communities it serves.

Contributions to Safer and More Secure Communities

Support for Sports Activities

ALSOK ANSHIN KYOSHITSU
As one of its social contribution activities aimed at resolving the issues
faced by local communities, the ALSOK Group dispatches its employees,
who are safety professionals, to elementary schools throughout Japan
to conduct the ALSOK ANSHIN KYOSHITSU program, which teaches
children crime prevention and first-aid skills. We have been implementing
this program for more than 11 years, over which 39,962 classes havebeen performed at 9,299 elementary schools and attended by upwardsof 1,235,000 students.
This program has received thejudges’ award of encouragement in
the Ministry of Education, Culture,
Sports, Science and Technology’sAwards for Companies Promoting
Hands-on Activities for Youths for two
consecutive years (the fiscal years
ALSOK ANSHIN KYOSHITSU class
ended March 31, 2015 and 2016).

Support for the Cultivation of Athletes and Promotion of Sports
Through sports, ALSOK strives toheighten team spirit among employees
and thereby further the development of
its business. The Company currently
has a total of 10 sports clubs, including
its prestigious judo and wrestling clubs
as well as its weight lifting, track andfield, and marksmanship clubs. These
Internal ALSOK self-defense
clubs have contributed to promoting
technique competition
sports in Japan by producing numerous
Olympic athletes and world champions. In addition, employees fromALSOK’s various branches and Group companies offer instruction on
judo, futsal, basketball, and track and field events to support thehealthy development of children and local communities.

Crime Prevention, Disaster Prevention, and Educational Activities
for Local Communities
ALSOK carries out volunteer crime prevention patrols using vehicles
equipped with revolving blue lights. In addition, when on standby,
employees patrol the routes used by elementary school students whencommuting to and from school. Other crime prevention activities closely
linked to local communities are also conducted on a Groupwide basis.
Furthermore, we hold the HOTTO LIFE KOZA, a class for senior citizens
to teach them how to avoid special-case scams and other crimes targeting
their age group, as well as the ALSOK Women’s Crime Prevention
Seminar. Amidst the frequent occurrence of crimes preying on seniorcitizens and women, these classes aim to ensure that such individuals
can feel safety and security in their everyday lives.
Such efforts even extend overseas as we have, for example, provided
AEDs to long-distance relay race events in Indonesia, demonstrating
their usage and helping to promote the use of these life-saving devices.

Number of ALSOK ANSHIN KYOSHITSU Classes Held
(Fiscal year ended March 31, 2016)

ALSOK Employees at Olympic Games Rio 2016
Eight ALSOK employees represented
Japan at Olympic Games Rio 2016.
These athletes delivered a mostimpressive performance claiming
a gold medal in judo and a gold andsilver medal in wrestling. Female
wrestler Kaori Icho*, in particular,
became a beacon of hope, inspiring
People’s Honour Award recipientand lending strength to the Japanese
Kaori Icho
people by winning her fourth consecutive Olympic gold medal, an accomplishment that earned her the
People’s Honour Award of Japan.
* Kaori Icho follows Saori Yoshida (employed by the Company until December 2015) as thesecond ALSOK athlete to receive the People’s Honour Award.

Aggregate Number of Times ALSOK-Employed
Athletes Have Participated in Olympic Games(As of August 31, 2016)

3,024

32
* ALSOK is※ALSOKは、JOCオフィシャルパートナー（セキュリティ&プランニング）です。
a Tokyo 2020 Official Partner (Security Services and Planning).

29

ALSOK REPORT 2016

Social Contribution Activities Based on ALSOK’s
Management Philosophy
Ongoing Support to Regions Impacted by
the Great East Japan Earthquake
Following the outbreak of the Great East
Japan Earthquake on March 11, 2011,
ALSOK Group employees immediately
headed to the heavily impacted regions,where they proceeded to provide
support for maintaining order alongwith other aid for the people of these
ALSOK motorcycle displaying “Wataregions. We are currently participatingshitachi wa Wasurenai” campaign sticker
in the Yui no Ba (Forum of Unity)
reconstruction support initiative spearheaded by Japan’s Reconstruction
Agency, and are also holding crime prevention classes for individuals
at public restoration housings assisting the reconstruction of regional
industries and development of communities in other ways. In March 2016,
ALSOK joined the “ Watashitachi wa Wasurenai (We Will Never Forget)”campaign launched by the Japanese Red Cross Society to keep theGreat East Japan Earthquake in memory. ALSOK displays the campaign’s
sticker on all of its motorcycles to help keep the memory alive.
ALSOK ARIGATO UNDOThe ALSOK ARIGATO UNDO movement
was launched by ALSOK’s founder
Jun Murai in 1967 as an embodimentof the arigato no kokoro principle,
which is part of our fundamental
spirit. The movement is funded byFemale students learning at a juniorcontributions and donations fromhigh school opened through support
employees and executives at theby Group Kilimanjaro Inc.
Company and Group companies that
concur with its objectives. Through monetary and non-monetary
donations, including those directed at disaster relief, this movement
supports social welfare, disaster relief, and a wide range of otheractivities. In April 2016, this movement was entrusted to the newly
established ALSOK ARIGATO UNDO Foundation, which was certified
as a nonprofit organization in October of the same year.

Support for Education and Volunteer Activities
Work Experience Program
Together with Future Innovation Forum,
an organization that collaborates
with companies to advance social
contribution activities, ALSOK holds
an annual work experience programfor fifth and sixth grade elementary
school students. Held in 2016, theStudents operating drones
fourth iteration of this program wasbased on the theme of security of the future merging people with IT.
In this program, participants were outfitted with wearable devices toexperience next-generation security services firsthand and also took
part in demonstrations of state-of-the-art security systems using drones.
By experiencing various security activities, participating students learned
about the systems used to protect the safety and security of society.
Disaster Relief Activities
ALSOK’s disaster relief volunteer support system assists employees
in engaging in volunteer activities by offering them special leave days
for participating in such activities.
Employees lined up to take part in disaster relief volunteer activities
after the severe earthquake that structure Kumamoto Prefecture in
April 2016. Upon arriving at the quake-stricken region, employee
volunteers coordinated with volunteer centers to tackle various tasks.
These tasks included cleaning up on behalf of evacuated individuals,
helping out at evacuation centers (preparing and setting up formeals, distributing support items, etc.), and sorting support items(clothing, food, water, daily sundries, etc.).
Moreover, donations totaling ¥16,116,000 were collected from wellminded ALSOK Group employees. We will continue to support regions
and individuals impacted by disasters through a myriad of activities
going forward.

Aggregate Number of Welfare Vehicles Donatedthrough ALSOK ARIGATO UNDO

Social Contribution Expenditures(Fiscal year ended March 31, 2016)(As of March 31, 2016)95
ALSOK ARIGATO UNDO homepage (in Japanese only)

386.9 million*¥* Excluding expenditures associated with the ALSOK ARIGATO UNDO movement

ALSOK REPORT 201630

Initiatives for Realizing Ongoing Improvement in Corporate Value

Material CSR Theme

4

OPERATING PRACTICE:
Providing Trustworthy Security Services

ALSOK is expected to maintain high levels of social trust while acting in a highly ethical and disciplined manner.
We therefore position compliance and business continuity as management issues of extreme importance, and are
advancing various initiatives in relation to these matters.

Stringent Compliance

Measures for Protecting and Managing Information Assets

Focus on Compliance
The Company is heavily focused on compliance and conducts its
security services operations while observing the Security Services
Act. The Company has established the Compliance Committee, which
is headed by the executive officer in charge of compliance. The committee strives to install an unwavering awareness of compliance inall executive officers and employees based on the compliance rules
formulated in 2002, and periodically verifies the status of compliancein business and other activities.

Basic Policies for Information Security
The ALSOK Group receives information from customers whenconcluding security contracts. Therefore, appropriate protection andmanagement of information assets is essential to conducting security
operations. With this in mind, we established the Basic Information
Security Policy in 2004. Forming the basis for Companywide information security efforts, this policy is applied to all employees, including
executive officers, and all the information assets that we hold.

ALSOK Hotline
The ALSOK Hotline was set up in April 2004 to facilitate reporting andconsultation regarding harassment and other inappropriate corporate
behavior. If employees encounter legal issues, improper conduct, or
unethical behavior, they are able to report such instances using thisvenue without fear of detrimental treatment. The ALSOK Hotline isbased on the principles of the protection of the reporter, the prevention of detrimental treatment, and the ability to report anonymously
and is thus able to safeguard corporate value by ensuring that illegal
or improper conduct is quickly detected.
We view compliance as an important issue needing to be addressedon a Groupwide basis. As of March 31, 2016, the ALSOK Hotline wasavailable to employees of the Company and 57 Group companies.
In addition, we have prepared ethicaleducation booklets, include those detailing
ALSOK’s approach toward corporate ethics
and methods for preventing harassment andimproper conduct. These booklets are distributed to employees as part of our efforts
to ensure strict compliance.

Reinforcement of Information Security
The ALSOK Group carefully inspects all systems necessary forproviding services and all internal systems to determine whether or
not they are vulnerable to threats. We have also constructed frameworks that allow security measures to be implemented immediately
should threats to system security be detected.
In addition, ALSOK institutes internal drills utilizing targeted emails*
twice a year to help instill in employees knowledge of the threats ofmalware contamination from cyberattacks as well as the appropriate
response measures. Furthermore, aiming to reinforce the protection
and management of information assets, the ALSOK Group is promoting
the acquisition of certification under ISO 27001, which is the international standard for information security management systems. Asof March 31, 2016, the Company and 15 Group companies had acquired
this accreditation. In addition, the Company has established an internal
computer security incident response team (CSIRT) as a precaution
for the risk of serious information security breaches.
As a security company responsible for protecting people’s lives
and assets, ALSOK realizes that trustworthiness and reliability form
the basis for its operations. Striving to achieve even higher levelsof personal information management, the Company acquired
PrivacyMark® accreditation in July 2013.

Ethics education booklets
distributed to employees* A type of cyberattack involving emails sent to specific companies or individuals
with the aim of attacking their systems or leaking confidential information

Number of Internal Training Sessions Held with the Aim ofProviding Trustworthy Security Services

Aggregate Number of Employees Taking Partin Drills Utilizing Targeted Emails(Fiscal year ended March 31, 2016)(Non-Consolidated)

Approx.

4,000

Approx.

64,000(Drills held 8 times since 2011)31

ALSOK REPORT 2016

Improvement of Security Services Quality andCustomer Satisfaction
Initiatives for Improving Quality
ALSOK has continued to hold the
Sohgo Security Alliance Quality
Improvement Tournament since 2010as a nationwide event open to theentire Group aimed at encouraging
employees to acquire the skills
necessary for conducting security
services and improving quality.
Belongings searching competition
The sixth annual tournament,using X-ray screening systems
held in 2015, introduced new competitions, including belongings searching and English-language service,designed to help prepare for access management operations at largescale events in light of the upcoming Olympic and Paralympic GamesTokyo 2020. A total of 232 employees advanced from preliminary
tournaments held across Japan to put their skills to the test in themain tournament’s now 17 events. In addition, presentations of quality
improvement initiatives at ALSOK Group long-term care service companies were commenced in 2016 as a new event for promoting quality
improvement initiatives in the long-term care services business.

Business Continuity Initiatives
Business Continuity—A Crucial Concern for Security Companies
ALSOK’s main business is to protect the safety and security of people,
meaning that the Company supports an important part of social
infrastructure. For this reason, it is absolutely essential that we prepare for unpredictable disasters and accidents and ensure that we
can continue business operations even under extreme circumstances.
In fact, we believe this crucial concern also represents one of our
responsibilities toward society.
The Company has established a business continuity plan (BCP) in
preparation for a wide range of potential disruptions, such as major
earthquakes and other natural disasters, system malfunctions, andoutbreaks of new strains of influenza. Based on this BCP, we acquired
certification under ISO 22301, the international standard for business
continuity management systems (BCMSs). However, ALSOK recognizes
that there is no defined end point for BCPs and that there is always
room for improvement and is therefore committed to implementing
ongoing enhancements to its BCP.

Enhancement of Customer Service
We strive to reflect both positive and negative opinions, requests, andfeedback from customers in our security services. To accomplish this,we compile customer input on a daily basis and issue reports to therelevant officers and to the president. In addition, improvements are
pursued through awareness-raising activities and guidance by related
divisions. Compiled customer input reports are also displayed on the
Company intranet to share this information with all employees.
Furthermore, presentations of customer service improvement
activities are held to identify offices that have been particularly successful in enhancing customer service and report on the results of these
activities. Awards are presented to offices conducting exemplary
initiatives to encourage further service quality improvements.

BCP Drills in Preparation for Emergencies and Results
In responding to natural disasters, it is important to minimize theimpacts of disasters and be prepared to halt the spread of damagesby averting secondary disasters. Moreover, risk management basedon BCP and BCM principles has become a common practice, and allorganizations are now expected to establish recovery plans and be
capable of swiftly resuming disrupted operations. The ALSOK Group
conducts comprehensive disaster response drills to prepare for natural disasters twice a year and also institutes individual drills, drills
on assembling employees via travel by foot, and safety confirmation
drills to ensure preparedness for any emergency.
The organization-wide response capabilities honed through thesedrills were put to the test by the 2016 Kumamoto earthquake. ALSOK
rose to the challenge, establishing a disaster response correspondence office in the Head Office only 11 minutes after the earthquakeand swiftly setting up systems to send support to the quake-stricken
region in the forms of human aid and supplies.

Breakdown of Customer Input Reports Compiled
at ALSOK Head Office

Time Required for First Truckload of Supplies to Reach
Disaster Site after the Kumamoto Earthquake

Reports of Praise

Reports of Complaints

2,447 / 1,514* Immediate action is taken to pursue improvements in response to complaints

1 hour, 19 minutes(Dispatched from the Fukuoka Branch)

ALSOK REPORT 201632

Initiatives for Realizing Ongoing Improvement in Corporate Value

Consideration for the Global Environment
Global environmental concerns are common issues for all of humanity. For this reason, the Company is working to
reduce the environmental impact of its operations and has set concrete goals to this effect.

Energy Use and Environmental Impact Reduction

Reduction of Security Vehicle Energy Use and 3R Initiatives

Concerted Group Effort to Reduce Energy Use
Mindful that we have many offices, facilities, and vehicles for business
use throughout Japan, we established the Medium- to Long-Term
Environmental Management Plan in the fiscal year ended March 31,
2010. Based on this plan, the Company is making a concerted effort
to reduce electricity usage and vehicle fuel consumption volumes.
In addition, we analyze the usage patterns of every bank ATM wemanage throughout Japan in order to determine the optimal routes forchecking these ATMs. Through this process, we are able to replenish
and collect cash more efficiently without impeding customer convenience, which remains our top priority. These efforts consequently
allow us to limit the number of unnecessary ATM checks, effectively
reducing fuel consumption and CO 2 emissions associated with thetravel involved in these checks.
In the fiscal year ended March 31, 2016, we worked to cultivate amind-set focused on electricity conservation among employees whileconverting vehicle standby positions in the Electronic Security Services
segment to facility standby positions and actively introducing fuelefficient vehicles and motorcycles into our fleet. At the same time, withthe aim of reducing vehicle traveling distance, we developed moreefficient routes for use by sales staff on sales visits and lowered thenumber of technicians placed on night duty. As a result, we achieveda massive 10.4% reduction in electricity usage in comparison with thefiscal year ended March 31, 2010, the year in which we establishedreduction goals. This decrease was accomplished despite the increasein the number of offices and the record-breaking summer heat.
In addition, vehicle fuel consumption volumes were down 1.3%
year on year, to 8,911 kiloliters. While vehicle traveling distance rosedue to the expanded range of business activities in the Transportation
Security Services segment, the impacts of this longer traveling distancewere outweighed by the benefits of introducing into our fleet hybridelectric vehicles, motorcycles, and pedal electric cycles. Going forward,
we will continue working toward converting our entire fleet to eco-friendly
vehicles in the pursuit of further reductions in fuel consumption.
Furthermore, the Company established environmental policies andacquired ISO 14001 certification for certain operating sites in 2016 withthe aim of improving the effectiveness of its environmental management system and making greater contributions to the realization of asustainable society.

Introduction of Fuel-Efficient and Eco-Friendly Vehicles
Vehicles are a major part of the ALSOK Group’s operations. However,
we are actively introducing hybrid-electric vehicles, electric vehicles,
motorcycles, pedal electric cycles, and other fuel-efficient vehicles
with the aim of converting our entire fleet to eco-friendly vehicles. In
addition, we are pursuing further fuel savings by promoting idlingstops and eco-friendly driving techniques.
As of March 31, 2016, nearly all of the vehicles in ALSOK’s fleet
qualified as low-emissions vehicles based on the certification standards
established by the Ministry of Land, Infrastructure, Transport andTourism. Specifically, our fleet comprised 410 hybrid-electric vehicles,
and we have also introduced into this fleet 734 motorcycles, 3 electricmotorcycles, 168 pedal electric cycles,
and 471 bicycles with the aim of cutting
fuel consumption while securing asufficient level of mobility. In addition,
we have begun introducing liquid
petroleum gas (LPG)- and fuel cellpowered vehicles and motorcycles* atcertain branches in order to further
Hybrid-electric vehicle introduced at
the Shizuoka Branch
reduce our environmental footprint.
ALSOK is also advancing
Companywide initiatives based on the “3Rs,” or reduce, reuse, andrecycle. We cooperate with garbage separation and ink cartridge
collection programs, and also reuse and recycle various types ofequipment. Articles to be disposed of at branches in the Tokyo metropolitan area are accumulated at our repair center in Shin Yokohama,
which categorizes items, repairs and ships those to be reused, andproperly disposes of or recycles the remaining items.
In the year under review, the average ratio of waste recycled at
all branches was approximately 31%. In addition, the rechargeable
nickel-cadmium batteries used in our various power supply equipment
are recycled to make further contributions to the preservation of
the environment.

Reduction in CO2 Emissions (Non-Consolidated)

Rechargeable Nickel-Cadmium Batteries Recycled(Fiscal year ended March 31, 2016, compared to fiscal year ended March 31, 2010)(Fiscal year ended March 31, 2016)

8.5%
33

ALSOK REPORT 2016

* LPG-powered engines emit 12% to 15% less CO2 than gasoline engines and approximately 6% less CO2 than diesel engines with the same emission class and fuel-supply
method. Accordingly, LPG is seen as the cleanest of all fossil fuels.

Approx.

22,000CSR Management
To the Company, CSR entails remaining ever mindful of the expectations of customers and society at large and exercising its management philosophy based on the principles of arigato no kokoro, an ever-present feeling of gratefulness andgratitude, and bushi no seishin, a strong and noble samurai spirit that emphasizes teamwork and unity above all else.

ALSOK’s Fundamental Spirit and CSR Policy

Strengthening of the CSR Promotion Framework

Protection of the Safety and Security of Society
Since its founding in July 1965, the Company has continued to develop
its security services business with a strong sense of commitment to
its fundamental spirit, which is defined by the two principles set out
in its management philosophy: arigato no kokoro and bushi no seishin.
We believe that CSR entails protecting the safety and security ofsociety by contributing to the resolution of the issues faced by customers
and society through our business activities.

CSR Activities Centered on the CSR OfficeIn April 2011, the Company established the CSR Office. This office is
responsible for all areas of the Group’s CSR activities and undertakes
such tasks as managing the implementation of CSR activities andcommunicating CSR-related information to stakeholders.
For the fiscal year ended March 31, 2015, the Company published
ALSOK Report 2015, the first edition of a new series of yearly reportsthat compile both financial and non-financial information to provide amore-integrated and easier-to-understand view of the link between
the ALSOK Group’s business activities and CSR activities. Meanwhile,
we provided more-robust disclosure of CSR-related information
through our corporate website to better practice corporate accountability. Going forward, we will continue to advance CSR activities inaccordance with ISO 26000 as we plan and construct our corporatewebsite and future ALSOK reports and undertake other endeavors
to further promote CSR.

Structure of CSR Ideals
Clear Identification of Activities Based on
Our Management Philosophy
Based on the Company’s management philosophy, ALSOK has
established its management policies and code of conduct as well asa framework of internal regulations and rules. Furthermore, theCompany has outlined issues to address in its CSR activities, givinga clear structure to its CSR ideals.
The management policies set out the principles of how the ALSOKGroup should engage with its stakeholders. The code of conduct
defines how all members of the Company, including employees andexecutive officers, should act in carrying out their daily businessactivities (see page 2). The Company has also established various
regulations and internal rules related to specific issues. Based onthese guidelines, we are incorporating CSR activities into all areasof our business operations.

Management
Philosophy

Initiatives to Inculcate CSR
Improvement of Awareness and Cultivation ofa CSR-Based Mind-Set
By distributing our in-house quarterly magazine, ALSOK CSR
Newsletter, and our CSR Activities Guide, we strive to inculcate CSR
in all employees. We also incorporate lectures on basic CSR principles
and the importance of CSR into training for newly promoted managers
and hold group training sessions to allow employees to think together
about how to incorporate CSR activities into our business. Throughsuch efforts, we are working to cultivate a CSR-based mind-set.
Furthermore, we have been conducting CSR activity surveys
targeting employees at the Head Office, branches, and all Group
companies since 2014. These surveys help us collect quantitative andqualitative information on the state of environmental, social, andgovernance (ESG) matters within the Group. Moreover, initiatives suchas this provide an opportunity to promote CSR, and CSR awarenesshas been improving with each coming year as a result.

Management
Policies

Code of Conduct

Internal Regulations and Rules

Training for newly promoted managers utilizing ALSOK Report 2015

ALSOK REPORT 201634

Corporate Governance

Basic Policies and Systems
The ALSOK Group advocates “contribution to society” as one ofits management policies, and we devote our best efforts to protecting the safety and security of our customers and of society as
a whole. Meanwhile, to continue to be a corporate group that istrusted by all stakeholders, we strive to reinforce Groupwide
corporate governance with measures that separate managerial
execution and oversight functions, allow swifter
decision making, encourage strong corporate ethics, and provide
transparency in business management.
Observation of Japan’s Corporate Governance Code
The Company observes the principles put forth by Japan’s
Corporate Governance Code, which was formulated by Tokyo Stock
Exchange, Inc., using these policies as guidelines for corporate
governance and carrying out detailed inspections and reviews oforganizational structures. In addition, we submit a Corporate
Governance Report to the Tokyo Stock Exchange on a yearly basis
and post this report on our corporate website (in Japanese only).
This report contains information on our efforts to observe the
Corporate Governance Code.
Going forward, we will continue to examine possible measuresfor our various systems in order to create an organizational
structure that features more effective corporate governance,
incorporating social trends as part of this endeavor.
Overview of Corporate Governance Systems
and Reasons for Adoption
The Company has adopted the Company with Audit & Supervisory
Board structure described in the Companies Act of Japan. By
implementing the following systems, the Company affirms that
effective and complete audits are conducted by Audit &Supervisory Board Members and that management is being
appropriately governed.
The Company has appointed 10 directors, two of which areoutside directors, and four Audit & Supervisory Board members,
three of which are outside Audit & Supervisory Board members.
The Board of Directors meets once a month, in principle, to decideon basic management policies and important matters pertaining
to operational execution and to supervise the execution of duties
by directors and executive officers. The Management Committee,
which is chaired by the chairman and representative director, meets
twice a month, in principle, to determine the agenda items to bepresented to the Board of Directors and to discuss the operational
execution policies formulated based on Board of Directors’ decisions. The Audit & Supervisory Board meets once a month, inprinciple, to discuss and make decision decisions based on reports
on important matters related to audits. One Audit & Supervisory
Board member attends meetings of the Management Committee
to provide appropriate oversight for management.
35

ALSOK REPORT 2016

We have adopted the current system based on the judgmentthat it effectively ensures the impartiality and transparency ofmanagement.
As stipulated in Clause 1, Article 427, of the Companies Act ofJapan, outside directors and outside Audit & Supervisory Board
Members have entered into a liability limitation agreement with
the Company in relation to the limitation of liability specified in
Clause 1, Article 423, of the Companies Act. Amounts of liability
under this agreement shall be the higher amount of ¥10 million
and the minimum amount of liability designated by Clause 1,
Article 425, of the Companies Act.
These provisions ensure that outside directors and outside
Audit & Supervisory Board Members can effectively performtheir expected duties.
Corporate governance system

Company with Audit & Supervisory Board

Chairman of the Board of Directors

Chairman and Representative Director

Number of directors

10 (of whom 2 are outside directors)

Number of Audit & Supervisory Board
Members

4 (of whom 3 are outside Audit &Supervisory Board Members)

Ratio of outside directors and Audit &36%
Supervisory Board Members to total
directors and Audit & Supervisory Board
Members
Number of independent directors /Audit & Supervisory Board Members

5

Number of meetings of the Board of
Directors and attendance by outside
directors and Audit & Supervisory Board
Members in the year under review

15 times
Outside directors:
1 attended 100% of meetings,
1 attended 92% of meetings
Outside Audit & Supervisory Board Members:
2 attended 100% of meetings,
1 attended 93% of meetings

Number of meetings of the Audit &Supervisory Board and attendance byoutside Audit & Supervisory Board
Members in the year under review

21 times
3 attended 100% of meetings

Reasons for Appointment and Duties of Outside Directors andOutside Audit & Supervisory Board Members
As for the outside directors and outside Audit & Supervisory
Board Members, it is assumed to cover the function of observationand supervision of the management team by objective and neutral
standpoint. Also, we do not set any basis nor policy concerning
independence to appoint outside directors and outside Audit &Supervisory Board Members, although we refer to requirements
of independent officers fixed by Tokyo Stock Exchange.
Also, outside directors and outside Audit & Supervisory Board
Members attend meetings of the Board of Directors, at which they
offer their opinions on the matters at hand. They receive briefings
on the issues to be discussed at meetings of the Board of Directors
the day prior to the meeting, allowing them to more effectively
monitor management. The outside Audit & Supervisory Board
Members coordinate with the Inspection Department and the
independent auditing corporation employed by the Company inregard to audits by Audit & Supervisory Board Members, internal
audits, and accounting audits. To facilitate this coordination,the outside Audit & Supervisory Board Members periodicallyexchange information with these bodies.
The participation of the outside directors in these meetings
enables them to monitor the operational execution of other directors with regard to Internal Control Operations and other mattersfrom an independent standpoint.
They also evaluate the legality of the measures implemented
by Internal Control Operations. To this end, they perform both
operational and accounting audits of the organization and review
all relevant documents.
The Company employs 2 outside directors and 3 outside Audit &Supervisory Board Members; applications have been submitted
to the Tokyo Stock Exchange identifying each of these individuals
as independent officers.

Compensation for Directors andAudit & Supervisory Board Members
Policies and Methods for Deciding Compensation Amounts
Annual limits of ¥400 million for the compensation of directors and¥120 million for the compensation of Audit & Supervisory Board
Members have been set at the General Shareholders’ Meeting.
The compensation of directors includes a fixed amount,calculated according to their positions and whether they are an
outside director or not, as well as a performance-linked amount,calculated based on an evaluation of the operational execution

performance of individual directors in the previous fiscal year
conducted in accordance with predetermined standards. Decisions
regarding the exact amounts of compensation of directors are
made by the Board of Directors.
The compensation of Audit & Supervisory Board Members is
paid as a fixed amount, and the exact amounts of compensation
are decided in accordance with standards set by the Audit &Supervisory Board.
Internal Control System
Based on the Companies Act and the Financial Instruments andExchange Act, the Company has established systems to ensure
directors perform duties in compliance with all relevant laws
and regulations and its articles of incorporation. In addition, theCompany has in place systems for guaranteeing that proper
operating practices are observed by other listed companies andthe corporate groups consisting of these companies and theirsubsidiaries.
The management of the ALSOK Group carried out an evaluation of the Group’s internal control system as of March 31, 2016,
based on the Financial Instruments and Exchange Act. This evaluation found that the internal control system is effective, which
has been noted in the report on the internal control system. The
independent auditing corporation, Grant Thornton Taiyo LLC, hasalso expressed the opinion that the result of the evaluation by the
management noted in the internal control report is accurate.

General Shareholders’ Meeting

Audit & Supervisory Board
3 Outside Audit & Supervisory Board Members
1 Internal Audit & Supervisory Board Members
Total: 4 (Includes two part-time
Audit & Supervisory Board Members)

Board of Directors’ Meetings (Monthly)
2 Outside Directors
8 Internal Directors
Total: 10
Discussions about Operational
Policies on Business Affairs
Management Committee(Twice monthly)

Committees
Risk Management Committee
Compliance Committee
Information Asset Management
Committee

Outside Audits by an Independent
Auditing Corporation: Accounting Audits Conducted by
Grant Thornton Taiyo LLC

Chairman and Chief Executive Officer (CEO)Internal Audits
President and Chief Operating Officer (COO)

Inspection Department

Head Office,Internal Company Divisional Management

Advisory Contracts with
Attorneys in Specialized Fields

Operating Committee of the Company(Twice monthly)
Executive Officers
7 Directors and Executive Officers
12 Executive Officers
Total: 19

Legal Consultation
Legal OfficeInternal Control Operations
As of Oct 4, 2016

ALSOK REPORT 201636

Corporate GovernanceCompliance
The Company has established the Compliance Committee, which
is headed by the executive officer in charge of compliance. The
committee strives to inculcate an unwavering awareness ofcompliance in all executive officers and employees based on thecompliance rules formulated in 2002, and periodically verifies thestatus of compliance in business and other activities. Furthermore,
the Company conducts activities to promote compliance on aGroupwide basis. Moreover, together with the Education &Training Department, the Compliance Committee is implementing
corporate ethics training and taking other steps to cultivate andthoroughly entrench a compliance-based mind-set.
The ALSOK Hotline was set up in April 2004 to facilitate
early identification and prevention of corporate ethics issues.
This hotline allows executive officers and employees to reportany issues that they may witness. On April 1, 2016, the Company
established an external reporting hotline to add to the alreadyexisting internal hotline.

Risk Management
The Company places particular importance on risk management,
which is central to its business of protecting the safety and securityof society. Accordingly, the Company formulated risk management
rules in 2002. The Company then established the Risk Management
Committee based on these risk management rules and assigned
the executive officer in charge of risk management as its chairperson. In addition, individual risk management assessment bodies
have been set up at the Head Office and each individual businessoffice to undertake Companywide risk management activities, suchas the identification and evaluation of risks and the formulation of
preventative measures and countermeasures. The Risk Management
Committee also contains subcommittees for risks in specific areas.
These subcommittees gather information on the risks in theirdesignated area, analyze and evaluate these risks, and draft
measures to mitigate these risks. Furthermore, the Company has
developed organizational structures to ensure that it can respondquickly should a serious emergency occur. Through such structures,
the Company is able to relay urgent orders throughout the organization, set up a response headquarters, or take other emergency
response measures.

37

ALSOK REPORT 2016

In September 2004, the Company established the Information
Asset Management Committee, chaired by the executive officer
in charge of information asset management. The purpose of thecommittee is to respond as swiftly as possible to changes in theinformation asset management environment, such as the full
implementation of the Personal Information Protection Law,
which was enacted in April 2005. The committee undertakes suchactivities as the development of a structure for the managementof personal, business, and other important information in the
Company’s possession as well as the promotion of employee
education on this topic.
The Legal Office exists to respond to lawsuits, legal disputes,
and other legal risks, which it does while coordinating with therelevant operating divisions. Moreover, the Company has formed
consultant contracts with seven law firms, ensuring that it canreceive appropriate advice and guidance for responding to major
legal and compliance issues and thereby helping prevent theactualization of risks. By maintaining compliance while receivingsuch counsel, we are involving internal and external lawyers in
the Company’s corporate governance systems.

Disclosure and IR Activities
ALSOK has formulated its Disclosure Policy based on which it
actively conducts impartial and timely information disclosure.
In addition, the Company has revised its investor relations (IR)website to provide stakeholders with greater ease in finding theinformation they seek. We also aim to foster a deeper understanding
among overseas institutional investors of the security services
industry in Japan and the growth strategies of the ALSOK Group.
To this end, we provide English-language translations of financialsummaries and other documents on our English-language IR website.
The Company’s IR Website
http://www.alsok.co.jp/en/ir/

Messages from Outside Directors

Future Development Hinged on Employee Growth
ALSOK is charged with the important mission of protecting the safety and security of society,and the Company has faithfully carried out this mission since its founding. Moved by this dedication, I accepted the position of outside director with the hope of aiding ALSOK in this mission.
The security services business is a business built on people. As such, the future developmentof security services companies hinges on how much value their employees and their ability tohelp them grow. I make sure never to forget this fact as I maintain my focus on governance.
Fortunately, ALSOK’s management closely associates itself with frontline operations, placing
great importance on the feelings of employees. In addition, ALSOK frequently recruits individuals from outside the Company, actively striving to utilize various senses of value within
the organization.
As an organization, ALSOK is very receptive to compliance and risk management needs.
However, given that the Company is looking to develop and expand its operation overseas in
the future, it is now tasked with the new need to prepare to function as a global company.
Yutaka Takehana
Meanwhile, ALSOK’s position as a Tokyo 2020 Official Partner will provide an opportunity to
Outside Director
demonstrate the impeccable quality of Japan’s security services to the entire world. For thisreason, it is crucial for the Company to be able to make real contributions to ensuring the safety of this event.
ALSOK is still in the progress of growing. Looking ahead, ALSOK will likely move toward a more complete state by supplementing its core security services operations with new businesses, thereby increasing its brand value. I aim to assist ALSOK ingrowing into a company that is highly beneficial to society while helping ensure that it remains true to the mission of protecting
the safety and security of society it has held since its founding.

Proactive Governance Going Beyond Oversight to Contributeto Improved CompetitivenessI advise ALSOK’s directors to voice opinions with regard to their own areas of responsibility
as well as to the areas other directors are in charge of and also to ensure that they apply theplan–do–check–act cycle to decisions made. Japan’s Corporate Governance Code was enacted
in June 2016. This code puts forth the idea of proactive governance that goes beyond simply
focusing on oversight to contribute to improved competitiveness and thereby facilitate theestablishment of more effective internal controls. I believe that one of the responsibilities ofoutside directors is to support the entrepreneurial spirit of a company’s officers. For thisreason, I too seek to go beyond simply pointing out issues to offer input that helps theCompany move forward.
At the same time, I realize the extreme importance of timely disclosure for shareholders
and provision of information to the Company’s various other stakeholders. I thus focus on
making sure that management is always thinking about disclosure timing and methods toguarantee that appropriate information transmission is not neglected. ALSOK’s customer
Takeshi Oiwa
base is not limited to corporate clients, but also includes individual users. For this reason,
Outside Audit & Supervisory Board Member
it is crucial that the Company actively transmit messages to society.
There is no one correct answer for the ideal corporate governance system, and each company will need to find its own answer.
Nevertheless, I think the value of outside directors comes from their ability to introduce management to the practices of othercompanies so that these practices can be used as a reference. At ALSOK, the outside directors proactively express their opinions,and management listens to these opinions earnestly, a fact that fills me with motivation.

* ALSOK is a Tokyo 2020 Official Partner (Security Services and Planning).

ALSOK REPORT 201638

Directors, Audit & Supervisory Board Members, and Executive Officers
As of October 4, 2016

Atsushi Murai
Chairman and Representative Director
Chief Executive Officer (CEO)Sep. 1995:	Director-General, Chubu Regional Police
Bureau (Resigned in Jun. 1996)
Jun. 1996:	Deputy Governor,
Deposit Insurance Corporation of Japan(Resigned in Sep. 1997)
Sep. 1997: Joined the Company as a consultant
Jun. 1998:	Senior Executive Vice President andRepresentative Director
Jun. 2001: President and Representative Director
Jul. 2003:	Chief Officer of Business Promotion
Division
Apr. 2004:	Chief Officer of Security Operations
Division
Apr. 2011: Chief Executive Officer (Current)
Apr. 2012:	Chairman and Representative Director(Current)
Major Concurrent Position
Dec. 1997:	Representative Director,
SOHGO CORPORATION (Current)

39

ALSOK REPORT 2016

Yukiyasu Aoyama
President and Representative Director
Senior Executive President
Chief Operating Officer (COO)
Jul. 2006:	Director-General, Customs and Tariff
Bureau, Ministry of Finance Japan		(Resigned in Jul. 2008)
Aug. 2008:	Joined the Company as Senior Executive
Officer, Chief Officer of Security
Operations Division
Apr. 2009:	In charge of Human Resources, Security
Operations, and Corporate Ethics
Jun. 2009:	Executive Vice President andRepresentative Director
Apr. 2010:	Senior Executive Vice President andRepresentative Director, Chief Officer
of Business Promotion Division
Apr. 2011: Chief Operating Officer (Current)
Apr. 2012:	President and Representative Director(Current)		
Senior Executive President (Current)
Major Concurrent Position
Jun. 2014:	Chairman, All Japan Security Service
Association (Current)

Yuichi Miyazawa
Director
Executive Vice President
Long-term CareManagement Company
Regional Management
Apr. 1978: Joined the Company
Apr. 2004:	General Manager of Human Resources
Department
Apr. 2007:	Executive Officer, Deputy Chief Officer ofWest Headquarters
Jun. 2010: Senior Executive Officer
Jun. 2011: Director and Senior Executive Officer
Apr. 2014:	In charge of Management Company, andRegional Management (Current)
Apr. 2016:	Director and Executive Vice President(Current)		In charge of Long-term Care (Current)
Major Concurrent Positions
Feb. 2015:	Representative Director,
ALSOK Care & Support Co., Ltd.
(Current)
May 2016:	President and Representative Director,
Wisnet Co., Ltd. (Current)

Kiyomi Hara
Director
Executive Vice President
Chief Officer of Business Promotion Division
Mar. 1970: Joined the Company
Jun. 2006:	President and Representative Director,
Tokyo Sohgo Security Services Co., Ltd.
(Seconded, resigned in Apr. 2008)
Jun. 2007:	Executive Officer
Jun. 2010: Senior Executive Officer
Jun. 2011: Director and Senior Executive Officer
Apr. 2016:	Director and Executive Vice President(Current)		Chief Officer of Business Promotion
Division (Current)
Major Concurrent Positions
Jun. 2011:	Representative Director,
ALSOK LEASING CO., LTD. (Current)
Apr. 2014:	Representative Director,
ALSOK Souei Co., Ltd. (Current)
Apr. 2016:	Representative Director,
Japan Facilio Co., Ltd. (Current)		Representative Director,
Nippon Building Maintenance Co., Ltd.
(Current)Yoshiro Kuribayashi
Director
Executive Vice President
Special Adviser
Stationed Security Services / General
Property Management and Fire Protection
Services
Apr. 1974: Joined the Company
Apr. 2007:	General Manager of Human Resources
Department
Apr. 2009:	Executive Officer
Jun. 2011: Senior Executive Officer
Jun. 2014: Director and Senior Executive Officer
Jun. 2016:	Director and Executive Vice President(Current)		Special Adviser (Current)		In charge of Stationed Security Services/ General Property Management andFire Protection Services (Current)
Major Concurrent Position
Apr. 2016:	President and Representative Director,
ALSOK STATIONED SECURITY CO., LTD.
(Current)

Hirohisa Hokari
Director
Senior Executive Officer
Corporate Planning & Administration
Strategic Business
Deputy Chief Officer of Business
Promotion Division
Business Planning & Management
Financial Institutions
Investor Relations
Apr. 2010:	Director-General of Operations
Department at Bank of Japan		(Resigned in Jun. 2011)
Jun. 2011:	Joined the Company as Executive Officer
Feb. 2012:	Senior Executive Officer and Deputy
Chief Officer of Business Promotion
Division (Current)
Jun. 2014:	Director and Senior Executive Officer(Current)
Apr. 2016:	Corporate Planning & Administration(Current)		Strategic Business (Current)		Deputy Chief Officer of Business
Promotion Division (Current)		Business Planning & Management(Current)		Financial Institutions (Current)		
Investor Relations (Current)

Hiraku Otani
Director
Senior Executive Officer
Financial & Accounting
International Affairs
Internal Control
Chief Officer of International Affairs
Apr. 2008:	Executive Officer, Mizuho Corporate
Bank, Ltd. (Currently Mizuho Bank, Ltd.)		
(Resigned in Apr. 2010)
Jun. 2010: Joined the Company as Executive Officer		In charge of Financial & Accounting andInternal Control (Current)
Jun. 2011: Senior Executive Officer
Apr. 2013:	In charge of International Affairs(Current)
Apr. 2014:	Chief Officer of International Affairs(Current)
Jun. 2016:	Director and Senior Executive Officer(Current)

Yutaka Takehana

Masakazu Iwaki
Director (Outside Director)

Audit & Supervisory Board Member

Sep. 2001:	Director, Hiroshima Prefectural Police
Headquarters
Jun. 2003:	Vice Governor of Tokyo(Resigned in Jul. 2005)
Aug. 2005:	Director of Public Safety Department,
National Police Agency(Resigned in Jan. 2007)
Mar. 2007:	Consultant,Matsushita Electric Industrial Co. Ltd.
(Currently Panasonic Corporation)
Oct. 2007:	Member of Tokyo Metropolitan Board of
Education (Resigned in Sep. 2015)
Apr. 2008:	Executive Officer,
Matsushita Electric Industrial Co. Ltd.
(Currently Panasonic Corporation)
Apr. 2009:	Managing Executive Officer,
Panasonic Corporation(Resigned in Mar. 2013)
Jun. 2013:	President & CEO, Tokyo Big Sight Inc.
(Current)
Jun. 2015:	Joined the Company as Outside Director(Current)

Jun. 2010:	Representative and Executive Vice
President, Nippon Steel Corporation(Currently NIPPON STEEL & SUMITOMOMETAL CORPORATION, resigned inMar. 2014)
Apr. 2014:	Member of the Board, NIPPON STEEL &SUMITOMO METAL CORPORATION(Resigned in Jun. 2014)
Jun. 2014:	Executive Advisor, NIPPON STEEL &SUMITOMO METAL CORPORATION(Resigned in Jul. 2016)
Jun. 2016:	Joined the Company as Outside Director(Current)

Apr. 1978: Joined the Company
Jan. 2010:	General Manager of Finance &Accounting Department
Oct. 2012:	General Manager of General Affairs
Department
Jun. 2014: Chief Officer of Regional Division (VIII)
Jun. 2015:	Audit & Supervisory Board Member(Current)

Major Concurrent Position
Jun. 2013:	President & CEO, Tokyo Big Sight Inc.
(Current)

Makoto Uenoyama

Jun. 2007:	Director,
Matsushita Electric Industrial Co. Ltd.
(Currently Panasonic Corporation)
Apr. 2010:	Managing Director, Panasonic
Corporation (Resigned in Jun. 2012)
Jun. 2012:	Managing Executive Officer,
Panasonic Corporation(Resigned in Mar. 2013)
Apr. 2013:	Corporate Advisor, Panasonic
Corporation (Resigned in Mar. 2015)
Jun. 2013:	Joined the Company as Outside Audit &Supervisory Board Member (Current)

Jul. 1997: Joined the Company
Jun. 2007: Chief Officer of Home Marketing Division
Apr. 2010: Executive Officer
Mar. 2011:	Representative Director,
Japan Facilio Co., Ltd.
(Resigned in Mar. 2014)
Apr. 2014: Senior Executive Officer
		Deputy Chief Officer of Business
Promotion Division (Current)
Apr. 2016:	In charge of Human Resources andCorporate Ethics (Current)
Jun. 2016:	Director and Senior Executive Officer(Current)
Major Concurrent Position
Sep. 2014:	Representative Director,
SOHGO CORPORATION (Current)

Director (Outside Director)

Audit & Supervisory Board Member(Outside Audit & Supervisory Board
Member)Tsuyoshi Murai
Director
Senior Executive Officer
Human Resources
Corporate Ethics
Deputy Chief Officer of Business
Promotion Division

Masaki Tatsuguchi

Takeshi Oiwa
Audit & Supervisory Board Member(Outside Audit & Supervisory Board
Member)Ikuhiro Watanabe
Audit & Supervisory Board Member(Outside Audit & Supervisory Board
Member)Jun. 2007:	General Manager of Custodial
Department, The Norinchukin Bank
(Resigned in May 2009)
Jun. 2009:	Manager of Internal Audit Division,
Starzen Co., Ltd.
Apr. 2013:	Executive Officer and Manager of Legal
Department, Starzen Co., Ltd.
(Resigned in Sep. 2014)
Oct. 2014:	Corporate Advisor, Norinchukin
Research Institute Co., Ltd.
(Resigned in Jun. 2015)
Jun. 2015:	Joined the Company as Outside Audit &Supervisory Board Member (Current)

Apr. 2007:	Managing Executive Officer,
Sompo Japan Insurance Inc. (Currently
Sompo Japan Nipponkoa Insurance Inc.)
Jun. 2007:	Director and Managing Executive Officer,
Sompo Japan Insurance Inc. (Currently
Sompo Japan Nipponkoa Insurance Inc.)
Jun. 2010:	Director and Senior Managing Executive
Officer, Sompo Japan Insurance Inc.
(Currently Sompo Japan Nipponkoa
Insurance Inc.)
Jan. 2011:	Deputy President and Director,
Sompo Japan Insurance Inc.
(Currently Sompo Japan Nipponkoa
Insurance Inc., resigned in Mar. 2011)
Apr. 2011:	Audit & Supervisory Board Member,
Nippon Export and Investment Insurance(Current)
Jun. 2011:	Joined the Company as Outside Audit &Supervisory Board Member (Current)

Executive Officers
Motohisa Suzuki

Ikuji Kayaki

Masato Yagi

Akira Kono

Senior Executive Officer
General Affairs / PR
Procurement
Deputy Chief Officer of Security Operations
Deputy Chief Officer of Business Promotion
Division
HOME ALSOK
Compliance
Risk Management
Information Assets Management
Chief Officer of General Administration Dept.

Senior Executive Officer
Chief Officer of Security Operations
Structural Reform(Transportation Security Services)

Senior Executive Officer
Chief Officer of Regional Division (I)Executive Officer
Human Resources
General Manager of Human Resources Dept.

Masahiro Kawaguchi

Masashi Terao

Senior Executive Officer
Chief Officer of R&D Planning Dept.

Senior Executive Officer
West Japan
Deputy Chief Officer of Business
Promotion Division (Kansai)

Shigeki Nomura
Senior Executive Officer
Deputy Chief Officer of Business
Promotion Division (Central Japan)
Chief Officer of Regional Division (III)Takashi Kumagai
Executive Officer
Deputy Chief Officer of Management Company
Deputy Chief Officer of Regional Management
Deputy Chief Officer of R&D
Deputy Chief Officer of Business
Promotion Division
Sales Promotion
Corporate Customers

Shinichi Honjo

Koji Kishimoto

Norihiko Mizutani

Executive Officer
Second in charge of Financial & Accounting
General Manager of Financial & Accounting Dept.

Executive Officer
Chief Officer of Regional Division (VII)

Executive Officer
Chief Officer of Regional Division (II)Shigeyoshi Kuroki
Executive Officer
Chief Officer of Regional Division (V)ALSOK REPORT 201640

Financial Section
Management Indexes

2006

2007

2008

2009

Net sales

267,545276,560

284,996

285,004

Cost of sales

199,144

203,080

212,287

215,711Gross profit

68,40073,47972,70969,292

Selling, general and administrative expenses

56,15457,507

58,91359,349Operating income

12,246

15,972

13,795

9,943

Ordinary income

13,102

16,917

14,642

10,630

Profit attributable to owners of parent

5,550

7,558

7,653

4,224

Gross profit margin (%)

25.6

26.6

25.5

24.3

Operating income margin (%)

4.6

5.8

4.8

3.5

Ordinary income margin (%)

4.9

6.1

5.1

3.7

Return on assets (ROA) (%)

4.6

6.0

5.0

3.6

Return on equity (ROE) (%)

4.4

5.7

5.6

3.1

EV/EBITDA (Times)1

7.4

6.9

5.1

3.0

Equity capital ratio (%)

45.7

47.2

46.2

47.7

Equity capital ratio on market-value basis (%)

67.5

77.2

47.4

29.5

Interest-bearing liabilities (Millions of yen)

65,54461,042

74,48566,247

12.3

14.9

15.2

20.7

Total asset turnover ratio (Times)

0.9

1.0

1.0

1.0

Shareholders’ equity turnover ratio (Times)

2.1

2.1

2.1

2.1

Tangible fixed assets turnover ratio (Times)

4.6

4.8

5.0

5.0

1,274.27

1,322.82

1,356.35

1,364.33

52.91

74.71

75.07

41.90

Fiscal year ended March 31

Profit and loss (Millions of yen)

Profitability

Stability

Interest coverage ratio (Times)2
Efficiency

Per share information
Net assets per share (Yen)Profit attributable to owners of parent per share (Yen)Price-book value ratio (Times)

1.5

1.6

1.0

0.6

Price earnings ratio (Times)

35.7

28.9

18.5

20.2

Dividends per share (Yen)

17

20

20

20

Consolidated dividend payout ratio (%)

32.1

26.8

26.6

47.7

Closing stock price

1,887

2,160

1,390

845

24,70325,30226,01426,960

11.3

11.6

11.8

11.9

—

—

—

—

—

—

—

—

Other information
Number of employees (Consolidated)	Average number of years of continuous service(Non-consolidated)	Percentage of employees returning to work after childcare
leave (Non-consolidated, total for male and female employees)
CO2 emissions volume (Non-consolidated, t-CO2)

1. Method of calculation for EV/EBITDA is as follows:
EV (Enterprise value) = Market capitalization + Interest-bearing liabilities – Short-term liquidity (Cash and deposits + Short-term investments in securities)
EBITDA (Earnings before interest, tax, depreciation and amortization) = Operating income + Depreciation and amortization
2. Due to changes in the method of calculation, interest coverage ratios for the fiscal year ended March 31, 2006, and earlier are calculated differently from those in subsequentfiscal years.

41

ALSOK REPORT 2016

2010

2011

2012

2013

2014

2015

2016

278,579

279,272

304,723

315,564

328,209

365,749

381,818

210,097

209,364

232,812242,410

248,900

276,116

282,880

68,482

69,90871,91073,15379,30889,632

98,93759,211

59,555

61,10061,36360,37566,66069,901

9,270

10,352

10,81011,79018,932

22,971

29,036

10,81911,765

12,55814,741

20,74524,70030,667

4,563

4,706

3,903

8,574

10,955

13,534

17,868

24.6

25.0

23.6

23.2

24.2

24.5

25.9

3.3

3.7

3.5

3.7

5.8

6.3

7.6

3.9

4.2

4.1

4.7

6.3

6.8

8.0

3.8

4.2

4.4

5.1

6.5

6.9

8.5

3.3

3.3

2.7

5.7

7.0

7.8

9.9

2.3

1.4

1.4

2.7

5.3

10.1

13.4

50.9

50.3

51.3

52.1

46.2

48.4

51.9

39.4

32.0

34.8

46.5

63.5

110.1

175.4

51,31849,311

39,27037,45571,66673,69847,208

24.0

20.1

34.1

36.9

36.4

28.5

30.1

1.0

1.0

1.1

1.1

1.0

1.0

1.1

2.0

2.0

2.1

2.1

2.1

2.2

2.1

4.9

4.9

5.2

5.4

5.2

5.4

5.3

1,397.90

1,421.67

1,446.93

1,536.30

1,574.74

1,800.15

1,805.09

45.39

46.82

38.83

85.30

108.99134.65177.77

0.8

0.6

0.7

0.9

1.4

2.3

3.4

23.9

19.3

25.3

16.1

19.9

30.4

34.3

20

20

20

25

30

38

50

44.1

42.7

51.5

29.3

27.5

28.2

28.1

1,083

905

982

1,373

2,164

4,095

6,100

27,322

27,79027,86828,05428,091

31,221

31,446

12.3

12.7

13.3

13.8

14.4

14.9

15.4

92.2

90.2

93.3

97.6

92.4

96.6

93.0

40,871

39,96838,022

38,587

41,377

39,21237,390ALSOK REPORT 201642

Financial Section

Breakdown of Sales / Number of Contracts

Net Sales by Service Type
Billions of yen

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Security Services
Electronic Security Services

143.2

143.9

142.5

138.9

138.4

142.9

147.1

151.8

160.4

167.1

Stationed Security Services

70.9

72.7

72.8

70.6

71.3

71.3

73.8

77.2

88.4

93.9

Transportation Security Services
General Property Management andFire Protection Services1
Long-Term Care Services
Other Services

44.5

46.6

47.4

46.8

47.6

49.8

50.8

51.0

52.3

54.6

―

―

―

―

17.0

36.6

40.6

44.8

58.3

54.9

―
17.8

―
21.6

―
22.2

―
22.1

―
4.7

―
4.0

―
3.0

0.5
3.1

3.1
3.1

7.5
3.5

Total

276.5

284.9

285.0

278.5

279.2

304.7

315.5

328.2

365.7

381.8

1. G
 eneral Property Management and Fire Protection Services was converted to a reportable segment in the fiscal year ended March 31, 2012, and accordingly net sales amounts forthis segment are displayed separately from the fiscal year ended March 31, 2011, and onward. Net sales amounts for fiscal years ended March 31, 2010, and prior are included
under “Other Services.”¥381.8 billion

Billions of yen

400

300

200

100

0

07

FY

Electronic Security Services

08

Stationed Security Services

09

10

Transportation Security Services

11

12

13

14

General Property Management and Fire Protection Services

15

16Long-Term Care Services

Other Services

Net Sales by Client Type
Billions of yen

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Business corporations2Financial institutions2

156.7
86.0

162.7
90.0

164.8
90.4

163.1
85.7

160.9
88.3

178.4
90.7

186.5
89.8

196.7
90.5

224.9
91.3

234.3
92.3

Public institutions2Individuals3

24.2
9.4

22.4
9.8

19.6
10.0

19.5
10.1

19.3
10.6

20.5
14.9

22.0
17.1

22.8
18.0

26.4
22.9

26.2
28.9

Total

276.5

284.9

285.0

278.5

279.2

304.7

315.5

328.2

365.7

381.8

2. In conjunction with the conversion of Japan Post to a privately operated company in October 2 007, sales to Japan Post Co., Ltd., have been transferred from “Public institutions”
to “Business corporations” and sales to Japan Post Bank Co., Ltd., and Japan Post Insurance Co., Ltd., have been transferred to “Financial institutions.” Sales to subsidiaries offinancial institutions were previously included under “Business corporations” but have since been transferred to “Financial institutions.”
3. Sales of HOME ALSOK APARTMENT AND CONDOMINIUM PLAN and HOME ALSOK MIMAMORI SUPPORT have been included under “Individuals,” even for contracts in which the customer is a business corporation or government office.

¥381.8 billion

Billions of yen

400

300

200

100

0

07

FY

Business corporations

43

ALSOK REPORT 2016

Financial institutions

08
Public institutions

09

10
Individuals

11

12

13

14

15

16

Number of Contracts
Contracts

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Security Services
Electronic Security Services

462,913487,228

507,954524,708

541,654580,263

630,977

677,672

803,601

854,083

		Corporate Clients

359,344

372,196

381,759

388,853

396,580

406,261

422,676

440,028

463,053478,925

		Individual Users

103,569

115,032

126,195

135,855

145,074

174,002

208,301

237,644

340,548

375,1585

Stationed Security Services

2,843

2,922

2,854

2,785

2,866

2,934

3,020

3,227

3,597

3,970

Transportation Security Services
General Property Management andFire Protection Services4Long-Term Care Services
Other Services

32,98033,39733,96035,96339,06548,284

51,69855,42059,134

62,146————44,212

47,91354,90363,00473,89881,908―57,425―56,099―43,171―42,909

―
8,307

―
8,957

―
11,989―13,725

7,043
15,434

12,804
18,217

Total

556,161

579,646587,939

606,365

636,104

688,351

752,587

813,048962,707

1,033,128

4. G
 eneral Property Management and Fire Protection Services was converted to a reportable segment in the fiscal year ended March 31, 2012, and accordingly the number ofcontracts for this segment is displayed separately from the fiscal year ended March 31, 2011, and onward. The number of contracts for fiscal years ended March 31, 2010,
and prior is included under “Other Services.”
5. If contracts for individual households in housing complexes are included, this figure would be approximately 920,000.

Number of Contracts for Corporate Clients

478,925 contracts

Contracts

500,000

400,000

300,000

200,000

100,000

0
FY

07

08

09

10

11

12

13

14

15

16

Number of Contracts for Individual Users
Contracts

375,158 contracts
5400,000

300,000

200,000

100,000

0
FY

07

08

09

10

11

12

13

14

15

16

ALSOK REPORT 201644

Management’s Discussion and Analysis

Analysis of Business Performance
Operating Environment
Consolidated Financial Results for the Fiscal Year Ended March
31, 2016 (April 1, 2015 – March 31, 2016)
In the year under review, the general trend toward modest recovery
continued in Japan, but the sense of opaqueness in the economy
grew slightly during the second half of the fiscal year. Moreover,
several trends appeared that present the risk of placing downward
pressure on the domestic economy. These trends included stagnant
consumer spending stemming from poor growth in wages as wellas increased uncertainty in the global economy arising from
economic slowdown and geopolitical risks in China, Europe, andemerging countries.

reductions by improving efficiency in security operation divisions by
having human resources handle a broader range of functions.
Due to the above factors, net sales rose 4.4% year on year, to¥381,818 million; operating income was up 26.4%, to ¥29,036 million;
ordinary income rose 24.2%, to ¥30,667 million; and profit attributableto owners of parent increased 32.0%, to ¥17,868 million.

Sales by Business Segment

Operating Results
In this environment, based on its policy of “responding accurately tocustomers’ various risks and outsourcing needs,” the ALSOK Group
continued working to strengthen and expand its mainstay security
services operations while also growing businesses in peripheral fields
that are highly compatible with security services, such as long-termcare and building maintenance. At the same time, we pursued cost

Security Services
Electronic Security Services
In Security Services, the Electronic Security Services segment
promoted sales of Control System S-860 as well as ALSOK-GV(read as “ALSOK G-five”), a service that combines Internet-based
security services utilizing image monitoring with ALSOKInformation Service, which allows for information regarding whenemployees arrive at or leave premises to be viewed online while
also providing Internet-based remote control functionality forequipment. In addition, October 2015 saw the launch of the new
ALSOK Image Cloud Service. This affordable yet highly functional
service provides safe, cloud-based storage for images recorded by
security cameras and enables the stored images to be viewed via
the Internet on a smartphone or PC. We also deployed wide-ranging
initiatives to respond to demand for stronger security to protect
against leakage of confidential information, which included taking
steps to address the Social Security and Tax Number System (“MyNumber” system).
These initiatives resulted in higher revenues from sales of accessmanagement systems, security cameras, and other equipment.
In services for individual users, we witnessed smooth progressin orders for the HOME ALSOK APARTMENT AND CONDOMINIUM
PLAN, a service for housing complexes, as well as services forprotecting the safety of senior citizens provided to municipal
governments. Also during the year under review, we enhanced our

Net Sales

Ordinary Income / Ordinary Income Margin

In regard to public safety in Japan, crime is declining rapidly, as
indicated by the fact that the number of reported crimes in 2015
reached a new post-World War II low. However, there seems to be
no end to the occurrence of crimes that affect people’s everyday
lives, such as crimes targeting women and children and specialcase scams aimed at senior citizens. As the same time, the rangeof risks faced by society is diversifying, now including such threats
as cybercrimes, information leaks, natural disasters, and frequently
occurring international terrorism. ALSOK thus realizes the need for
it to provide a wide range of services that respond to social needs
as a company responsible for an important piece of social infrastructure supporting the safety and security of society.

(Millions of yen)(%)

400,000¥381,818 million 12.0

325,000

9.0

250,000

6.0

175,000

3.0

0
FY

12

13

14

15

16

(Millions of yen)(%)

35,00010.0¥30,667 million

30,0000

6.0

20,0004.0

15,0002.0

12

Ordinary Income

45

ALSOK REPORT 2016

8.0

25,000

0
FY

8.0%

13

14

Ordinary Income Ratio

15

16

0

product lineup with the launch of Home Security Basic, the newstandard of home security services equipped with cutting-edge
features that respond to such trends as the rapid spread of smartphones and the diversification of the communication methods
available to different homes.
Stationed Security Services
In the Stationed Security Services segment, orders for stationed
security at commercial complexes as well as orders for temporary
security at events contributed to higher sales. At the same time,
we realized further sales growth by acquiring orders in new fields,such as train station management and wholesale market security.
Transportation Security Services
In the Transportation Security Services segment, orders for the
Total ATM Management System buoyed sales amid a growing trend
toward outsourcing operation and management of ATMs installedin financial institutions and convenience stores.
Due to the above, net sales in the Security Services segment
increased 4.8% year on year, to ¥315,730 million, and operating
income rose 21.5%, to ¥32,707 million.
General Property Management and Fire Protection Services
In the General Property Management and Fire Protection Services
segment, we bolstered intra-Group coordination in order to strengthen
our system for providing one-stop response to customer needs
related to the maintenance, management, and operation of buildings,
condominiums, and other facilities, resulting in the smooth acquisition of facility-related orders. In addition, sales were up for
ALSOK Aerial Photography Services, which utilize aerial robots toefficiently manage large-scale solar power installations and help
maintain high levels of generation efficiency, as well as for fire
extinguishing equipment and charging facilities for electric vehicles.
However, revenue from installation work was down. As a result, net

Number of Electronic Security Services Contracts

sales in the General Property Management and Fire Protection
Services segment decreased 5.7% year on year, to ¥54,976 million,
while operating income increased 10.1%, to ¥4,376 million.
Long-Term Care Services Services / Other Services
In the Long-term Care Services / Other Services segment, net sales
increased 77.1% year on year, to ¥11,110 million, and operating
income rose 40.7%, to ¥729 million, as a result of the improved
performance of HCM Corporation and ALSOK Care & Support Co.,
Ltd., which were both consolidated in the fiscal year ended March
31, 2015. Going forward, the Group will fully leverage its management resources to develop its conventional long-term care service
operations while also creating new hybrid services by fusing
security services and long-term care.
Analysis of Individual Items
In the year under review, net sales increased ¥16,068 million, or4.4%, year on year, to ¥381,818 million.
Cost of sales was ¥282,880 million, primarily due to a ¥3,978
million increase in labor costs and a ¥5,601 million increase in
miscellaneous expenses.
Selling, general and administrative expenses amounted to¥69,901 million due to a ¥1,053 million increase in salaries andallowances.
Ordinary income rose ¥5,966 million, or 24.2%, to ¥30,667 million.
Extraordinary income was up due to a ¥58 million increase in gainon sales of investment securities and a ¥19 million increase incompensation income.
Extraordinary loss rose as a result of a ¥75 million increase inimpairment loss.
Profit attributable to owners of parent increased ¥4,334 million,
or 32.0%, to ¥17,868 million.

Number of Contracts for Individual Users(Contracts)(%)(Contracts)

1,000,000

12.0

400,000(%)

750,000

9.0

300,000

9.0

500,000

6.0

200,000

6.0

250,000

3.0

100,000

3.0

375,158 contracts

854,083 contracts

0
FY

08

09

10

11

12

13

14

15

16

0

0
FY

08

09

10

11

12

13

14

15

16

0

ALSOK REPORT 201646

Forecast for the Fiscal Year Ending March 31, 2017
In the fiscal year ending March 31, 2017, the benefits of various
government measures will be felt in the Japanese economy.
However, we will need to remain wary of the opaque nature ofoverseas markets as well as developments in the financial market
and trends in corporate business confidence.
In the security industry, traditional security needs will remainpresent. At the same time, we expect to see expanding business
opportunities resulted from the accelerated development of bothtangible and intangible social infrastructure as part of post-earthquake reconstruction efforts, national resilience improvement
plans, and preparations for large-scale events. However, intensifiedcompetition, due in part to decreases in earnings among financial
institutions resulted from Japan’s negative interest rate policy, isforecast to create a harsh operating environment for the security
industry during the fiscal year ending March 31, 2017. Successunder these difficult conditions will require that we promote thefurther differentiation of our products and services.
ALSOK has always been a company that protects the bodies,
lives, and assets of its customers, and it has continued to build
upon its security services track record since its establishment.
In addition to growing its security services operations, the entire
Group will actively develop businesses in peripheral fields going
forward as it creates products and services that live up to customer
expectations and improve its business performance.
In the fiscal year ending March 31, 2017, the ALSOK Group
forecasts net sales of ¥425,000 million, up 11.3% year on year;
operating income of ¥32,800 million, up 13.0%; ordinary income of¥35,000 million, up 14.1%; and profit attributable to owners of parentof ¥22,000 million, up 23.1%, results that will be achieved throughthe implementation of initiatives such as those described above.

Total Assets / ROA

AssetsTotal assets at the end of the year under review decreased ¥24,301
million, or 6.5%, from the previous fiscal year-end, to ¥349,561
million. Total current assets decreased ¥22,432 million, or 10.7%,
to ¥188,013 million, and total noncurrent assets decreased ¥1,869
million, or 1.1%, to ¥161,548 million.
The ¥22,432 million decrease in current assets was primarily due
to a ¥3,363 million decrease in cash and deposits, and a ¥23,617
million decrease in cash for Transportation Security Services,which offset a ¥1,623 million increase in notes and accounts
receivable–trade.
The ¥1,869 million decrease in noncurrent assets was mainly
attributable to a ¥1,022 million decrease in goodwill and a ¥9,173
million decrease in net defined benefit asset, which offset a ¥4,175
million increase in buildings and structures, net and a ¥5,222 million
increase in deferred tax assets.
Liabilities
Total liabilities at the end of the year under review decreased¥25,560 million, or 15.1%, from the previous fiscal year-end, to¥143,939 million. Total current liabilities decreased ¥43,242 million,or 33.1%, to ¥87,222 million, and total noncurrent liabilities
increased ¥17,681 million, or 45.3%, to ¥56,717 million.
The ¥43,242 million decrease in current liabilities was a result offactors such as a ¥38,415 million decrease in short-term loans payable
and a ¥5,501 million decrease in accrued consumption taxes.
The ¥17,681 million increase in noncurrent liabilities was due toa ¥10,013 million increase in long-term loans payable and a ¥5,725
million increase in net defined benefit liability.

Total Net Assets / ROE(Millions of yen)(%)

(Millions of yen)(%)

450,000

15.0

250,000

16.0

370,000¥349,561million 12.0

200,000

290,000

9.0

8.5%

210,000

6.0

130,000

3.0

0
FY

12

Total Assets

47

Financial Position

ALSOK REPORT 2016

13
ROA

14

15

16

¥205,622 million

12.0

9.9%
150,000

8.0

100,000

4.0

0

0
FY

12

Total Net Assets

13
ROE

14

15

16

0

Net Assets
Total net assets at March 31, 2016, were up ¥1,258 million, or 0.6%,
from the previous fiscal year-end, to ¥205,622 million.
Cash and Cash Equivalents
The balance of cash and cash equivalents (hereafter referred to as“cash”) at March 31, 2016, was ¥35,630 million, down from ¥37,976
million at March 31, 2015. This decrease was because net cash
provided by operating activities was ¥19,678 million, net cash used
in investing activities was ¥12,808 million, and net cash used infinancing activities was ¥9,176 million.
Cash flows from operating activities
As a result of our operating activities in the year under review, net
cash provided by operating activities increased 0.1% year on year, to¥19,678 million. Principal items increasing cash included ¥30,682
million in income before income taxes, an increase of 24.5% year
on year, and ¥12,109 million in depreciation and amortization, an
increase of 6.9%. Conversely, major items decreasing cash included¥3,538 million in decrease in assets and liabilities for Transportation
Security Services, a decrease of 69.6%; ¥8,378 million in income
taxes paid, a decrease of 2.3%; and ¥2,083 million in increase in net
defined benefit asset, an increase of 5.8%.
Increase (decrease) in assets and liabilities for Transportation
Security Services includes the increases and decreases in funds
procured for transportation security services that are included in cash
for Transportation Security Services and short-term loans payable.
Cash flows from investing activities
Net cash used in investing activities in the year under review was¥12,808 million, a 47.3% year-on-year decrease. The primary factors
were ¥13,736 million in purchase of property, plant and equipment,
up 13.0% from the previous fiscal year, and ¥2,692 million inpurchase of investment securities, up 192.9%.
Cash flows from financing activities
Net cash used in financing activities was ¥9,176 million, comparedwith net cash provided by financing activities of ¥6,596 million in
the previous fiscal year. Principal items increasing cash included¥12,690 million in proceeds from long-term loans payable, a yearon-year increase of 1,279.3%. Conversely, major items decreasing
cash included ¥10,900 million in net decrease in short-term loans
payable, compared with net increase in short-term loans payableof ¥15,802 million in the previous fiscal year; ¥4,071 million in cash
dividends paid, an increase of 15.7%; and ¥3,519 million in repaymentof long-term loans payable, an increase of 2.1%.

Dividend Policies
The ALSOK Group considers the return of earnings to shareholders
to be a top management priority, and its basic policy is to distributeprofits to shareholders based on its operating results while fortifying
internal reserves. The Group uses internal reserves for investments
in R&D required for future growth and development, qualitative
upgrades to information systems, and capital investment for new
businesses as it works to improve corporate value.
Also, it is the policy of the ALSOK Group to issue dividends fromretained earnings twice a year as interim and year-end dividends.
The year-end dividend is decided at the General Shareholders’ Meeting,while the interim dividend is decided by the Board of Directors.
Accordingly, for the fiscal year ended March 31, 2016, in consideration of results in the year under review, results forecasts for thecurrent fiscal year, and capital investment plans, the Company paid
an annual dividend of ¥50.00 per share, including an interim dividendof ¥20.00 per share, for a consolidated payout ratio of 28.1%.
Risk Information
In relation to the ALSOK Group's business and accounting circumstances, the following items can potentially have significant effects
on the judgment of investors. Future-related information mentioned
below was deemed appropriate by the Group as of June 24, 2016,
the date on which the 51th Securities Report was filed.
1. Sales Depending on a Specific Business Sector
Sales from the financial institutions sector accounted for over 20%of the Group's total sales in the fiscal year ended March 31, 2016.
Consequently, trends in the economic environment surrounding
financial institutions, including the possible cancellations of existing
security service contracts due to the elimination or consolidation of
branch locations, can have a considerable effect on the Group’s
operating performance. Therefore, the Group will continue toaggressively advance sales promotion toward other business sectors
in order to find new clients as well as maintain and develop the firm
relationship with existing clients in the financial institutions sector.
2. Electronic Security Services BusinessOf the Group's total sales, 43.8% are dependent on the Electronic
Security Services business. The effective operation of the Electronic
Security Services business requires continuous capital investment
for structuring and maintaining operational infrastructures such as
the preparation of Guard Centers and depots, vehicles for Electronic
Security Services and communication systems, as well as personnel
expenses for Guard Center staff and security staff. Should theGroup fail to enter into a certain volume of Electronic Security
Services contracts due to any of a wide range of factors associatedwith the Group's Electronic Security Services business, the Group's
operating performance can be affected. Therefore, we have tried todiversify our business so that we can minimize business risks.

ALSOK REPORT 201648

3. Cash for Transportation Security Services
The Group uses its own funds or funds financed through overdrafts
as cash to be used in the CD machines installed by the subsidiaries
of financial institutions in their business partners' stores and offices
or cash used to deposit advances for Cash Deposit Machine On-line
System contracts. For this reason, should there be an increase ininterest rates associated with cash procured for these purposes,
the Group's operational performance could be adversely affected.
Consequently, the Group must renegotiate the pricing conditions
defined in contracts between the Group and its clients. Furthermore,
the Company has subscribed to cash securities transport insurance
to cover any damage or loss that may occur during the transportation or storage of such cash.
4. Dependency on a Specific Equipment Supplier
The Group mostly depends on specific companies for development
and provision of the center equipment installed in the Guard
Centers. Should any difficulty arise in the provision of such center
equipment due to natural disasters or other reasons, the normal
operation of the Guard Centers could be affected. As for provision
involving the center equipment as well as main equipment used forthe offer of Electronic Security Services, the Group enters into amaster agreement for commodity purchases to provide for anticipated quantities of items. Furthermore, the Group holds certain
levels of spare items for maintenance to allow for emergencies.
5. Adaptation to Changes in the Technological Environment
The development of security-related equipment and the adoption ofstate-of-the-art ICT technologies are indispensable to the Group's
adequate provision of security services, since we need to deal with“increasingly complicated and heinous crimes,” “expansion in crime
fields such as cyberattacks, etc.,” “obsolescence of existing facilities
due to the sophistication of information communication infrastructures,” and “advances in a wide range of operations applying ICT
technology”. Should our adaption to technological progress fallbehind the changes in the technological environment, the Group's
operating performance could be negatively affected. Therefore, the
ALSOK Group continues to make efforts in the development of
security-related equipment and advanced ICT technologies principallyin the R&D Department of the Group. At the same time, we work to
avoid risk by staying abreast of the latest technology trends incommunications, devices and, other technologies.
6. Management of Client Information
In order to conclude a security service contract with clients, theGroup obtains a significant amount of information about themincluding their names, addresses and phone numbers of relatedparties, as well as various information about the clients' premises
where security services are to be provided, and utilizes that essential
information for the execution of security services and businessactivities. If any problem, whether inevitable or not, should arise,
49

ALSOK REPORT 2016

the Group may suffer for unfavorable reputation and legal claim fordamages. We, therefore, manage client information properly throughemployee education and careful observation of subcontractors.
These measures enable us to avoid leaking, losing, and deleting
personal information. As a further precaution, the ALSOK Grouphas Leakage of Personal Information Insurance, which covers all
Group companies.
7. Ensuring Human Resources
In recent years, Japanese society has been rapidly aging due to a
combination of extended average life expectancy and a plunge inthe birthrate. Although it can be anticipated that these trends willlead to a rise in the need for ALSOK's security services, it could
become more difficult to recruit younger workers in this laborintensive industry. We established a recruitment association withthe aim of strengthening the cooperative structure in recruitmentof the Group companies. We also established a company to re-employ
experienced retired workers to secure high-quality labor as a groupwhole. In addition, we correspond to demands such as applicants ofhomecoming as possible and will keep the environment for employees
to continuously work in the Group. Furthermore we established a
new company which reemploys experienced retired workers for the
purpose of securing a high-quality labor force. In addition, formulation for more efficient operational structure is in progress by the
introduction of security services and security robots which utilize ICT.
8. Legal Restrictions
In order to provide our clients with various security and other services,
the Group is subject to a variety of legal restrictions, including major
ones stated in the table below. Should any of these legal restrictions
be amended or abolished, or any new legal provisions established,
the Group's operating performance could be affected.
9. Measures in Relation to Natural and Other Disasters
In the event in which unprecedented natural disaster were to occur,
normal signal transmission / reception from / to the clients would
become unavailable, causing serious difficulties such as thesuspension of our security services. In such cases, the resulting
claims for damages and the decline in public trust of the Group could
affect the operating performance and future business developmentof the Group. In addition, the Group may be compelled to pay huge
expenses to recover damaged Guard Centers and other facilities.
The Group has made backups for the Guard Centers through the
Support Center to prepare for damage caused by natural disasteras a business continuity plan (BCP) of security system. Moreover,the Group established system servers, which receive a security
alarm signal from throughout Japan, in two Network Centers andmake a backup system according to the priority. Preparing for
major wide-area natural disaster, the Group will reduce risk by
taking measures for each stage.

10. Risk of Massive Disasters
Should a major earthquake occur, or there be wind and flood
damage, and following disasters such as long-term power failure
occur, the Group's networks or other operational infrastructure
could stop functioning, which may disrupt its ability to provide
security and other services. Moreover, such disasters could
damage the Group's assets, such as security equipment locatedon clients' premises, forcing the Group to repair or replace thoseassets. As a result, the Group's operating performance or financial
position could be adversely affected. Therefore, the Group has
developed a number of precautionary measures based on its wealthof security-related experience and expertise. It has formulated
disaster response rules in accordance with disaster response

Major Operation

Electronic Security Services
Stationed Security Services
Transportation Security Services
Electronic Security Services
General Property Management andFire Protection Services

regulations, established a BCP and other response manuals,
stockpiled necessary disaster prevention items, and developed aflexible nationwide response network. It also conducts periodic
disaster prevention training and education and other precautionary
measures. As an approach to not let the ATMs suspend operation if
at all possible in the event of natural disaster, we obtained ISO 22301
certification in March 20, 2014. This will be the nation’s first as asecurity service targeting at Transportation Security Services whichcharges cash for ATMs the ALSOK Group manages and troubleshooting operation for ATMs. Hereafter, the Group will enhance thestructure and contribute to the preservation of social infrastructure.

Relevant Laws

Competent Authorities, etc.

Security Business Law / Road Traffic Law

National Public Safety Commission

Act against Delay in Payment of Subcontract Proceeds, Etc. to­Subcontractors

Japan Fair Trade Commission,
Small and Medium Enterprise Agency

Telecommunications Business Law / Radio Law

Ministry of Internal Affairs and Communications

Construction Business Act

Ministry of Land, Infrastructure, Transport andTourism

Act on Ensuring Fair Electric Business Practices

Ministry of Economy, Trade and Industry

Electrical Appliance and Material Safety Act

Ministry of Economy, Trade and Industry

Electronic Security Services

The Specified Commercial Transaction Act

Ministry of Economy, Trade and Industry /Consumer Affairs Agency

Consumer Contract Act

Consumer Affairs Agency

Transportation Security Services,Long-term Care, and Other Services

Truck Transport Business Law / Freight Forwarding Business Law /Road Trucking Vehicle Law

Ministry of Land, Infrastructure, Transport andTourismTransportation Security Services

Warehousing Business Law

Ministry of Land, Infrastructure, Transport andTourism

Act on Penal Detention Facilities and Treatment of Inmates and Detainees

Ministry of Justice

Act on Special Districts for Structural Reform

Cabinet OfficeFire and Disaster Management Act

Ministry of Internal Affairs and Communications

Fire Prevention Ordinance

Each municipality

Pharmaceutical and Medical Device Act /Act on Maintenance of ­Sanitation in Buildings

Ministry of Health, Labour and Welfare

Waste Disposal Act

Ministry of the Environment

Building Lots and Buildings Transaction Business Law / Architect Act /Act on Advancement of Proper Condominium Management

Ministry of Land, Infrastructure, Transport andTourism

Electricity Business Act / Law Concerning the Securing of Safety and the
Optimization of Transaction of Liquefied Petroleum Gas

Ministry of Economy, Trade and Industry

Correspondence Delivery Act

Ministry of Internal Affairs and Communications

Worker Dispatching Act / Employment Security Act

Ministry of Health, Labour and Welfare

Long-Term Care Insurance Act

Ministry of Health, Labour and Welfare / Each prefecture /Each municipality

Insurance Business Law / Financial Instruments and Exchange Act /Act on Prevention of Transfer of Criminal Proceeds

Financial Services Agency

Law About the Adequacy of Duties of the Detective Business

National Public Safety Commission

Personal Information Protection Law

Consumer Affairs Agency / Ministry of Economy,
Trade and Industry / National Public Safety Commission

Act on Special Measures to Prevent and Correct Shift for Consumption Tax

Japan Fair Trade Commission / Small and Medium
Enterprise Agency / Consumer Affairs Agency /National Public Safety Commission

Act Against Unjustifiable Premiums and Misleading Representations

Consumer Affairs Agency

Stationed Security Services

General Property Management andFire Protection Services

Long-term Care and Other Services

ALSOK REPORT 201650

Financial Section

Consolidated Balance Sheets

Millions of yen
As of March 31, 2016 and 2015

AssetsCurrent assets
		 Cash and deposits
		 Cash for Transportation Security Services
		 Notes and accounts receivable–trade
		 Lease receivables and investment assets
		 Short-term investment securities
		 Raw materials and supplies
		 Costs on uncompleted construction contracts
		Advances paid
		 Deferred tax assets
		Other
		 Allowance for doubtful accounts
		 Total current assets
Noncurrent assets
		 Property, plant and equipment
			Buildings and structures
				Accumulated depreciation
				Buildings and structures, net
			 Machinery, equipment and vehicles
				Accumulated depreciation				 Machinery, equipment and vehicles, net
			Land			Lease assets
				Accumulated depreciation
				Lease assets, net
			Construction in progress
			Other				Accumulated depreciation
				Other, net
			 Total property, plant and equipment
		Intangible assets
			Software
			Goodwill
			Other			Total intangible assets
		 Investments and other assets
			Investment securities
			Long-term loans receivable			 Lease and guarantee deposits
			Insurance funds
			 Net defined benefit asset
			Deferred tax assets
			Other			 Allowance for doubtful accounts
			 Total investments and other assets
		 Total noncurrent assets
Total assets

51

ALSOK REPORT 2016

2015

2016

46,11396,76044,020
3,108
861
4,759
393
6,301
1,868
6,502
(243)
210,445

42,75073,14245,643
4,114
419
6,150
436
6,030
1,880
7,682
(236)
188,01342,599(23,758)
18,840124,784(106,286)
18,49823,21911,063(6,126)
4,937
2,712
13,310(9,814)
3,495
71,70447,269(24,252)
23,016
127,800(108,573)
19,22723,18013,394(6,712)
6,682
1,274
14,340(10,381)
3,958
77,340

4,192
11,172
1,489
16,853

4,033
10,1491,210
15,394

38,629
395
8,039
2,053
9,514
5,587
11,192(552)
74,859163,418
373,863

37,633
350
8,282
1,955
341
10,8109,788(347)
68,813
161,548
349,561Millions of yen
As of March 31, 2016 and 2015

Liabilities
Current liabilities
		 Notes and accounts payable–trade
		 Short-term loans payable		 Current portion of long-term loans payable		 Current portion of bonds
		Accounts payable–other		Lease obligations
		 Income taxes payable
		 Accrued consumption taxes
		 Provision for bonuses
		 Provision for directors’ bonuses
		 Deferred tax liabilities
		Other		 Total current liabilities
Noncurrent liabilities
		Bonds payable
		 Long-term loans payable		Lease obligations
		 Deferred tax liabilities
		 Deferred tax liabilities for land revaluation
		 Net defined benefit liability
		 Provision for directors’ retirement benefits
		 Asset retirement obligations
		Other		 Total noncurrent liabilities
Total liabilities

Net Assets
Shareholders’ equity
		Capital stock		Capital surplus
		Retained earnings
		Treasury stock		 Total shareholders’ equity
Valuation and translation adjustments
		 Valuation difference on available-for-sale securities
		 Revaluation reserve for land		 Foreign currency translation adjustment
		 Remeasurements of defined benefit plans, net of tax
		 Total valuation and translation adjustments
Non-controlling interest
Total net assets
Total liabilities and net assets

2015

2016

23,94659,5383,459
64
15,680
2,775
4,232
8,544
1,460
186
0
10,576130,464

22,602
21,1222,616
64
15,357
3,192
6,188
3,043
1,470
137
2
11,42487,222

115
1,915
5,832
615
332
25,484
1,725
68
2,946
39,035
169,500

51
11,928
8,235
332
314
31,210
1,669
75
2,900
56,717
143,939

18,675
32,117130,753(1,989)179,557

18,675
32,117
144,551(1,991)
193,352

8,235(5,293)173(1,725)
1,389
23,415204,363
373,863

6,570(5,286)113(13,309)(11,912)24,182
205,622349,561

ALSOK REPORT 201652

Financial Section

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

Consolidated Statements of Income

Millions of yen

Fiscal years ended March 31, 2016 and 2015

2015

2016

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Gain on sales of investment securities
Rent income
Gain from insurance claim
Equity in earnings of affiliates
Amortization of negative goodwill
Penalty income
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on sales of investment securities
Loss on retirement of noncurrent assets
Financing expenses
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Compensation income
Total extraordinary income
Extraordinary loss
Loss on valuation of investment securities
Impairment loss
Loss on extinguishment of tie-in shares
Total extraordinary loss
Income before income taxes
Income taxes–current
Income taxes–deferred
Total income taxes
Net income
Profit attributable to non-controlling interest
Profit attributable to owners of parent

365,749
276,116
89,632
66,66022,971

381,818
282,880
98,937
69,901
29,036

249
548
159
247
89
641
60
268
952
3,217

209
617
24
263
63
790
—
358
739
3,066

689
0
228
290
279
1,488
24,700

652
7
217
297
260
1,436
30,667

2
13
16

60
33
93

49
0
13
63
24,653
8,653
1,127
9,780
14,872
1,337
13,5342
75—
77
30,682
10,429855
11,284
19,398
1,529
17,868

Consolidated Statements of Comprehensive Income
Fiscal years ended March 31, 2016 and 2015

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Revaluation reserve for land
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Share of other comprehensive income (loss) of associates accounted for using equity method
Total other comprehensive income (loss)
Comprehensive income(Contents)
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interest

53

ALSOK REPORT 2016

Millions of yen

2015

2016

14,872

19,398

2,413
33
29
4,416
335
7,228
22,100(1,787)17(23)(11,742)(111)(13,648)
5,749

20,400
1,700

4,566
1,183

Consolidated Statements of Changes in Net Assets

Millions of yen
Shareholders’ equity

Balance as of April 1, 2014

Capital stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders’equity18,675

32,117

114,961(1,988)

163,766

5,776

Cumulative effects of changes in accounting policies
Balance at the beginning of current period reflecting changes inaccounting policies

18,675

32,117

120,738

5,776(1,988)

169,542

Changes of items during the period
Dividends from surplus(3,518)(3,518)

Profit attributable to owners of parent

13,534

13,534(0)Purchase of treasury stock(0)Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of March 31, 2015——

10,015(0)

10,015

18,675

32,117130,753(1,989)179,557

Non-controllinginterest

Total net assets

21,914

180,205

190

5,966

22,104

186,171

Valuation and translation adjustments

Balance as of April 1, 2014
Cumulative effects of changes in accounting policies
Balance at the beginning of current period reflecting changes inaccounting policies

Valuation difference
on available-forsale securities

Revaluation
reserve for land

Foreign currencytranslation
adjustment

Remeasurementsof defined benefit
plans, net of tax

Total valuation andtranslation
adjustments

5,969(5,343)46(6,148)(5,475)

5,969(5,343)46(6,148)(5,475)

Changes of items during the period
Dividends from surplus(3,518)

Profit attributable to owners of parent

13,534(0)Purchase of treasury stockNet changes of items other than shareholders’ equity

2,266

49

126

4,423

6,865

1,311

8,176

Total changes of items during the period

2,266

49

126

4,423

6,865

1,311

18,192

Balance as of March 31, 2015

8,235

(5,293)173(1,725)

1,389

23,415204,363
Millions of yen
Shareholders’ equity

Balance as of April 1, 2015

Capital stock

Capital surplus

Retained earnings

Treasury stock

Total shareholders'equity18,675

32,117130,753(1,989)179,557—

Cumulative effects of changes in accounting policies
Balance at the beginning of current period reflecting changes inaccounting policies

18,675

32,117130,753(1,989)179,557

Changes of items during the period
Dividends from surplus(4,071)(4,071)

Profit attributable to owners of parent

17,86817,868(2)

Purchase of treasury stock(2)

Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance as of March 31, 2016——

13,797(2)

13,794

18,675

32,117

144,551(1,991)

193,352

Non-controllinginterest

Total net assets

23,415204,363

Valuation and translation adjustments

Balance as of April 1, 2015
Cumulative effects of changes in accounting policies
Balance at the beginning of current period reflecting changes inaccounting policies

Valuation difference
on available-forsale securities

Revaluation
reserve for land

Foreign currencytranslation
adjustment

Remeasurementsof defined benefit
plans, net of tax

Total valuation andtranslation
adjustments

8,235(5,293)173(1,725)

1,389

—
8,235

(5,293)173(1,725)

1,389

23,415204,363

Changes of items during the period
Dividends from surplus(4,071)

Profit attributable to owners of parent

17,868(2)

Purchase of treasury stock
Net changes of items other than shareholders’ equity(1,665)

7(59)(11,584)(13,302)766(12,535)

Total changes of items during the period(1,665)

7(59)(11,584)(13,302)

766

1,258

Balance as of March 31, 2016

6,570

(5,286)113(13,309)(11,912)24,182

205,622

ALSOK REPORT 201654

Financial Section

Consolidated Statements of Cash Flows

Millions of yen
Fiscal years ended March 31, 2016 and 2015

Net cash provided by (used in) operating activities
Income before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Amortization of negative goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liability
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for directors' bonuses
Interest and dividends income
Interest expenses
Equity in (earnings) losses of affiliates
Loss (gain) on sales of noncurrent assets
Loss (gain) on retirement of noncurrent assets
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities
Loss (gain) on valuation of derivatives
Decrease (increase) in notes and accounts receivable–trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable–trade
Decrease (increase) in net defined benefit asset
Decrease (increase) in assets and liabilities for Transportation Security Services
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Income taxes refunded
Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Decrease (increase) in time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries
Purchase of shares of subsidiaries resulting in change in scope of consolidation
Decrease (increase) in short-term loans receivable
Payments of long-term loans receivableCollection of long-term loans receivable
Other
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Redemption of bonds
Purchase of treasury stock
Repayments of lease obligations
Cash dividends paid
Cash dividends paid to non-controlling interest
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of period

55

ALSOK REPORT 2016

2015

2016

24,653
11,331
0
768
(60)
(281)
213
(246)
(54)
(797)
689
(641)
1
228
(161)
49
(105)
(5,391)(348)
2,676(1,970)(11,624)
8,953
27,884953(698)(8,573)100
19,66630,682
12,109
75
1,098
—
(210)
(25)
10
(49)
(827)
652
(790)
(1)
217
(77)
2
10
(1,640)(1,451)(1,425)(2,083)(3,538)(5,028)27,711988(653)(8,378)11
19,678(498)(12,153)
2
(919)
1,357
(498)
(11,435)
(12)
(102)
133
(168)
(24,295)

1,066(13,736)69(2,692)
1,770
—
—
(28)
(41)
86
697
(12,808)

15,802920(3,447)(57)(0)(2,700)(3,518)
(401)
6,596
40
2,007
35,791
177
37,976(10,900)
12,690(3,519)(64)(0)(2,903)(4,071)(406)(9,176)(38)(2,345)37,976—35,630Corporate Information / Stock Information As of March 31, 2016

Corporate Information
Distribution of Shares by Shareholder Type

Corporate NameSOHGO SECURITY SERVICES CO., LTD.

Head Office

1-6-6 Motoakasaka, Minato-ku, Tokyo
107-8511, Japan

Financial Institutions

33.7%

Domestic Corporations

24.0%

Established

July 16, 1965

Individuals and Other

20.2%

Capital¥18,675 million

Foreign Investors

20.2%

Fiscal Year-End

March 31

Treasury Stock

1.5%

Securities Companies and Other 0.4%

Employees(Consolidated) 31,446(Non-consolidated) 12,290

Business Operations

Head office / 10 Headquarters /65 Branches / 38 Offices / 244 Sales offices

Stock Information
Total Number of Shares Authorized

300,000,000

Number of Shares Issued

102,040,042(including. 1,506,740 shares of treasury stock)

Number of Shareholders at theEnd of the Preceding Fiscal Period

10,091

Stock ListingFirst Section of Tokyo Stock Exchange

Securities Code2331

Minimum Trading Lot

100

Major Shareholders (Top 10)
Number of
Shares Held(Thousand shares)

Name

SOHGO CORPORATION

7,388

7.34

Saitama Machinery Co., Ltd.

5,283

5.25

Employees Shareholding Association

4,853

4.82

Trust & Custody Services Bank, Ltd. (as trustee forMizuho Bank Ltd. Retirement Benefit Trust Accountre-entrusted by Mizuho Trust and Banking Co., Ltd.)

4,261

4.23

Kamakura Corporation

4,150

4.12

Japan Trustee Services Bank, Ltd. (Trust account)

3,763

3.74

Sompo Japan Nipponkoa Insurance Inc.

3,441

3.42

Tokio Marine & Nichido Fire Insurance Co., Ltd.

3,420

3.40

Atsushi Murai

2,985

2.96

Kizuna Corporation

2,950

2.93

* Treasury stock (1,506,740 shares) has been excluded.

8,000

Controlling
Share (%)

24,000Stock Chart
(Yen)

(Yen)

8,000

24,000
Nikkei Stock Average

6,000

18,0004,000

12,000
Our Closing Price (Left axis)

2,000

6,000

0

0

(Thousand shares)

18,000
Trading Volume

12,0006,000
02007/3

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/3

ALSOK becomes a Tokyo 2020 official partner
In October 2015, ALSOK concluded an agreement with the Tokyo Organising Committee of the Olympic and Paralympic
Games to become a Tokyo 2020 Official Partner in the category of “Security Services and Planning.”
The Company has long contributed to the promotion of sports in Japan by producing many of the athletes that haverepresented the country in such Olympic sports as judo and wrestling. Leading up to Olympic and Paralympic Games Tokyo
2020, we will continue to support the efforts of our athletes. During the event itself, we will contribute to the event’s successthrough rigorous security provided by an all-Japanese team.

ALSOK REPORT 2016

56

NINE CONSECUTIVE YEARS OF INCLUSION IN PRINCIPAL SRI INDEX
Since 2007, ALSOK has been selected for inclusion in the FTSE4Good Global Index, a socially
responsible investment (SRI) index. We believe this continued inclusion reflects recognition of
ALSOK’s active engagement in CSR activities.

SOHGO SECURITY SERVICES CO., LTD.
1-6-6 Motoakasaka, Minato-ku,
Tokyo 107-8511, Japan
http://www.alsok.co.jp/en/
IR OfficeTEL +81-3-3423-2331
FAX +81-3-3470-1565

CSR Office·	REBORG is registered trademarks of SOHGO SECURITYSERVICES CO., LTD.
·	amica is a registered trademark of HCM Corporation.
·	Bluetooth is a registered trademark of Bluetooth SIG, Inc.
·	TOKYO SKYTREE TOWN is a registered trademark of TOBURAILWAY CO., LTD., and TOBU TOWER SKYTREE CO., LTD.
·	PrivacyMark is a registered trademark of JIPDEC.

TEL +81-3-3470-1972
FAX +81-3-5411-1636

Printed in Japan