Annual Report
2003

In response to changing customer needs, SECOM
is working to realize its vision for the future—theSocial System Industry—by providing comprehensive, integrated services and systems that makelife more secure, convenient and comfortable.

PROFILE

E

stablished in 1962 as Japan’s first security services firm, SECOM
CO., LTD., has earned a reputation as a pioneer in the market bydeveloping innovative products and services that truly benefit
society. The Company’s achievements to date have supported solid
growth and transformed SECOM into a provider of security and peaceof mind.
In 1989, SECOM introduced its vision for the future—the Social
System Industry, a new social framework created through the provisionof comprehensive, integrated products and services that make life moresecure, convenient and comfortable. To achieve this vision, SECOM has
expanded its focus beyond security services to include medical, insurance, information, geographic information system (GIS) and education
services. From this foundation, SECOM is now aiming to take the Social
System Industry to the next level, the focus of which will be to maximize
synergies among its diverse businesses and develop groundbreaking
new products and services.
SECOM has also expanded its operations overseas through an
extensive network of security services subsidiaries and joint ventures.
This global network currently encompasses companies in Taiwan, theRepublic of Korea, Thailand, Malaysia, Singapore, Indonesia, thePeople’s Republic of China (PRC), the United States, the United Kingdom
and Australia.

CONTENTSHIGHLIGHTS ............................................................................................... 1
TO OUR SHAREHOLDERS .......................................................................... 2
SPECIAL FEATURE ..................................................................................... 5
REVIEW OF OPERATIONS .......................................................................... 16
FINANCIAL SECTION .................................................................................. 21
SUPPLEMENTAL NONCONSOLIDATED FINANCIAL DATA ......................... 55
CORPORATE INFORMATION ...................................................................... 59
SECOM GROUP’S BASIC BUSINESS AREAS.............................................. 61
BOARD OF DIRECTORS.............................................................................. 63

HIGHLIGHTSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2003

In millions of yen

In thousandsof U.S. dollars

Years ended March 31

Year ended
March 31

2003

2002

2001

2003

Revenue and other income................................................ ¥0,520,743
Net income ........................................................................
30,275
Total assets........................................................................
1,158,082
Total shareholders’ equity..................................................
372,518¥0,493,526
34,082
1,166,113
401,326¥468,293
43,996882,334
377,304$4,339,525
252,292
9,650,684
3,104,318

In yenIn U.S. dollars¥ 188.76
40.00
1,618.64$01.11
0.33
13.79

Per share of common stock:
Net income (basic)........................................................
Cash dividends paid......................................................
Shareholders’ equity.....................................................

¥0,132.87
40.00
1,655.04¥0,146.19
40.00
1,720.57

Notes: 1. Yen amounts have been translated into U.S. dollars, for convenience only, at the rate of ¥120=US$1, the rate prevailing on the Tokyo
Foreign Exchange Market on March 31, 2003. Billion is used in the American sense of one thousand million.
2. Net income per share of common stock is based on the average number of shares outstanding during each period.
3. Shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of each period, minus
treasury stock.
4. Subsequent to March 31, 2003, cash dividends per share of ¥40.00 were approved at the general shareholders’ meeting on June 27, 2003
(see Note 18 of the accompanying Notes to Consolidated Financial Statements).

Revenue and Other Income

Net Income

Total Shareholders’ Equity(In billions of yen)

(In billions of yen)

(In billions of yen)

550

50

450

440

40

360

330

30

270

220

20

180

110

10

90

0

0
99 00 01 02 03

0
99 00 01 02 03

1

99 00 01 02 03

TO OUR SHAREHOLDERS

security needs, step up competitiveness in all core busiespite signs of improvement in the stock
nesses, and combine and integrate services and busimarket and capital investment, the outlook
nesses to create innovative, comprehensive newfor Japan’s economy continues to invite cauofferings.
tion. Lackluster personal consumption and an
In the security services field, we responded to auncertain global geopolitical situation contributed furrash of automated teller machine
ther to a persistently harsh economic(ATM) robberies involving backhoes orenvironment.
other construction equipment by
Against this backdrop, SECOM
developing several key products
has continued to implement meaaimed at both making ATMs moresures aimed at taking the Social
secure and reducing thefts of heavy
System Industry to the next level.
machinery used in ATM robberies. We
These measures focus on enhancing
commenced sales of ATM Building
existing services, reinforcing marketSecurity System, which detects theing and heightening efficiency, as wellapproach of construction equipment
as on offering new products and sertoward an ATM site and warns avices that respond to society’s changwould-be robber to desist before a
ing needs and realizing Group
Makoto Iida
crime is committed, as well as ATM
synergies to better serve customers.
Founder
Surround Protection Unit, which facilIn the fiscal year ended March 31,
itates more secure installation of ATMs, making them
2003, these efforts contributed to a 5.5% increase in
extremely difficult to dislodge. At the same time, we
consolidated revenue and other income, to ¥520.7 bilbegan marketing our COCO-SECOM mobile security
lion. Owing to the absence in the period under review
services to construction and other firms to thwart theof a net gain on sale of securities in the previous period,
misappropriation of equipment.
net income declined 11.2%, to ¥30.3 billion. As a conIn the area of home security services, we alsosequence, basic net income per share was ¥132.87,
introduced
a number of innovative products that comdown from ¥146.19 in the previous fiscal year. Cashplement our home security systems to meet demand
dividends per share of ¥40.00 were approved at the
prompted by an increase in residential break-ins involvgeneral shareholders’ meeting held on June 27, 2003.
ing smashing windows or destroying doors. In addition
to offering such physical security products as SECOM
Promoting Integrated Services and Businesses
Anshin Glass high-impact window glass and Strong
Since 1989, SECOM has worked to create the infraDoor, a reinforced door, we developed SECOM Home
structure for the Social System Industry. With the
Camera System, an external monitoring and stillcompletion of this infrastructure in sight, in 2002—
image surveillance camera system. In response to
our 40th anniversary—we announced the next level of
emerging demand for personal security outside thethe Social System Industry’s development, the focus
home for children and the elderly, we also augmentedof which is to provide a full range of services that
COCO-SECOM, a suite of services for locating mobile
respond to the needs of our customers.
people and objects, with COCO-SECOM withDuring the period under review, we sought toEmergency Call. In addition to basic track-and-locateenhance our responsiveness to emerging safety andD2

functions, this service features a portable personal
analyzing risks associated with providing medical care.
alarm that enables users to have an alert relayed to a
We also continue to enhance SECOM Healthcare Net,
predetermined telephone number in the event of ana network service that we offer exclusively to healthemergency.
care institutions. In autumn 2003, we plan to introduce
In addition to developing new commercial and
SECOM Medical Club, a membership-based service prihome security products and services,marily for our home security subscribers
we reinforced our Total Security
that includes preventive treatment andPlanning (TSP) services, whereby weemergency medical services, as well as
combine on-line security services,
specialist and hospital referrals.
safety-related products and services,
We continued to step up marketcasualty insurance, and inspection anding of our lineup of original insurance
maintenance services into tailoredservices, which combine insurance
packages. Such packages reduce overwith security, medical and other serall costs to customers and facilitate
vices. Core offerings here include New
integrated management.
SECOM Anshin My Car, which featureson-site dispatch services and traditional
In the medical services field, we
automobile insurance; Security Discountcontinued to capitalize on our knowToshitaka Sugimachi
Chairman
Fire Policy, a policy for commercial cenhow in the area of home medical care
tralized security system subscribers thatby developing new products and seroffers reduced premiums; SECOM
vices. Building on our more than 10
Anshin My Home, a comprehensive fire
years of expertise in the provision of
insurance policy targeted mainly at resihome nursing and pharmaceutical disdential subscribers; and MEDCOM, anpensing and home delivery services, weunrestricted cancer treatment policy
began offering start-up consulting andthat provides access to cutting-edge
support services for physicians setting
treatments and medical consultation.
up home medical care clinics. ThroughWe revamped our information sersuch efforts, we are striving to makevices business by integrating our cyberhome medical care an available andsecurity and network services busiviable option for patients nationwide.
nesses. Capitalizing on our accumuWe have also developed a variety
lated expertise in physical and cyberof effective, low-cost, reliable systems
Shohei Kimura
security, we launched SECOM Data
that combine medical services with
President andRepresentative Director
Safe, a repository that offers highinformation technology (IT). These
security data storage, protecting servers
include SECOM Ubiquitous Electronic
from physical risks and data from cyber risks. We also
Medical Report (EMR), an innovative electronic meddeveloped a noncontact integrated circuit (IC) cardical report system that gives authorized personnel
based security system for corporate premises thataccess to patient information over the Internet, andcombines office security, including building and floor
Medical Risk Management System, which, as its
access control, with computer security, digitalname implies, is a scientific theory-based system for3

TO OUR SHAREHOLDERS

enhancing the SECOM brand image—one of our mostprecious assets—and strengthening our corporate
culture by developing products and services thattranscend conventional boundaries and truly benefit
society. In so doing, we work to contribute to the creation of a more secure society, as well as to ensurethat SECOM is the company people rely on to meet awide range of essential needs.
To these ends, we will continue to maximize ourposition as the pioneer of Japan’s security services
industry to redefine the boundaries of our businessand strengthen our emphasis on the needs of customers. As always, our business development efforts
will focus not only on the provision of independent
products and services, but on maximizing the synergies of SECOM Group companies to facilitate theextension of comprehensive, integrated, affordable
services that make life more secure, convenient andcomfortable. We will also work to cultivate new
businesses that will ensure SECOM’s ongoing value
to society.
We are acutely aware of the importance of
responsive, efficient management in today’s rapidlychanging environment. We also recognize the needfor management that is capable of identifying and seizing new opportunities and achieving sustained growthin shareholder value. We will strive to continue
responding to the expectations of shareholders on
both counts, and we look forward to your continued
support of our efforts.

certificate authentication and other cyber security
services.
In the GIS services business, subsidiary Pasco
Corporation focused on developing new technologies
and offering new services that respond to customer
needs. In line with the Japanese government’s “e-Japan
Priority Policy Program”—formulated to realize theofficial goal of making Japan one of the world’s mostadvanced IT nations by 2005—Pasco expanded its
marketing of GIS services for the public sector. These
include PasCAL, a comprehensive service that assists
local governments with the provision of social services, and Wagamachi Guide, an interactive site thathelps local governments improve services for residents. Pasco also reinforced its lineup for the private
sector, including Management-Navigation Light, an
area marketing tool, and Management-Navigation
CRM, a customer relationship management (CRM)
tool, thereby enhancing its market presence.
In the education services field, subsidiary SecomLines Co., Ltd., expanded its lineup of educational
solutions with Lines E-Library Advance, a virtual education platform designed to support computer-aided
classroom learning.
Making SECOM the Brand of Choice
As a company committed to the provision of security
and peace of mind, SECOM has endeavored to createa brand worthy of its customers’ trust. On behalf ofmanagement and staff, we pledge to continue

August 29, 2003

Makoto Iida
Founder

Toshitaka Sugimachi
Chairman4

Shohei Kimura
President and Representative Director

SPECIAL FEATURE

Taking the Social System Industry
to the Next Level

S

ECOM continues to define its mission as being to provide a full range of services that respond to the needs of
its customers. To this end, we are maximizing the comprehensive capabilities of the entire SECOM Group. We
are building on our success as a provider of security services. This success is underpinned by our commitment toquality and responsiveness, which we have realized by maintaining control over every aspect of our services, fromresearch and development and the manufacture of equipment to planning, installation, 24-hour monitoring, emergency response and maintenance. At the same time, we are generating unique internal synergies by combining
our security, medical, insurance, information, GIS and education services. This enables us to offer innovative
solutions in the form of integrated, appropriately priced packages that make life more secure, convenient andcomfortable —the ultimate goal of the Social System Industry.
Today, we are aiming to take the Social System Industry to the next level. Our focus here will be on ensuring that
SECOM is a company people feel they can turn to and trust to meet a wide range of needs. Accordingly, we willcontinue to place our ultimate priority on communicating with customers to ensure a firm grasp of their concerns, andon developing new, integrated offerings that deliver security and peace of mind. In the following pages, we invite you
to take a closer look at recent SECOM initiatives for individuals, commercial customers and medical institutions.
5

SPECIAL FEATURE

Services for Individuals:
Security, Convenience andPeace of Mind

occurs, and SECOM Window Frame, comprising decorative window bars with built-in sensors and reinforced
steel that resists distortion and breakage, making it difficult for intruders to enter through windows. We also

Enhancing Security for Families at Home

introduced Strong Door, a reinforced door for use inside

Ensuring the safety of people in their homes is at thehomes that cannot be forced open for a specified period

heart of the Social System Industry vision. Since intro-of time after the lock has been forced. Through these andducing Japan’s first home security system in 1981, we

other physical security products and services, we will

have developed a wide range of highly effective systems

continue to enhance security for families at home.

that provide security and peace of mind to customers in
the residential security market. The increasing incidence

Expanding Home Medical Servicesof residential break-ins in Japan in recent years has

Since pioneering the concept of home security, we havespurred rapid growth in the market for home security

viewed health and medical services as an inherent

services. Even more alarming has been a rise in thecomponent of our mission to provide security and peace

number of break-ins perpetrated when residents are atof mind. In 1982, we introduced My Doctor, an emer-

home—particularly at night when they are asleep, which

gency medical alert system, as an option to home secu-

has prompted greater awareness of the need to protect

rity service subscribers. In 1992, we added Health Hot

homes even when residents are there.

Line, a health advisory service, as a standard feature of

We have responded to expanding demand by rein-

our home security system. In response to growing

forcing our lineup of products and services for our homedemand, in autumn 2003 we plan to introduce SECOM

security system subscribers. New offerings include

Medical Club, a membership-based service primarily for

SECOM Anshin Glass, a high-impact window glass with

our home security subscribers. SECOM Medical Club willbuilt-in sensors that alert SECOM the instant breakage

encompass preventive treatment, emergency medical

6

services and specialist and hospital referral services.

home. We are currently working with specialists in theGoing forward, we hope to expand the market forarea of circulatory disorders to develop consulting ser-SECOM Medical Club services to include employees ofvices and health monitors and are planning to eventuallycompanies that use our commercial security systems.

expand our lineup to include monitors for patients withWe also believe people should have access torespiratory ailments.

home-based alternatives to hospital treat-

We are confident that home medical

ment. Accordingly, we have created acare will continue to grow in importancesolid platform for providing convenient,

as an alternative to hospitalization.

effective medical and nursing care ser-

Accordingly, we will continue to reinforce

vices to patients in their own homes. To

our capabilities in this area, thereby con-enhance our capabilities in this field, we

tributing to efforts to ensure effective

are currently developing a range of ser-health care for everyone.

vices using portable health monitors. Our
first service features a compact, portable

Insurance Services: Building on Our

electrocardiograph that patients can use

Expertise in Security and Medical Careto record heart activity simply by placing it

Ever since we entered the security services business, it has been our belief thatagainst their chest. Monitor data is transmitted to our electrocardiography center, where it is

only by offering a full range of services, from prevention

converted into an electrocardiogram and faxed to athrough to compensation, could we provide total security

specified hospital or other health care facility. This per-and peace of mind. When we first began offering secu-

sonalized service makes it possible for patients them-rity services, however, it was difficult for firms in otherselves to monitor and record information on theirindustries to offer insurance services. With the deregu-

condition when they are out as easily as they can atlation of Japan’s insurance industry in the mid-1990s, weCentralized Security Services

SECOM
SE
OM
ControlC
tro
Center
err
C
Cente
tr Ce

(2) Alert Emergency Services( ) and Utilities as Necessary(2)y(2) Alert the SECOM(2) Emergency Depot

Fire Dept.
Dept

Police Dept.
Dept Gas Comp
Company
y

SE OM
SECOM
Em
ge y Depot
po
EmergencyEmergency(1) Telephone(1) Circuit Alert

Gas
POLICEO C(3) Dispatch SECOM(3) Emergency Response Personnel

Subscriber

7

SPECIAL FEATURE

entered the non-life insurance market. Since then, sub-cellular telephone base stations, with our accumulated

sidiary Secom General Insurance Co., Ltd., has offered asecurity expertise, technologies and network capabilities.

unique lineup of products combining security and insur-

As an option, customers can also request to haveance. These include SECOM Anshin My Home, a

SECOM emergency personnel dispatched to the location

comprehensive fire insurance policy that offers sub-of the person or object in question.

scribers to home security services a sig-

Since launching COCO-SECOM innificant discount on premiums. We also

April 2001, we have augmented services

offer New SECOM Anshin My Car, which

in response to increasingly diverse cus-offers round-the-clock on-site emergency

tomer needs. Recent offerings include

services.

COCO-SECOM Car Alarm, which adds

Capitalizing on our expertise in insur-

antitheft functions to basic mobile secu-

ance and medical services, we createdrity services. COCO-SECOM EZ and

MEDCOM, an unrestricted cancer treat-

COCO-SECOM-i, which operate with ament policy that provides access tocellular telephone, incorporate a medical

cutting-edge treatments not covered

emergency alert function. In response to

by Japan’s national health insurance

Japan’s rising crime rate, in 2003 we

scheme. MEDCOM also pays the entire

launched COCO-SECOM with Emer-

portion of medical fees incurred by the patient for can-gency Call, a portable personal alarm that enables users

cer treatment covered by national health insurance, as

to have an alert relayed to a predetermined telephonewell as fees for advanced treatments, thereby greatly

number in the event of an emergency. Another popular

reducing the financial burden on patients undergoing

addition in 2003 was COCO-SECOM for Pets. To facili-

treatment. The policy also covers referrals to selectedtate the creation of a high-precision COCO-SECOM

leading cancer treatment centers, consultation with spe-transmitter appropriate for small animals, we developed

cialists and the solicitation of second opinions. A true
SECOM original, MEDCOM is another important part ofour mission to provide customers with security andpeace of mind.
COCO-SECOM: Security for People, Property andPets on the Move
COCO-SECOM is a suite of services that integrate security, information and GIS services to tap new demand
for security for people, vehicles and portable items.
These services are designed to minimize concerns aboutkidnapping or the disappearance of elderly people
suffering from senile dementia and about the increasing
frequency of automobile and motorcycle theft.
COCO-SECOM combines locating technologies that use
data from the Global Positioning System (GPS) and8

one of the world’s smallest GPS transmitters. COCO-

student needs and abilities. Lines E-Library Advance

SECOM for Pets has been featured in the media, bothis also compatible with an ongoing project initiated byin Japan and abroad, attracting attention from pet lovers

the Ministry of Education, Culture, Sports, Science andworldwide. We will continue to adapt and expand theTechnology to promote use of the Internet in the

COCO-SECOM lineup to capitalize on the growing

educational sector.

market for mobile security.

On another front, we continue tocultivate operations in two areas crucial toOffering Distinctive Products andmodern society—living spaces and food.

Services that Enrich People’s Lives

Residential real estate development sub-We consider educational services anothersidiary Secom Home Life Co., Ltd., hasessential element of the Social Systemused its wealth of experience and exper-

Industry. In the period under review,tise to develop the Glorio series of value-

subsidiary Secom Lines, a manufacturer

added condominiums with advancedof educational software, launched Linessecurity systems. We currently sell the

E-Library Advance, a virtual education

SECOM Fine Foods series—healthy andplatform that focuses on drills aimed attasty vegetables and fruit grown withminimal use of agrochemicals and chem-

monitoring learning progress. We anticipate strong demand from schools for Lines E-Library

ical fertilizers, and processed food products containing

Advance in a variety of learning support situations. In

few additives or preservatives—using catalogs and the

addition to contracting Lines E-Library Advance for theInternet. Our real estate development and food busi-

classroom, schools have the option of extending accessnesses both reflect our ability to fuse our unique capa-

to students’ home personal computers (PCs), thereby

bilities to develop products that meet consumers’ needs.

enabling teachers to tailor study programs to individual

COCO-SECOM Location and Emergency Response System
Request for Search(Telephone/Internet)
GPS Satellite

Notification of Police((If Warranted))

COCO-SECOM
COCO
COCO
O E
EC
COM
COM
Operations
i sC
Centern
pe tio
ntt
ent

SECOM
SE
OM
Emergency
me ge cyy Depot
ep

Police Dept.

Cellular Telephone
Base Station
POLICEO C

Positioning
Information
Dispatch of Emergency
Response Personnel(If Requested)

Subscri
Subscriber

Transmitterr D
Device(Vehicle-Mounted)
Transmitter Device
e(Portable)

9SPECIAL FEATURE

Services forCommercial Customers:
Unmatched, Round-the-ClockSupportproducts and services, SECOM is helping to make ATMs
more secure and reduce thefts of heavy machinery usedin ATM robberies.
Swift, in-and-out break-ins are also increasingly
common in other types of commercial premises.

Developing New Security Systems to

Robbers enter an office or store and inHelp Foil Crime

only a few minutes make off with safes,

Rising crime rates in Japan in recent

cash or valuable merchandise. SECOM

years have been accompanied by a trend

AX, a next-generation security control

toward more carefully orchestrated, bru-

system, uses imaging sensors to trans-

tal and diverse types of criminal activity.

mit visual images to the SECOM Control

We are maximizing our technologicalCenter in the event of an intrusion. To

capabilities and know-how to develop

ensure even more effective protection of

new systems to ensure the security of

subscribers’ assets from such robberies,

commercial establishments.

we introduced Foggy Protection, an innovative feature that can be added to secu-

Japan has seen a particularly sharprity systems such as SECOM AX. Foggy

increase in robberies in which robbers
use stolen construction equipment to destroy a stand-Protection emits a thick cloud of vapor—making it impos-

alone ATM booth or built-in ATM unit and then remove

sible for intruders to see what they are doing—andthe cash-loaded ATM. We have responded with a num-sounds a loud alarm. The vapor emitted is harmless to

ber of innovative products and services. These include

humans and office equipment.

ATM Building Security System, the first of its kind inJapan, which flashes bright lights and sounds an alarm

Advanced Fully Digital Surveillance Camera andwhen it detects the approach of a power shovel or a

Access-Control Systems

backhoe. This revolutionary system incorporates our

We have marshaled our cutting-edge technologies in theadvanced technological capabilities in the areas of sens-

area of monitoring systems to offer D-CCTV, Japan’s firsting and image recognition, allowing the instantaneous

fully digital closed-circuit television (CCTV) surveillance

identification of anomalous vehicles and prompt mea-

camera system. Digitization facilitates the display andsures, thereby greatly accelerating responsiveness. We

recording of video images that are clear and feature noalso developed ATM Surround Protection Unit, which

degradation of picture quality. This system has been

facilitates more secure installation. Together, these two

adopted for use by financial institutions, conveniencenew offerings are highly effective in discouraging thestores, large-scale commercial complexes, railway sta-theft of ATMs and the cash therein. In a related move,tions and public buildings and facilities to ensure thewe began marketing our COCO-SECOM mobile security

safety of visitors and prevent break-ins. The sharpness

services to construction and other firms to thwart theand clarity of D-CCTV’s digital images makes this sys-

misappropriation of equipment. If a piece of equipment

tem particularly useful when highly precise monitoring

mounted with a COCO-SECOM transmitter device isof activity and identification of individuals are required.

moved from its assigned place, the device immediately

In response to increased awareness of and demandalerts the COCO-SECOM Operations Center. With thesefor fingerprint identification systems, we incorporated

10

our leading access-control technologies into New

various surfaces and up and down stairs, sensing and

SESAMO IDs, an updated version of our popular finger-

avoiding obstacles in its path. It is also equipped withprint identification-based access-control package forseveral defense mechanisms, including sound and bright

corporate premises. To enhance the competitiveness oflight menaces, electric shocks and a vapor cloud-emitting

this product, we improved the precision of fingerprint

device, ensuring the safety of its cargo.

identification and increased processing
efficiency. We also achieved a lower

Protecting Valuable Information withproduct price and introduced a host of

Advanced Cyber Security Services

attractive options.

Cyber security is another pillar of ouroperations. We entered the networking

Maximizing Synergies among

business when interest in the Internet

Businesses to Reduce Costs tofirst began to take off in Japan. Since

Customers

then, we have developed a broad range

We extend Total Security Planning (TSP)of highly effective cyber services. These

services primarily for office buildings or

include network security monitoring,other major facilities. TSP involves thedigital authentication services—essential
to e-commerce—and the Secure Datadevelopment of service packages combining on-line security systems with, among others,

Center, which facilitates the safe housing of customers’

security-related merchandise, casualty insurance, facility

servers and a secure network environment andmonitoring and maintenance services. Such packages

enhances the reliability of e-businesses.

offer customers a variety of benefits, including reduced
costs, integrated services and more effective security.
This unique business model is an outstanding example of
how the Social System Industry concept works.
SECOM Robots: The Future of Security
We are currently developing robots that will be capableof reproducing human movements for use in a variety offields. In the period under review, we introduced our first
prototype, a safe-equipped security guard robot that follows verbal commands. This robot, which not only
moves at the same speed as humans but also navigatesstairways, slopes and thresholds, as well as avoids
obstacles, represents a key achievement for the SECOM
Intelligence Systems (IS) Laboratory in robotics and sensing technologies. It also reflects the Development
Center’s accumulated expertise in security systems andequipment development. Designed to carry cash andvaluables, the robot follows human security guards over11

SPECIAL FEATURE

Our network security monitoring services include

developing SECOM Data Safe, a high-security computer

SECOM Virus Monitoring Service, which monitors andserver-based repository that draws on our accumulated

protects customers’ networks from viruses, and SECOM

expertise in physical and cyber security. A compre-

Intrusion Detection Service, which provides round-the-hensive security solution, SECOM Data Safe provides

clock protection against unauthorized access. These

protection against physical risks, such as equipment

services also ensure prompt responses

failure, theft, destruction and damage

to security threats as well as compensa-

from fires, floods, radio waves and earth-tion in the event of a security breachquakes, and cyber risks, including unau-

resulting in damage.

thorized access, virus damage, false

In the area of digital authentication

representation and information leaks. We

services, we offer SECOM Passport forare also marketing SECOM Data Safe toWeb, which issues digital authentication

private-sector

certificates, providing assurance that asecure data storage.

companies

requiring

web site is legitimate. Other services inthis area include setting up and operating

GIS Services: Effective Support forsystems for organizations wishing toCorporate Management
COCO-SECOM G-Manager assists in theestablish their own digital certificate
authority. To date, we have set up and continue to oper-

management of automobile fleets and employees. A

ate digital certificate authorities for Japan’s four leading

distinguishing feature of this service is its group searchfinancial institutions, based on the Identrus protocol—thefunction, which allows the subscriber to pinpoint the

global standard for identity authentication for e-businesslocation of several automobiles or people simultaneously.

transactions. We have also had numerous opportunities

This feature makes COCO-SECOM G-Manager particularly

to demonstrate our mastery in the area of government

effective in improving efficiency, customer service andpublic key infrastructure (GPKI) services.
Built in answer to the growing cyber security needsof customers, the Secure Data Center offers comprehensive services, including physical security, cyber security
and network services.
Spurred by the Japanese government’s “e-Japan
Priority Policy Program,” regional public organizations are
implementing ambitious e-government programs. The
aim of e-government is to bring administrations closer
to citizens and businesses by facilitating on-line access topublic services, thereby improving convenience andefficiency. Mechanisms to ensure the security of data
are crucial to the success of e-government initiatives. At
the same time, the nature of e-government imposescertain restrictions on how and where security systems
are managed. We have responded to such needs by

12security for transport companies, taxi firms and othera broad lineup that includes Japan’s first full-fledged

companies with numerous sales or maintenance staff.

home medical services.

For customers in the private sector, we also offer

Japan’s rapidly aging society and the rising cost of

the Management-Navigation series, which provides digi-

medical treatment are bringing about significant changes

tal maps superimposed with the customer’s own datain health care in Japan. For example, the Ministry ofand figures, creating a valuable analysis- and decision-

Health, Labour and Welfare’s efforts to discourage pro-support tool for everyone from top management to field

longed hospital stays have led to the adoption of a sys-

staff. We continue to ramp up our GIS offerings to assist

tem whereby the portion of medical costs reimbursed by

the efforts of companies to enhance security and bolster

the government decreases with every day a patient is

profitability.

hospitalized. Accordingly, the need for alternatives forpatients who opt for home-based care rather thanlengthy hospital stays is increasing sharply. Anticipating
this trend, in 1991 we began offering round-the-clock

Services for Medical Institutions:
Comprehensive Assistance for
Health Care Professionals

home nursing services and pharmaceutical dispensing
and home delivery services, which involve filling prescriptions in our clean room and delivering them topatients’ homes. Since 1999, we have expanded theSupport Services for Home Medical Care Clinics

geographic reach of these services, accumulating exten-

In line with our belief that health and well-being aresive expertise in the setting up and management ofessential to security and peace of mind, we havehome nursing clinics. Building on this experience, Secom

positioned medical services as a crucial constituent ofMedical System recently began offering consulting and

the Social System Industry. This business centers on

support programs for physicians starting up new home

subsidiary Secom Medical System Co., Ltd., which offers

medical care clinics, as well as for physicians managing

Digital Certificate Authority Hosting Services(5) Real-Time Identity Verification
Certificate
Authority(2) Certificateue(2) Issue

Certificate
Authority
A BankB Bank(1) Application

X Company(6) Warranty(3) Transaction Order(With Certificate Attached)

13(4) Real-Time(4) Identity(4) Verification(7) Warranty

Y Company

SPECIAL FEATURE

established clinics. By reducing the time and effort nec-

analyzes errors by physicians or nurses—both thoseessary to manage clinics, these services enable physi-that resulted in accidents and those that did not—andcians to focus on the more important task of providing

compiles its findings in report format. By facilitating accu-

effective care for patients.

rate analysis of risk, this system serves as a valuable support tool for medical institutions grappling

Personnel Solutions for Medicalwith the task of establishing internal risk

Institutions

management schemes.

In line with our goal of providing broad-

Secom Medical System also offers

based support for hospitals and clinics,

a variety of IT-based systems designed to

we recently launched medical personnel

support modern medical care. These

solutions services. With changes to theinclude SECOM Ubiquitous EMR, Japan’s

residency system for new medical school

first application service provider (ASP)-

graduates and the reorganization of

based electronic report service for homenational universities, medical institutions

medical care, and SECOM Medical Man-of all types are expected to face anagement System. In the period underincreasingly harsh operating environment

review, the company introduced SECOM

in the years ahead as staff migration increases and rev-

Medical Image Storage System, an ASP system for stor-

enues fall. Privately run institutions, in particular, areing and transmitting digital image data. With this sys-

likely to need assistance to attract skilled doctors andtem, data from computerized tomography (CT), magnetic

administrators. In anticipation of emerging needs, weresonance imaging (MRI) and other systems is transmit-

recently launched medical personnel solutions for doc-

ted via high-speed Internet to image gateway equipment

tors, administrators and institutions. Through these ser-at hospitals. From there, data is transmitted to servers

vices, we look forward to contributing to a higher

housed in the Secure Data Center for storage. This

standard of medical care throughout Japan.
Medical Malpractice Risk Analysis System
Medical accidents are a primary concern of medical professionals and patients in Japan, as elsewhere.
Preventing medical accidents depends not only on identifying the causes of such accidents when they happen,
but also on analyzing the potential risks posed by pervasive factors, such as procedural shortcomings and problems with the conditions under which care is provided.
In the period under review, Secom Medical Systembegan offering Medical Risk Management System, a system for analyzing and minimizing the risk of medical accidents. This system, which was developed in cooperation
with the Tohoku University School of Medicine Hospital,
collects pertinent data on past accidents, as well as

14system allows authorized personnel to access and view

SECOM Group will be guided by a commitment to raising

images over the Internet, enhancing their ability to offer

customer satisfaction and ensuring SECOM is a company

preventive treatment, diagnose and treat illness andto which people can turn with confidence.

observe progress. Through these and other ASP- andWe have built a reputation for developing innova-

network-based services, we will continue to support

tive, market-creating products and services that are truly

efforts to improve the efficiency of medical institutions

beneficial to society. By promoting the integration of ourand services.

businesses and realizing synergies, we have catapulted
the Social System Industry into a new stage of development. We look forward to achieving the full potential of
the Social System Industry in the coming years.

The Next Level
The SECOM Group today provides a broad range ofinnovative products and services that have redefined theboundaries of the security industry. Our expansion todate has been facilitated by the relationship of trust we
have built with customers—the core of the Social System
Industry—which has enabled us to maintain open lines ofcommunication and keep abreast of their needs.
This relationship will continue to support our efforts
going forward. We will broaden our focus and develop
new products and services in response to emerging
customer needs. As always, the companies of theHome Medical Services andElectronic Medical Report Management

Flow of Information*ASP: Application Service Provider

Medical Care Institution
Outpatient Care

Physician Guidance

Prescription
Nurse Report

Coordinationd

Pharmaceutical
Pharm
Ph
ma
ace
ce
eu
utical Dispensingupe s g
and H
and
Ho
Home
om
om
me
eD
Deliveryvery S
ServicServices
ervic
ices

SECOM ASP* Center(SECOM
ECOM Pharmacy)EC
Pharmacyharmac
har
mac
cy)
cy

(EMR Management)Home
me Nursing
Nurs
N
Nurs
Services
ervice((SECOM
SECOM
E
ECOM
N
Nurse
StationStation)
ation
atio

Prescription
Visiting Nurse
Pharmaceutical Delivery

Pati
Patient
Pt t

15

REVIEW OF OPERATIONS

Percentage of Revenue and Other Income*Security Services

Medical Services

68.3%

3.8%

Insurance Services

5.6%*Excluding intersegment transactions

CONTENTSSECURITY SERVICES ......................................................17
MEDICAL SERVICES .......................................................18
INSURANCE SERVICES ...................................................18
INFORMATION AND COMMUNICATION RELATEDAND OTHER SERVICES..................................................19
OVERSEAS OPERATIONS ...............................................20

16

Information and Communication
Related and Other Services

21.7%

Commercial and Home Security Service
Subscribers by Category
At March 31, 2003

Service industries
Retailing/wholesaling
Financial services
Manufacturing
Government agencies
OthersHouseholds

Commercial

Security Services

13.0%
10.1%
8.8%
8.5%
7.0%
19.7%
32.9%

and development and the manufacture of equipment toplanning, installation, 24-hour monitoring, emergency
response and maintenance.
For commercial customers, we continued toactively market SECOM AX and SECOM IX, on-line centralized systems that employ advanced image monitoring. Newly launched products included SECOM DX, acentralized security system featuring IC stick-type keys,
and ATM Building Security System, Japan’s first systemthat provides protection against ATM robberies involving
the destruction of ATM booths.
Our centralized home security systems link subscribers’ homes with our control centers to monitor for
intruders, fires, gas leaks and emergency calls. In theevent of a problem, control center staff dispatch emergency response personnel and, if necessary, contact thepolice, fire department or other appropriate authorities.
Contracts for these systems rose steadily during theperiod under review.
Large-scale proprietary systems combine on-site
patrols with security and equipment management

Electronic Security Services
In the fiscal year ended March 31, 2003, revenue in theelectronic security services category, which comprises
the provision of commercial and home security and largescale proprietary systems, rose 4.2%, to ¥258.4 billion,
and accounted for 49.6% of consolidated revenue andother income, compared with 50.2% in the previous
period.
On-line centralized commercial security systems
form the core of this category. These services use
SECOM sensors, which are located on subscribers’premises and linked via telecommunications circuits toour control centers, to facilitate remote monitoring.
Control center staff are prepared to respond promptly toalarms by dispatching emergency response personnel
and, if necessary, alerting the police or fire department.
Our success in this field is underpinned by our commitment to quality, which we have realized by maintaining
control over every aspect of our services, from research

17

REVIEW OF OPERATIONS

Medical Services

systems. One of our best-known offerings in this area is
SECOM TOTAX ZETA, a comprehensive system forindustrial facilities and commercial buildings.

Revenue and other income in the medical services segment totaled ¥20.0 billion, up 47.7% from the previous
period, and amounted to 3.8% of consolidated revenue
and other income, up from 2.7% in the previous period.
This segment centers on home medical care-related
services, namely home nursing, personal care and pharmaceutical dispensing and home delivery services;
remote image diagnosis support; medical information
systems; medical equipment sales; management ofsenior citizens’ residences; and leasing of real estate for
medical institutions. These services are administered bysubsidiary Secom Medical System, established tointegrate our medical, health and personal care services.
Our home nursing services have earned a solid reputation among patients and medical professionals alike.
We have steadily expanded our network of visiting nurse
stations and currently operate more than 30 of these facilities, allowing us to provide services to an increasing number of patients. Hospinet, which is marketed to medical
institutions, transmits MRI and CT images via integrated
services digital network (ISDN) to the Hospinet Center for
examination by our highly experienced diagnostic experts,
who then provide consultation to the patient’s primary
physician. SECOM Ubiquitous EMR supports a teamapproach to home medical care—in which physicians,
nurses, pharmacists and medical care providers work
together to ensure effective treatment—by facilitating
access to medical reports by authorized personnel overthe Internet.
The medical services segment also encompasses
subsidiary Mac Corporation. Mac’s operations center on
the sale of medical equipment and instruments.

Other Security Services
This category comprises static guard services, which
depend on the judgment and practical abilities of extensively trained, professional security guards, and armoredcar services, which require highly skilled drivers and special vehicles to safely transport cash and valuables. In the
period under review, this category generated revenue of¥53.2 billion, an increase of 4.0%, and accounted for
10.2% of consolidated revenue and other income,compared with 10.4% in the previous period.
Merchandise and Other
We offer a variety of security-related products, including
CCTV monitoring, access-control, fire detection and extinguishing, and external and internal monitoring systems;
and services, such as COCO-SECOM mobile security services. Revenue in this category rose 2.3%, to ¥44.1 billion, and represented 8.5% of consolidated revenue andother income, compared with 8.7% in the previous period.
In the period under review, we responded to theincreasingly diverse security needs of customers with anumber of new merchandise offerings. These included
D-CCTV, a fully digital surveillance camera system thatenables images to be monitored and recorded without
deterioration. In the area of access-control systems, we
commenced sales of an updated version of SESAMO
IDs, our fingerprint identification-based system, withimproved precision and processing efficiency. We also
augmented our lineup of PYTHAGORAS proprietary
security vaults with models offering greater protection
against theft.
We also expanded our COCO-SECOM menu of services, which provide security for people and property on
the move. New products include COCO-SECOM
G-Manager, which provides track-and-locate services forgroups of individuals or objects; COCO-SECOM with
Emergency Call; and a COCO-SECOM service developed
especially for construction equipment.

Insurance Services
The insurance services segment recorded revenue andother income of ¥29.1 billion, an increase of 1.3%, andaccounted for 5.6% of consolidated revenue and otherincome, compared with 5.8% in the preceding year.

18

In the period under review, subsidiary Secom General
Insurance continued to draw on synergies with other
SECOM Group companies to offer an extensive range ofattractive products. These include policies that capitalize on
our capabilities as a security services provider. Particularly
notable offerings are Security Discount Fire Policy, a policy
for subscribers to on-line security services, and SECOM
Anshin My Home, a comprehensive fire insurance policy primarily for home security system subscribers. Bothof these policies offer reduced premiums, recognizing
the security system as a risk-lowering factor. We alsooffer New SECOM Anshin My Car, an automobile insurance policy that provides round-the-clock on-site emergency services, and MEDCOM, an unrestricted cancer
treatment policy that combines insurance services withmedical expertise and gives patients access to cuttingedge treatments not covered by Japan’s national healthinsurance scheme.

Service and SECOM Intrusion Detection Service, bothof which feature round-the-clock monitoring and reporting to ensure a high level of security and stability. In
addition to cyber security services, Secom Trust.net
offers network services and the Secure Data Center,
which combines physical and cyber security to provide
comprehensive services.
Capitalizing on Group expertise in physical andcyber security, in the period under review we introduced
SECOM Data Safe, Japan’s first commercial data repository. We also began providing cyber security services
to the Miyazaki prefectural government to ensure thesecurity of Miyazaki’s e-government program.
GIS Services
Pasco, a leading purveyor of GIS and aerial mapping services in Japan, continued to cultivate new technologies andservices in response to the needs of its customers, thereby
cultivating new markets for its GIS and mapping services.
In the area of GIS services, Pasco offers PasCAL—a
comprehensive GIS service integrating various types ofdata with digital maps—to government ministries andagencies in line with the Japanese government’s“e-Japan Priority Policy Program.” The company also offers
Wagamachi Guide, an interactive site for local governmentsthat enables residents to access various information using
a map interface. For private-sector customers, Pasco continued to reinforce its Management-Navigation series ofinnovative GIS solutions, which includes ManagementNavigation Light, an area marketing support service, andManagement-Navigation CRM, a customer relationshipmanagement support system.
Pasco’s mapping services include surveying, which
capitalizes on its aerial photography capabilities andremote sensing technologies, and three-dimensionallaser measurement, used in urban planning and public
facility management.

Information and Communication
Related and Other Services
Revenue and other income in this segment rose 9.4%, to¥113.0 billion, equivalent to 21.7% of consolidated revenue
and other income, up from 20.9% in the previous period.
Information Services
Subsidiary Secom Information System Co., Ltd., offers abroad range of services to external customers, including
the planning, development, operation and maintenanceof corporate networks. The company also plans, builds
and operates the SECOM Group’s information networks
and intranet.
Secom Trust.net Co., Ltd., specializes in cybersecurity, providing digital authentication, network security monitoring and other related services. The company’s digital authentication services include issuing
digital authentication certificates and setting up and operating systems for organizations wishing to establish theirown digital certificate authority. Network security monitoring services focus on SECOM Virus Monitoring

Education Services
Secom Lines, a pioneer in the field of computer-aided
learning in Japan, continued to focus on the development
and provision of local area network (LAN)-based learning

19

REVIEW OF OPERATIONS

Overseas Operations

systems, Internet-based educational software and on-line
educational software utilities.

In response to the increasingly diverse and sophisticatedsecurity needs of customers worldwide, we are expanding
our operations in overseas markets. One distinguishing
characteristic of our approach overseas is that we takeknow-how and security systems developed in our homemarket and blend them with local customs and conditions to create value-added, customized solutions. This
has enabled the SECOM Group to gain local acceptanceand create a security service network that transcends
differences in customs and cultures.
At present, we have operations in 10 countries andterritories. In the belief that the desire for security is universal, we launched our first overseas operation in
Taiwan in 1978. This was followed in succession by operations in the Republic of Korea and the United States in
1981. Since then, we have set up operations in Europe,in the United Kingdom; in Oceania, in Australia; and elsewhere in Asia, in Thailand, Malaysia, Singapore,
Indonesia and the PRC.

Real Estate Sales
In line with its goal of providing safe and comfortable
homes, subsidiary Secom Home Life develops and markets condominiums that incorporate other value-added
SECOM Group services, including security services,
home medical care, home personal care, information
services and insurance coverage.
Real Estate Leasing
SECOM provides real estate leasing services through its
subsidiary Arai & Co., Ltd., which joined the SECOM
Group in the previous period. Arai continues to maximize
its extensive experience and expertise in property management and draw on the capabilities of other Group
companies to generate new synergies and expand its
operations.

20

FINANCIAL SECTIONCONTENTSFINANCIAL REVIEW ......................................................................................
CONSOLIDATED FINANCIAL STATEMENTS .................................................
CONSOLIDATED BALANCE SHEETS ......................................................
CONSOLIDATED STATEMENTS OF INCOME .........................................
CONSOLIDATED STATEMENTS OF CHANGESIN SHAREHOLDERS’ EQUITY...............................................................
CONSOLIDATED STATEMENTS OF CASH FLOWS ................................
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .........................
INDEPENDENT AUDITORS’ REPORT ............................................................
SUMMARY OF SELECTED FINANCIAL DATA ...............................................
COMMON STOCK DATA..............................................................................

21

22
26
26
28
29
30
31
51
52
53

FINANCIAL REVIEW

real estate sales business and other businesses
with high cost-of-sales ratios, and of valuation losses
on inventories.
Selling, general and administrative expenses
edged up 4.2%, or ¥4.8 billion, to ¥120.0 billion. Owing
to cost-cuttings efforts, however, these expenses
accounted for 23.0% of revenue and other income,down 0.3 percentage point.
Flagging conditions in the Japanese stock market underscored an ¥11.5 billion loss on other-thantemporary impairment of investment securities, up
28.2%, or ¥2.5 billion. Owing to an increase in bankloans for the acquisition of a real estate leasing firmat the end of the previous period and purchase oftreasury stock, interest expenses climbed 133.6%,or ¥2.1 billion, to ¥3.7 billion. Other expenses jumped
38.9%, or ¥4.2 billion, to ¥15.1 billion, primarily
owing to the recognition of impairment losses oflong-lived assets and loss on disposal of security
equipment.

Operating Results
Overview
In the fiscal year ended March 31, 2003, SECOM
and its consolidated subsidiaries (collectively “theCompany”) took decisive steps to enhance theiroperations—which encompass security services,
medical services, insurance services, information services, GIS services, education services, real estate
sales and real estate leasing—by improving services
and expanding marketing, system construction andproduct development.
Owing to these and other efforts, consolidated
revenue and other income rose 5.5%, or ¥27.2 billion,to ¥520.7 billion. This was attributable to solid resultsin all operating segments. Nonetheless, net income
declined 11.2%, or ¥3.8 billion, to ¥30.3 billion, owing
to the absence of a gain on sale of securities, net,
recorded in the previous period.
Revenue and Other Income
Revenue and other income amounted to ¥520.7
billion, an increase of 5.5%, or ¥27.2 billion, owing
to increased sales in all operating segments. Net
sales advanced 6.2%, or ¥29.7 billion, to ¥512.7 billion. This increase reflected higher sales in the security services segment, which focuses on centralized
security systems; expansion of the medical services
segment to include home medical services and leasing of real estate for medical institutions; and contributions from a real estate leasing subsidiary acquiredin the previous fiscal year. Interest and other amounted
to ¥8.0 billion, up 6.1%, or ¥464 million.

Income
The aforementioned increase in the cost-of-sales
ratio, higher loss on other-than-temporary impairmentof investment securities and absence of a ¥3.0 billion
gain on sales of securities, net—present in the preceding period—pushed income before income taxes
down 18.4%, or ¥11.9 billion, to ¥52.9 billion. Income
taxes declined 20.3%, or ¥6.1 billion, to ¥24.0 billion,
representing 45.5% of income before income taxes,
down from 46.6%. Net income slipped 11.2%, or¥3.8 billion, to ¥30.3 billion, and accounted for 5.8%of consolidated revenue and other income, downfrom 6.9%. Basic net income per share was ¥132.87,
down from ¥146.19, while diluted net income pershare was also ¥132.87, down from ¥146.11. Cashdividends of ¥40.00 per share were approved at thegeneral shareholders’ meeting held on June 27, 2003.

Costs and Expenses
Costs and expenses rose 9.1%, or ¥39.1 billion,to ¥467.9 billion. This increase is due to a higher costof sales, a consequence of a rise in revenue, andincreases in loss on other-than-temporary impairmentof investment securities and interest.
Cost of sales advanced 8.7%, or ¥25.4 billion,to ¥317.5 billion, and represented 61.9% of net
sales, up from 60.5% the preceding term. This rise
was largely a consequence of higher sales in the

Segment Information
For detailed segment information, please see Note 28of the accompanying Notes to Consolidated Financial
Statements.

22Ltd., which manages senior citizens’ residences.
Both of these companies became consolidated
subsidiaries in the preceding period. Income before
income taxes was ¥1.8 billion for the segment, up
from a loss before income taxes of ¥698 million in
the preceding period.
The insurance services segment recorded
revenue and other income of ¥31.2 billion, up 1.6%,
or ¥491 million. Despite this improvement, the segment posted a loss before income taxes of ¥9.2 billion, compared with income before income taxes of¥304 million in the previous period, reflecting a loss
on other-than-temporary impairment of investment
assets, particularly investment securities.
The information and communication related
and other services segment, which encompasses
information-related services, GIS services, real estate
sales and real estate leasing, reported revenue andother income of ¥116.0 billion, a rise of 7.9%, or¥8.5 billion. This increase largely reflected the inclusion of the full-year results of consolidated subsidiary
Arai & Co.’s real estate leasing operations as wellas brisk sales of condominiums. The segment’s loss
before income taxes mushroomed to ¥2.0 billion, from¥130 million, however, owing to a loss on other-thantemporary impairment of investment securities.

Revenue and other income in the security
services segment amounted to ¥357.0 billion, an
increase of 3.6%, or ¥12.4 billion. Excluding intersegment transactions, segment revenue and otherincome totaled ¥355.7 billion, equivalent to 68.3% of
total revenue and other income, down from 69.3% in
the preceding period. Commercial security and home
security services generated ¥254.9 billion of thistotal, up 4.3%, or ¥10.4 billion. Large-scale proprietary systems accounted for ¥3.5 billion, an increaseof 0.7%, or ¥23 million. Static guard services
contributed ¥35.9 billion, up 5.3%, or ¥1.8 billion.
Armored car services represented ¥17.3 billion, rising
1.5%, or ¥260 million. Merchandise and other generated ¥44.1 billion, advancing 2.3%, or ¥1.0 billion.
Income before income taxes in the security services
segment decreased 3.5%, or ¥2.9 billion, to ¥80.1
billion, equivalent to 22.4% of segment revenue andother income, compared with 24.1% in the previous
period, owing to valuation losses on inventories anda loss on disposal of security equipment.
Revenue and other income in the medical services segment climbed 47.2%, or ¥6.4 billion, to¥20.1 billion. This rise was primarily attributable tofirm results in the home medical services businessand contributions from the medical services
operations of Arai & Co. and Ryomay Royal Life Co.,

Cash Dividends Paid
per Share

Basic Net Income
per Share(In yen)(In yen)
250

50

200

40

150

30

100

20

50

10
0

0

99 00 01 02 03

99 00 01 02 03

23

¥100.8 billion.
Total liabilities edged up 2.9%, or ¥21.4 billion,to ¥757.3 billion. Total current liabilities rose 16.0%,
or ¥39.2 billion, to ¥284.5 billion, as bank loans
increased 82.4%, or ¥56.0 billion, to ¥124.0 billion,
a consequence of new loans undertaken to fund purchases of treasury stock and the conversion of longterm debt into short-term bank loans. Accrued income
taxes fell 53.0%, or ¥12.2 billion, to ¥10.8 billion.
Long-term debt declined 22.8%, or ¥30.3 billion,to ¥102.8 billion, also owing to the conversion of
long-term debt into short-term bank loans and repayments of long-term debt. Investment deposits bypolicyholders totaled ¥231.1 billion and accounted for
20.0% of total liabilities and shareholders’ equity.
Total shareholders’ equity decreased 7.2%,
or ¥28.8 billion, to ¥372.5 billion. This decrease wasprimarily attributable to the purchase of treasury
stock, which boosted common stock in treasury,at cost, ¥44.1 billion, to ¥44.3 billion. As a consequence, the equity ratio was 32.2%, down from
34.4% a year earlier.

Financial Position
Total assets of the Company as of March 31, 2003,
amounted to ¥1,158.1 billion, down 0.7%, or ¥8.0
billion, from the previous fiscal year-end.
Total current assets fell 7.9%, or ¥37.1 billion, to¥431.0 billion, as cash and cash equivalents declined
14.8%, or ¥31.2 billion, to ¥179.2 billion, and inventories fell 25.1%, or ¥14.0 billion, to ¥41.8 billion. The
decline in inventories was attributable to a rush of
condominium sales in March 2003, which resulted ina decline in real estate inventories. Short-term investments soared 77.8%, or ¥9.8 billion, to ¥22.5 billion,
as an increase in held-to-maturity debt securities due
within one year resulted in their shift to current
assets, from investments and long-term receivables.
The decline in total current assets, coupled with anincrease in total current liabilities, pushed the current
ratio down to 1.5 times, from 1.9 times a year earlier.
Investments and long-term receivables rose
21.5%, or ¥45.7 billion, to ¥258.4 billion. This
increase reflected a restructuring of our investment
portfolio, which resulted in an increase in the weightof investment securities and long-term receivables.
Property, plant and equipment, less accumulated
depreciation, amounted to ¥368.0 billion, down 5.5%,or ¥21.3 billion, owing to the sale of real estate forlease. Other assets rose 4.8%, or ¥4.7 billion, to

Shareholders’Equity per Share

Cash Flows
The Company remains committed to maintaining
sufficient liquidity to ensure flexibility in its operations
and guarantee a solid financial foundation. Accordingly,

Total Assets

Depreciation andAmortization(In billions of yen)

(In yen)(In billions of yen)

2,000

1,250

60

1,600

1,000

48

1,200

750

36

800

500

24

400

250

12

0

0

0
99 00 01 02 03

99 00 01 02 03

24

99 00 01 02 03

Company’s investment portfolio was also reflectedin proceeds from sales of investment securities of¥16.5 billion, while proceeds from sales of property,
plant and equipment amounted to ¥25.5 billion.
The decrease in net cash used in investing activities
during the period was attributable to the decline in net
cash provided by operating activities.
Net cash used in financing activities amounted
to ¥41.4 billion, compared with ¥38.6 billion provided
by financing activities in the previous period. This
total reflected a ¥44.1 billion increase in treasury
stock, net, and dividends paid of ¥9.3 billion. Repayments of long-term debt amounted to ¥53.8 billion,
while proceeds from long-term debt totaled ¥10.8
billion. Increase in bank loans totaled ¥56.8 billion.
Proceeds from long-term debt, repayments of longterm debt and increase in bank loans provided net
proceeds of ¥13.7 billion, compared with ¥47.5 billion
in the preceding period.
As a consequence of the Company’s operating,investing and financing activities during the period
under review, cash and cash equivalents at end ofyear amounted to ¥179.2 billion, down ¥31.2 billion
from ¥210.5 billion a year earlier.

wherever possible, the Company finances strategic
investments with cash generated by its operating
activities.
In the period under review, net cash provided byoperating activities amounted to ¥95.2 billion, adecrease from ¥174.8 billion in the previous period.
This total, which included net income of ¥30.3 billion
and depreciation and amortization of ¥52.1 billion,
represented a decline of ¥79.6 billion from the previous period. The primary factor behind the decrease in
net cash provided by operating activities was a sharp
decline in increase in investment deposits by policyholders, to ¥4.7 billion, from ¥96.2 billion, as hardmarket conditions, including low interest rates,
prompted the Company to suspend sales of funded
personal accident insurance policies.
Net cash used in investing activities totaled¥84.7 billion, down ¥63.3 billion from ¥148.0 billion
in the preceding period. Principal components ofthis total included payments for purchases of investment securities of ¥80.2 billion, owing to a restructuring of the Company’s investment portfolio, andpayments for purchases of property, plant and equipment of ¥50.2 billion, mainly reflecting outlays forsecurity equipment and control stations necessitatedby an increase in the number of security system
subscribers. The aforementioned restructuring of theCapital Expenditures

Cash Flows(In billions of yen)

(In billions of yen)

150

200

120

100

90
0
60
–100

30

–200

0

01

99 00 01 02 03

02

Cash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
25

03

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2003 and 2002ASSETS

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2002

2003

¥0,179,228 ¥0,210,477
4,432
4,880
45,25140,75022,463
12,63547,02849,132
21,32921,22641,801
55,824
46,796
51,912(1,558)(1,522)2,921
2,762
12,851
11,2018,420
8,764
430,962
468,041$(1,493,567
36,933377,092
187,192
391,900
177,742
348,342
389,967(12,983)
24,342
107,092
70,164
3,591,350

2003

Current assets:
Cash and cash equivalents (Note 6)........................................................................
Time deposits ...........................................................................................................
Cash deposits (Note 7) .............................................................................................
Short-term investments (Note 8).............................................................................
Notes and accounts receivable, trade ....................................................................
Due from subscribers ..............................................................................................
Inventories (Notes 9 and 13)....................................................................................
Short-term receivables ............................................................................................
Allowance for doubtful accounts ............................................................................
Deferred insurance acquisition cost (Note 14) .......................................................
Deferred income taxes (Note 17).............................................................................
Other current assets .................................................................................................
Total current assets ...........................................................................................

Investments and long-term receivables:
Investment securities (Note 8).................................................................................
Investments in affiliated companies (Note 10).......................................................
Long-term receivables .............................................................................................
Lease deposits ..........................................................................................................
Other investments ....................................................................................................
Allowance for doubtful accounts ............................................................................

Property, plant and equipment (Notes 11, 13, 20 and 21):Land ...........................................................................................................................
Buildings and improvements ..................................................................................
Security equipment and control stations ...............................................................
Machinery, equipment and automobiles................................................................
Construction in progress..........................................................................................
Accumulated depreciation .......................................................................................

Other assets:
Deferred charges (Note 2 (8)) ..................................................................................
Goodwill (Notes 5 and 12) .......................................................................................
Intangibles and other (Note 12)...............................................................................
Deferred income taxes (Note 17).............................................................................
Total assets ........................................................................................................
The accompanying notes are an integral part of these statements.

26

152,406
34,94245,516
11,746
19,599(5,836)258,373

122,247
34,94330,105
11,707
18,979(5,296)
212,685

1,270,050
291,183
379,300
97,883
163,325(48,633)
2,153,108

157,230
167,303
198,651
53,921
3,456
580,561(212,587)
367,974

155,624
157,097
183,998
55,04031,167582,926(193,651)
389,275

1,310,250
1,394,192
1,655,425
449,342
28,8004,838,009(1,771,559)
3,066,450

38,374
12,491
22,95826,950100,773¥1,158,082

38,187
10,836
21,87325,216
96,112¥1,166,113

319,784
104,092
191,316
224,584
839,776$(9,650,684

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

March 31

March 31

2003

2002

2003

Current liabilities:
Bank loans (Notes 7 and 13) ....................................................................................
Current portion of long-term debt (Notes 13 and 20)............................................
Notes and accounts payable, trade.........................................................................
Other payables..........................................................................................................
Deposits received (Note 7).......................................................................................
Deferred revenue ......................................................................................................
Accrued income taxes ..............................................................................................
Accrued payrolls .......................................................................................................
Other current liabilities.............................................................................................
Total current liabilities ......................................................................................

¥0,124,048
20,507
15,554
19,86928,83839,067
10,813
15,200
10,582
284,478¥0,068,003
32,703
16,401
20,33722,74437,19623,003
14,946
9,961
245,294$1,033,733
170,892
129,617
165,575
240,317
325,558
90,108
126,667
88,1832,370,650

Long-term debt (Notes 13 and 20) ..............................................................................
Guarantee deposits received.......................................................................................
Accrued pension and severance costs (Note 15).......................................................
Deferred revenue..........................................................................................................
Unearned premiums and other insurance liabilities (Note 14) ................................
Investment deposits by policyholders (Note 14) .......................................................
Deferred income taxes (Note 17) ................................................................................
Other liabilities .............................................................................................................
Total liabilities....................................................................................................

102,767
36,75841,704
18,71937,410231,1091,613
2,721
757,279

133,047
33,63536,622
18,461
37,268226,4072,813
2,298
735,845856,392
306,316
347,533
155,992
311,750
1,925,908
13,442
22,675
6,310,658

Minority interest in subsidiaries ................................................................................

28,28528,942

235,708

66,36979,987
9,672
300,529

66,36079,9799,663
279,593553,075
666,558
80,6002,504,409(2,758)42(26,115)(10,921)(39,752)(4,481)
43(23,109)(6,581)(34,128)(22,983)350(217,625)(91,008)(331,266)

Common stock in treasury, at cost (Note 18);
8,200,245 shares in 2003 and 22,512 shares in 2002..........................................
(44,287)(141)
Total shareholders’ equity ................................................................................
372,518
401,326
Total liabilities and shareholders’ equity ........................................................ ¥1,158,082 ¥1,166,113(369,058)
3,104,318$9,650,684

LIABILITIES AND SHAREHOLDERS’ EQUITY

Commitments and contingent liabilities (Note 24)
Shareholders’ equity:
Common stock (Notes 18 and 25):
Authorized 900,000,000 shares in 2003 and 2002;
issued 233,281,133 shares in 2003 and 233,274,769 shares in 2002...............
Additional paid-in capital (Notes 18 and 25) ..........................................................
Legal reserve (Note 18) ............................................................................................
Retained earnings (Note 18) ....................................................................................
Accumulated other comprehensive income (loss):
Unrealized losses on securities (Note 8) .............................................................
Unrealized gains on derivative instruments (Note 23) ......................................
Minimum pension liabilities adjustments (Note 15) ..........................................
Foreign currency translation adjustments ..........................................................

27

CONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2003
2003

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2002

2001

2003

¥483,014
2,967¥433,817
2,569$4,272,783
—

—
7,545
493,526

21,366
10,541
468,293—
66,742
4,339,525

317,457
119,999

292,092
115,158

260,720
107,1412,645,475
999,992

11,546
3,729
15,140467,871

9,004
1,596
10,903428,753

1,851
1,925
14,112385,749

96,21731,075
126,166
3,898,925

52,87264,77382,544

440,600

27,877(3,829)24,04837,096(6,913)30,18330,011
5,740
35,751

232,308(31,908)
200,400

Income before minority interest in subsidiaries, equity
in net income of affiliated companies and cumulative
effect of accounting change ..................................................

28,824

34,59046,793

240,200

Minority interest in subsidiaries ...........................................................

(950)(1,862)(408)(7,917)

Equity in net income of affiliated companies .....................................

1,244

1,354

1,310

10,367

Income before cumulative effect of accounting change.......

29,11834,082

47,695

242,650

Cumulative effect of accounting change, net of tax(Notes 2 (10) and 2 (13)) .......................................................................

1,157

—

(3,699)

9,642

Net income................................................................................

¥030,275¥034,082¥043,996$0,252,292

In yenTranslation into
U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

Revenue and other income:Net sales .............................................................................................. ¥512,734
Gain on sale of securities, net (Notes 8 and 26) ...............................
—
Gain on securities contribution to employee retirement benefit
trust (Note 8)......................................................................................
—
Interest and other (Note 16) ...............................................................
8,009
520,743
Costs and expenses:
Cost of sales ........................................................................................
Selling, general and administrative (Notes 2 (15) and 19) ..............
Loss on other-than-temporary impairment of investment
securities............................................................................................
Interest .................................................................................................
Other (Notes 8 and 11)........................................................................

Income before income taxes ...................................................
Income taxes (Note 17):
Current .................................................................................................
Deferred ...............................................................................................

Per share data (Note 4):
Income before cumulative effect of accounting change—
Basic .................................................................................................
Diluted ..............................................................................................
Cumulative effect of accounting change—
Basic .................................................................................................
Diluted ..............................................................................................
Net income—Basic .................................................................................................
Diluted ..............................................................................................
The accompanying notes are an integral part of these statements.

28

2003

2002

2001

2003

¥127.79¥127.79¥146.19¥146.11¥204.63¥204.46

$1.07
$1.07

¥005.08¥005.08¥¥——(¥015.87)(¥015.85)

$0.04
$0.04

¥132.87¥132.87¥146.19¥146.11¥188.76¥188.61

$1.11
$1.11

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2003
Balance, March 31, 2000 ..................................................................
Comprehensive income:Net income ....................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized losses on securities—
Unrealized holding gains or losses arising during the period ...
Less: Reclassification adjustment for gains or losses
included in net income ................................................
Minimum pension liabilities adjustments ..................................
Foreign currency translation adjustments .................................
Total comprehensive income.........................................................
Cash dividends ...................................................................................
Transfer to legal reserve.....................................................................
Conversion of convertible bonds........................................................
Purchase of treasury stock.................................................................
Reissuance of treasury stock .............................................................
Balance, March 31, 2001 ..................................................................
Comprehensive income:Net income ....................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized losses on securities—
Unrealized holding gains or losses arising during the period ...
Less: Reclassification adjustment for gains or losses
included in net income ................................................
Unrealized gains on derivative instruments—
Unrealized holding gains or losses arising during the period..
Less: Reclassification adjustment for gains or losses
included in net income ................................................
Minimum pension liabilities adjustments ..................................
Foreign currency translation adjustments .................................
Total comprehensive income.........................................................
Cash dividends ...................................................................................
Transfer to legal reserve.....................................................................
Conversion of convertible bonds........................................................
Purchase of treasury stock.................................................................
Reissuance of treasury stock .............................................................
Balance, March 31, 2002 .................................................................
Comprehensive income:Net income ....................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized losses on securities—
Unrealized holding gains or losses arising during the period ...
Less: Reclassification adjustment for gains or losses
included in net income ................................................
Unrealized gains on derivative instruments—
Unrealized holding gains or losses arising during the period..
Less: Reclassification adjustment for gains or losses
included in net income ................................................
Minimum pension liabilities adjustments ..................................
Foreign currency translation adjustments .................................
Total comprehensive income.........................................................
Cash dividends ...................................................................................
Transfer to legal reserve.....................................................................
Conversion of convertible bonds........................................................
Purchase of treasury stock.................................................................
Balance, March 31, 2003 .................................................................

In millions of yen
Accumulated
Commonother comstockprehensive
Retainedin treasury
earnings income (loss) stock, at cost

Number ofsharesissuedCommonstock

Additional
paid-in
capitalLegalreserve

233,075,442¥66,097¥79,713¥7,587¥222,238(¥01,787)(¥00,042)¥373,806

—

—

—

—

43,996——43,996

Total

—

—

—

—

—

(6,496)—(6,496)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(13,105)(16,345)
4,670

—
—
—

—
—
24,302——233,099,744

—
—
30
—
—
66,127——30—
279,745

—
1,031
—
—
—
8,618

(9,323)(1,031)———
255,880—————(33,063)

—
—
—
(801)
840
(3)

(13,105)(16,345)
4,670
12,720(9,323)
—
60
(801)
842
377,304

—

—

—

—

34,082——

34,082

—

—

—

—

—

(6,082)—(6,082)

—

—

—

—

—

3,930

—

3,930

—

—

—

—

—

135

—

135

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(92)
(5,999)
7,043

—
—
—

—
—
175,025——
233,274,769

—
—
233
—
—
66,360——234—
079,979

—
1,045
—
—
—
9,663

(9,324)(1,045)———279,593—————(34,128)

—
—
—
(264)
126
(141)

(92)
(5,999)7,043
33,017(9,324)
—
467
(264)
126
401,326

—

—

—

—

30,275——30,275

—

—

—

—

—

(4,315)—(4,315)

—

—

—

—

—

6,038

—

6,038

—

—

—

—

—

105

—

105

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(106)
(3,006)(4,340)

—
—
—

—
—
6,364
—
233,281,133——
9—¥66,369——8—¥79,987—
9——¥9,672(9,330)(9)——¥300,529————(¥39,752)———(44,146)(¥44,287)(106)(3,006)(4,340)24,651(9,330)—17(44,146)¥372,518

Translation into thousands of U.S. dollars (Note 3)

Commonstock

Balance, March 31, 2002 ......................................................................................... $553,000
Comprehensive income:Net income............................................................................................................
—
Other comprehensive income (loss), net of tax (Note 18):
Unrealized losses on securities—
Unrealized holding gains or losses arising during the period........................
—
Less: Reclassification adjustment for gains or losses
included in net income .......................................................................
—
Unrealized gains on derivative instruments—
Unrealized holding gains or losses arising during the period........................
—
Less: Reclassification adjustment for gains or losses
included in net income .......................................................................
—
Minimum pension liabilities adjustments..........................................................
—
Foreign currency translation adjustments.........................................................
—
Total comprehensive income ................................................................................
Cash dividends ..........................................................................................................
—
Transfer to legal reserve ............................................................................................
—
Conversion of convertible bonds ...............................................................................
75
Purchase of treasury stock ........................................................................................
—
Balance, March 31, 2003 ......................................................................................... $553,075
The accompanying notes are an integral part of these statements.
29

Additional
paid-in
capitalLegalreserve

Accumulated
Commonother comstockprehensive
Retainedin treasury
earnings income (loss) stock, at cost

Total

$666,492 $80,525$2,329,942——

252,292——

252,292———(35,958)—(35,958)———

50,317—50,317

—

—

—

875

—

875

—
—
—

—
—
—

—
—
—

(883)
(25,050)(36,167)

—
—
—

—
—
—
75
66
—
—
—
$666,558 $80,600($284,400) ($001,175) $3,344,384(883)(25,050)(36,167)
205,426(77,750)——(77,750)
(75)
—
—
—
—
—
—
141
—
—
(367,883)(367,883)$2,504,409 ($331,266) ($369,058) $3,104,318

CONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2003

Cash flows from operating activities:
Net income.......................................................................................................................
Adjustments to reconcile net income to net cash provided
by operating activities—
Depreciation and amortization, including amortization of deferred charges ........
Accrual for pension and severance costs, less payments .......................................
Deferred income taxes................................................................................................
Net loss on sales and disposal of property, plant and equipment .........................
Impairment loss on property, plant and equipment (Note 11)................................
(Gain) loss on sales of investment securities ...........................................................
Gain on securities contribution to employee retirement benefit trust (Note 8).....
Gain on sales of subsidiaries’ shares (Note 26)........................................................
Loss on other-than-temporary impairment of investment securities.....................
Equity in net income of affiliated companies ...........................................................
Minority interest in subsidiaries ................................................................................
Cumulative effect of accounting change, net of tax (Notes 2 (10) and 2 (13)) .......
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits .....................................................................
(Increase) decrease in receivables and due from subscribers, net of allowances(Increase) decrease in inventories .........................................................................
(Increase) decrease in other current assets ..........................................................
Increase in deferred charges ..................................................................................
Decrease in payables ..............................................................................................
Increase (decrease) in deposits received ..............................................................
Increase in deferred revenue .................................................................................
Increase (decrease) in accrued income taxes .......................................................
Increase in guarantee deposits received...............................................................
Increase in other current liabilities ........................................................................
Increase in unearned premiums and other insurance liabilities ........................
Increase in investment deposits by policyholders ...............................................
Other, net .................................................................................................................

In millions of yen

Translation into thousandsof U.S. dollars (Note 3)

Years ended March 31

Year ended March 31

2003

2002

2001

2003

¥030,275¥(034,082¥(043,996$0,252,292

52,067
188(3,829)
2,778
3,012
507
—
(330)
11,546(1,244)950(1,157)49,891
3,736(6,913)
1,448—(2,095)
—
(872)
9,004
(1,354)
1,862—

45,020
4,190
5,740
1,941
—
(1,998)(21,366)
(571)
1,851
(1,310)408
3,699

433,892
1,567(31,908)
23,15025,1004,225—(2,750)96,217(10,367)
7,917(9,642)(4,502)
1,483
10,073(1,586)(13,668)
(869)
4,771
2,129
(12,375)
3,588
1,700
142
4,702
4,895

(4,152)(6,727)(5,533)(3,017)(14,295)(1,015)
6,708
1,737
5,145
6,012
853
3,184
96,221929

895(2,010)4,027
6,305(13,881)(24,279)(3,503)
3,788
4,249
2,588
1,713
8,201
54,084(155)(37,516)
12,35883,942(13,217)(113,900)(7,242)39,75817,742(103,125)
29,90014,167
1,183
39,18340,791

Net cash provided by operating activities..........................................................

95,246

174,839

123,622793,717

Cash flows from investing activities:
Decrease in time deposits ..............................................................................................
Proceeds from sales of property, plant and equipment ..............................................
Payments for purchases of property, plant and equipment ........................................
Proceeds from sales of investment securities ..............................................................
Payments for purchases of investment securities........................................................
(Increase) decrease in short-term investments ............................................................
Proceeds from sales of subsidiaries’ shares (Note 26) ................................................
Payments for purchases of subsidiaries’ shares, net of cash acquired (Note 5) .......
Acquisition of Mac Corporation, net of cash acquired.................................................
Increase in short-term receivables, net .........................................................................
Payments for long-term receivables..............................................................................
Proceeds from long-term receivables ...........................................................................
Increase in other assets ..................................................................................................
Other, net .........................................................................................................................

430
25,512(50,171)
16,492(80,170)
10,29290(18)—(3,362)(10,910)
12,147(3,772)(1,278)

7,950
3,693
(144,229)
10,149(22,602)15,459
2,654
1,270
—
(10,301)(8,346)
1,654(5,371)
—

3,976
1,543
(95,441)
5,663(16,802)(2,478)2,088(2,410)(3,203)(9,522)(3,561)
10,689(6,768)—

3,583
212,600(418,092)
137,433(668,083)
85,767750(150)—(28,016)(90,917)
101,225(31,433)(10,650)

Net cash used in investing activities ..................................................................

(84,718)(148,020)(116,226)(705,983)

Cash flows from financing activities:
Proceeds from long-term debt .......................................................................................
Repayments of long-term debt ......................................................................................
Increase (decrease) in bank loans ..................................................................................
Proceeds from minority shareholders ...........................................................................
Dividends paid .................................................................................................................
(Increase) decrease in treasury stock, net (Note 18) ....................................................
Other, net .........................................................................................................................

10,803(53,817)56,753135(9,330)(44,146)(1,754)

69,773(15,948)(6,284)
1,137(9,324)
(138)
(585)

31,770(16,202)(4,516)21(9,323)39(530)

90,025(448,475)
472,941
1,125(77,750)(367,883)(14,617)(344,634)

Net cash provided by (used in) financing activities ..........................................

(41,356)

38,631

1,259

Effect of exchange rate changes on cash and cash equivalents ....................................

(421)

525

239

(3,508)Net increase (decrease) in cash and cash equivalents ...................................................
Cash and cash equivalents at beginning of year .............................................................

(31,249)
210,477

65,975
144,502

8,894
135,608(260,408)
1,753,975

Cash and cash equivalents at end of year .......................................................................

¥179,228¥(210,477¥(144,502$1,493,567

The accompanying notes are an integral part of these statements.

30

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2003

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in security services, medical services, non-life insurance services, information and communication related services and other services. The Company’s
principal business activities are security services including
on-line centralized security services for commercial and residential premises, as well as large-scale proprietary security
services, static guard services, armored car services formoney collection and deposit, and the development,
manufacturing and sale of various security equipment.
The Company is focusing on its “Social System Industry”,
a network of integrated systems and services centered on thefields of security, medical care, non-life insurance, and information and communication related services, targeted at theneeds of people and business. To develop this Social System
Industry concept, the Company has been diversifying the operation of its services covering: home and other medical services;non-life insurance services; information and communication
services, including cyber security services, software development and system integration activities; Geographic Information
System services using aerial surveying technology; school
education systems; development and sale of real estate; leaseof real estate and other services. Moreover, the Company iscurrently expanding its business into broadband services using
cable television networks through its affiliated companies.

The excess of cost over underlying identifiable net assets at
acquisition dates of investments in subsidiaries and affiliatedcompanies is recorded as goodwill.
On occasion, a consolidated subsidiary or affiliated company accounted for using the equity method may issue its
shares to third parties as either a public or private offeringor upon conversion of convertible bonds to common stockat amounts per share in excess of or less than the Company’s
average per share carrying value. With respect to such transactions, where the sale of such shares is not a part of abroader corporate reorganization contemplated or plannedby the Company, the resulting gains or losses arising fromthe change in ownership interest are recorded in income forthe year the transaction occurs.

2. Significant Accounting Policies
The parent company and its Japanese subsidiaries maintain their records and prepare their statutory financial statements in accordance with accounting principles generally
accepted in Japan. Certain adjustments and reclassifications
have been incorporated in the accompanying financial statements to conform with accounting principles generally
accepted in the United States of America. These adjustments
were not recorded in the statutory books of account.
The preparation of financial statements in conformity withaccounting principles generally accepted in the United Statesof America requires management to make estimates andassumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amountsof revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Significant accounting policies followed in the preparationof the accompanying consolidated financial statements are
summarized below:(3) Cash Equivalents
For the purpose of the statements of cash flows, the Company considers all highly liquid investments purchased withinitial maturities of three months or less to be cash equivalents.

(1) Basis of Consolidation and Investments in AffiliatedCompanies
The consolidated financial statements include the accountsof the parent company and those of its majority owned subsidiary companies. All intercompany transactions andaccounts have been eliminated in consolidation.
Investments in 20 to 50 percent owned companies, in which
the ability to exercise significant influence exists, are accounted
under the equity method. Consolidated income includes
the Company’s current equity in the net income of affiliatedcompanies, after elimination of intercompany profits.

(5) Inventories
Inventories, consisting of security-related products, realestate, and information and other related products, are stated
at lower of cost or net realizable value. Cost is determined, inthe case of real estate, based on a specific identification
method and, in the case of other inventories, using themoving-average method.

(2) Foreign Currency Translation
All asset and liability accounts of foreign subsidiaries andaffiliates are translated into Japanese yen at appropriate yearend current rates and all income and expense accounts aretranslated at average rates of exchange during the year.
The resulting translation adjustments are accumulated andreported as part of other comprehensive income (loss).
Foreign currency receivables and payables of the Company
are translated into yen at the rate in effect at the balance
sheet date and the resulting translation gains and losses are
credited or charged to income for the year.

(4) Investments in Debt and Equity Securities
The Company classifies investments in debt and equity
securities as “available-for-sale” or “held-to-maturity”. The
Company has no securities classified as “trading”. Marketable debt and equity securities which are classified as“available-for-sale” are recorded at fair value. Unrealized
gains and losses on securities classified as “available-forsale” are reported as part of other comprehensive income(loss), net of tax. Debt securities that are expected to be“held-to-maturity” are reported at amortized cost. Other
investments in non-public companies are recorded at cost
net of other-than-temporary impairment.
Realized gains or losses on the sale of investments are
based on the moving-average cost method and are credited
or charged to income.

31

(6) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring
new insurance policies are deferred and are being amortizedprincipally over the premium-paying period of the related
insurance policies applying a percentage relationship of cost
incurred to premiums from contracts issued to applicable
unearned premiums throughout the period of the contract.

SFAS No. 144 on April 1, 2002. The adoption of SFAS No. 144
did not have a material effect on the Company’s consolidated
financial position and results of operations.
The Company periodically reviews the carrying amountof its long-lived assets held and used, other than goodwill
and intangible assets with indefinite lives, and assets to bedisposed of, whenever events or changes in circumstancesindicated that the carrying amount may not be recoverable.
Long-lived assets to be held and used are reviewed for
impairment by comparing the carrying amount of the assets
with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss
would be recognized during the period. The impairment loss
would be calculated as the difference between the asset carrying amount and the fair value. Long-lived assets that are
to be disposed of other than by sale are considered held andused until they are disposed of. Long-lived assets that are
to be disposed of by sale are reported at the lower of theircarrying amount or fair value less cost to sell. Reductions incarrying amount are recognized in the period in which thelong-lived assets are classified as held for sale.

(7) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant betterments, are carried at cost. When assets are retired or otherwise disposed of, the cost and related depreciation are
cleared from the respective accounts and the net difference,less any amounts realized on disposition, is reflected inincome. Depreciation is computed primarily using thedeclining-balance method at rates based on the estimateduseful lives of the assets. Assets leased to others under operating leases are primarily depreciated using the straight-line
method over the estimated useful lives. Depreciation expense
was ¥34,735 million ($289,458 thousand), ¥32,084 million and¥28,582 million for the years ended March 31, 2003, 2002 and2001, respectively. Maintenance, repairs and renewals arecharged to income as incurred.
The estimated useful lives of depreciable assets are
as follows:
Buildings
22 to 50 years
Security equipment and control stations
5 years
Machinery, equipment and automobiles 3 to 15 years(10) Goodwill and Other Intangible Assets
In June 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (“SFAS”)
No. 141, “Business Combinations”, and SFAS No. 142,
“Goodwill and Other Intangible Assets”. SFAS No. 141
requires that the purchase method of accounting be used forall business combinations completed after June 30, 2001.
SFAS No. 141 also specifies the types of acquired intangible
assets that are required to be recognized and reported separately from goodwill and those acquired intangible assetsthat are required to be included in goodwill. SFAS No. 142
requires that goodwill no longer be amortized. SFAS No. 142
requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to beamortized over their estimated useful lives and reviewed for
impairment in accordance with SFAS No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets”. Any
recognized intangible asset determined to have an indefinite
useful life is not to be amortized, but instead reviewed for
impairment in accordance with SFAS No. 142 until its life isdetermined to no longer be indefinite.
The Company adopted the provisions of SFAS No. 141 andNo. 142 on April 1, 2002, with the exception of the immediate
requirement to use the purchase method of accounting for all
future business combinations completed after June 30, 2001.
SFAS No. 141 required the Company to evaluate its existingintangible assets and goodwill and to make any necessary
reclassifications in order to conform with the new separation
requirements at the date of adoption. Upon adoption of SFAS
No. 142, the Company reassessed the useful lives and residual values of all intangible assets and made necessary amortization period adjustments. In connection with the transitional
impairment evaluation, SFAS No. 142 required an assessmentof goodwill impairment as of April 1, 2002. To accomplish
this, the Company was required to (1) identify its reporting
units, (2) determine the carrying value of each reporting unit
by assigning the assets and liabilities, including the existing
goodwill and intangible assets to those reporting units, and(3) determine the fair value of each reporting unit. To the(8) Deferred Charges
Deferred charges primarily consist of costs related to installation services of security equipment. The installation costs aredeferred and amortized using the straight-line method overthe contractual period of security services after completion of
the installation. Amortization was ¥13,197 million ($109,975
thousand), ¥12,490 million and ¥11,566 million for the years
ended March 31, 2003, 2002 and 2001, respectively. Previously,
the installation costs had been capitalized as property, plantand equipment and depreciated using the straight-line method
over the contractual period. The related reclassifications ofpreviously reported amounts have been made to conformwith current classifications.
(9) Impairment or Disposal of Long-Lived Assets
In August 2001, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (“SFAS”)
No. 144, “Accounting for the Impairment or Disposal of LongLived Assets”, which superseded both SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of”, and the accounting and reporting
provisions of Accounting Principles Board (“APB”) Opinion
No. 30, “Reporting the Results of Operations—Reporting theEffects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions”, for the disposal of a segment of a business(as previously defined in that Opinion). SFAS No. 144 retains
the fundamental provisions in SFAS No. 121 for recognizing
and measuring impairment losses on long-lived assets held
for use and long-lived assets to be disposed of by sale, while
also resolving significant implementation issues associatedwith SFAS No. 121. The Company adopted the provisions of32

extent the carrying amount of a reporting unit exceeded thefair value of the reporting unit, the Company compared theimplied fair values of the reporting units’ goodwill. The
implied fair values of goodwill were determined by allocating
the fair values of the reporting units to all of the assets(recognized and unrecognized) and liabilities of the reporting
units in a manner similar to a purchase price allocation, in
accordance with SFAS No. 141. The residual fair value after
this allocation was the implied fair values of the reporting
units’ goodwill.
On April 1, 2002, as a result of the adoption of SFAS
No. 141, the Company recorded a transition gain, as a cumulative effect of accounting change, due to the write-off ofunamortized deferred credits of ¥1,157 million (¥9,642 thousand) which existed at March 31, 2002. The Company recognized an impairment loss amounting to ¥161 million ($1,342
thousand) in the year ended March 31, 2003 since the carrying amounts of goodwill exceeded their implied fair values.

charge of ¥3,699 million, net of tax, representing the effect of
adoption of SAB No. 101. The charge has been reflected as acumulative effect of accounting change in the accompanying
consolidated statements of income. The accounting change
did not have a material effect on the Company’s consolidated
statement of income for the year ended March 31, 2001.
Revenue from security services is recognized over the contractual period or, in the case of specific services, when suchservices are performed. Subscribers are generally requested
to prepay a portion of service charges which are credited todeferred revenue and taken into income ratably over thecovered service period.
Merchandise and software sales are recognized when persuasive evidence of an arrangement including title transfer exists,
delivery has occurred, the sales price is fixed or determinable,
and collectibility is probable, and in the case of installations,when such installations are completed.
Revenue from long-term contracts for Geographic Information System services is recognized under the percentage-ofcompletion method.
Property and casualty insurance premiums are earned
ratably over the terms of the related insurance contracts.
Unearned premiums are earned ratably over the terms of theunexpired portion of premiums written.

(11) Unearned Premiums and Other Insurance Liabilities
Unearned premiums are related to unexpired periods of
insurance contracts and are earned on a pro-rata basis over
the remaining contract period. Other insurance liabilities consist principally of liabilities for unpaid claims and adjustment
expenses, which are estimates of payments to be made onreported claims, and incurred but not reported claims, which
are computed based on past experience for unpaid losses.

(14) Research and Development
Research and development costs are charged to income
as incurred.

(12) Income Taxes
The provision for income taxes is computed based on thepretax income included in the consolidated statements ofincome. The asset and liability approach is used to recognize
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Valuation
allowances are recorded to reduce deferred tax assets when it
is more likely than not that a tax benefit will not be realized.
The effect on deferred tax assets and liabilities of a change intax rates is recognized in income in the period that includes
the enactment date.

(15) Advertising Costs
Advertising costs are charged to income as incurred, except
for the costs related to insurance policies. Advertising costs
for acquiring new insurance policies are deferred and amortized as part of insurance acquisition costs. Advertisingexpenses included in selling, general and administrative
expenses for the years ended March 31, 2003, 2002 and 2001
were ¥5,315 million ($44,292 thousand), ¥5,602 million and¥4,885 million, respectively.
(16) Derivative Financial Instruments
Effective on April 1, 2001, the Company adopted Statementof Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities” andSFAS No. 138, “Accounting for Certain Derivative Instruments
and Certain Hedging Activities, an amendment of FASB Statement No. 133”. Both standards establish accounting andreporting standards for derivative instruments and for hedging
activities, and require that an entity recognize all derivatives as
either assets or liabilities in the balance sheet and measure
those instruments at fair value. The cumulative effect adjustment upon the adoption of SFAS No. 133 and No. 138, net ofthe related income tax effect, resulted in an increase to othercomprehensive income of ¥129 million.
The Company recognizes all derivative financial instruments in the consolidated financial statements at fair value
regardless of the purpose or intent for holding them. Changes
in the fair value of derivative financial instruments are either
recognized periodically in income or in shareholders’ equity
as a component of other comprehensive income (loss)
depending on whether the derivative financial instruments
qualify for hedge accounting, and if so, whether they qualify(13) Revenue Recognition
During the year ended March 31, 2001, the Company
adopted Staff Accounting Bulletin (“SAB”) No. 101, “Revenue
Recognition in Financial Statements” issued by the UnitedStates of America Securities and Exchange Commission
retroactively to April 1, 2000. As a result, the Company haschanged its method of accounting for revenues from installation services of security equipment. Effective April 1, 2000,
revenues from installation services of security equipment arerecognized over the contractual period of security services
after completion of the installation. The related installation
costs are also deferred and amortized over the contractual
period. Previously, installation revenues for security equipment were recognized when the Company had substantiallycompleted all of its obligations pursuant to the terms of theinstallation services contract. The Company viewed its obligation under the installation services contract to be substantiallycompleted when installation services of security equipment
were completed and recognized revenues at that time.
At April 1, 2000, the Company recorded a one-time non-cash33

as a fair value hedge or a cash flow hedge. Changes in the fairvalues of derivative financial instruments accounted for as afair value hedge are recorded in income along with the portion of the change in the fair value of the hedged item that
relates to the hedged risk. Changes in the fair value of derivative financial instruments accounted for as a cash flow hedge,
to the extent it is effective as a hedge, are recorded in othercomprehensive income (loss), net of tax. Changes in the fairvalue of derivative financial instruments not qualifying as ahedge are reported in income.
The Company meets the documentation requirements asprescribed by SFAS No. 133 and No. 138, which include theirrisk management objective and strategy for undertaking various hedge transactions. In addition, formal assessment ismade at the hedge’s inception and periodically on an on-goingbasis, as to whether the derivatives used in hedging activities
are highly effective in off-setting changes in fair values orcash flow of hedged items. Hedge accounting is discontinued
for ineffective hedges, if any. Discontinued hedges are recognizedin current income.
Prior to adoption of SFAS No. 133 and No. 138, the Company
used derivative financial instruments to limit its exposure toloss in relation to underlying debt instruments resulting fromadverse fluctuation in interest rates or to provide higher interest income to the Company. The related interest differentials
paid or received under these agreements were recognized over
the terms of the agreements in interest expense.

(19) Recent Pronouncements
In June 2001, the Financial Accounting Standards Board(“FASB”) issued Statement of Financial Accounting Standards(“SFAS”) No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 applies to legal obligations associatedwith the retirement of long-lived assets that result from theacquisition, construction, development and (or) the normal
operation of long-lived assets, except for certain obligationsof lessees. SFAS No. 143 requires that the fair value of a liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fairvalue can be made. The associated asset retirement costs arecapitalized as part of the carrying amount of the long-lived
asset and subsequently allocated to expense over the asset’s
useful life. The Company adopted the provisions of SFAS No.
143 on April 1, 2003. The adoption of SFAS No. 143 did nothave a material effect on the Company’s consolidated financial position and results of operations.
In June 2002, the FASB issued SFAS No. 146, “Accounting
for Costs Associated with Exit or Disposal Activities”. SFAS
No. 146 addresses financial accounting and reporting forcosts associated with exit or disposal activities and supersedes Emerging Issues Task Force Issue (“EITF”) No. 94-3,“Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring)”. SFAS No. 146 requiresthat a liability be recognized for those costs only when theliability is incurred, that is, when it meets the definition of aliability in the Statements of Financial Accounting Concepts
No. 6, “Elements of Financial Statements”. SFAS No. 146 alsoestablishes fair value as the objective for initial measurementof liabilities related to exit or disposal activities. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of
SFAS No. 146 did not have a material effect on the Company’s
consolidated financial position and results of operations.
In November 2002, the FASB issued FASB Interpretation(“FIN”) No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees
of Indebtedness of Others, an interpretation of FASB statement No. 5, 57 and 107 and a rescission of FASB Interpretation No. 34”. FIN No. 45 requires that a liability be recorded in
the guarantor’s balance sheet upon issuance of a guarantee.
In addition, FIN No.45 requires disclosures about the guarantees that an entity has issued. The Company adopted therecognition provisions of FIN No. 45 prospectively to guarantees issued after December 31, 2002. The disclosure provisions of FIN No. 45 are effective for consolidated financial
statements at March 31, 2003. The adoption of FIN No. 45
did not have a material effect on the Company’s consolidated
financial position and results of operations.
In January 2003, the FASB issued FIN No. 46, ‘‘Consolidation of Variable Interest Entities, an Interpretation of ARB
No. 51.’’ FIN No. 46 addresses the consolidation and disclosures by business enterprise of a variable interest entity(“VIE”) as defined in the Interpretation. FIN No. 46 requiresthat the primary beneficiary, an enterprise that holds a majority of variable interests in the VIE, consolidate the VIE and an
enterprise that holds significant variable interests but is not(17) Earnings Per Share
Basic Earnings per Share (“EPS”) is computed based on the
average number of shares of common stock outstanding forthe period. Diluted EPS assumes the dilution that could occur
if securities or other contracts to issue common stock were
exercised or converted into common stock, or resulted in theissuance of common stock.
(18) Free Distribution of Common StockA corporation in Japan may make free distributions of its
common stock to shareholders at the discretion of its Boardof Directors. Free share distributions are accounted for eitherby (i) a transfer from additional paid-in capital to the common
stock account, or (ii) no entry if free shares are distributed
from the portion of previously issued shares in the common
stock account. Under the Japanese Commercial Code, stock
dividends are effected by an appropriation of retained earnings to the common stock account by a resolution of theshareholders and an issuance of additional shares by wayof a stock split with respect to the amount appropriated byresolution of the Board of Directors.
A corporation in the United States of America issuingshares, comparable to less than 25 percent free share distributions, would be required to account for them as stock dividends and the fair value of the shares would be transferredfrom retained earnings to the appropriate capital accounts.
Such transfers, however, would have no effect on total
shareholders’ equity (Note 25).
Free distributions of common stock are included in the EPS
calculation in accordance with accounting principles generally
accepted in the United States of America.

34

the primary beneficiary disclose the information about the VIE.
FIN No. 46 is effective immediately for all new VIEs created or
acquired after January 31, 2003. For VIEs created or acquired
prior to February 1, 2003, FIN No. 46 is applicable no later thanthe beginning of the first interim or annual reporting period
beginning after June 15, 2003 (effective for the Company the
beginning of the year ending March 31, 2005). The Company
did not enter into any new arrangements with VIEs during theperiod from February 1, 2003 through March 31, 2003.
The Company provides loans and guarantees to organizations managing hospitals and related institutions. Certain
organizations are considered as VIEs under FIN No. 46, andthe Company holds a majority of or significant variable interests in the VIEs. Total assets held by the VIEs at March 31,
2003 were ¥34,869 million ($290,575 thousand). The Company’s maximum exposure to loss would be ¥26,150 million($217,917 thousand). In relation to these VIEs, the Company iscurrently in the process of evaluating the effects of the adoption of FIN No. 46 on the Company’s consolidated financial
position and results of operations.
The Company also provides loans and guarantees to realestate investment companies. Certain investment companies
are considered as VIEs under FIN No. 46. As the Company
has been consolidating these companies, the adoption of
FIN No. 46 will have no material effect on the Company’s
consolidated financial position and results of operations.
In January 2003, the Emerging Issues Task Force reacheda final consensus on EITF No. 03-2, “Accounting for theTransfer to the Japanese Government of the Substitutional
Portion of Employee Pension Fund Liabilities”. EITF No. 03-2
addresses accounting for a transfer to the Japanese government of a substitutional portion of an Employees’ Pension
Fund (“EPF”) plan which is a defined benefit pension planestablished under the Japanese Welfare Pension Insurance
Law. EITF No. 03-2 requires employers to account for theentire separation process of a substitutional portion from anentire plan (including a corporate portion) upon completionof the transfer to the government of the substitutional portionof the benefit obligation and related plan assets as the culmination of a series of steps in a single settlement transaction.
Under this approach, the difference between the fair value ofthe obligation and the assets required to be transferred to
the government should be accounted for and separately disclosed as a subsidy. In April 2002, following the enactmentof the Japanese Welfare Pension Insurance Law, the parent
company and certain of its Japanese subsidiaries obtained
approval from Japan’s Ministry of Health, Labour and Welfare
for exemption from the future benefit obligation with respect
to the substitutional portion of the EPF plan. The Company
will recognize the relevant gain or loss in accordance with
EITF No. 03-2 when the past benefit obligation and related
plan assets are transferred to the government. The effect of
the completion of the transaction has not yet been determined because the benefit obligation and the related plan
assets to be transferred may change significantly.

3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial
statements solely for the convenience of the reader. Thesetranslations should not be construed as representing thatthe yen amounts actually represent, or have been or could be
converted into U.S. dollars. The translations of yen into U.S.
dollars have been made at the rate of ¥120=US$1, the rate
prevailing on the Tokyo Foreign Exchange Market on
March 31, 2003.
4. Reconciliation of the Differences between Basicand Diluted Net Income Per Share (“EPS”)
Reconciliation of the differences between basic and diluted
EPS for the years ended March 31, 2003, 2002 and 2001 is
as follows:
In millionsof yenThousandsof shares

Income before
cumulative
effect ofaccountingchangeWeightedaverage shares

For the year ended
March 31, 2003:
Basic EPS—
Income before cumulative
effect of accounting change.. ¥29,118
Effect of dilutive securities—
Convertible bonds ...................
0
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation ...... ¥29,118
For the year ended March 31, 2002:
Basic EPS—
Income before cumulative
effect of accounting change ... ¥34,082
Effect of dilutive securities—
Convertible bonds.....................
3
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation........ ¥34,085
For the year ended March 31, 2001:
Basic EPS—
Income before cumulative
effect of accounting change ... ¥47,695
Effect of dilutive securities—
Convertible bonds.....................
5
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation........ ¥47,700(20) Reclassifications
Certain reclassifications of previously reported amounts
have been made to conform with current classifications.

35

In yenIn U.S.
dollars

EPS

227,849 ¥127.79 $1.07
9227,858 ¥127.79 $1.07

233,138 ¥146.19
150

233,288 ¥146.11

233,081 ¥204.63
211

233,292 ¥204.46

5. Acquisitions
In December 2000, the parent company acquired all issued
shares of Mac Corporation, which engages in sales and maintenance services for medical equipment, for an aggregate
amount of ¥3,980 million.
In August 2001, the parent company acquired all issued
shares of Yoshikikaku Co., Ltd., which engages in sales andlease services for medical facilities and equipment, for an
aggregate amount of ¥3,457 million. The estimated fair valuesof the assets acquired and liabilities assumed at the date ofacquisition are as follows:

6. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2003 and 2002 werecomprised as follows:

Cash ..........................................
Time deposits...........................
Call loan....................................
Investment securities ..............

¥1,088
7,154
743
8,985
1,430
2,295
1,803
5,528
¥3,457

March 31

March 31

2002

2003

¥106,949 ¥115,947
28,33935,84330,00040,00013,94018,687¥179,228 ¥210,477$0,891,242
236,158
250,000
116,167$1,493,567

Investment securities include marketable bonds of theJapanese government and deposits with financial institutions,most of which are held for safekeeping in the name of therelevant company by financial institutions such as banks andsecurities companies. These agreements mature within threemonths and the carrying values approximate market. The
Company has never experienced any losses through defaultof the financial institutions and does not anticipate any
default on agreements outstanding.

In March 2002, the parent company acquired all issued sharesof Arai & Co., Ltd., which engages in sales and leasing servicesof real estate, for an aggregate amount of ¥1,500 million. The
estimated fair values of the assets acquired and liabilities
assumed at the date of acquisition are as follows:

7. Cash Deposits
The Company operates cash collection and deposit services
for financial institutions relating to cash dispensers locatedoutside of financial institution facilities. Cash deposit balances,mostly in cash dispensers, of ¥45,251 million ($377,092 thousand) and ¥40,750 million at March 31, 2003 and 2002, respectively, are segregated from cash and cash equivalents and are
restricted as to use by the Company. The Company funds
most of the necessary cash through bank overdrafts anddeposits from the related financial institutions. Bank loans anddeposits received include ¥17,203 million ($143,358 thousand)and ¥26,738 million ($222,817 thousand), respectively, atMarch 31, 2003, and ¥15,234 million and ¥20,560 million,
respectively, at March 31, 2002, relating to this operation. As
part of its fee arrangement for such services, the Company isreimbursed for the interest cost of the related overdrafts.

In millions of yen

Current assets.........................................................
Property, plant and equipment .............................
Goodwill..................................................................
Other........................................................................
Total assets acquired .........................................
Current liabilities ....................................................
Long-term debt.......................................................
Other........................................................................
Total liabilities assumed ....................................
Minority interest in subsidiaries ...........................
Net assets acquired ............................................

In thousands of
U.S. dollars

2003

In millions of yen

Current assets.........................................................
Investments and long-term receivables ...............
Other........................................................................
Total assets acquired .........................................
Current liabilities ....................................................
Long-term debt.......................................................
Other........................................................................
Total liabilities assumed ....................................
Net assets acquired ............................................

In millions of yen¥07,282
41,762
2,743
13,17264,95923,49434,0085,944
63,446
13¥01,500

8. Short-Term Investments and Investment Securities
Short-term investments (current) and investment securities(non-current) include debt and equity securities. The related
aggregate fair value, gross unrealized gains, gross unrealized
losses and cost pertaining to “available-for-sale” and “heldto-maturity” investments at March 31, 2003 and 2002 wereas follows:

The acquisitions referred to above have been accounted forunder the purchase method of accounting, and the identifiable
assets and liabilities of the acquired companies have beenrecorded at their fair value at the date of acquisition. The resultsof their operations have been included in the consolidated
statements of income since the date of acquisition of the majority of outstanding shares. The difference between the purchaseprice and the value assigned to the underlying net assets
acquired is included in goodwill and amounted to ¥12,491 million ($104,092 thousand) and ¥10,782 million at March 31, 2003
and 2002, respectively.
The consolidated pro forma information that would show theresults of the Company’s consolidated operations for the years
ended March 31, 2002 and 2001 has not been disclosed basedon materiality considerations.

In millions of yen
March 31, 2003
Gross unrealized

36

Cost

Gains

LossesFair value

Available-for-sale:
Equity securities ...
Debt securities ......
Total .........................

¥051,251
87,946¥139,197¥1,592
1,243¥2,835¥4,180475¥4,655¥048,663
88,714¥137,377

Held-to-maturity:
Debt securities ......

¥014,251¥ 0,010¥0,042¥014,219

In millions of yen

In thousands of U.S. dollars

March 31, 2002

March 31, 2003

Gross unrealized
Cost

Gains

Available-for-saleLossesFair value

Available-for-sale:
Equity securities ...
Debt securities ......
Total .........................

¥059,311
50,345¥109,656¥3,444714¥4,158¥8,038894¥8,932¥054,717
50,165¥104,882

Held-to-maturity:
Debt securities ......

¥017,500¥¥0,090¥017,410—

Held-to-maturity

Cost

Fair value

Cost

Fair value

Due within 1 year .........$102,142
Due after 1 year
through 5 years .......... 566,350
Due after 5 years
through 10 years ........ 35,700
Due after 10 years ....... 28,691..................................$732,883$099,692$087,500$087,584

574,167

28,75928,40836,06629,358$739,283—
2,500$118,759—
2,500$118,492

In thousands of U.S. dollars
March 31, 2003

During the years ended March 31, 2003, 2002 and 2001,
the net unrealized losses on “available-for-sale” securities
included as part of other comprehensive income (loss), netof tax, decreased by ¥1,723 million ($14,359 thousand), andincreased by ¥2,152 million and ¥19,601 million, respectively.
Proceeds from the sale of “available-for-sale” securities forthe years ended March 31, 2003, 2002 and 2001 were ¥8,228
million ($68,567 thousand), ¥5,126 million and ¥3,749 million,
respectively. On those sales, the gross realized gains andgross realized losses, using a specifically identified movingaverage cost basis, for the years ended March 31, 2003, 2002
and 2001 were as follows:

Gross unrealized
LossesFair value

Available-for-sale:
Equity securities..... $0,427,092
Debt securities .......
732,883
Total........................... $1,159,975$13,267 $34,834
10,358
3,958$23,625 $38,792$0,405,525
739,283$1,144,808

Held-to-maturity:
Debt securities ....... $0,118,759$00,083 $00,350$0,118,492

Cost

Gains

At March 31, 2003, debt securities principally consisted ofshort-term investments in monetary trusts, Japanese government bonds, corporate bonds, U.S. treasury securities andU.S. Government Agency Bonds.
In September 2000, the parent company contributed certain
marketable equity securities, not including those of its subsidiaries and affiliated companies, to an employee retirement
benefit trust, with no cash proceeds thereon. The fair value ofthese securities at the time of contribution was ¥21,550 million.
Upon contribution of these securities, net unrealized gains
amounting to ¥21,366 million were realized and included in
the consolidated statement of income for the year ended
March 31, 2001.
The cost and fair value of “available-for-sale” and ”held-tomaturity” debt securities by contractual maturity at March 31,
2003 are as follows:

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2003

2002

2001

2003

Gross realized gains..... ¥0,759
Gross realized losses ... 1,266¥2,556470¥1,491
255$06,325
10,550

The Company maintains long-term investment securities,
included as investment securities, issued by a number of
non-public companies. The aggregate carrying amount of theinvestments in non-public companies, at cost net of otherthan-temporary impairment, was ¥23,241 million ($193,675
thousand) and ¥12,500 million at March 31, 2003 and 2002,
respectively. The corresponding fair value at that date was
not computed as such estimation was not practicable.

In millions of yen
March 31, 2003
Available-for-sale

9. Inventories
Inventories principally consist of operational equipment
and certain merchandise, including security-related products,
software and real estate for sale.
Inventories at March 31, 2003 and 2002 comprised thefollowing:

Held-to-maturity

Cost

Fair value

Cost

Fair value

Due within 1 year ......... ¥12,257
Due after 1 year
through 5 years .......... 67,962
Due after 5 years
through 10 years ........
4,284
Due after 10 years .......
3,443.................................. ¥87,946¥11,963¥10,500¥10,510

68,900

3,451

3,409

4,328
3,523
¥88,714—300¥14,251—300¥14,219

37

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2003

2002

2003

Security-related products .......... ¥07,504
Real estate................................... 28,662
Information and other-related
products ....................................
5,635¥41,801¥10,493
39,154$062,534
238,850

6,177¥55,824

46,958$348,342

A summary of transactions and balances with the affiliatedcompanies accounted for using the equity method is presented
below:

Work in process real estate inventories at March 31, 2003
and 2002, amounting to ¥20,931 million ($174,425 thousand)and ¥35,682 million, respectively, are included in real estate.
10. Investments in Affiliated Companies
The Company has investments in affiliated companies thatare accounted for under the equity method. The principal
investments are Nohmi Bosai Ltd., a 28.6 percent owned
affiliate, which is Japan’s largest manufacturer of fire alarms
and listed on the First Section of the Tokyo Stock Exchange;
Taiwan Secom Co., Ltd., a 27.6 percent owned affiliate, which
is listed on the Taiwan Stock Exchange; S1 Corporation,
a 25.6 percent owned affiliate, which is listed on the Korea
Stock Exchange; Japan Image Communications Co., Ltd.,a 30.6 percent owned affiliate; and Japan Cablenet Holdings
Limited, a 23.0 percent owned affiliate.
Summarized financial information regarding the affiliatedcompanies accounted for under the equity method was asfollows:
In thousands ofIn millions of yen

U.S. dollars

March 31

March 31

2002

2003

Current assets ..........................
Non-current assets ..................

¥102,363 ¥106,123
139,396 129,402$0,853,025
1,161,633

2003

Total assets ..........................

¥241,759 ¥235,525$2,014,658

Current liabilities......................
Non-current liabilities..............
Shareholders’ equity ...............

¥063,570 ¥058,303
64,45859,985
113,731 117,237$0,529,750
537,150
947,758

Total liabilities andshareholders’ equity ..........

¥241,759 ¥235,525$2,014,658

Year ended
March 31

2001

2003

Net sales................... ¥178,397 ¥158,770 ¥150,005$1,486,642

Gross profit .............. ¥055,179 ¥045,621 ¥042,441$0,459,825

Net income............... ¥006,996 ¥007,384 ¥004,318$0,058,300

2003

2002

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2003

2002

2001

2003

Sales .......................... ¥01,862¥1,595¥1,637$15,517

Purchases .................. ¥10,061¥9,704¥9,764$83,842

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2003

2002

2003

Notes and accounts
receivable, trade......................... ¥00,606¥0,940$05,050

Loan receivables .......................... ¥00,987¥0,268$08,225

Notes and accounts payable....... ¥02,672¥2,901$22,267

Guarantees for bank loans .......... ¥10,101¥8,765$84,175

11. Long-Lived Assets
The Company recognized impairment losses on property,
plant and equipment of ¥3,012 million ($25,100 thousand) for
the year ended March 31, 2003, which were included in otherexpenses in the accompanying consolidated statements ofincome. The impaired assets included the properties held byreal estate investment companies as part of investment assetsof the insurance service segment. Fair value was determinedbased on appraisal value.

In thousands ofIn millions of yen
U.S. dollars
Years ended
March 31

In millions of yen

12. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding
goodwill at March 31, 2003 and April 1, 2002 were as follows:
In millions of yen
March 31, 2003
Gross
carrying
amountDividends received from affiliated companies for the years
ended March 31, 2003, 2002 and 2001 were ¥924 million($7,700 thousand), ¥655 million and ¥419 million, respectively.
Among the affiliated companies accounted for using theequity method, the stocks of three companies carried atequity of ¥22,457 million ($187,142 thousand) and ¥22,302
million at March 31, 2003 and 2002, respectively, had aquoted market value of ¥33,884 million ($282,367 thousand)and ¥40,643 million at March 31, 2003 and 2002, respectively.
The unamortized amounts of goodwill were ¥729 million($6,075 thousand) and ¥415 million at March 31, 2003 and2002, respectively. In accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 142, “Goodwill andOther Intangible Assets”, this equity-method goodwill is nolonger amortized, but is being analyzed for impairment. Prior
to the adoption of SFAS No. 142, goodwill was amortized ona straight-line basis over periods not exceeding 10 years.

Accumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software..................................... ¥022,065
Other...........................................
5,560
Total ............................................... ¥027,625(¥06,311) ¥015,754(2,959)2,601(¥09,270) ¥018,355

Unamortized intangible assets ... ¥004,603¥—¥004,603

In millions of yen
April 1, 2002
Gross
carrying
amount38

Accumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software..................................... ¥019,029
Other...........................................
6,445
Total ............................................... ¥025,474(¥03,980) ¥015,049(4,174)2,271(¥08,154) ¥017,320

Unamortized intangible assets ... ¥004,553¥—¥004,553

Reconciliations of reported income before cumulative effectof accounting change and net income and basic and diluted
Earnings per Share (“EPS”) to the amounts adjusted for the
exclusion of goodwill amortization for the years ended March
31, 2002 and 2001 were as follows:

In thousands of U.S. dollars
March 31, 2003
Gross
carrying
amountAccumulated
amortization

Amortized intangible assets:
Software..................................... $183,875
Other...........................................
46,333
Total ............................................... $230,208

Net
carrying
amountIn millions of yen($52,592) $131,283(24,658)
21,675($77,250) $152,958

Unamortized intangible assets ... $038,358$—

Years ended
March 31
2002

$038,358

Aggregate amortization expense for the year ended March
31, 2003, was ¥4,134 million ($34,450 thousand).
The estimated aggregate amortization expense for intangible
assets for the next five years is as follows:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥4,650
4,385
3,820
2,929
1,360

$38,750
36,542
31,833
24,408
11,333

2004 ....................................................
2005 ....................................................
2006 ....................................................
2007 ....................................................
2008 ....................................................

Reported net income ............................................ ¥34,082 ¥43,996
Addback: Goodwill amortization .........................
2,197
1,897
Adjusted net income ............................................ ¥36,279 ¥45,893
Per share data:
In yenYears ended
March 31
2002

The changes in the carrying amount of goodwill by businesssegment for the year ended March 31, 2003 were as follows:

Security
services

April 1, 2002 ...........
Goodwill acquired
during the year.....
Impairment
losses ....................
Translation
adjustment ...........
March 31, 2003.......

Medical Insurance
services services

Total¥1,239¥5,063¥—¥5,637¥11,939

—

—

—

708

708

—

(161)

—

—

(161)

5
¥1,244—¥4,902—¥——¥6,345

5¥12,491

Reported diluted EPS........................................ ¥146.11 ¥204.46
Addback: Goodwill amortization .....................
9.42
8.13
Adjusted diluted EPS ........................................ ¥155.53 ¥212.59
Net income:
Reported basic EPS........................................... ¥146.19 ¥188.76
Addback: Goodwill amortization .....................
9.42
8.14
Adjusted basic EPS ........................................... ¥155.61 ¥196.90
Reported diluted EPS........................................ ¥146.11 ¥188.61
Addback: Goodwill amortization .....................
9.42
8.13
Adjusted diluted EPS ........................................ ¥155.53 ¥196.74

In thousands of U.S. dollars

Security
services

Information
andcommunication
related andother services

Total

$—

$46,975$099,492

—

5,900

5,900

—

—

(1,342)—$——$52,875

42$104,092

Medical Insurance
services services

April 1, 2002 ........... $10,325 $42,192
Goodwill acquired
during the year.....
——
Impairment
losses ....................
— (1,342)
Translation
adjustment ...........
42—
March 31, 2003....... $10,367 $40,850

2001

Income before cumulative
effect of accounting change:
Reported basic EPS........................................... ¥146.19 ¥204.63
Addback: Goodwill amortization .....................
9.42
8.14
Adjusted basic EPS ........................................... ¥155.61 ¥212.77

In millions of yen
Information
andcommunication
related andother services

2001

Reported income before cumulative
effect of accounting change ............................... ¥34,082 ¥47,695
Addback: Goodwill amortization .........................
2,197
1,897
Adjusted income before cumulative
effect of accounting change ............................... ¥36,279 ¥49,592

13. Bank Loans and Long-Term Debt
Bank loans of ¥124,048 million ($1,033,733 thousand) and¥68,003 million at March 31, 2003 and 2002, respectively, aregenerally comprised of 30 to 365 day notes. Their interest
rates ranged from 0.49 to 1.88 percent at March 31, 2003 andfrom 0.4 to 2.41 percent at March 31, 2002. Substantially allof these loans are with banks. The Company has entered into
basic agreements with these banks that state that, with respect
to all present or future loans with such banks, collateral (including sums on deposit with such banks) or guarantors shall be
provided immediately upon request. Further, any collateral
furnished pursuant to such agreements or otherwise will beapplicable to all indebtedness to such banks. The Company
has never been requested to submit such additional security.

39

Long-term debt at March 31, 2003 and 2002 comprised thefollowing:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2002

2003

2003

Loans, principally from banks
due 2003 to 2016 with interest
rates ranging from 0.00 to 6.60%
in 2003 and 2002:
Secured .......................................... ¥053,032 ¥061,565
Unsecured ..................................... 27,343
57,237
1.60% unsecured convertible
bonds due 2002, convertible
currently at ¥2,667.8 ($22.23) for
one common share, redeemablebefore due date...............................
—
33
1.60% unsecured convertible
bonds due 2004, convertible
currently at ¥2,372.4 ($19.77) for
one common share, redeemablebefore due date...............................
18
18
2.05% unsecured notes due 2003 ...
—
5,000
0.53% unsecured bonds due 2006.. 30,000
30,0000.46% unsecured bonds due 2007..
1,500—
1.80% secured bonds due 2004 ......
200
200
1.21% secured bonds due 2006 ......
300
300
Obligations under capital leases,
due 2003 to 2026 (Note 20)............ 10,881
11,397
123,274 165,750
Less:
Portion due within one year .......... 20,507
32,703¥102,767 ¥133,047

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”),
a subsidiary of the parent company, maintains accounting
records as noted in Note 2 in accordance with the accounting
principles and practices generally accepted in Japan, whichvary in some respects from accounting principles generally
accepted in the United States of America. Those differences
are principally, (a) that insurance acquisition costs arecharged to income when incurred in Japan whereas in the
United States of America those costs are deferred and amortized generally over the premium-paying period of the insurance policies, (b) that liabilities related to incurred but notreported claims are computed based on related regulations inJapan whereas in the United States of America those liabilities are computed based on past experience for unreported
losses, and (c) that unearned premiums are calculated basedon the documents authorized by the Supervisory Authorities
in Japan whereas in the United States of America unearned
premiums are reflected based on the lapse and surrender
over the contract period.
In addition, under certain property and casualty insurance
contracts with a refund clause and long-term insurance policies that provide refunds at maturity, such as personal injury
and fire, the policyholder receives a refund if premiums havebeen fully paid unless a substantial settlement (as definedin the policy) has occurred. The Company has provided forsuch refundable amounts by classifying a portion of the net
premiums written, together with interest thereon, as investment deposits by policyholders. Contract and policy terms are
principally five years.
For purposes of preparing the consolidated financial statements, appropriate adjustments have been made to reflect
such items in accordance with accounting principles generally
accepted in the United States of America.
The amounts of net equity of Secom Insurance at March 31,
2003 and 2002 were ¥15,902 million ($132,517 thousand) and¥19,653 million, respectively.

$0,441,934
227,858—150—
250,000
12,5001,667
2,500
90,675
1,027,284
170,892$0,856,392

Property, plant and equipment with a carrying amount of¥72,804 million ($606,700 thousand), inventories with a carrying amount of ¥24,097 million ($200,808 thousand), investment securities with a carrying amount of ¥695 million ($5,792
thousand), time deposits of ¥192 million ($1,600 thousand) andintangibles and other with a carrying amount of ¥1,616 million($13,467 thousand) were pledged as collateral for short-termand long-term debt at March 31, 2003.
The Company has no compensating balance arrangementswith any lending bank. However, as is the customary practicein Japan, the Company had time deposits aggregating ¥1,228
million ($10,233 thousand) with such banks at March 31, 2003.
The aggregate annual maturities on long-term debt after March
31, 2003 are as follows:
Years ending March 31

2004.....................................................
2005.....................................................
2006.....................................................
2007.....................................................
2008.....................................................
Later years ..........................................

In millions of yen

In thousands of
U.S. dollars¥020,507
16,34928,92743,543
3,215
10,733¥123,274$0,170,892
136,242
241,058
362,858
26,79289,442$1,027,284

15. Pension and Severance Costs
Employees of the parent company and its Japanese subsidiaries whose services are terminated are, under mostcircumstances, entitled to lump-sum severance indemnities or
eligible for pension benefits. Lump-sum severance indemnities
are provided to employees with three to 10 service years andare determined based on current basic rates of pay, length ofservice and conditions under which the termination occurs.
The parent company and certain of its Japanese subsidiaries
maintain an Employees’ Pension Fund (“EPF”) plan which isa defined benefit pension established under the Japanese
Welfare Pension Insurance Law, covering substantially all of
their employees. The EPF plan is composed of the substitutional portion and the corporate portion. The pension benefits
for the substitutional portion are determined based on standard remuneration scheduled by the Japanese Welfare
Pension Insurance Law and the length of participation. The
pension benefits of the corporate portion are determined basedon current basic rates of pay, length of service and conditions
under which the termination occurs. The EPF plan is funded40

in conformity with the funding requirements of the Japanese
Welfare Pension Insurance Law.
To supplement the EPF plan, the parent company andits major Japanese subsidiaries act as trustees for noncontributory defined benefit pension plans which cover substantially all of the eligible employees having 10 years ormore of service. The benefits are in the form of lump-sumand (or) pension payments and are determined by formulabased upon length of service and age at time of termination.
The Company contributes amounts required to maintain sufficient plan assets to provide for accrued benefits, subject tolimitations on deductibility imposed by Japanese income
tax laws.
In March 2002, the parent company and certain of its
Japanese subsidiaries integrated and amended three pension plans as described above, comprised of a lump-sum
payment plan, the corporate portion of the EPF plan and a
non-contributory defined benefit pension plan, to a cash balance pension plan, effective April 1, 2002. Under the cash balance pension plan, each participant has an account which iscredited annually based on the current rate of pay and market-related interest rate. With this plan amendment, the benefit obligation decreased and the resulting prior service benefit
is amortized based on the remaining service period.
In April 2002, following the enactment of changes to theJapanese Welfare Pension Insurance Law, the parent company and certain of its Japanese subsidiaries obtained
approval from Japan’s Ministry of Health, Labour and Welfare
for exemption from the future benefit obligation with respect
to the substitutional portion of the EPF plan. The Company
will recognize the relevant gain or loss in accordance with
the Emerging Issues Task Force No. 03-2, “Accounting for theTransfer to the Japanese Government of the Substitutional
Portion of Employee Pension Fund Liabilities,” when the pastbenefit obligation and related plan assets are transferred to
the government.
In March 2003, the parent company and certain of its
Japanese subsidiaries decided to transfer the 20 percent
portion of their cash balance pension plan for the eligible
employees having three years or more of service to a defined
contribution pension plan and amend the calculation methodof a market-related interest rate for the remaining 80 percent
portion, effective April 1, 2003. With this plan amendment, thebenefit obligation decreased and the resulting prior service
benefit is amortized based on the remaining service period.

Net pension and severance costs under Statement of
Financial Accounting Standards (“SFAS”) No. 87, “Employers’
Accounting for Pensions”, for the years ended March 31, 2003,
2002 and 2001 were as follows:

2003

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2002

2001

Net pension andseverance costs (credit):
Service cost.................... ¥(4,200 ¥08,032 ¥(6,898
Interest cost.................... 3,449
3,930 3,755
Expected return onplan assets ................... (2,749) (3,488) (3,962)
Amortization oftransition assets...........
(46)
(46)
(46)
Amortization of priorservice benefit.............. (1,172)
(85)
(37)
Recognized actuarialloss................................ 3,336
1,872
606
Net periodic benefit cost... ¥(7,018 ¥10,215 ¥(7,214

2003$(35,000
28,742(22,908)(384)(9,767)27,800$(58,483

The changes in benefit obligation and plan assets, funded
status and composition of amount recognized in the consolidatedbalance sheets were as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2002

2003

2003

Change in benefit obligation:
Benefit obligation
at beginning of year ............... ¥137,867 ¥131,087 $ 1,148,892
Service cost...............................
4,200
8,032
35,000Interest cost ..............................
3,449
3,930
28,742
Plan participants’contributions...........................
7
1,612
58
Actuarial loss ............................
554
12,482
4,616
Amendments ............................
(6,786) (15,671)(56,550)
Benefits paid .............................
(3,803)(3,698)(31,692)
Acquisition ................................
—
93—
Benefit obligation
at end of year.......................... 135,488 137,867
1,129,066
Change in plan assets:
Fair value of plan assets
at beginning of year ...............
88,24995,719735,408
Actual return on plan assets....
(8,521) (11,876)(71,008)
Employer contribution .............
6,414
5,880
53,450Plan participants’contributions...........................
7
1,612
58
Benefits paid .............................
(3,432)(3,086)(28,600)
Fair value of plan assets
at end of year..........................
82,717
88,249689,308
Funded status................................
52,771
49,618439,758
Unrecognized actuarial loss ........ (79,511) (71,023)(662,592)
Unrecognized transition assets...
89
135
742
Unrecognized prior service
benefit ..........................................
22,425
16,852
186,875
Net amount recognized .............. (¥004,226) (¥004,418) ($ 0,035,217)41

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 312003

16. Exchange Gains and Losses
Interest and other revenue for the years ended March 31,
2003, 2002 and 2001 includes net exchange gains of ¥389
million ($3,242 thousand), ¥321 million and ¥313 million,
respectively.

2003

2002

Amounts recognized in the
consolidated balance sheets
consist of:
Accrued pension andseverance costs ...................... ¥41,704 ¥36,622
Accumulated othercomprehensive income(loss) ........................................ (45,930) (41,040)
Net amount recognized .............. (¥04,226) (¥ 4,418)

17. Income Taxes
Total income taxes for the years ended March 31, 2003,
2002 and 2001 were allocated as follows:$347,533(382,750)($035,217)

March 31

Discount rate.......................................
Expected long-term rate of
return on plan assets........................
Long-term rate of salary increase .....

2003

2002

2001

2.5%

2.5%

3.0%

3.0%
2.7%

3.0%
4.0%
2.7% 2.2–3.5%

The plan assets consist principally of corporate equity
securities, government securities and corporate debt securities.
The provisions of SFAS No. 87 require recognition in thebalance sheet of a minimum pension liability and related
intangible assets for pension plans with an accumulated benefit obligation in excess of plan assets. The minimum pension
liability which exceeded the unrecognized prior service cost
was recorded as a component of accumulated other comprehensive income (loss), net of tax, of ¥26,115 million ($217,625
thousand) and ¥23,109 million at March 31, 2003 and 2002,
respectively.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plan withaccumulated benefit obligation in excess of plan assets were¥135,488 million ($1,129,066 thousand), ¥123,916 million($1,032,633 thousand) and ¥82,717 million ($689,308 thousand),
respectively, at March 31, 2003, and ¥137,867 million, ¥124,127
million and ¥88,249 million, respectively, at March 31, 2002.
Most overseas subsidiaries have various retirement plans,
which are primarily defined contribution plans, covering
substantially all of their employees. The funding policy forthe defined contribution plans is to annually contribute an
amount equal to a certain percentage of the participants’annual salaries. The contributions to the defined contribution
pension plans for the years ended March 31, 2003, 2002 and2001 were ¥22 million ($183 thousand), ¥20 million and¥19 million, respectively.

42

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2001

2003

Income .......................... ¥24,048 ¥30,183 ¥ 35,751
Cumulative effect ofaccounting change ....
——
(3,528)
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized losses
on securities ...........
439(1,273) (13,419)
Unrealized gains
on derivative
instruments ............
6
24—
Minimum pension
liabilities
adjustments............
(1,379) (3,633) (11,788)
Foreign currencytranslation
adjustments............
(279)
—
—
¥22,835 ¥25,301 ¥ 07,016$200,4002003

The assumptions used in computing the information above
are as follows:

In millions of yen

2002

—

3,658
50
(11,492)(2,325)$190,291

The Company is subject to a number of different income
taxes which, in the aggregate, indicate a statutory tax ratein Japan of approximately 41.9 percent for the years ended
March 31, 2003, 2002 and 2001.
Amendments to Japanese tax regulations were enacted on
March 24, 2003. As a result of this amendment, the statutory
tax rate was reduced from approximately 41.9 percent to40.6 percent effective from April 1, 2004. Deferred tax assets
and liabilities expected to be settled or realized on or after
April 1, 2004 were calculated at the rate of approximately
40.6 percent.
Reconciliations of the differences between income taxes
computed at statutory tax rates and consolidated income tax
expense were as follows:

The significant components of deferred tax assets andliabilities at March 31, 2003 and 2002 were as follows:

2003

Year ended
March 31

2001

2003

2002

Income taxes
computed at statutory
tax rate of 41.9% ....... ¥22,153 ¥27,140 ¥34,586
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions .................
2,537
2,081
1,305
Reversal ofvaluation
allowance due
to utilization ofoperating loss
carryforwards.........
(1,545)(670) (2,504)
Amortization of
non-deductible
goodwill..................
—
763
699
Other, net..................
903
869
1,665
Consolidated
income taxes ...... ¥24,048 ¥30,183 ¥35,751

In thousands of
U.S. dollars
March 31

2002

2003

2003

Deferred tax assets:
Loss carryforwards ................. ¥(23,019 ¥(22,062
Accrued pension andseverance costs ..................... 17,081
17,611
Deferred revenue .................... 11,880
11,850Adjustment of book value atthe date of acquisition—
Land and buildings .............
9,432
10,245
Other assets.........................
2,593
2,676
Accrued bonus ........................
3,116
2,453
Investment securities..............
2,650
805
Allowance for doubtful
accounts.................................
2,399
1,627
Vacation accrual ......................
1,953
1,873
Property, plant andequipment ............................
1,897—
Enterprise and state income
taxes .......................................
916
2,020
Other ........................................
7,855
7,136
Gross deferred tax assets... 84,791
80,358Less: Valuation allowance .. (21,889) (21,256)
Total deferred tax assets .... 62,902
59,102
Deferred tax liabilities:
Deferred installation costs ..... (8,076)(8,052)Adjustment of book value atthe date of acquisition—
Land and buildings ............. (6,589)(7,012)Other investments............... (2,523)(2,603)Long-term receivables ........ (1,955)(2,021)
Capitalization of property
acquisition tax ....................... (1,592)(1,540)
Unearned premiums andother insurance liabilities ..... (1,454)(1,291)Other ........................................ (2,525)(2,979)Gross deferred tax
liabilities............................. (24,714) (25,498)
Net deferred tax assets ...... ¥(38,188 ¥(33,604

In thousands ofIn millions of yen
U.S. dollars
Years ended
March 31

In millions of yen
March 31

$184,608

21,142(12,875)—
7,525$200,400

43$(191,825
142,342
99,00078,60021,60825,96722,08319,992
16,27515,808
7,633
65,458706,591(182,408)
524,183(67,300)(54,908)(21,025)(16,292)(13,267)(12,117)(21,040)(205,949)$(318,234

The transaction for repurchase of treasury stock included
a portion with related parties, Yugen Kaisha Iida Kosan andYugen Kaisha Toda Zenken, which are asset managementcompanies with a majority of voting interests held by the parent company’s directors and their immediate families. The
amounts purchased from these related parties, Yugen Kaisha
Iida Kosan and Yugen Kaisha Toda Zenken, were ¥25,530
million ($212,750 thousand) and ¥16,512 million ($137,600
thousand), respectively.

The valuation allowance principally relates to deferred tax
assets of the subsidiaries with operating loss carryforwards,
for tax purposes, that are not expected to be realized. The netchange in the total valuation allowance for the years ended
March 31, 2003 and 2002 was an increase of ¥633 million ($5,275
thousand) and ¥1,296 million, respectively.
In assessing the realizability of deferred tax assets, theCompany management considers whether it is more likely
than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become deductible. The Company management considered the scheduled reversal of deferred tax liabilities,
projected future taxable income and tax planning strategies
in making this assessment. Based upon the level of historicaltaxable income and projections for future taxable income
over the periods in which the deferred tax assets are
deductible, the Company management believes it is more
likely than not that the Company will realize the benefits ofthese deductible differences, net of the existing valuation
allowance at March 31, 2003 and 2002.
No deferred income taxes have been provided on undistributed earnings of overseas subsidiaries totaling ¥2,852
million ($23,767 thousand) at March 31, 2003 because they
are not expected to be remitted in the foreseeable future.
At March 31, 2003, tax loss carryforwards of domestic subsidiaries amounted to ¥49,193 million ($409,942 thousand)and are available for offsetting against future taxable earningsof such subsidiaries for up to five years, as follows:
Expires in the years ending March 31

2004 ......................................................
2005 ......................................................
2006 ......................................................
2007 ......................................................
2008 ......................................................

In millions of yen

In thousands of
U.S. dollars¥32,758
2,068
3,010
3,584
7,773
¥49,193$272,983
17,23325,08329,86764,776$409,942(2) Retained Earnings
The Japanese Commercial Code, amended effective
October 1, 2001, provides that an amount equal to at least 10
percent of cash dividends and other distributions fromretained earnings paid in cash by the parent company and its
Japanese subsidiaries be appropriated as a legal reserve until
an aggregate amount of additional paid-in capital and legal
reserve equals 25 percent of the common stock account.
The Japanese Commercial Code requires that dividends
at year-end, which the Board of Directors resolved to declarecustomarily in the first month following year-end, be approvedat the general shareholders’ meeting to be held within threemonths after the end of the accounting period.
Subsequent to March 31, 2003, the parent company’s Boardof Directors declared an annual cash dividend of ¥9,003 million ($75,025 thousand) to shareholders of record on March
31, 2003. The dividend declared is subject to approval at thegeneral shareholders’ meeting scheduled for June 27, 2003.
Dividends are recorded in the period they are declared.
(3) Accumulated Other Comprehensive Income (Loss)
An analysis of the changes in accumulated other comprehensive income (loss) for the years ended March 31, 2003,
2002 and 2001 is as follows:
In millions of yen
Pre-tax
amountTax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2003:
Unrealized losses on securities—
Unrealized holding gains or losses
arising during the period ........... (¥07,053) ¥02,738 (¥04,315)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income .........................
9,215(3,177)
6,038
Unrealized gains on derivative
instruments—
Unrealized holding gains or losses
arising during the year ...............
177
(72)
105
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income .........................
(172)
66
(106)
Minimum pension
liabilities adjustments .................... (4,385)
1,379(3,006)
Foreign currencytranslation adjustments ................. (4,619)
279(4,340)
Other comprehensive
income (loss) ........................... (¥06,837) ¥01,213 (¥05,624)

The tax loss carryforwards of overseas subsidiaries at
March 31, 2003 amounted to ¥5,398 million ($44,983 thousand), a part of which will begin to expire in the year ending
March 31, 2004.
18. Shareholders’ Equity(1) Treasury StockOn August 13, 2002, the parent company repurchased its
own stock, in accordance with the resolution approved by
the shareholders’ meeting held on June 27, 2002. The shares
repurchased were 8,000,000 shares at ¥5,420 ($45.17) per
share for an aggregate amount of ¥43,360 million ($361,333
thousand). The purchase price per share was determinedbased on the closing price on the Tokyo Stock Exchange on
August 12, 2002.

44

In millions of yen
Pre-tax
amountTax(expense)or benefit

In thousands of U.S. dollars

Net-of-tax
amountPre-tax
amount

For the year ended March 31, 2002:
Unrealized losses on securities—
Unrealized holding gains or losses
arising during the period ........... (¥09,379) ¥03,297 (¥06,082)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income .........................
5,954(2,024)
3,930
Unrealized gains on derivative
instruments—
Unrealized holding gains or losses
arising during the year ...............
209
(74)
135
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income .........................
(142)
50
(92)
Minimum pension
liabilities adjustments .................... (9,632)
3,633(5,999)Foreign currencytranslation adjustments .................
7,043
—
7,043
Other comprehensive
income (loss) ........................... (¥05,947) ¥04,882 (¥01,065)

Tax(expense)or benefit

Net-of-tax
amount

For the year ended March 31, 2003:
Unrealized losses on securities—
Unrealized holding gains or losses
arising during the period ........... ($58,775) $22,817 ($35,958)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income ......................... 76,792 (26,475) 50,317
Unrealized gains on derivative
instruments—
Unrealized holding gains or losses
1,475
(600)
875
arising during the year ...............
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income ......................... (1,433)
550
(883)
Minimum pension
liabilities adjustments .................... (36,542) 11,492 (25,050)
Foreign currencytranslation adjustments ................. (38,492)
2,325 (36,167)
Other comprehensive
income (loss) ........................... ($56,975) $10,109 ($46,866)

For the year ended March 31, 2001:
Unrealized losses on securities—
Unrealized holding gains or losses
arising during the period ........... (¥10,490) ¥03,994 (¥06,496)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income ......................... (22,530)
9,425 (13,105)
Minimum pension
liabilities adjustments .................... (28,133) 11,788 (16,345)
Foreign currencytranslation adjustments .................
4,670
—
4,670
Other comprehensive
income (loss) ........................... (¥56,483) ¥25,207 (¥31,276)

19. Research and Development Expenses
Research and development expenses included in selling,
general and administrative expenses for the years ended
March 31, 2003, 2002 and 2001 were ¥5,003 million ($41,692
thousand), ¥5,121 million and ¥3,921 million, respectively.
20. Leased Assets—Lessee
The Company leases certain office space, employee residential facilities, computer and transportation equipment.
Some leased buildings and computer and transportationequipment are held under capital leases. Other leases areclassified as operating leases.
On April 23, 1996, the Company entered into a long-termlease agreement for a building and land in Mitaka, Tokyo. The
lease agreement extends for 30 years beginning May 1, 1996.
For financial reporting purposes, the portion of the lease
relating to the building has been classified as a capital lease;accordingly, an asset of approximately ¥5,086 million($42,383 thousand) has been recorded in the building andimprovements account. The portion of the lease relating to
the land has been classified as an operating lease. The future
minimum lease payments for the site at March 31, 2003 were
¥7,557 million ($62,975 thousand).

45

The future minimum lease payments required underoperating leases that have initial or remaining noncancelable lease terms in excess of one year at March 31,
2003 are as follows:

A summary of leased assets under capital leases at March
31, 2003 and 2002 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2003

2002

2003

Buildings and improvements..... ¥05,185
Machinery, equipment
and automobiles ....................... 11,888
Intangibles and other..................
123
Accumulated depreciation ......... (7,076)¥10,120¥05,185$(43,208

12,04979(6,606)¥10,707

99,067
1,025(58,967)$(84,333

Years ending March 31

2004 ............................................................
2005 ............................................................
2006 ............................................................
2007 ............................................................
2008 ............................................................
Later years..................................................
Total future minimum lease payments ...

In millions of yen

2004..........................................................
2005..........................................................
2006..........................................................
2007..........................................................
2008..........................................................
Later years ...............................................
Total minimum lease payments ............
Less: Amount representing interest ......
Present value of net minimum lease
payments (Note 13) ..............................
Less: Current obligations .......................
Long-term capital lease obligations ......

In thousands of
U.S. dollars¥02,916
2,212
1,556
879
606
6,621
14,7903,909$024,300
18,433
12,967
7,325
5,050
55,175
123,250
32,575

10,881
2,535¥08,346

90,675
21,125$069,550¥01,778
1,723
1,693
1,677
1,671
22,911¥31,453

In thousands of
U.S. dollars$014,817
14,358
14,108
13,975
13,925
190,925$262,108

21. Property on Operating Leases—Lessor
The Company’s leasing operations consist principally ofleasing of certain office space and related properties. The
properties on operating leases are primarily held by realestate investment companies as part of investment assets of
the insurance services segment and by Arai & Co.,Ltd., whichis engaged in leasing services of real estate.
A summary of investment in property on operating leases andproperty held for lease at March 31, 2003 and 2002 is as follows:

Depreciation expenses under capital leases for the years
ended March 31, 2003, 2002 and 2001 were ¥2,991 million($24,925 thousand), ¥3,195 million and ¥2,890 million,
respectively.
The following is a schedule by year of future minimum
lease payments under capital leases together with the present
value of the net minimum lease payments at March 31, 2003:
Years ending March 31

In millions of yen

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2003

2002

2003

Land ............................................. ¥105,052 ¥102,655
Buildings and improvements..... 86,540
80,835Construction in progress............
1,271
26,137
Intangibles and other..................
1,681
1,680
Accumulated depreciation ......... (10,712) (9,263)¥183,832 ¥202,044$0,875,433
721,167
10,592
14,008(89,267)$1,531,933

The future minimum rentals on non-cancelable operatingleases at March 31, 2003 are as follows:

Rental expenses under operating leases for the years ended
March 31, 2003, 2002 and 2001 were ¥15,182 million ($126,517
thousand), ¥12,961 million and ¥12,151 million, respectively.
A significant portion of such rentals relates to cancelable
short-term leases for office space and employee residential
facilities, many of which are renewed upon expiration.
On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The
lease agreement extends for 20 years beginning December 8,
2000. For financial reporting purposes, the lease has beenclassified as an operating lease. Based on the agreement,
annual lease payments for the site are approximately ¥1,339
million ($11,158 thousand) over a 20-year period.

Years ending March 31

In millions of yen

2004 ............................................................
2005 ............................................................
2006 ............................................................
2007 ............................................................
2008 ............................................................
Later years..................................................
Total future minimum rentals ..................

46¥08,694
2,830
1,287
746
651
12,035¥26,243

In thousands of
U.S. dollars$072,450
23,583
10,7256,217
5,425
100,292$218,692

22. Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of financial instruments in cases for which
it is practicable.

In thousands of U.S. dollars
March 31
2003
Carrying
amount(1) Cash and Cash Equivalents; Time Deposits; Cash
Deposits; Notes and Accounts Receivable, Trade; Due fromSubscribers; Short-Term Receivables; Bank Loans; Notes
and Accounts Payable, Trade; Other Payables; Deposits
Received; and Accrued Payrolls
The carrying amounts approximate fair value because of
the short maturities of such instruments.

Estimated
fair value

Non-derivatives:
Liabilities—
Long-term debt including current
portion ................................................. $1,027,284 $1,030,233
Investment deposits
by policyholders ................................. $1,925,908 $2,050,475
Derivatives:
Assets—Interest rate swaps ............................... $0,000,008 $0,000,008
Liabilities—
Interest rate swaps ............................... $0,007,675 $0,007,675(2) Long-Term Receivables
The fair values of long-term receivables are based on the present value of future cash flows through estimated maturity, discounted using estimated market discount rates. The carrying
amount of long-term receivables approximates fair value.

Limitation:
Fair value estimates are made at a specific point in time,
based on relevant market information and information about
the financial instruments. These estimates are subjective innature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

(3) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current
portion was estimated based on the discounted amounts offuture cash flows using the Company’s current incremental
borrowing rates for similar liabilities. As long-term interest
rates have not fluctuated significantly in recent years inJapan, the carrying amounts of obligations under capitallease approximate estimated fair value.

23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuationsin interest and foreign currency rates. The Company assesses
interest rate risk and foreign currency exchange risk by continually monitoring changes in these exposures and by evaluating hedging opportunities. The Company does not hold or
issue derivative financial instruments for trading purposes.
The Company is also exposed to credit-related losses in theevent of non-perfomance by counterparties to derivative
financial instruments, but it is not expected that any counterparties will fail to meet their obligations, because most of thecounterparties are internationally recognized financial institutions and contracts are diversified into a number of major
financial institutions.

(4) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are
estimated by discounting future cash flows using the interest
rates currently being offered for similar contracts.
(5) Interest Rate Swap Agreements
The fair values of interest rate swaps are estimated byobtaining quotes from financial institutions.
The carrying amounts and estimated fair values of thefinancial instruments excluding debt and equity securities
which are disclosed in Note 8 at March 31, 2003 and 2002 are
as follows:
In millions of yen
March 31
2003
Carrying
amountEstimated
fair value(2) Interest Rate Risk Management
The Company’s exposure to the market risk of changes ininterest rates relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements to manage fluctuations in cash flows resulting fromchanges in interest rates. Interest rate swaps are used tochange floating rates on debt obligations to fixed rates byentering into receive-floating, pay-fixed interest rate swaps
under which the Company receives floating interest rate
proceeds and make fixed interest rate payments, thereby
creating fixed-rate debt.

2002
Carrying
amountEstimated
fair value

Non-derivatives:
Liabilities—
Long-term debt
including current
portion ...................... ¥123,274 ¥123,628 ¥165,750 ¥165,840
Investment deposits
by policyholders ...... ¥231,109 ¥246,057 ¥226,407 ¥243,916
Derivatives:
Assets—Interest rate swaps .... ¥000,001 ¥000,001 ¥000,163 ¥000,163
Liabilities—
Interest rate swaps .... ¥000,921 ¥000,921 ¥001,127 ¥001,127

47

(3) Cash Flow Hedge
The Company designates interest rate swap agreements as
cash flow hedges for variability of cash flows originated fromfloating rate borrowings. The interest rate swap agreements
mature at various dates through 2008. The effective portion ofchanges in fair values of derivative instruments designated as
cash flow hedges of these debt obligations are reported inother comprehensive income (loss). These amounts arereclassified into current income in the same period as hedged
items affect current income. The ineffective portion of changes
in fair values are reported in income immediately. The sum of
the amount of the hedge ineffectiveness and net gain or loss
excluded from the assessment of hedge effectiveness is notmaterial for the years ended March 31, 2003 and 2002.
Approximately ¥8 million ($67 thousand) of net derivative
gains included in other comprehensive income (loss), net oftax at March 31, 2003, will be reclassified into current income
within 12 months from that date. At March 31, 2003 and 2002,
the notional principal amounts of interest rate swap agreements designated as cash flow hedges were ¥36,093 million($300,775 thousand) and ¥43,683 million, respectively.

26. Gain on Sale of Subsidiaries’ Shares
On April 28, 2000, The Westec Security Group, Inc.
(“Westec”), a wholly owned subsidiary in the United States ofAmerica, sold all of the outstanding shares of Westec Business
Security, Inc. to ADT Security Services, Inc. for an aggregate
sales price of ¥1,016 million in cash. The sale resulted in a gainof ¥571 million.
On February 19, 2002, Secom Joshinetsu Co., Ltd. (“Secom
Joshinetsu”), a 62.0 percent owned subsidiary, completed an
initial public offering on the Second Section of the Tokyo Stock
Exchange. In conjunction with the offering, the parent company sold 1,000,000 outstanding shares of Secom Joshinetsu
for a sale price of ¥2,162 million. Through a secondary offering, Secom Joshinetsu issued an additional 500,000 shares for
total proceeds of ¥1,081 million. As a result of these transactions, the parent company’s ownership in Secom Joshinetsu
declined to 52.1 percent. The resulting pre-tax gains on
the sale of subsidiary shares and new issuance of Secom
Joshinetsu’s shares of ¥700 million and ¥160 million, respectively, are recognized in the consolidated statement of income
for the year ended March 31, 2002. In the consolidated statement of cash flows for the year ended March 31, 2002, thegain on sale of subsidiary shares is excluded from cash flows
from operating activities and the related cash proceeds areclassified in cash flows from investing activities. The cash
proceeds from the new issuance by Secom Joshinetsu tominority shareholders are classified in cash flows fromfinancing activities.

(4) Non-Hedge Derivative Instuments
The parent company and its two subsidiaries entered into
interest rate swap agreements whereby they pay a LIBORbased floating rate of interest and receive a long-term based
floating swap rate. The Company believes that the long-termbased floating swap rate will provide higher interest income to
the Company compared to the LIBOR-based floating rate. Thisswap agreement is designed to replace LIBOR-based interest
income with long-term swap rate interest income for theinvestment securities. Changes in fair value of non-hedging
derivative financial instruments are reported in income.

27. Supplemental Cash Flow Information
Supplemental cash flow information is as follows:

24. Commitments and Contingent Liabilities
Commitments outstanding at March 31, 2003 for thepurchase of property, plant and equipment approximated¥2,384 million ($19,867 thousand).
The Company provides guarantees to third parties withrespect to bank loans extended to its affiliated companies andother entities. Such guarantees are provided to enhance thecredit standing of the affiliated companies and other entities.
For each guarantee provided, the Company would have toperform under guarantee, if the affiliated companies andother entities default on a payment within the guaranteed
period of one to 14 years. The maximum amount of undiscounted payments the Company would have to make in theevent of default amounts to ¥27,218 million ($226,817 thousand) at March 31, 2003. No amount has been accrued for theCompany’s obligations under its guaranty arrangement at
March 31, 2003.

Years ended
March 31

Year ended
March 31

2001

2003

$029,392

Income taxes .................. ¥40,263 ¥31,952 ¥25,762$335,525

Non-cash investing andfinancing activities:
Conversion of
convertible bond............ ¥00,017 ¥00,467 ¥00,060$000,142

Additions to obligations
under capital leases ..... ¥02,739 ¥03,959 ¥02,654$022,825

Acquisition—
Fair value of assets
acquired...................... ¥Cash paid for capitalstock............................
Minority interestin subsidiaries............
Net liabilities
assumed .................. ¥48

In thousands of
U.S. dollars

Cash paid during theyear for:
Interest ............................ ¥03,527 ¥01,568 ¥01,996

2003

25. Free Share Distributions of Less than 25 Percent
The method of accounting for the Company’s less than
25 percent free share distributions is described in Note 2.
Had the Company accounted for such free share distributions
made during the period from 1974 to 1990 in the mannerused by companies in the United States of America, ¥98,388
million ($819,900 thousand) would have been transferredfrom retained earnings to the appropriate capital accounts.
However, there would be no effect on total shareholders’ equity.

In millions of yen

2002— ¥73,944 ¥07,550

$

—

—

(4,957)(3,980)

—

—

(13)

—

—

— ¥68,974 ¥03,570$—

28. Segment Information
The Company has applied Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of anEnterprise and Related Information”, which requires disclosure of financial and descriptive information about theCompany’s reportable operating segments. The operating
segments reported below are the segments of the Company
for which separate financial information is available and forwhich operating profit/loss amounts are evaluated regularly
by executive management in deciding how to allocate
resources and assess performance.
The Company has four reportable business segments:
security services, medical services, insurance services, andinformation and communication related and other services.
The security services segment provides various types of security services by utilizing the Company’s unique security systems
and manufactures and sells security equipment. The medical
services segment provides intravenous solutions to patients at
home, home-based nursing care services, medical data transmission services by utilizing the Company’s network and leasing of real estate for medical institutions. The insurance
services segment represents non-life insurance-related underwriting business in the Japanese market. The information andcommunication related and other services segment represents
the Company’s network business, aerial surveying and mapping services, Geographic Information System services anddevelopment and sales of real estate as well as leasing of realestate. The Company develops real estate, principally condominiums, for consumers, to promote a network of integrated
communication systems to create synergies with home security
services. These communication services are considered asubset or an integrated part of the real estate package.
Revenue and other income by segment includes interest
income and other revenue reasonably allocated to thesegments. Corporate revenue includes interest income,investment income, net exchange gains and dividend income
from companies unaffiliated with the parent company orWestec, a wholly owned subsidiary as a holding company in
the United States of America. Corporate expenses include
general and administrative expenses and net exchange lossesof these two companies.
Intersegment sales are priced on a basis intended toapproximate amounts charged to unaffiliated customers.
Identifiable assets are those assets used exclusively in theoperations of each segment or which are allocated when used
jointly. Corporate assets, which are held by the above two companies for general and administrative facilities, consist principallyof cash and cash equivalents, short-term investments, investment
securities, land, buildings, machinery and equipment.

Information by business and geographic segments for theyears ended March 31, 2003, 2002 and 2001 is as follows:(1) Business Segment Information

2003

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2001

2003

2002

Revenue and otherincome:Security services—
Customers .................. ¥355,702 ¥342,169 ¥316,139
Intersegment ..............
1,321
2,448
1,285
357,023 344,617 317,424
Medical services—
Customers .................. 19,951
13,507
6,347Intersegment ..............
171
166
147
20,122
13,673
6,494
Insurance services—23,303Customers .................. 29,144
28,759Intersegment ..............
2,026
1,920
2,030
31,17030,67925,333
Information andcommunication
related and otherservices—
Customers .................. 112,994 103,315
92,552
Intersegment ..............
2,995
4,213
5,715
115,989 107,528
98,267
Total ............................... 524,304 496,497 447,518(6,513) (8,747) (9,177)
Eliminations ..................
Corporate items ............
2,952
5,776
29,952
Consolidated revenue
and other income ....... ¥520,743 ¥493,526 ¥468,293
Income (loss) before
income taxes:
Security services........... ¥080,108 ¥082,984 ¥077,389
1,810(698) (1,522)
Medical services ...........
(9,181)304(1,629)Insurance services ........
Information andcommunication
related and otherservices ........................
(1,998)(130)366
Total ............................... 70,739
82,46074,604
Corporate items
and eliminations ......... (14,138) (16,091)
9,865Interest expense ...........
(3,729) (1,596) (1,925)
Consolidated income
before income taxes... ¥052,872 ¥064,773 ¥082,544

49$2,964,183
11,0082,975,191
166,258
1,425
167,683
242,867
16,883259,750

941,617
24,958966,575
4,369,200(54,275)
24,600$4,339,525$0,667,567
15,082(76,508)(16,650)
589,491(117,816)(31,075)$0,440,600

2003

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2001

2003

2002

Assets:Security services ... ¥0,396,850 ¥0,408,657 ¥369,582
Medical services....
67,214
61,615
11,241
Insuranceservices .................
319,750
352,454 213,438
Information andcommunication
related and otherservices .................
209,954
179,383 137,362
Total.........................
993,768 1,002,109 731,623
Corporate items.....
129,372
129,061 118,292
Investments in andloans to affiliatedcompanies............
34,942
34,94332,419Total assets ............ ¥1,158,082 ¥1,166,113 ¥882,334

2003$3,307,083
560,1172,664,583

Years ended
March 31

Year ended
March 31

Depreciation andamortization:
Security services ...... ¥44,014 ¥042,106 ¥39,005
Medical services .......
953
1,301
546
Insurance services....
2,305
1,253
626
Information andcommunication
related and otherservices ...................
4,200
4,234
4,039
Total...........................
51,472
48,894
44,216
Corporate items........
595
997
804
Total depreciation
and amortization .... ¥52,067 ¥049,891 ¥45,020
Capital expenditures:
Security services ...... ¥29,586 ¥037,152 ¥33,681
Medical services .......
5,115
2,717
376
Insurance services....
12,899 104,398
58,247
Information andcommunication
related and otherservices ...................
4,726
2,928
3,634
Total...........................
52,326 147,195
95,938
Corporate items........
612
13
2,769
Total capital
expenditures ........... ¥52,938 ¥147,208 ¥98,707

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2002

2001

Electronic security
services:
Commercial
security andhome security........ ¥254,931 ¥244,494 ¥230,763
Large-scale
proprietarysystems ..................
3,461
3,438
3,647
Other security
services:
Static guard
services ..................
35,90834,10732,204
Armored car
services ..................
17,261
17,001
15,109Merchandise andother...........................
44,141
43,12934,416
Total security
services ...................... ¥355,702 ¥342,169 ¥316,139

291,183$9,650,684
In thousands of
U.S. dollars

2001

2003

1,749,617
8,281,400
1,078,101

In millions of yen

2002

The following table is a breakdown of security services revenue to external customers by service category. The security
services business is managed as a single operating segmentby the Company’s management.

2003$366,783
7,942
19,2082003$2,124,425
28,842299,233
143,842
367,841$2,964,183(2) Geographic Segment Information
Revenue and other income attributed to countries based on
location of customers and long-lived assets for the years
ended March 31, 2003, 2002 and 2001 was as follows:

35,000428,933
4,959$246,550
42,625
107,492

39,383436,050
5,100

The capital expenditures in the above table represent theadditions to property, plant and equipment of each segment.
The Company has no single customer that accounts formore than 10 percent of total revenue.

Years ended
March 31

Year ended
March 31

2001

2003

$4,221,283
118,242$4,339,525

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2001

2003

Long-lived assets:
Japan........................ ¥445,632 ¥463,144 ¥302,366
Other ........................
5,528
6,384
6,421
Total ......................... ¥451,160 ¥469,528 ¥308,787$3,713,600
46,067$3,759,667

2003$441,150

In thousands of
U.S. dollars

Revenue and otherincome:Japan........................ ¥506,554 ¥480,165 ¥455,623
Other ........................
14,18913,361
12,670Total ......................... ¥520,743 ¥493,526 ¥468,293

2003$433,892

In millions of yen

2002

2002

There are no individually material countries with respect tothe revenue and other income and long-lived assets included
in other areas.

50

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
SECOM CO., LTD.:

We have audited the accompanying consolidated balance sheets of SECOM CO., LTD. and subsidiaries as of March 31, 2003 and2002, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the years
in the three-year period ended March 31, 2003, all expressed in Japanese yen. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SECOM CO., LTD. and subsidiaries as of March 31, 2003 and 2002, and the results of their operations and their cash flows
for each of the years in the three-year period ended March 31, 2003, in conformity with accounting principles generally acceptedin the United States of America.
As discussed in Note 2 of the notes to the consolidated financial statements, SECOM CO., LTD. and subsidiaries changed their
method of accounting for goodwill and other intangible assets in the year ended March 31, 2003, and their method of revenue
recognition in the year ended March 31, 2001.
The accompanying consolidated financial statements as of and for the year ended March 31, 2003 have been translated into
United States dollars solely for the convenience of the reader. We have recomputed the translation and, in our opinion, the consolidated financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forthin Note 3 of the notes to the consolidated financial statements.

Tokyo, JapanMay 16, 2003

51

SUMMARY OF SELECTED FINANCIAL DATASECOM CO., LTD. and Subsidiaries
Years ended March 31

In millions of yen
2003

2002

2001

2000

1999

Composition of consolidated revenue
and other income by segment
Revenue and other income ........................................................... ¥520,743 ¥493,526 ¥468,293 ¥412,424 ¥394,146
Security services:........................................................................ 355,702
342,169
316,139
295,834
293,104
As a percentage of revenue and other income .............
68.3%
69.3%
67.5%
71.8%
74.4%
Electronic security services—244,494
230,763
221,765
219,670
Commercial security and home security........................... 254,931
As a percentage of revenue and other income .............
48.9
49.3
53.8
55.7
49.5
Large-scale proprietary systems ........................................
3,461
3,647
3,773
4,223
3,438
As a percentage of revenue and other income .............
0.7
0.7
0.8
0.9
1.1
Subtotal......................................................................... 258,392
247,932
234,410
225,538
223,893
Other security services—
35,90834,10732,204
31,66330,178
Static guard services ...........................................................
As a percentage of revenue and other income .............
6.9
6.9
6.9
7.7
7.7
Armored car services ..........................................................
17,261
17,001
15,10913,54012,275
As a percentage of revenue and other income .............
3.3
3.5
3.2
3.3
3.1
Subtotal.........................................................................
53,16951,10847,31345,20342,453Merchandise and other...........................................................
44,141
43,12934,41625,09326,758As a percentage of revenue and other income .............
8.5
8.7
7.3
6.1
6.8
Medical services .........................................................................
19,951
13,507
6,347
1,326
1,075
As a percentage of revenue and other income .............
3.8
2.7
1.4
0.3
0.3
Insurance services ......................................................................
29,14428,75923,30330,462
4,775
As a percentage of revenue and other income .............
5.6
5.8
5.0
7.4
1.2
Information and communication related
103,315
92,552
72,68455,367and other services .................................................................... 112,994
As a percentage of revenue and other income .............
21.7
20.9
19.8
17.6
14.0
Corporate items ..........................................................................
2,952
5,776
29,952
12,11839,825
As a percentage of revenue and other income .............
0.6
1.3
6.3
2.9
10.1
Net income, cash dividends andshareholders’ equity
Net income...................................................................................... ¥ 30,275 ¥ 34,082 ¥ 43,996 ¥ 47,326 ¥ 49,918
Cash dividends (paid)(3) ..................................................................
9,330
9,324
9,323
8,146
7,555
Shareholders’ equity...................................................................... 372,518
401,326
377,304
373,806
327,147
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans ...............................................................................
Current portion of long-term debt .........................................
Convertible bonds...................................................................
Straight bonds.........................................................................
Other long-term debt ..............................................................
Total debt .............................................................................
Shareholders’ equity ..................................................................
Total capitalization ..............................................................
Return on total assets (percent) (a)...............................................
Return on equity (percent) (b) .......................................................
Percentage of revenue and other income absorbed by:Depreciation and amortization ..................................................
Rental expense............................................................................
Ratio of accumulated depreciation to depreciable
assets (percent) ............................................................................
Net property turnover (times) .......................................................
Before-tax interest coverage (times) (c) .......................................
Before-tax interest and rental coverage (times) (d).....................

¥322,804
282,066
87.3%
209,855
65.0
4,264
1.3
214,119
28,852
8.9
11,522
3.6
40,37427,573
8.5
855
0.3
5,365
1.7
30,910
9.6
3,608
1.1

¥ 18,990
6,972
283,840

20.0
3.3
0.0
5.2
11.4
39.9
60.1
100.0
2.6
8.1

10.7
4.4
0.0
5.6
16.1
36.8
63.2
100.0
2.9
8.5

14.5
1.9
0.1
2.0
6.1
24.6
75.4
100.0
5.0
11.7

15.6
1.2
0.1
2.1
3.2
22.2
77.8
100.0
6.1
12.7

8.4
2.5
0.3
2.6
2.6
16.4
83.6
100.0
7.8
15.3

5.7
1.7
0.6
3.0
3.4
14.4
85.6
100.0
4.0
6.7

10.0
2.9

10.1
2.6

9.6
2.6

8.3
3.0

7.8
2.7

9.2
3.2

50.6
1.42
15.2
7.0

48.9
1.27
41.6
11.9

54.0
1.99
43.9
14.8

60.0
2.71
60.0
14.4

59.3
3.09
77.7
19.1

59.1
2.60
50.3
12.5

Note: Installation revenue is included in the corresponding electronic security services.

52

1998

2003

2002

2001

2000

1999

1998

Number of shares outstanding(1)Issued.......................................................................... 233,281,133 233,274,769 233,099,744 233,075,442 116,392,109 116,233,393
Owned by the Company............................................
8,200,245
22,512510
4,840
11,817
3,185
Balance ....................................................................... 225,080,888 233,252,257 233,099,234 233,070,602 116,380,292 116,230,208
Per share information(1)¥ 132.87¥ 146.19¥ 188.76¥ 203.22¥ 214.51¥ 81.70
Basic net income per share (in yen)(2) ......................
40.00
40.00
40.00
35.00
32.50
30.00
Cash dividends paid per share (in yen)(3) ................
1,655.04
1,720.57
1,618.64
1,603.83
1,405.51
1,221.03
Shareholders’ equity per share (in yen)(4) ...............
321.88320.17341.91
310.28310.76177.01
Cash flow per share (in yen)(2) (e) ...............................
1.84
3.33
4.39
5.49
3.99
3.34
Price/Book value ratio................................................
22.88
39.20
37.61
43.30
26.15
49.88
Price/Earnings ratio....................................................
9.44
17.90
20.77
28.36
18.05
23.02
Price/Cash flow ratio..................................................
Stock price at year-end (in yen) ................................
3,040
5,730
7,100
8,800
5,610
4,075
Notes: (a) Net income/Total assets(b) Net income/Shareholders’ equity(c) (Income before income taxes + Interest expense)/Interest
expense(d) (Income before income taxes + Interest expense + 1/3 Rental
expense)/(Interest expense + 1/3 Rental expense)(e) (Net income + Depreciation and amotization - Dividend
approved) / Average number of shares outstanding during eachperiod

(1)

(2)
(3)

(4)

Per share amounts have been adjusted to reflect the impact of astock split on November 19, 1999.
The number of shares outstanding at the end of each year ended
March 31, has not been adjusted to reflect this stock split.
Per share amounts are based on the average number of shares
outstanding during each period.
Subsequent to March 31, 2003, cash dividends of ¥9,003 million(¥40 per share) were approved at the general shareholders‘meeting on June 27, 2003 (see Note 18 of the accompanying
notes to consolidated financial statements).
Per share amounts are based on the number of shares
outstanding at the end of each period, minus treasury stock.

COMMON STOCK DATASECOM CO., LTD.
As of March 31

SHAREHOLDER INFORMATION
2003

Number of shareholders ............................................... 20,230
Common shares held by:
Financial institutions................................................... 46.14%
Securities firms ...........................................................
2.04
Other corporations......................................................
4.60
Foreign investors ........................................................ 28.64
Individuals and others ................................................ 18.58
Total.......................................................................... 100.00%

53

2002

2001

2000

1999

1998

17,60915,621

15,019

9,458

9,911

45.31%
1.61
13.78
24.64
14.66
100.00%44.44%
1.73
13.84
25.76
14.23
100.00%42.74%
2.66
13.86
25.96
14.78
100.00%45.71%
0.90
13.67
26.90
12.82
100.00%44.26%
0.98
13.73
27.40
13.63
100.00%PRICE INFORMATION (TOKYO STOCK EXCHANGE)
Price per share (in yen)

2001

2002

2003

April–June ..............................................................................................
July–September.....................................................................................
October–December................................................................................
January–March ......................................................................................
April–June ..............................................................................................
July–September.....................................................................................
October–December................................................................................
January–March ......................................................................................

Nikkei Stock Average (in yen)

High

Low

High

Low

¥7,820
6,950
7,040
6,900
6,780
6,250
4,950
4,220

¥6,410
4,880
5,890
5,330
5,550
4,520
3,780
2,950

¥14,529.41
12,817.41
11,064.30
11,919.30
11,979.85
10,960.25
9,215.56
8,790.92¥12,574.26
9,504.41
9,924.23
9,420.85
10,074.56
9,075.09
8,303.39
7,862.43

Remarks

COMMON STOCK ISSUES

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

Share capital
after issue(In thousandsof yen)Allotment ratio
to shareholders

June 15, 1974
Dec. 21, 1974
May 21, 1975
May 21, 1975
Dec. 1, 1975
May 31, 1976
June 1, 1976
Dec. 1, 1976
Nov. 30, 1977
Dec. 1, 1977
Dec. 1, 1978
June 1, 1981
Dec. 1, 1981
Jan. 20, 1983
Nov. 30, 1983
Nov. 30, 1984
Nov. 30, 1985
Jan. 20, 1986
Nov. 30, 1986
Nov. 30, 1987
Jan. 20, 1988
Nov. 30, 1988
Nov. 30, 1989
Jan. 19, 1990
Mar. 31, 1990
Mar. 31, 1991
Mar. 31, 1992
Mar. 31, 1993
Mar. 31, 1994
Mar. 31, 1995
Mar. 31, 1996
Mar. 31, 1997
Mar. 31, 1998
Mar. 31, 1999
Nov. 19, 1999
Mar. 31, 2000
Mar. 31, 2001
Mar. 31, 2002
Mar. 31, 2003

1,968
2,760
1,196
1,244
4,320
1,880
2,060
6,798
2,042
6,300
7,560
3,000
4,836
5,320
194
1,418
186
6,031
2,878
1,609
3,541
439
1,808
22,986
1,446
2,949
2,035
267
6,986
477
613
1,825
29
159
116,410
273
25
175
6

9,200
11,96013,156
14,40018,72020,60022,66029,45831,50037,80045,36048,36053,19658,51658,71060,12860,314
66,34569,22370,832
74,37374,812
76,62099,606
101,052
104,001
106,036
106,303113,289
113,766
114,379
116,204
116,233
116,392
232,802
233,075
233,100
233,275
233,281¥00,460,000
598,000
657,800
720,000
936,000
1,030,000
1,133,000
1,472,900
1,575,000
1,890,000
2,268,000
2,418,000
2,659,800
3,000,000
3,280,942
5,329,282
5,602,945
5,602,945
11,269,932
15,021,200
15,021,200
16,063,099
21,573,139
21,573,139
25,070,104
32,244,732
37,338,751
37,991,568
56,756,263
58,214,178
59,865,105
65,253,137
65,327,060
65,709,927
65,709,927
66,096,852
66,126,854
66,360,338
66,368,827—
3 for 10
1 for 10—
3 for 10—
1 for 10
3 for 10—
2 for 10
2 for 10—
1 for 10
1 for 10———
1 for 10——
0.5 for 10——
3 for 10
—
—
—
—
—
—
—
—
—
—
10 for 10*————

Issue at market price (¥900)
Stock split
Stock split
Issue at market price (¥1,134)
Stock split
Issue at market price (¥2,570)
Stock split
Stock split
Issue at market price (¥1,700)
Stock split
Stock split
Issue at market price (¥2,230)
Stock split
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Stock split
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds

Note: The above is a record of SECOM’s common stock issues since the common stock was listed on the Tokyo Stock Exchange in June 1974.
*One share was split into two.
54

SUPPLEMENTALNONCONSOLIDATEDFINANCIAL DATACONTENTSNONCONSOLIDATED BALANCE SHEETS ............................................ 56
NONCONSOLIDATED STATEMENTS OF INCOME ............................... 58

55
55

NONCONSOLIDATED BALANCE SHEETSSECOM CO., LTD.
As of March 31

ASSETS

In millions of yen
2003

2002

2001

2000

1999

1998

Current assets:
Cash on hand and in banks....................................... ¥093,045
Notes receivable ........................................................
365
Due from subscribers ................................................
8,312
Accounts receivable, trade........................................
4,696
Receivables—other ....................................................
3,048
Marketable securities.................................................
7,951
Common stock in treasury ........................................
—
Merchandise...............................................................
6,738
Supplies ......................................................................
1,420
Prepaid expenses.......................................................
1,508
Deferred income taxes ..............................................
4,642
Short-term loans ........................................................
53,112Other current assets ..................................................
2,368
Allowance for doubtful accounts..............................
(3,602)
Total current assets......................................... 183,603¥101,947
741
7,727
6,720
3,537
1,479
—
9,563
1,649
1,858
4,096
40,6602,458(2,960)179,475¥077,581
538
7,073
5,089
3,123
6,313
3
6,625
1,326
1,606
3,064
28,8982,683(2,246)
141,676¥092,077
324
6,243
4,173
3,457
15,483
42
5,525
1,122
1,370
1,961
33,1894,275(137)
169,104¥093,901
459
5,564
3,238
1,243
25,888
119
4,805
948
1,241
—
29,031
1,513(146)
167,804¥ 83,462
392
5,218
3,409
1,003
31,151
25
3,642
967
1,084
—
23,683
1,390(136)
155,290

Fixed assets:
Tangible assets:
Buildings and improvements ................................
Automobiles ...........................................................
Security equipment and control stations .............
Machinery and equipment ....................................
Tools, furniture and fixtures..................................
Land.........................................................................
Construction in progress .......................................
Other........................................................................

28,777525
60,221
1,502
3,679
42,1971,463
19

20,576635
75,216
3,571
3,384
37,9072,012
25

23,007680
70,511
4,105
3,317
37,8382,327
1623,697579
65,8252,907
2,335
35,153
1,616
18

24,295
737
62,686
1,509
2,167
34,9971,693
1923,617815
55,7391,535
2,167
34,5251,630
11Intangible assets:
Telephone rights and other ...................................
Telephone and telegraph utility rights .................
Software..................................................................

2,834
541
10,957

3,602
635
10,536

4,702
804
11,423

6,518
1,157
3,314

4,533
1,976
—

4,458
2,957
—

23,57927,285

10,706

12,5195,535

160,870
9,749
8,505
1,026
19,223
11,555(1,312)391,294¥570,769

145,227
11,242
8,698
1,263
—
11,423(1,205)
362,663¥504,339

129,771
2,636
6,803
1,540
1,632
9,429
(13)
305,623¥474,727

112,714
3,112
6,890
9,437
—
6,671
(14)
285,941¥453,745

105,145
2,951
6,494
7,292
—
4,177
(30)
259,018¥414,308

Investments and other:
Investment securities .............................................
20,797
Investments in subsidiaries andaffiliated companies............................................. 159,902
Long-term loans receivable...................................
10,060
Lease deposits ........................................................
8,489
Long-term prepaid expenses ................................
19,709Deferred income taxes...........................................
18,379Other investments..................................................
10,650Allowance for doubtful accounts ..........................
(1,596)
Total fixed assets ............................................ 399,105
Total assets ..................................................... ¥582,70856

In millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

2003

2002

Current liabilities:
Accounts payable....................................................... ¥002,121
Bank loans ..................................................................
53,504Current portion of straight and convertible bonds...
—
Payables—other .........................................................
9,606
Accrued expenses......................................................
577
Deposits received.......................................................
24,750
Deferred revenue—service charges .........................
21,048
Income taxes payable................................................
6,806
Payables—construction.............................................
3,536
Accrued bonus ...........................................................
4,920
Other current liabilities..............................................
3,838
Total current liabilities .................................... 130,706¥001,814
15,23433
10,168619
20,868
20,10918,163
3,514
4,940
2,772
98,234¥

1,908
20,157—
10,722
5,714
15,682
19,583
13,904
4,328
—
2,438
94,436¥

1,683
23,455
—
7,590
5,484
18,785
19,255
9,858
4,123
—
3,331
93,564¥

Fixed liabilities:
Straight and convertible bonds ................................
Long-term loans.........................................................
Guarantee deposits received ....................................
Deferred tax liabilities................................................
Accrued severance indemnities................................
Accrued pension and severance costs.....................
Other fixed liabilities..................................................
Total fixed liabilities........................................
Total liabilities .................................................

30,0183,700
16,722——30,379—80,819211,525

30,018—16,446——
31,342—77,806
176,040518—
15,785
581
—
1,999
120
19,003
113,439578—
15,047—369——
15,994
109,558

1,347—
14,607—378—
557
16,889115,016

1,724—
14,194—397——
16,31597,972

Shareholders’ equity:
Common stock ...........................................................

66,36966,36066,12766,09765,71065,327

Capital surplus:
Additional paid-in capital.......................................
Total capital surplus........................................

82,54582,54582,536
82,53682,30382,30382,27382,27381,782
81,782

78,11078,110

9,028

9,028

8,077

7,127

6,294

5,521

800

800

800

800

800

800

27
2,212
3,039
254,364
266,431

29
2,212
3,041
233,264
245,333

30
2,212
3,042
226,776
237,895

31
2,212
3,043
206,629
216,799

56
2,212
3,068
181,875
191,237

58
2,212
3,070
164,308
172,899

Unrealized gains on securities..................................
125
Common stock in treasury, at cost...........................
(44,287)
Total shareholders’ equity.............................. 371,183
Total liabilities and shareholders’ equity ..... ¥582,708

642
(142)
394,729¥570,769

4,575—
390,900¥504,339——
365,169¥474,727——
338,729¥453,745——
316,336¥414,308

Retained earnings:
Legal reserve ..........................................................
Voluntary reserve:
Reserve for systems development....................
Reserve for tax deferral on
assets replacement...........................................
General reserve...................................................
Total voluntary reserve...................................
Unappropriated retained earnings .......................
Total retained earnings...................................

57

2001

2000

1999

1,671
21,058
5
6,707
5,356
25,44018,735
13,771
3,173
—
2,211
98,127

1998

¥

1,256
10,193
394
5,640
6,248
17,54818,087
14,808
3,326
—
4,157
81,657

NONCONSOLIDATED STATEMENTS OF INCOME

SECOM CO., LTD.
Years ended March 31

In millions of yen
2003

2002

2001

2000

1999

1998

Revenue: ...................................................................... ¥278,611
Percent change from prior year..........................
1.4%
Service charges ....................................................... 250,237
Percent change from prior year..........................
2.5
Sales of merchandise..............................................
28,374
Percent change from prior year..........................
(7.4)¥274,669
6.9%
244,0155.8
30,65416.6¥257,009
6.0%
230,723
5.4
26,28611.9¥242,462
4.7%
218,978
4.2
23,48410.4¥231,505
4.0%
210,239
4.1
21,266
3.2¥222,541
4.5%
201,929
5.5
20,612(3.8)

Costs: ...........................................................................
As a percent of revenue ......................................
Cost of service .........................................................
As a percent of service charges..........................
Cost of sales.............................................................
As a percent of merchandise sales.....................

155,49955.8
135,315
54.1
20,184
71.1

162,42859.1
140,001
57.4
22,42773.2

141,31055.0
122,457
53.1
18,853
71.7

130,58653.9
113,81652.0
16,77071.4

123,18053.2
108,34951.5
14,831
69.7

117,801
52.9
103,887
51.4
13,914
67.5

Gross profit:.................................................................
As a percent of revenue ......................................
Gross profit on service............................................
As a percent of service charges..........................
Gross profit on sales ...............................................
As a percent of merchandise sales.....................

123,11244.2
114,922
45.9
8,190
28.9

112,24140.9
104,014
42.6
8,227
26.8

115,69945.0
108,266
46.9
7,433
28.3

111,87646.1
105,162
48.0
6,714
28.6

108,32546.8
101,890
48.5
6,435
30.3

104,74047.1
98,042
48.6
6,698
32.5

Selling, general and administrative expenses..........
As a percent of revenue ......................................

68,94424.8

73,33926.7

62,48524.3

60,21224.8

58,186
25.1

61,572
27.7

Operating profit...........................................................
As a percent of revenue ......................................

54,16819.4

38,902
14.2

53,214
20.7

51,66421.3

50,13921.7

43,168
19.4

Other income (expenses)
Interest, dividends, and other income ...................
Interest expense ......................................................
Other expense..........................................................

4,288
(494)
(4,449)

4,660
(354)
(4,316)

7,212
(269)
(6,918)5,210(15)(4,822)5,198(18)(4,804)4,230(36)(3,887)

Ordinary profit.............................................................
As a percent of revenue ......................................

53,51319.2

38,892
14.2

53,23920.7

52,03721.5

50,51521.8

43,475
19.5

Extraordinary profit.....................................................

6,543

28,211

23,247

5,427

12,073—Extraordinary loss .......................................................

(7,535)(38,712)(24,570)(5,810)(12,168)—

Income before income taxes......................................
As a percent of revenue ......................................

52,521
18.9

28,391
10.3

51,91620.2

51,65421.3

50,42021.8

43,475
19.5

Provision for income taxes.........................................
Effective tax rate ..................................................

21,73641.4

11,442
40.3

21,32041.1

21,382
41.4

24,34348.3

19,49144.8

Net income ..................................................................
As a percent of revenue ......................................
Percent change from prior year..........................

30,785
11.0
81.6

16,9496.2(44.6)

30,59611.9
1.1

30,272
12.5
16.1

26,07711.3
8.7

23,984
10.8
6.4

58

CORPORATEINFORMATION

Headquarters:
Independent auditors:
Transfer agent:

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG
The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

MAJOR CONSOLIDATED SUBSIDIARIES(As of July 31, 2003)
Issued capital(In millions of yen)

Percentageof equity/
voting rights¥3,530
201
15
50
175
30
210
40
10
10
10
10
10
50
50
50
50
24
308
10
10
100
30
2,358
23
20
10
20
10
499
200
271
100
100
45

52.1%
59.1
70.0
51.0
60.2
68.3
100.0
(100.0)(100.0)(100.0)100.0(100.0)(100.0)
100.0
100.0
100.0
100.0
(52.3)
82.5(100.0)(100.0)
60.0
51.0
67.8
(52.2)(76.6)(100.0)(100.0)(100.0)
100.0
76.0
100.0
100.0
100.0
100.0

Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Security services
Installation and maintenance of security equipment
Installation of security equipment
Installation of security equipment
Maintenance of equipment
Maintenance of equipment
Maintenance of facilities
Manufacturing of security equipment
Manufacturing and sales of security systems
Sales of security and water-treatment equipment
Printing services
Specialized security services
Car maintenance<Medical services>
Secom Medical System Co., Ltd.
Seisho Corporation
Koyu Co., Ltd.
Kyokushin Shoji Co., Ltd.
Mac Corporation
Yoshikikaku Co., Ltd.
Kensei Co., Ltd.
Ryomay Royal Life Co., Ltd.
Central Medical Service Co., Ltd.
Japan Life Plus Medical Co., Ltd.
Secom Medical Resource Co., Ltd.

200
10
10
10
95
20
100
210
50
10
10

100.0
(100.0)(100.0)(100.0)(100.0)(100.0)(100.0)51.8(100.0)(100.0)(100.0)Home health/nursing care and other medical related services
Maintenance of medical facilities
Sales of medical and other supplies
Management of real estate
Sales of medical equipment
Operation of restaurants and shops at medical facilities
Management of pharmacies
Management of nursing homes
Management of nursing homes
Medical related services
Medical staffing solutions<Insurance services>
Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

165
5,611

(100.0)82.6

Non-life insurance agency
Non-life insurance<Information and communication related
and other services>
Secom Trust.net Co., Ltd.

1,469

76.0

Lines of business

Domestic<Security services>
Secom Joshinetsu Co., Ltd.
Secom Hokuriku Co., Ltd.
Secom Yamanashi Co., Ltd.
Secom Mie Co., Ltd.
Secom Sanin Co., Ltd.
Secom Miyazaki Co., Ltd.
Secom Jastic Co., Ltd.
Secom Jastic Joshinetsu Co., Ltd.
Secom Jastic Hokuriku Co., Ltd.
Secom Jastic Miyazaki Co., Ltd.
Secom Jastic Akita Co., Ltd.
Secom Jastic Sanin Co., Ltd.
Secom Jastic Yamanashi Co., Ltd.
Secom Static Hokkaido Co., Ltd.
Secom Static Tohoku Co., Ltd.
Secom Static Nishi-Nihon Co., Ltd.
Secom Static Kansai Co., Ltd.
Secom Sado Co., Ltd.
Chuo Bohan Co., Ltd.
Chuo Bohan Act Service Co., Ltd.
JK. Siress Co., Ltd.
Japan Safety Guard Co., Ltd.
Meian Co., Ltd.
Secom Techno Service Co., Ltd.
Secom Tech Sanin Co., Ltd.
Secom Techno Joshinetsu Co., Ltd.
Secom Maintenance Joshinetsu Co., Ltd.
TES Co., Ltd.
Riken Maintenance Co., Ltd.
Secom Industries Co., Ltd.
Otec Electronics Co., Ltd.
Secom Alpha Co., Ltd.
Secom Corporation
Secom HGS Co., Ltd.
Secom Auto Service Co., Ltd.

Information, communication and cyber security services• ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
• Subsidiaries are categorized into segments above according to their major lines of business.

59(Continued )MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Secom Information System Co., Ltd.
Laboratory for Innovators of Quality of Life
Cable Net Niigata Co., Ltd.
Pasco Corporation
Pasco Road Center Co., Ltd.
GIS Tokyo Co., Ltd.
GIS Hokkaido Co., Ltd.
GIS Hokuriku Co., Ltd.
GIS Kyushu Co., Ltd.
GIS Tokai Co., Ltd.
Pasco System Techonogy Center Co., Ltd.
Ject Chugoku Co., Ltd.
Urban Environmental Improvement Center Co., Ltd.
ESRI Japan, Inc.
Environmental Information Technology
Center Co., Ltd.
Tokyo Digital Map Co., Ltd.
Secom Lines Co., Ltd.
Masterpiece Co., Ltd.
Secom Home Life Co., Ltd.
Arai & Co., Ltd.
Stappy, Inc.
Arai Corporation, Inc.
Secom Credit Co., Ltd.
Wonder Dream Co., Ltd.
Secom Staff Service Co., Ltd.
ACM Enterprise Co., Ltd.
Veggiefruit Co., Ltd.
The Windsor Hotels International Co., Ltd.
Ena Urbane Properties Co., Ltd.
Nasu Urbane Properties Co., Ltd.
Bandai Urbane Properties Co., Ltd.
Fuji Urbane Properties Co., Ltd.

Percentageof equity/
voting rights

Lines of business¥0,350
100
1,692
8,758
50
100
50
20
50
10
80
90
50
50

100.0%(94.5)(89.9)
70.0(61.0)(100.0)(100.0)(80.0)(92.4)(100.0)(100.0)(88.9)(90.0)(75.0)

Software development
Research and planning of social life
CATV broadcasting service
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services
Geographic information system services

50
60
1,398
21
3,700
2,000
5
10
400
490
50
40
300

(70.9)(66.7)
97.6(100.0)99.9(87.0)
100.0(100.0)100.0
100.0(100.0)(72.5)
100.0

165
3
3
3
3

90.0
100.0
100.0
100.0
100.0

Geographic information system services
Geographic information system services
Sales of educational systems
Sales and development of software
Development of residential buildings
Real estate leasing
Management of real estateManagement of real estate
Credit services
Employee welfare for SECOM Group
Employment agency
Management of soccer school
Processing and marketing of agricultural and fisheries
products
Hotel management
Real estate leasing
Real estate leasing
Real estate leasing
Real estate leasing

US$0.3 thousand
US$95 thousand
US$9 thousand
US$100 thousand£39,126 thousand
Rmb312,968 thousand
Rmb17,228 thousand
Rmb29,122 thousand

100.0(100.0)(92.8)(100.0)100.0
100.0(95.0)(90.0)

Holding company
Security services
Security services
Sales of franchises with Westec trademark
Security services
Holding company
Security services
Security services

Rmb20,792 thousand
Rmb8,298 thousand
US$3,950 thousand
THB300 million
AUD31.5 million
AUD32.0 million(80.0)(80.0)
94.9
88.4
100.0
(100.0)

Security services
Security services
Security services
Security services
Holding company
Security services

78.3(100.0)(58.5)(70.0)

Holding company
Housing-related business
Software development
Geographic information system services(52.0)

Geographic information system services(100.0)(99.7)(100.0)Development of information systems
Investment
Investment

Overseas<Security services>
The Westec Security Group, Inc.
Westec Security, Inc.
Westec Interactive Security, Inc.
Westec Franchising, Inc.
Secom Plc
Secom (China) Co., Ltd.
Dalian Secom Security Co., Ltd.
Shanghai Secom Security Co., Ltd.
Beijing Jingdun Secom
Electronic Security Co., Ltd.
Qingdao Secom Security Co., Ltd.
P.T. Secom Indopratama
Thaisecom Pitakkij Co., Ltd.
Secominter (Australia) Pty. Ltd.
Secom Australia Pty. Ltd.

<Other services>
Asia Pacific Business Link Ltd.
US$9,670 thousand
Shanghai Asia Pacific Property Co., Ltd.
US$5,000 thousand
P.T. Nusantara Systems International
US$10,649 thousand
Pasco Certeza Computer-Mapping Corporation
PHP8,400 thousand
Super Dimension Earth Science Researchand Development Co., Ltd.
Rmb1,000 thousand
Beijing Secom Information
Technology Co., Ltd.
US$2,500 thousand
ClearLight Partners, LLC
US$91,910 thousand
Gold Stone Investment Inc.
US$3 thousand• ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
• Subsidiaries are categorized into segments above according to their major lines of business.

60

SECOM GROUP’S BASIC BUSINESS AREAS
SECOM offers a wide range of services and productsthat help provide peace of mind in today’s rapidlychanging society.

Centralized Security Systems
Dispatch

Static Guard Services
Static guard services are provided for facilities where customer needs are best
served by professionally trained on-site personnel.

SECOM
Emergency Response
Emergency
Depot

Armored Car Services
SECOM provides armored car services for the collection and transportationof cash and securities.

Security Services
Centralized Security Systems
Commercial Use:

Merchandise

SECOM
Control Center● SECOM AXSECOM AX is a new-generation security control systemwith advanced on-site image sensors that incorporate
microphones to enable the SECOM control center staff tovisually check the subscriber’s premises.
● SECOM IX
SECOM IX is a remote imaging security system forcommercial facilities offering around-the-clock services.
● SECOM DXSECOM AXSECOM DX is an on-line security system developed tomeet the needs of shops, offices, warehouses, factories and other commercial
and industrial establishments.
● SECOM TX
SECOM TX provides on-line protection for commercial buildings with more than
one tenant.
● HANKS SYSTEMHANKS SYSTEM is an on-line security control system for automated banking
facilities.
● SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.

Alert as Necessary● SECOM CCTV SYSTEMSECOM CCTV SYSTEM is a multifunctional, cost-effective closed-circuit
surveillance camera system. The system is fully digital, eliminating the riskof image degradation. It is also capable of detecting attempts to disable ordestroy the camera.
● SECURILOCKSECURILOCK uses identification numbers and integrated circuit (IC) passcards to control access to restricted areas.
● SESAMO SERIESSESAMO SERIES comprises access-control systems for use in corporate
offices, factories, parking facilities and any other security-sensitive area. Thesesystems employ such technologies as wireless IC pass cards, magnetic cards,
personal identification numbers, microwave transmission and fingerprint
identification.
● TOMAHAWK SERIESTOMAHAWK SERIES is an extensive lineup of innovative extinguishingsystems, including TOMAHAWK MACH II residential-use fire extinguisher and
TOMAHAWK III high-speed automated fire extinguishing system with gas
suppression.
● PYTHAGORAS SERIESPYTHAGORAS SERIES is a security vault with superior protection, heat
resistance and performance.
● SENSOR LIGHTSENSOR LIGHT is a sensor-equipped light activated automatically when thesensor detects human body temperature.
● PHYSICAL SECURITY PRODUCTS FOR HOMESSECOM offers a broad range of physical security products for homes. These
include SECOM Anshin Glass, a high-impact window glass designed toprevent intruders from entering through broken windows; SECOM Window
Frame, a steel-reinforced window frame; and Strong Door, a door that cannot
be forced open for a specified period of time after it has been engaged.

Subscribers

Alarm Sent

Police Department
Fire Department
Utility Companies
Other Organizations

Residential Use:
● SECOM HOME SECURITY
SECOM HOME SECURITY is a total home security system combining basic
intrusion- and fire-prevention services and emergency call services, as well as gas
leak monitoring and medical emergency call service options. The system is linked
around-the-clock with a SECOM control center, where personnel respond
immediately in the event of a problem by dispatching emergency response
personnel and, if necessary, contacting the appropriate authorities.
● SECOM CONDOMINIUM SECURITY SYSTEMSSECOM condominium security systems provide comprehensive building
management functions for condominiums and total safety with a centralized
security system for each unit in the building. SECOM MS-3, the newest model,features intercoms as standard equipment.

Large-Scale Proprietary Systems● SECOM TOTAX ZETASECOM TOTAX ZETA integrates cutting-edge networking capabilities and asecurity system into a comprehensive local control system for industrial
complexes and buildings.

COCO-SECOM
COCO-SECOM is an innovative system that uses signals from Global
Positioning System (GPS) satellites and mobile phone base stations to locate
moving subjects, such as people, vehicles and property. As an option,customers can also request to have emergency response personnel
dispatched to the location of the subject or an
emergency alert relayed to a predetermined
telephone number. The services include
COCO-SECOM EZ and COCO-SECOM-i, mobile
phone-based medical emergency alert services;
Automobile Emergency Monitoring Service, a
car alarm service that monitors parked vehicles;
COCO-SECOM G-Manager, a service with a groupsearch function that allows the subscriber topinpoint simultaneously the location of a numberof automobiles or people; and COCO-SECOM forPets, featuring compact transmitters.
COCO-SECOM

Medical Services

Insurance Services

Information and Communication Related and Other Services● HOME MEDICAL SERVICESSECOM’s medical services for patients at home include pharmaceutical services,encompassing the preparation—in the SECOM Pharmacy cleanroom—and deliveryof prescription pharmaceuticals, and home nursing services provided throughvisiting nurse stations. To promote home medical services, SECOM has also
introduced consulting and support services for physicians opening home
medical care clinics.
● HOME-BASED PERSONAL CARE SERVICESSECOM provides patients recovering at home with helpers to assist withpersonal hygiene, bathing, exercise and other daily activities, as well as provide
light housekeeping.
● SECOM UBIQUITOUS ELECTRONIC MEDICAL REPORT (EMR)
SECOM Ubiquitous EMR is a medical report system for home medical care thatenables the sharing of data among members of the home care team, including
the primary physician, visiting nurse and pharmacy.
● HOSPINET
Hospinet, a remote image diagnosis support service, transmits magnetic
resonance imaging (MRI), computerized tomography (CT) and other images to
SECOM’s Hospinet center, where diagnostic experts examine them and provide
consultation to the primary physician.
● MY SPOONMy Spoon is a robot that enables people with impaired upper body mobility to
eat with minimal assistance. This is the first robot of its kind in Japan.
● CONDOMINIUMS WITH FULL-TIME PERSONAL CARE SERVICESSECOM manages Sacravia Seijo and Royal Life Tama, condominiums in Tokyo forsenior citizens (60 years of age and older) with full-time personal care services.

● SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that features
reduced premiums for subscribers to commercial security systems.
● SECOM ANSHIN MY HOME
SECOM Anshin My Home is a comprehensive fire insurance package thatfeatures reduced premiums for subscribers to home security systems.
● MEDCOMMEDCOM is an unrestricted treatment policy that funds cutting-edge treatments
for cancer that are not covered by Japan’s national health insurance scheme.
● NEW SECOM ANSHIN MY CAR
New SECOM Anshin My Car is a comprehensive automobile insurance policythat includes on-site emergency services in the event of an accident, as well as
discounts for drivers without a traffic violation history or on cars equipped withantitheft devices.

● SECURE DATA CENTER
Secure Data Center provides a comprehensive service for e-commerce thatcombines SECOM’s expertise in both physical and cyber security.
● SECOM DATA SAFESECOM Data Safe is a high-security computer server-based repository thatcombines advanced physical and cyber security.
● DIGITAL AUTHENTICATION SERVICESSECOM offers public key infrastructure (PKI) services that provide an effectivemeans of establishing credibility among Internet users, including issuance ofdigital certificates and a set-up and operating service for organizations thatwish to establish their own digital certificate authority.
● NETWORK SECURITY MONITORING SERVICESSECOM provides security and stability for clients’ IT systems around-theclock. SECOM monitors and reports on threats to security, and on network
operating status and network traffic.
● GEOGRAPHIC INFORMATION SYSTEM (GIS) SERVICESSECOM provides a range of services based on aerial
mapping and GIS technologies, including PasCAL,
a comprehensive service for local governments, andthe Management-Navigation series of corporate
management support services.

● COMPUTER EDUCATION SERVICES FOR SCHOOLSSECOM promotes a better educational environment by providing a range ofmultimedia resources, including local area network (LAN) systems forclassrooms, an educational groupware system and educational software.
● SECOM FINE FOODSSECOM Fine Foods is a line of quality organic food products marketed throughmail order catalogs and the Internet.
● REAL ESTATE DEVELOPMENTSECOM offers safe and high-grade Glorio condominiums.
● CABLE TELEVISIONSECOM provides cable television (CATV)-based broadband services.

SECOM DATA SAFE

61

62

BOARD OF DIRECTORS

Juichi Toda

Makoto Iida

Kanemasa Haraguchi

Toshitaka Sugimachi

Shohei Kimura

Katsuhisa Kuwahara

Seiichiro Kobayashi

Shigemi Tanaka

Shoichi Kake

Shuji Maeda

Katsuo Akiyama

Founder:
Makoto Iida
Co-Founder:
Juichi Toda
Chairman:Toshitaka Sugimachi
President andRepresentative Director:
Shohei Kimura

Senior Executive
Director:
Nobuyuki Sasaki

Nobuyuki Sasaki

Directors:
Yoichi Tao
Seiichi Mori
Seiji Yamanaka
Shinobu Iida
Yushiro Ito
Fumio Obata
Hiroshi Ito
Shunji Ogahara
Masaaki Saida
Kiyomasa Sugii

Executive Directors:
Katsuhisa Kuwahara
Seiichiro Kobayashi
Shigemi Tanaka
Shoichi Kake
Shuji Maeda
Katsuo Akiyama

Executive Vice President:
Kanemasa Haraguchi
63

Corporate Auditors:
Teruo Ogino
Ken Tsunematsu
Hiroshi Yasuda
Kohei Yamashita(As of July 31, 2003)