In a constantly changing
world, SECOM is working
daily to realize its Social
System Industry vision—
high-quality, innovative
services designed to provide
peace of mind.

Annual Report

2001

PROFILE

S

ince its establishment, SECOM CO., LTD., has continuously evolved its
operations in an effort to enhance the scope and quality of its services.
In line with its core objective of providing peace of mind to people anywhere atanytime, in 1966 SECOM launched a pioneering on-line security system, marking
the Company’s emergence as a provider of advanced security services combining
computerized remote monitoring and human support.
Today, SECOM is building on its market-leading security and network
capabilities to realize its vision for the future—the Social System Industry, a newsocial infrastructure created through the provision of comprehensive, integrated
services and systems that make life more secure, convenient and comfortable. To
this end, the Company has diversified into such areas as information, medical,
education, non-life insurance and geographic information system (GIS) services.
The Company has also expanded its on-line security services worldwide
through a network of subsidiaries and joint ventures. This global network currently
encompasses operations in the United States, the United Kingdom, Australia,
Taiwan, the Republic of Korea, Thailand, Malaysia, Singapore, Indonesia andthe People’s Republic of China (PRC).

CONTENTSHIGHLIGHTS ............................................................................. 1
TO OUR SHAREHOLDERS ........................................................ 2
SPECIAL FEATURE ................................................................... 5
REVIEW OF OPERATIONS......................................................... 12
FINANCIAL SECTION ................................................................ 17
SUPPLEMENTAL NONCONSOLIDATED FINANCIAL DATA........ 45
CORPORATE INFORMATION .................................................... 49
SECOM’S BASIC BUSINESS AREAS ......................................... 51
BOARD OF DIRECTORS ............................................................ 53

HIGHLIGHTSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2001

In millions of yen
Years ended March 31

Revenue and other income...............................................
Net income .......................................................................
Total assets .......................................................................
Total shareholders’ equity .................................................

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

In thousandsof U.S. dollars
Year ended
March 31

2001

2000

1999

2001

¥467,671
44,118868,204
377,532¥412,397
47,432779,548
373,912¥394,146
49,918643,454
327,147$3,771,540
355,790
7,001,645
3,044,613

In yenIn U.S. dollars¥ 214.51
32.50
1,405.51$ 1.520.32
13.06¥ 189.28
40.00
1,619.62¥ 203.67
35.00
1,604.29

Notes: 1. Japanese yen amounts have been translated into U.S. dollars, for convenience only, at the rate of ¥124=US$1, the rate prevailing on the Tokyo foreignexchange market on March 31, 2001. Billion is used in the American sense of one thousand million.
2. Per share amounts are adjusted for the two-for-one stock split that became effective on November 19, 1999.
3. Net income per share is based on the average number of shares outstanding during each period.
4. Per share amounts of shareholders’ equity are based on the number of shares outstanding at the end of each period, minus treasury stock.
5. Subsequent to March 31, 2001, cash dividends per share of ¥40 were approved at the general shareholders’ meeting on June 28, 2001
(see Note 16 of the accompanying notes to consolidated financial statements).

Revenue andOther Income

Net Income

Shareholders’ Equity(In billions of yen)

(In billions of yen)

(In billions of yen)
500

50

400

400

40

320

300

30

240

200

20

160

100

10

80

0

0
97 98 99 00 01

0
97 98 99 00 01

97 98 99 00 01

Services
Merchandise, software,
medical, geographic
information system andreal estate
Insurance services
Gain on sale of securities, net
Gain on securities contribution toemployee retirement benefit trust
Interest and other

SECOM CO., LTD. Annual Report 2001

1

TO OUR SHAREHOLDERSI

Makoto Iida
Foundern the fiscal year ended March 31, 2001, Japan’s
economy showed signs of improvement as private-sector capital investment rose, particularly in theinformation and telecommunications sectors. Nonetheless, a recovery failed to materialize as personal consumption remained sluggish and stock prices flagged. In this environment, SECOM pressed
forward with efforts to realize its Social System Industry vision, focusing on Groupwide efforts toenhance existing services, reinforce marketing and develop new services and systems that respondto the needs of customers. These efforts contributed to a 13.4% increase in consolidated revenue
and other income, to ¥467.7 billion. Services generated ¥281.7 billion of this total; merchandise, software, medical, geographic information system and real estate contributed ¥129.8 billion; and insurance services totaled ¥21.7 billion. Other income comprised a ¥2.6 billion gain on sale of securities,
net, a ¥21.4 billion gain on securities contribution to employee retirement benefit trust and ¥10.4 billion in interest and other.
Despite firm growth in revenue, net income fell 7.0%, to ¥44.1 billion, primarily owing to higher
income taxes and the cumulative effect of accounting change. Basic net income per share was¥189.28, down from ¥203.67 per share the previous period. Cash dividends per share of ¥40.00 wereapproved at the general shareholders’ meeting held on June 28, 2001.

Expanding into New Areas
SECOM’s operations encompass security, information, medical, education, non-life insurance and GIS
services. To realize our Social System Industry vision, we are working to maximize synergies among
these seemingly unrelated businesses to provide comprehensive, integrated services and systems,
thereby creating value not possible with independent services. During the period under review, we
made particularly significant strides in developing innovative offerings that combine security services
with non-life insurance and GIS services.
In the security services field, we introduced COCO-SECOM—literally “Here SECOM”—
an innovative system that uses signals from Global Positioning System (GPS) satellites and cellular
telephone base stations to locate the position of mobile subjects, such as people and vehicles, and,if warranted, instructs SECOM to dispatch emergency response personnel. COCO-SECOM represents
a new application of subsidiary Pasco Corporation’s extensive experience and expertise in GIS
services. Other important additions to our security services lineup included SESAMO NT III, anaccess-control system employing contactless integrated circuit (IC) cards, and SESAMO MC, an

SECOM’s

2

Social System Industry

SECOM CO., LTD. Annual Report 2001

access-control system that uses any magnetic card complying with the relevant Japanese Industrial
Standards (JIS). We also augmented our lineup of PYTHAGORAS proprietary security vaults with the
new PYTHAGORAS series, which offers improved fire resistance and lower prices, and our HANKS ∑cash dispenser and automated teller machine (ATM) booth lineup with HANKS ∑-J, a simplified
model that offers significant reductions in price and shipping costs.
In information services, subsidiary Secom Trust.net Co., Ltd., capitalized on its advanced technological capabilities and accumulated expertise in the area of authentication to launch SECOM Secure
Data Center services. In addition to highly sophisticated access control, SECOM Secure Data Center
offers rigorous monitoring of unauthorized access and virus activity and provides other support services
to ensure the security and responsiveness of e-business Web sites while minimizing costs. Together with
Fujitsu Limited, Marubeni Corporation and the Tokyo Electric Power Company, Incorporated, weestablished Japan Cablenet Limited, which provides cable television (CATV)-based broadband services.
In the medical services field, subsidiary Secom Home Medical System Co., Ltd., worked to
expand its network of visiting nurse stations, thereby improving accessibility to its services. During
the period, we acquired all outstanding shares in Mac Corporation, a medical instruments firmbased in Sapporo, Hokkaido. On another front, we acquired a stake in Royal Life Tama, a residential
facility for senior citizens in Machida, Tokyo.
The primary driver in our education services field is subsidiary Secom Lines Co., Ltd. In the
period under review, the company continued to take a variety of steps aimed at popularizing
SECOM’s on-line computer-aided learning system for schools.
In the non-life insurance sector, subsidiary Secom General Insurance Co., Ltd., continues tobroaden its lineup of innovative policies that combine security and insurance. The company’s
lineup includes Secom Anshin My Home, a comprehensive fire insurance package offered at a discount to SECOM centralized residential security system subscribers in recognition of their low-risk
status. This policy provides seamless protection, thus ensuring safety and peace of mind.
Subsidiary Pasco is one of Japan’s leading purveyors of aerial mapping and GIS services. In the
period under review, Pasco launched Management Navigation Service, a powerful management information service to support corporate management.
Our real estate development services arm is led by subsidiary Secom Home Life Co., Ltd.
During the period under review, the company continued to develop high-grade, safe condominiums
with built-in on-line security systems.

visionToshitaka Sugimachi
President andRepresentative Director

is expanding the scope of its security services

SECOM CO., LTD. Annual Report 20013

Advancing Our Social System Industry Vision
A key priority for the current period will be to promote COCO-SECOM—which we have positioned
as a core element of the Social System Industry—by stepping up efforts to market the system.
Society’s expectations regarding safety and security are becoming increasingly sophisticatedand diverse. To tap new demand and develop services and systems that respond to changing needs,
as well as ensure SECOM remains the first choice of people seeking peace of mind, we recognize
the need to constantly evolve our business model.
Growth and change are also essential to realizing our Social System Industry vision, that is, tocreate a new social infrastructure by providing services and systems for corporate and private customers that make life more secure, convenient and comfortable. Accordingly, we will build on our
extensive information network to further integrate our core businesses, including security, information, medical, education and insurance, as well as seek out new opportunities that complement
existing services and systems.
As a leading corporation, we recognize the importance of not only reinforcing our operations
but also fulfilling our various responsibilities to society. To this end, we will step up efforts toincrease management efficiency and enhance shareholder value.
We look forward to reporting new milestones as we move closer to realizing our Social System
Industry vision, and we ask for the continued support of our shareholders.
August 31, 2001

Makoto Iida
Founder

4

SECOM CO., LTD. Annual Report 2001

Toshitaka Sugimachi
President andRepresentative Director

SPECIAL FEATURE

Expanding Our Operations to Respondto Increasingly Diverse
Security Needs
Information
Services

Security
Services

Cyber
Security

COCOSECOM

Non-Life
Insurance
Services

MedicalServices

Education
Services

GIS
Services

SECOM is expanding its operations into a broad range of business areas in pursuit of
its Social System Industry vision. For the past several years, our core security operations—the central theme of which is to provide security and peace of mind—havebeen the focus of our development efforts.
To grow our commercial security operations, we have worked to develop new systems and upgrade the functionality and effectiveness of existing systems on an ongoing basis. We have also branched out into cyber security, a natural extension of these
operations, in response to the Internet’s increasingly important role in business.
We have also expanded into the home security market, broadening our emphasis
to include convenience and quality of life. At the same time, we have complemented
antitheft, fire alarm and other security services with health and medical services. Morerecently, we have also launched insurance services, thereby enabling us to offer truly
comprehensive security and peace of mind.
In April 2001, we opened a new chapter in the SECOM story by launching a new
security system that has broadened the definition of the security services industry.
This system, COCO-SECOM, provides protection for people and property, such as
automobiles, on the move.
These are just a few examples of how we are creating new security systems that
anticipate the new and growing risks posed by rapid social change, globalization andthe information revolution. In the following pages, we take a closer look at recent
initiatives aimed at responding to the diverse and evolving needs of customers.

SECOM CO., LTD. Annual Report 2001

5

Centralized Security
Services
SECOM
Emergency
Depot

Dispatchtch S
SECOM Emergency
Response
spon Personnel

Telephone
ne Circ
Circuit Fire
Alert
Dept.

Alert asNecessary

PoliceDept.
Gas
Companyy

Digital Certificate
Authority Hosting
Services

SubscriberbersReal-Time
Identity Verification

Certificate
Authority
rity

Certificate
Authority
Au
Warranty
Certificate
Issue

Warranty

Application

CompanyA

Real-Time
Identity Verification

CompanyBerrd ten Oifica ed)oi
ct rt chsa Ce tta
an th A
Tr (Wi

SECOM’s

6

Social System Industry

SECOM CO., LTD. Annual Report 2001

A

dvanced Image
Processing Technologies—Raising System
Functionality and EffectivenessIn 1998, we developed and launched SECOM AX, an online centralized security system that employs advanced
image sensors to combat the rise in carefully orchestrated crime at commercial establishments. The system’s introduction has made it possible to capture
images of the crime events and the rooms in which theyoccur as well as rapidly dispatch SECOM emergency
response personnel and alert the police. When an
image sensor detects an anomaly, it instantly transmits
the image to SECOM’s control center staff. If there is anintruder alert, the system sends still images of the eventand several frames preceding and following it. If an
emergency button is pressed, the system sends a still
image of the emergency event and several frames preceding it and continues to transmit the real-time images. The
images received at the control center are displayed on amonitor, allowing the staff to respond appropriately. The
staff can use the image sensor to visually confirm the stateof the subscriber’s premises, its built-in microphone tolisten to the room and its speaker to provide a trespass
warning to any intruders.
In 1999, we launched SECOM IX image monitoring system, an on-line security system designed to prevent robberies of convenience stores and otherlate-night commercial establishments. SECOM IX uses
closed-circuit television (CCTV) monitoring and moving
image transmission technologies to transmit video
images, sound and emergency signals to our image
centers when an emergency button is pressed or monitoring is requested. The emergency button may bepressed by an employee at the subscriber’s premises if
the employee feels threatened. Requests for monitoring
may be made if the employee feels uneasy. When the
resulting images and sound reach the image centers,
which are located within control centers, center staff
can analyze the situation, make an announcement
using the remote speaker, dispatch emergency response
personnel and notify law enforcement officers. We havealso used SECOM IX to develop Image Patrol Service,
which offers constant, remote monitoring of premises
from our image centers.

visionAs these systems illustrate, we are incorporating
the latest image-processing technologies in our systems
to improve their functionality and effectiveness.
Through efforts to market SECOM AX and SECOM IX systems, we are helping to counter the impact of the rise incrime in Japan in recent years.
Network Security Services—
Protecting the Unseen
Growth in e-commerce and the submission of personal
information, such as applications and resumes, via theInternet, is fueling the need for effective cyber security
for commercial and residential users. A crucial component of today’s information infrastructure, cyber security
services range from the formation of security policies tocounter the various threats associated with Internet use,
to services relating to public key infrastructure (PKI) anddigital identities, access control, antivirus protection andthe prevention of unauthorized access.
As the leader in Japan’s security industry, SECOM
is developing network security services as part of theSocial System Industry, thereby complementing its
extensive physical security services.
Subsidiary Secom Trust.net provides network
security monitoring and authentication services.
Network monitoring services involve computer experts
specialized in computer virus and unauthorized accesscountermeasures to offer SECOM Virus Monitoring
Service, an around-the-clock virus protection service forthe networks of companies and organizations, andSECOM Intrusion Detection Service, a real-time remotemonitoring service. Authentication services include
SECOM Passport for Web, which issues certificates for
Web sites with encoded transmissions; SECOM Passport
for Members, which issues certificates for use within
specific corporate or other organizations; andcertificate authority hosting services, which encompass
the construction and operation of certificate authority
services on behalf of customers.
In December 1998, SECOM led 17 other companies in forming Entrust Japan Co., Ltd., to market the
PKI products created by Entrust, Inc., a U.S. based
world-renowned leader in this market.

SECOM has 47 control
centers linked on-linewith subscribers
around the clock.

is expanding the scope of its security services

SECOM CO., LTD. Annual Report 2001

7

Home Medical Services

Prescriptio
iptionion

Medical Care
Institution

Pharmaceutical
Service

SECOM
M
PharmacyCo

ord

Pharmaceutical
Pha
ical
Deliv
Delivery

ina

tio

n

lti

su
on

C

Prescription

Nurse
ReportPhysicianPhys
Guidancedan

ng
MedicalediccalExaminExammination
Visiting
Home NursinggService

SE
SECOM
S
ECO
OM
Nurse Station
Nurse

Patient

SECOM’s

8

Social System Industry

SECOM CO., LTD. Annual Report 2001

In December 2000, we completed SECOM Secure
Data Center, which is protected by highly sophisticatedaccess control, to facilitate the provision of network
access control and antivirus monitoring services,
enabling us to offer total protection encompassing both
physical and cyber security.
As the Internet community continues to develop,
we aim to sustain a leading position as a provider of thecyber security so crucial to its operation.
SECOM—The Trusted Name in Home Security
SECOM developed its first home security system in 1981.
Since then, the market for home security systems haschanged significantly, owing to the forces of urbanizationand internationalization as well as the aging of Japan’ssociety. There is now a greater general awareness of andinterest in services providing security and peace of mind.
In addition to protecting their residences while
they are away, SECOM home security systems connect
subscribers’ homes to SECOM control centers via an
on-line network, ensuring peace of mind even when
they are at home. This system detects intruders, fires
and gas leaks and features a portable wireless alarm
allowing subscribers to summon emergency or medical
assistance from anywhere in the home. If an alarm isactivated, control center staff are alerted and immediately dispatch SECOM emergency response personnel.
This system has enabled us to build solid relationships
because customers know they can rely on us to be
there when needed.
Just as a secure home is the foundation of daily
life, home security systems are the foundation uponwhich we are working to realize our Social System
Industry vision. We are devoting considerable resources
to tapping the residential market. As part of these efforts,
we have established home security shops nationwide topromote security services and products. Moreover, weare combining home security with services provided byother Group companies, such as comprehensive residential insurance policies offered by Secom General
Insurance or health advice offered to subscribers athome over our health hotline, to further earn consumers’ trust and appreciation as the top name in home
security.

visionFamily Health and Medicine as an Extensionof Home Security
We view health and medical services as an inherent
component of our mission to provide security andpeace of mind. Our entry into the medical field camewith the launch of the My Doctor emergency medical
alert system, which we offer as part of our home
security services.
Since 1991, we have operated Japan’s first fullfledged home medical care service. Until then, patients
had to be admitted into a hospital to receive medical care.
We believe an affluent society is one that offers people
choices. This concept also extends to health care.
Our principal medical care businesses are pharmaceutical services, in which intravenous medicines prescribed by the patient’s physician are prepared in our“clean room” and then delivered to patients; and homenursing services, in which highly skilled, experienced
nurses provide medical care under the direction of physicians, including patient observation, treatment of bedsores, catheter management and rehabilitation guidance.
In 1999, amendments to Japan’s Medical Care Insurance
system made it possible for private-sector nursing stations
to offer home medical care services covered by the system. Since then, we have established nursing stations in
25 major urban centers throughout Japan.
We continue to expand our medical and healthcare services. Recent additions include Hospinet, aremote image diagnosis support service provided to
medical institutions. We operate two of Japan’s toprated residential facilities for senior citizens and haverecently acquired a medical instrument firm.
We will continue to reinforce our medical services with the aim of helping people to live healthierand more rewarding lives. At the same time, we will
strive to enhance our grasp of market needs andbroaden the scope of this key business.

SECOM’s medical
services businessincludes SECOM
Pharmacy, which fillsprescriptions anddelivers them topatients.

Promoting Peace of Mind with Insurance
We have long felt that bundling on-line security systems
with casualty insurance would enable us to offer theultimate in security and peace of mind. We also believecustomers would feel reassured if both the security company protecting their premises from criminal activities
and disasters and the insurance company providing

is expanding the scope of its security services

SECOM CO., LTD. Annual Report 2001

9

COCO-SECOM
Location and Emergency
Response System
Satellite
Requestfor Searchrch(Telephephone/Intenternet)

COCO
C
OCO-SECOM
SECOM
M
Operations
CenterPositioning
Information

Subscriber

Cel
Cellular
TelephoneBase Station

SECOM
Emergency Depot

PoliceDept.
Compact Homing
gD
Device(Portable)

Notification
otificof Police(If Warra
arranted)

Dispatchh of Emergency
Response Personnel
Respons(If
If Requested)
Re

Compact Homing Device(Vehicle-Mounted)

SECOM’sSocial System Industry

10 SECOM CO., LTD. Annual Report 2001

coverage for such events were one and the same. With
the deregulation of Japan’s insurance industry in 1996,
such comprehensive services became possible. In 1998,
we entered the insurance industry by investing in adomestic non-life insurance company. Now called
Secom General Insurance, this company is involved indeveloping unique insurance products worthy of the
SECOM tradition.
Secom General Insurance’s current lineup
includes Secom Anshin My Car, an automobile insurance policy that provides around-the-clock on-site
emergency services, including the dispatch of SECOM
emergency response personnel in the event of a traffic
accident. For corporate clients subscribing to our online security systems, the company offers Security
Discount Fire Policy, a fire insurance policy with a
discount on premiums that reflects the low risk posedby these subscribers.
Our third main insurance product is Secom
Anshin My Home, a comprehensive fire insurance policy. A particularly attractive feature of this policy, which
covers both the residence and its contents, is the significant discount on premiums offered to subscribers to ourhome security services in recognition of their low-risk status. In addition to the risk of theft or disaster being
reduced by the home security system, a portion of theftprovisions is already covered by a general insurance policy borne by the home security system, allowing us tooffer the policy at very attractive rates.
By entering the insurance field, SECOM hasequipped itself to provide total security and peace ofmind—from prevention through to compensation.
Protecting People and Property on the Move
Starting from April 2001, SECOM has launched COCOSECOM, a new suite of mobile security services, which
utilizes the know-how and network expertise gained
from our commercial and home security services andthe latest locator technologies to extend protection topeople or vehicles on the move. If the whereabouts
of a person carrying a compact wireless terminal isunknown, or if a motorcycle or other vehicle equippedwith the device is stolen, the COCO-SECOM Operations
Center can locate the person or property and notify thecustomer. Emergency response personnel can also be
dispatched from a nearby SECOM emergency depot tovisionthat location at the customer’s request and report backto the customer. In addition, COCO-SECOM includes
Automobile Monitoring Service, which involves the
COCO-SECOM Operations Center operator notifying thecustomer immediately if his or her vehicle is moved
from its parking spot, triggering an alarm.
Competitive advantages of COCO-SECOM services
include accuracy, ease of use and an affordable price.
These services combine data from both GPS satellites
and cellular telephone base stations to provide thehighest locating accuracy currently available. The
portable homing device used with the service is also
extremely light and compact, resembling the latest
models of cellular telephones. Moreover, the monthly
fees for the various services are reasonable comparedwith other services currently on the market.
To use COCO-SECOM, a customer requests
SECOM to locate the target person or vehicle carrying
the compact homing device. At the COCO-SECOM
Operations Center, the operator then conducts a searchusing GPS satellite signals and the cellular telephonebase station network. The customer is then informed ofthe location (map location or address) by telephone or
the Internet. If the customer requests, SECOM dispatches emergency response personnel from the nearest depot to the site and, if the situation warrants it,
notifies the appropriate authorities.
Our COCO-SECOM service was developed in
response to the growing number of missing persons andkidnappings in Japan, as well as the rising incidence of
motorcycle and automobile theft in recent years. The
system is attracting considerable attention because of
its effectiveness in alleviating concern and providing
people with alternative ways of addressing these problems. COCO-SECOM is attracting attention as an innovative new component of the Social System Industry thathas expanded the reach of security services beyond thehome and office, thereby helping to make life moresecure, convenient and comfortable.

Staff at the COCOSECOM Operations
Center respondpromptly to requests
from subscribers tolocate persons
or vehicles.

is expanding the scope of its security services

SECOM CO., LTD. Annual Report 2001 11

REVIEW OF OPERATIONS

Security Service Subscribers by Category
At March 31, 2001

Commerce
16.5%
Manufacturing
14.4
Banking and financial services 12.0
Service industries
19.7
Government agencies
9.1
Others28.3

CONTENTSSECURITY SERVICES .........................................................................................

13

MEDICAL SERVICES .........................................................................................

13

INSURANCE SERVICES ......................................................................................

14

INFORMATION AND COMMUNICATION RELATED AND OTHER SERVICES .......

14

OVERSEAS OPERATIONS ..................................................................................

16

12 SECOM CO., LTD. Annual Report 2001

Security Services
Electronic Security Services
In the fiscal year ended March 31, 2001, revenue
and other income in the electronic security services category, encompassing commercial andhome security and large-scale proprietary systems, rose 3.9%, to ¥234.4 billion, and accounted
for 50.1% of consolidated revenue and otherincome, down from 54.7% in the fiscal year
ended March 31, 2000.
On-line centralized commercial security
systems form the core component of this category. Centralized security systems use SECOM
sensors, which are located on subscribers’premises and linked via telecommunications circuits to our control centers, to facilitate aroundthe-clock remote monitoring. Our control center
staff collect and analyze data and are prepared
to respond promptly to alarms by dispatching
emergency response personnel and, if necessary, calling the police, ambulance service, fire
department or gas company.
Our centralized home security systems link
subscribers’ homes with our control centers tofacilitate remote monitoring for intruders, fire,
gas leaks and medical emergency calls, thereby
ensuring safety and peace of mind.
Other Security Services
This category comprises static guard andarmored car services. In the period under review,
these services generated revenue and otherincome of ¥47.3 billion, an increase of 4.7%, andrepresented 10.1% of consolidated revenue andother income, compared with 11.0% in theprevious period.
Merchandise and OtherThis category encompasses sales of CCTV surveillance cameras, access-control systems, automatic fire detection and extinguishing systems
and intruder detection systems. Revenue andother income in this category climbed 37.2%, to¥34.4 billion, equivalent to 7.4% of consolidated
revenue and other income, up from 6.1% in thefiscal year ended March 31, 2000.
The period brought two important additions
to our merchandise lineup, namely SESAMO NT
III, an access-control system employing contactless IC cards, and SESAMO MC, an access-control
system that uses any magnetic card complying
with JIS. We also augmented our lineup of
PYTHAGORAS proprietary security vaults with
the new PYTHAGORAS series, which offers
improved fire resistance at lower prices.

Medical Services
Revenue and other income from the medical services segment was ¥6.3 billion, up 4.8 times fromthe previous period and accounted for 1.4% ofconsolidated revenue and other income, compared with 0.3% in the previous period.
During the period under review, subsidiary
Secom Home Medical System worked to
expand its network of visiting nurse stations,

Percentage of Revenue and Other Income

67.6%
Security Services
SECOM CO., LTD. Annual Report 2001 13

thereby improving accessibility to the services
provided by these stations. In addition to such
Medical Care Insurance-approved traditional
home nursing services as assisting patientsusing home intravenous or oxygen equipment,these stations now offer Long-Term Carelnsurance-approved services.
In another development, we welcomed
Mac, a Sapporo-based medical instruments firm,
into the SECOM Group. This development has
significantly reinforced our service capabilities
in this sector.

Insurance Services
The insurance services segment generated ¥22.7
billion in revenue and other income in the
period under review, a decline of 25.5% from theprevious period, and accounted for 4.8% of consolidated revenue and other income, down from
7.4%. Subsidiary Secom General Insurance continues to promote sales of attractive products
and services that capitalize on its capabilities insecurity and insurance, such as Secom Anshin
My Car insurance and Security Discount Fire
Policy, for SECOM corporate security system subscribers. During the period under review, thecompany augmented its lineup with Secom
Anshin My Home, a comprehensive fire insurance package for SECOM centralized residential
security system subscribers that provides comprehensive, seamless protection, thus ensuringsafety and peace of mind.

In the area of casualty insurance, Secom
General Insurance offers Anshin L Rich, ahigh-return casualty insurance policy, and Anshin
New Double, a comprehensive policy that pays
back the principal in full upon maturity.
Customers continue to give high marks to theguaranteed principal and attractive returns ofboth policies.

Information and Communication Related
and Other Services
Revenue and other income in this segment
advanced 27.3%, to ¥92.6 billion, and constituted 19.8% of consolidated revenue andother income, compared with 17.6% in theprevious period.
Software and Information andCommunication Related Services
Subsidiary Secom Information System Co., Ltd.,is in charge of our information and telecommunications network and Web site design, construction and operation. The company’s services also
extend to corporate network system design,development, operation and maintenance.
Subsidiary Secom Trust.net provides a wide
range of cyber security services, including
authentication, network security monitoring andsecurity consulting. Authentication services, such
as SECOM Passport for Web, which issues certificates for Web sites, are providing a PKI that will
enhance the reliability of e-business activities.

Percentage of Revenue and Other Income

14 SECOM CO., LTD. Annual Report 2001

1.4%

4.8%

Medical Services

Insurance Services

Network security monitoring involves SECOM
Virus Monitoring Service and SECOM Intrusion
Detection Service, which provide around-theclock monitoring and reporting on virus activity
and unauthorized intrusion, respectively. Security
consulting encompasses the analysis, assessment and diagnosis of network risk and thedevelopment of proposals to facilitate its management. Secom Trust.net also offers network
construction services and Web application services, which include Web-based information
system management and support.
During the period, we capitalized on our
technological capabilities in authentication—
which enabled us to win several contracts
from major banks to build and operate a digital
certificate authority service for use with the
Identrus business-to-business network of global
financial institutions—to launch SECOM
Secure Data Center services. In addition tohighly physical security and rigorous monitoring of unauthorized network access and virus
activity, SECOM Secure Data Center offers
various support services to ensure the security
and responsiveness of e-business while
minimizing costs.
GIS Services
Subsidiary Pasco is one of Japan’s leading purveyors of aerial mapping and GIS services. In the
period under review, Pasco launchedManagement Navigation Service, a management
support service developed for private-sector cor-porate customers. Management Navigation
Service integrates digital maps with customergenerated corporate data to assist management
analysis, marketing and customer service. Pasco
extends this service to customers under exclusive, long-term user contracts, whereby it provides regular, low-cost updates of base maps andsystem content. Pasco also makes use ofaddresses and other necessary information,
which it links with the information from subscribers’ systems, base maps and system content.
By enabling management to assess market
conditions accurately, Management Navigation
Service functions as an important tool forenhancing competitiveness and ensuring
survival in a challenging environment.
Education Services
A pioneer in the field of computer-aided learning, subsidiary Secom Lines, continued topromote sales of software packages designed
to support computer-assisted learning forschools. These include local-area network(LAN) systems for classrooms and Internetbased software programs.
Real Estate Development
Secom Home Life, the SECOM Group’s real estatedevelopment arm, continues to incorporate other
SECOM Group services, including security,
home medical care, information and insurance,
to develop and market high-value-added
condominiums.

Percentage of Revenue and Other Income

19.8%
Information and Communication
Related and Other Services

SECOM CO., LTD. Annual Report 2001 15

SECOM provides aOverseas Operations
In line with its belief that desire for safety andpeace of mind is universal, SECOM began offering on-line security services in Taiwan in 1978
and in the Republic of Korea and the UnitedStates in 1981. Today, SECOM also has operations in the United Kingdom, Australia,
Thailand, Malaysia, Singapore, Indonesia
and the PRC.

variety of security
services in overseas
markets.

16 SECOM CO., LTD. Annual Report 2001

We have earned a solid reputation inoverseas markets because of our ability to create packages combining top-of-the-line services
with an understanding of local needs and sensibilities. We will continue to capitalize on our
expertise to enhance our services in the markets we currently serve as well as expand into
new markets where there is demand for SECOMstyle security services.

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 ..........................................

18
22
22
24
25
26
27
41
42

COMMON STOCK DATA ......................................................................... 43

SECOM CO., LTD. Annual Report 2001 17

FINANCIAL REVIEW

Operating Results
Overview
In the fiscal year ended March 31, 2001, SECOM continued
to enhance its security services as well as its operations
in such fields as medical services, non-life insurance,
information systems, GIS services, education and realestate development. We also stepped up marketing, systems improvement and product development efforts.
Consolidated revenue and other income amounted
to ¥467.7 billion, an increase of 13.4%, or ¥55.3 billion,
from the fiscal year ended March 31, 2000. This rise wasattributable to continued growth in revenue and otherincome in the security services segment, the inclusion of afull year of revenue of subsidiary Pasco—compared with
only six months in the previous period—and gain on securities contribution to employee retirement benefit trust.
Services, comprising centralized and other security
services, produced revenue and other income of ¥281.7
billion, an increase of 4.1%, or ¥11.0 billion, andaccounted for 60.2% of consolidated revenue and otherincome, down from 65.7% in the previous period. Revenue
and other income from merchandise, software, medical,
geographic information system and real estate climbed
33.2%, or ¥32.4 billion, to ¥129.8 billion, equivalent to27.8% of total revenue and other income, up from 23.6%.
Insurance services generated consolidated revenue andother income of ¥21.7 billion, a decline of 27.5%, or ¥8.2
billion, and represented 4.6% of the consolidated total,
down from 7.3%. SECOM also recorded ¥2.6 billion in gainon sale of securities, net, and ¥10.4 billion in interest andother. In addition, SECOM contributed certain securities to
its employee retirement benefit trust to increase pension
plan funding, resulting in a gain of ¥21.4 billion.
Segment Results
Revenue and other income in the security services segment totaled ¥316.1 billion in the period under review, anincrease of 6.9%, or ¥20.3 billion, and accounted for 67.6%
of consolidated revenue and other income, compared

18 SECOM CO., LTD. Annual Report 2001

with 71.8% in the previous period. Revenue and otherincome from electronic security services was ¥234.4 billion, up 3.9%, as commercial security and home security
services—the main on-line security services—recorded afirm 4.1% gain, to ¥230.8 billion. The success of these services countered a 3.3% dip in large-scale proprietary systems, to ¥3.6 billion. Other security services generated
revenue and other income of ¥47.3 billion, an increase of
4.7%, composed of revenue and other income from static
guard services of ¥32.2 billion, up 1.7%, and armored car
services of ¥15.1 billion, an 11.6% gain. Merchandise andother contributed ¥34.4 billion, a 37.2% increase.
Revenue and other income in the medical services
segment totaled ¥6.3 billion, up 4.8 times from the previous year, and accounted for 1.4% of consolidated revenue
and other income, compared with 0.3% in the previous
period. This gain was largely attributable to an improvement in the performance of our home medical care services and to contributions from medical instruments firm
Mac, which became a consolidated subsidiary during theperiod under review.
The insurance services segment generated ¥22.7 billion in revenue and other income, a decline of 25.5%. This
segment represented 4.8% of consolidated revenue andother income, down from 7.4% the previous year. Thisdecline was primarily attributable to a decrease in gain onsale of securities held by Secom General Insurance for theperiod under review.
In the information and communication related andother services segment, which encompasses networkrelated and GIS services as well as real estate development, revenue and other income advanced 27.3%, to¥92.6 billion, and constituted 19.8% of consolidated
revenue and other income, compared with 17.6% in theprevious period. Growth in this segment reflected theinclusion of a full year of revenue from Pasco, brisk gains
in such IT-based business areas as network construction
services, and a strong performance by SECOM’s real estatedevelopment arm.

Costs and Expenses
Costs and expenses climbed 13.4%, or ¥45.4 billion, to¥385.0 billion, primarily owing to the increase in revenue
and other income. Cost of services—that is, cost related toelectronic and other security services—rose 6.0%, or ¥8.5
billion, to ¥150.4 billion, equivalent to 53.4% of consolidated revenue and other income from services, up from
52.4% in the previous period. This was attributable to anincrease in personnel costs and depreciation expenses.
Cost of merchandise, software, medical, geographic
information system and real estate amounted to ¥95.0 billion, up 35.7%, or ¥25.0 billion, and represented 73.2% ofconsolidated revenue and other income for the category,up from 71.8% in the previous year. This increase wasattributable to the inclusion of a full year of revenue fromsubsidiary Pasco, increased real estate sales and theconsolidation of new subsidiary Mac.
Cost of insurance services was ¥15.0 billion, a declineof 20.6%, or ¥3.9 billion, from the previous period, representing 69.0% of revenue and other income from insurance
services, compared with 63.1% in the previous period.
Selling, general and administrative expenses
advanced 7.9%, or ¥7.8 billion, to ¥106.9 billion, or 22.9%
of consolidated revenue and other income, a decrease
from 24.0% in the previous year. Other expenses climbed
88.7%, or ¥7.5 billion, to ¥15.9 billion. This increase wasattributable to amortization of goodwill, valuation losses

in investment securities and other investments and theallowance for doubtful accounts.
IncomeIncome before income taxes in the period under review
was ¥82.7 billion, an increase of 13.5%, or ¥9.9 billion,
reflecting a gain on securities contribution to employee
retirement benefit trust. Income taxes climbed 57.4%, or¥13.0 billion, to ¥35.7 billion, and the effective tax rateincreased to 43.2%, from 31.1%. The lower effective tax
rate in the previous period reflected improved performances by several domestic subsidiaries with operating
loss carryforwards, which were subject to valuation
allowance, as outlined in Note 15 of the notes toconsolidated financial statements.
As a consequence of higher income taxes and thecumulative effect of accounting change, net of tax, net
income fell 7.0%, or ¥3.3 billion, to ¥44.1 billion (see Note
2 (12) of the notes to consolidated financial statements).
Return on revenue and other income was 9.4%, downfrom 11.5% in the previous period. Basic net income pershare was ¥189.28, down from ¥203.67 per share in theprevious period, while diluted net income per shareamounted to ¥189.13, down from ¥203.52. Cash dividends
paid per share of ¥40.00 were approved at the generalshareholders’ meeting held on June 28, 2001.

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
97 98 99 00 01

97 98 99 00 01

SECOM CO., LTD. Annual Report 2001 19

Other assets soared 168.7%, or ¥27.5 billion, to ¥43.7
billion, mainly reflecting increases in deferred income
taxes, as outlined in Note 15 of the notes to consolidated
financial statements.
Total liabilities rose 23.2%, or ¥87.6 billion, to ¥464.4
billion. Total current liabilities edged down 0.5%, or ¥1.1 billion, to ¥218.4 billion, owing to a 46.3% decline in payablesof subsidiary Secom Home Life for its real estate development, to ¥19.2 billion. Investment deposits by policyholdersof subsidiary Secom General Insurance advanced 71.1%, or¥54.1 billion, to ¥130.2 billion. Accrued pension and severance costs increased 113.0%, or ¥11.3 billion, to ¥21.3 billion. This increase was primarily the result of recording an
additional minimum pension liability, owing to an increase
in benefit obligation attributable to a reduction in theassumed discount rate used in computing benefit obligations for Japanese pension plans, and decreases in thecurrent value of pension assets held by SECOM, reflecting
sluggish stock market conditions in Japan.
Total shareholders’ equity amounted to ¥377.5 billion, up 1.0%, or ¥3.6 billion, reflecting a 15.2%, or ¥33.8
billion, increase in retained earnings, to ¥256.1 billion;
additional minimum pension liabilities adjustments of¥17.1 billion, a ¥16.3 billion increase from the previous
period, owing to the aforementioned increase of minimum pension liabilities; and a net unrealized loss in debt
and equity securities of ¥2.3 billion, compared with a net
unrealized gain at the previous fiscal year-end of ¥17.3
billion, mainly as a result of sluggish stock market
conditions in Japan. The equity ratio fell to 43.5%,

Financial Position
Total assets of SECOM amounted to ¥868.2 billion as ofMarch 31, 2001, an increase of 11.4%, or ¥88.7 billion, fromthe previous fiscal year-end. Time deposits slipped 23.5%,
or ¥3.8 billion, to ¥12.5 billion, while the shift of certain
investments to investment securities prompted a 76.0%, or¥69.6 billion, decline in short-term investments, to ¥22.0
billion. These declines countered a 7.9%, or ¥10.4 billion,
increase in cash and cash equivalents, to ¥141.7 billion,
and a 39.1%, or ¥11.6 billion, gain in short-term receivables, which resulted in a balance of ¥41.3 billion. As aconsequence, total current assets declined 10.5%, or ¥45.7
billion, to ¥387.3 billion, and the current ratio slipped to
1.8 times, from 2.0 times at the end of the previous year.
Investments and long-term receivables advanced
49.6%, or ¥79.2 billion, to ¥238.8 billion. This increasereflected several factors. Investment securities rose 54.8%,
or ¥42.3 billion, to ¥119.4 billion, primarily owing to theaforementioned reclassification of investments fromcurrent assets. An increase in contracts held, mainly
insurance policies, caused long-term receivables to jump
59.7%, or ¥25.6 billion, to ¥68.4 billion. New investments
in a CATV-related company and others pushed investments in affiliated companies up 31.3%, or ¥7.7 billion,to ¥32.3 billion.
Property, plant and equipment, less accumulated
depreciation, was ¥198.4 billion, up 16.2%, or ¥27.7 billion. This increase was largely attributable to a 16.6%, or¥38.3 billion, increase in security equipment and control
stations, to ¥268.3 billion.
Total Assets

Shareholders’Equity per Share

Depreciation andAmortization(In billions of yen)

(In billions of yen)

(In yen)
2,000

1,000

50

1,600

800

40

1,200

600

30

800

400

20

400

200

10

0

0
97 98 99 00 01

20 SECOM CO., LTD. Annual Report 2001

0
97 98 99 00 01

97 98 99 00 01

from 48.0%, attributable to such factors as the impact ofhigher investment deposits by policyholders of Secom
General Insurance.

Cash Flows
SECOM is committed to maintaining sufficient liquidity toensure flexibility in its operations and guarantee a solid
financial foundation. Accordingly, to the best of its ability
the Company finances strategic investments with cash
generated by its operating activities.
In the period under review, net cash provided by operating activities amounted to ¥136.3 billion, an increase of
97.3%, or ¥67.3 billion, from the previous year. This change
primarily reflected a ¥54.1 billion increase in investment
deposits by policyholders, up from an ¥18.6 billion
increase in the previous period. Depreciation and amortization was ¥44.8 billion, an increase from ¥34.2 billion.
Net cash used in investing activities totaled ¥117.8
billion, up 45.5%, or ¥36.8 billion, from the previous year,
primarily as a consequence of payments for purchases ofproperty, plant and equipment of ¥51.8 billion, comparedwith ¥37.5 billion in the previous year; ¥19.2 billion in
payments for investments in securities, up from ¥2.7 billion in the previous year, primarily owing to investment in
a CATV-related affiliate; an increase in short-term receivables, net, of ¥22.8 billion, compared with an increase of¥1.1 billion in the previous year; and payments for longterm receivables of ¥36.6 billion, up from ¥24.7 billion.
Increase in short-term receivables, net, and the increasein payments for long-term receivables were mainly

attributable to the rise in investment deposits by policyholders of Secom General Insurance.
Net cash used in financing activities was ¥8.4 billion,in contrast with ¥12.7 billion net cash provided by suchactivities in the previous year. Proceeds from long-term
debt were ¥22.0 billion, while repayments of long-term
debt were ¥16.1 billion, resulting in a net increase of ¥5.9
billion, compared with a net decrease of ¥1.9 billion in
the previous period. On the other hand, bank loans
decreased ¥4.5 billion, compared with a ¥17.2 billion
increase in the previous period. Accordingly, net proceeds from bank loans and long-term debt amounted to¥1.4 billion, compared with ¥15.3 billion in the previous
year. A per-share dividend increase to ¥40.00, from ¥35.00(after adjustment to reflect the impact of a stock split),
boosted dividends paid to ¥9.3 billion, from ¥8.1 billion
in the previous year.
As a consequence of SECOM’s operating, investing
and financing activities during the period under review,
cash and cash equivalents at end of year amounted to¥141.7 billion, up 7.9%, or ¥10.4 billion, from ¥131.3
billion a year earlier.
Subsequent Event
On June 27, 2001, SECOM issued unsecured bonds due on
June 27, 2006, in the amount of ¥30.0 billion, with acoupon rate of 0.53%. The cash raised will finance theCompany’s capital expenditures, strategic investments andworking capital.

Capital Investment

Cash Flows(In billions of yen)

(In billions of yen)

60

150

48

100
50

36

0
24

-50

12

-100

0

-150
97 98 99 00 01

99

00

01

Cash flows fromoperating activities
Cash flows frominvesting activities
Cash flows fromfinancing activities
SECOM CO., LTD. Annual Report 2001 21

CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2001 and 2000

ASSETS
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 (Note 9) ....................................................................................................................
Short-term receivables ..............................................................................................................
Allowance for doubtful accounts ..............................................................................................
Deferred insurance acquisition cost (Note 12) .........................................................................
Deferred income taxes (Note 15)...............................................................................................
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 and 18):
Land ..............................................................................................................................................
Buildings and improvements......................................................................................................
Security equipment and control stations...................................................................................
Machinery, equipment and automobiles...................................................................................
Construction in progress.............................................................................................................
Accumulated depreciation ..........................................................................................................

Other assets:
Telephone and telegraph utility rights.......................................................................................
Deferred income taxes (Note 15)................................................................................................
Goodwill (Note 5).........................................................................................................................
Intangibles and other...................................................................................................................
Total assets ...........................................................................................................................
The accompanying notes are an integral part of these statements.

22 SECOM CO., LTD. Annual Report 2001

In millions of yen

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

March 31

March 31

2001

2000

2001

¥(141,725
12,46036,59721,993
48,917
16,951
49,713
41,331(1,096)
2,044
7,379
9,319
387,333¥(131,329
16,29137,492
91,64047,93012,151
52,40029,714
(974)
1,901
4,383
8,733
432,990$(1,142,944
100,484
295,137
177,363394,492
136,702400,911
333,314(8,839)16,48459,50875,153
3,123,653

119,438
32,34968,38911,60914,554(7,567)
238,772

77,143
24,63542,813
9,773
10,857(5,637)
159,584

963,210
260,879
551,524
93,621
117,371(61,024)
1,925,581

48,42864,294
268,332
50,4762,431
433,961(235,608)
198,353

45,31960,768230,059
45,025
3,692
384,863(214,171)
170,692

390,548518,500
2,163,968
407,065
19,6053,499,686(1,900,065)
1,599,621

3,681
16,388
10,16913,50843,746¥(868,204

3,881
—
5,813
6,588
16,282¥(779,548

29,685132,161
82,008108,936
352,790$(7,001,645

In millions of yen

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

March 31

March 31

2001

2000

2001

Current liabilities:
Bank loans (Notes 7 and 11) .......................................................................................................
Current portion of long-term debt (Notes 11 and 18) ...............................................................
Notes and accounts payable, trade ............................................................................................
Other payables .............................................................................................................................
Deposits received.........................................................................................................................
Deferred revenue (Note 2 (12)) ...................................................................................................
Accrued income taxes .................................................................................................................
Accrued payrolls ..........................................................................................................................
Other current liabilities................................................................................................................
Total current liabilities..........................................................................................................

¥072,527
14,351
15,855
19,24317,09936,662
18,264
14,264
10,101
218,366¥074,660
5,715
16,34235,803
20,54926,087
13,647
11,915
14,698219,416$0,584,895
115,734
127,863
155,186
137,895
295,661
147,290
115,032
81,4601,761,016

Long-term debt (Notes 11 and 18) .................................................................................................
Guarantee deposits received from subscribers ............................................................................
Accrued pension and severance costs (Note 13)..........................................................................
Deferred revenue (Note 2 (12)).......................................................................................................
Unearned premiums and other insurance liabilities (Note 12) ...................................................
Investment deposits by policyholders (Note 12) ..........................................................................
Deferred income taxes (Note 15) ...................................................................................................
Other liabilities.................................................................................................................................
Total liabilities.......................................................................................................................

24,065
17,93921,34017,20634,085130,187545
641
464,374

23,59917,086
10,021—
25,884
76,1034,620
88376,817

194,072
144,670
172,097
138,758
274,879
1,049,895
4,395
5,169
3,744,951

Minority shareholders’ interest in subsidiaries ...........................................................................

26,29828,819212,081

66,12779,745
8,618
256,108

66,09779,713
7,587
222,344533,282
643,105
69,5002,065,387(2,329)(17,110)(13,624)

17,272(765)(18,294)(18,782)(137,984)(109,871)

377,535

373,954

3,044,637

3
377,53242373,91224
3,044,613¥868,204¥779,548$7,001,645

LIABILITIES AND SHAREHOLDERS’ EQUITY

Shareholders’ equity:
Common stock of ¥50 ($0.40) par value (Notes 16 and 21):
Authorized 900,000,000 shares in 2001 and 300,000,000 shares in 2000;
issued 233,099,744 shares in 2001 and 233,075,442 shares in 2000 ..................................
Additional paid-in capital (Notes 16 and 21) .............................................................................
Legal reserve (Note 16) ...............................................................................................................
Retained earnings (Note 16) .......................................................................................................
Accumulated other comprehensive income (loss):
Net unrealized gain (loss) in debt and equity securities (Note 8) ........................................
Additional minimum pension liabilities adjustments (Note 13)...........................................
Cumulative foreign currency translation adjustments..........................................................
Less—Common stock in treasury, at cost;
Less— 510 shares in 2001 and 4,840 shares in 2000 ...............................................................
Total shareholders’ equity ...................................................................................................
Commitments and contingent liabilities (Note 20)
Total liabilities and shareholders’ equity............................................................................

SECOM CO., LTD. Annual Report 2001 23

CONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2001

In millions of yen

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

Years ended March 31

Year ended March 31

2001

2000

1999

2001

¥281,723¥270,741¥266,346$2,271,960

129,835
21,7452,569

97,46529,985
5,454

80,902
4,678
35,7001,047,056
175,363
20,71821,366
10,433
467,671—
8,752
412,397—
6,520
394,146

172,306
84,137
3,771,540

150,355

141,901

139,764

1,212,540

94,99415,013106,927
1,812
15,911
385,01270,01318,908
99,1081,229
8,431
339,590

61,682
3,995
96,8371,078
8,097
311,453

766,081
121,073862,314
14,613
128,314
3,104,935

82,65972,807

82,693

666,605

30,011
5,659
35,67027,396(4,727)
22,66934,946(2,573)32,373242,024
45,637
287,661

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

46,98950,13850,320378,944

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

(482)(3,837)(1,241)(3,887)

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

1,310

1,131

839

10,564

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

47,81747,432

49,918385,621

Cumulative effect of accounting change, net of tax (Note 2 (12)) ........................

(3,699)——(29,831)

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

¥044,118¥047,432¥049,918$0,355,790

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

Years ended March 31

Year ended March 31

Revenue and other income:
Services...................................................................................................................
Merchandise, software, medical, geographic information system
and real estate ......................................................................................................
Insurance services..................................................................................................
Gain on sale of securities, net (Notes 8 and 22) ..................................................
Gain on securities contribution to employee retirement benefit trust(Notes 8 and 13) ...................................................................................................
Interest and other (Note 14) ..................................................................................

Costs and expenses:
Cost of services ......................................................................................................
Cost of merchandise, software, medical, geographic information system
and real estate ......................................................................................................
Cost of insurance services.....................................................................................
Selling, general and administrative (Notes 2 (14) and 17)..................................
Interest ....................................................................................................................
Other (Note 14) .......................................................................................................

Income before income taxes ......................................................................
Income taxes (Note 15):
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.

24 SECOM CO., LTD. Annual Report 2001

2001

2000

1999

2001

¥205.15¥204.99¥203.67¥203.52¥214.51¥214.09$(1.65$(1.65(¥15.87)(¥15.86)

¥
¥

¥
¥

—
—

($0.13)($0.13)¥189.28¥189.13¥203.67¥203.52¥214.51¥214.09$(1.52$(1.52——

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2001

Balance, March 31, 1998 ...................................................................
Comprehensive income:Net income......................................................................................
Other comprehensive income (loss), net of tax (Note 16):
Unrealized gain on securities:
Unrealized holding gain arising during the period ...................
Less: Reclassification adjustment for gain
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, 1999 ...................................................................
Comprehensive income:Net income......................................................................................
Other comprehensive income (loss), net of tax (Note 16):
Unrealized gain on securities:
Unrealized holding gain arising during the period ...................
Less: Reclassification adjustment for gain
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.........................................................
Stock split (Note 16) ............................................................................
Purchase of treasury stock..................................................................
Reissuance of treasury stock ..............................................................
Balance, March 31, 2000 ...................................................................
Comprehensive income:Net income......................................................................................
Other comprehensive income (loss), net of tax (Note 16):
Unrealized gain (loss) on securities:
Unrealized holding loss arising during the period....................
Less: Reclassification adjustment for gain
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 ..................................................................

In millions of yen
CommonAccumulated
stock
other comRetainedin treasury
prehensive
earnings income (loss) stock, at cost

Number ofsharesissuedCommonstock

Additional
paid-in
capitalLegalreserve

116,233,393¥65,327¥78,928¥5,956¥142,326(¥08,672)(¥0,025)¥283,840

—

—

—

—

49,918——49,918

—

—

—

—

—

6,000

—

6,000

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(15)
(888)
(4,832)—————
158,716——
116,392,109

—
—
383
—
—
65,710——383—
779,318

—
721
—
—
—
6,677

(7,555)(721)———
183,968—————(8,407)———(1,640)
1,546
(119)

(15)
(888)
(4,832)50,183(7,555)—766(1,640)1,553
327,147

—

—

—

—

47,432——47,432

—

—

—

—

—

4,879

—

4,879

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(675)
8,054
(5,638)—————273,686
116,409,647——
233,075,442

—
—
387
—
—
—
66,097

—
—
387
—
—
8
79,713

—
910
—
—
—
—
7,587

(8,146)
(910)
—
—
—
—
222,344

—
—
—
—
—
—
(1,787)————(4,945)
5,022
(42)

(675)
8,054
(5,638)54,052(8,146)—774—(4,945)
5,030
373,912

—

—

—

—

44,118——44,118

—

—

—

—

—

(6,496)—(6,496)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

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

—
—
—

—
—
24,302——233,099,744

—
—
30
—
—
¥66,127——30—
2¥79,745

—
1,031
—
—
—
¥8,618(9,323)(1,031)———¥256,108—————(¥33,063)

—
—
—
(801)
840
(¥0,003)(13,105)(16,345)
4,670
12,842(9,323)
—
60
(801)
842
¥377,532

Total

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

Commonstock

Balance, March 31, 2000 .......................................................................................... $533,040
Comprehensive income: ............................................................................................
Net income.............................................................................................................
—
Other comprehensive income (loss), net of tax (Note 16):
Unrealized gain (loss) on securities:
Unrealized holding loss arising during the period...........................................
—
Less: Reclassification adjustment for gain
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................................................................................
242
Purchase of treasury stock .........................................................................................
—
Reissuance of treasury stock .....................................................................................
—
Balance, March 31, 2001 .......................................................................................... $533,282

CommonAccumulated
stock
other comRetainedin treasury
prehensive
earnings income (loss) stock, at cost

Additional
paid-in
capitalLegalreserve$642,847$61,185——355,790

—

—

—
—
—

—
—
—

—
—
242
—
16
$643,105

—
8,315
—
—
—
$69,500$1,793,097 ($014,411)

Total($0,339)$3,015,419——

355,790—(52,387)—(52,387)———(105,685)(131,815)
37,661———(75,185)—(8,315)
—
—
—
—
—
—
—
$2,065,387 ($266,637)———(6,460)6,775($0,024)(105,685)(131,815)
37,661
103,564(75,185)—484(6,460)6,791$3,044,613

The accompanying notes are an integral part of these statements.

SECOM CO., LTD. Annual Report 2001 25

CONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2001

2001

In millions of yen

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

Years ended March 31

Year ended March 31

2000

1999

Cash flows from operating activities:
Net income ........................................................................................................................ ¥044,118 ¥047,432 ¥049,918
Adjustments to reconcile net income to net cash provided
by operating activities—
Depreciation and amortization .....................................................................................
44,77534,23230,542
Accrual for pension and severance costs, less payments .........................................
4,190
525
1,733
Deferred income taxes ..................................................................................................
5,659(4,727)(2,573)Net loss on sales and disposal of property, plant and equipment............................
2,655
2,129
1,806
(Gain) loss on sales of investment securities..............................................................
(1,998)(1,163)
182
Gain on securities contribution to employee retirement benefit trust (Note 8).......
(21,366)——
Gain on sales of subsidiary’s shares (Note 22)...........................................................
(571)
—
—
Gain on sales of shares of Secom Techno Service Co., Ltd. .....................................
—(4,291)—Gain on sales of shares of Tokyo Internet Corporation .............................................
——(13,054)
Gain on sales of shares of Westec Residential Security, Inc. andValley Burglar and Fire Alarm Co., Inc.......................................................................
——(22,828)
Equity in net income of affiliated companies..............................................................
(1,310)(1,131)(839)
Minority interest in subsidiaries...................................................................................
482
3,837
1,241
Cumulative effect of accounting change, net of tax (Note 2 (12)) .............................
3,699
—
—
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits .......................................................................
895
6,352
(10,673)
Increase in receivables and due from subscribers, net of allowances..................
(2,010) (23,406)(5,215)(Increase) decrease in inventories............................................................................
4,029(26,350)(7,203)(Increase) decrease in other current assets .............................................................
6,422
(373)
(419)
Increase (decrease) in payables................................................................................
(24,279)
27,115
1,480
Increase (decrease) in deposits received .................................................................
(3,506)(8,232)
9,529
Increase (decrease) in deferred revenue..................................................................
3,788
871
(196)
Increase (decrease) in accrued income taxes..........................................................
4,249(3,445)(2,120)
Increase in guarantee deposits received from subscribers....................................
777
669
462
Increase (decrease) in other current liabilities ........................................................
1,642
3,060
(343)
Increase (decrease) in unearned premiums and other insurance liabilities ........
8,201(4,226)—
Increase in investment deposits by policyholders..................................................
54,084
18,571—Other, net....................................................................................................................
1,720
1,641
(199)
136,345
Net cash provided by operating activities ............................................................
69,09031,231
Cash flows from investing activities:
3,976(Increase) decrease in time deposits ...............................................................................
1,619(2,117)955
Proceeds from sales of property, plant and equipment ................................................
1,551
1,774
(51,794) (37,539) (46,332)
Payments for purchases of property, plant and equipment..........................................
5,663
Proceeds from sales of investment in securities............................................................
2,419
606
(19,242)
Payments for investments in securities ..........................................................................
(2,733) (13,214)(2,478) (26,855)(Increase) decrease in short-term investments ..............................................................
3,993
1,016
Proceeds from sales of subsidiary’s shares (Note 22) ...................................................
———
Proceeds from sales of shares of Secom Techno Service Co., Ltd...............................
4,512
—
1,072
Proceeds from sales of shares of Tokyo Internet Corporation (Note 22) .....................
—
11,757
Proceeds from sales of shares of Westec Residential Security, Inc. and—Valley Burglar and Fire Alarm Co., Inc. .........................................................................
—
33,503(3,203)Acquisition of Mac Corporation, net of cash acquired (Note 5)....................................
———
Acquisition of Pasco Corporation, net of cash acquired ................................................
(9,494)——
Acquisition of Secom General Insurance Co., Ltd., net of cash acquired .....................
—
12,365(22,815)
Increase in short-term receivables, net ...........................................................................
(1,149)(1,911)(36,555) (24,656)
Payments for long-term receivables ...............................................................................
(454)
12,415
Proceeds from long-term receivables .............................................................................
14,550311(6,802)
Increase in other assets ....................................................................................................
(3,406)(2,501)—Other, net ...........................................................................................................................
197
1,602
Net cash used in investing activities ..................................................................... (117,792) (80,984)(618)
Cash flows from financing activities:
Proceeds from long-term debt.........................................................................................
22,031
2,614
7,445
Repayments of long-term debt ........................................................................................
(16,102)(4,480)(5,016)
Increase (decrease) in bank loans....................................................................................
(4,516)
17,16013,908Proceeds from minority shareholders.............................................................................
5
5,443
660
Dividends paid...................................................................................................................
(9,323)(8,147)(7,555)(Increase) decrease in treasury stock, net.......................................................................
39
77
(94)
(530)
Other, net ...........................................................................................................................
——Net cash provided by (used in) financing activities .............................................
(8,396)
12,667
9,348
239
Effect of exchange rate changes on cash and cash equivalents .....................................
(630)
(635)
10,396
Net increase in cash and cash equivalents .......................................................................
143
39,326
131,329 131,186
Cash and cash equivalents at beginning of year ..............................................................
91,860Cash and cash equivalents at end of year ......................................................................... ¥141,725 ¥131,329 ¥131,186
The accompanying notes are an integral part of these statements.

26 SECOM CO., LTD. Annual Report 2001

2001

$0,355,790
361,089
33,79045,637
21,411(16,113)(172,306)(4,605)———(10,564)
3,887
29,831
7,218(16,210)32,492
51,790(195,798)(28,274)
30,54834,266
6,266
13,242
66,137436,161
13,871
1,099,556
32,065
7,702(417,694)
45,669(155,177)(19,984)
8,194
—
8,645
—
(25,831)——(183,992)(294,798)
100,121(54,855)—(949,935)
177,669(129,855)(36,419)40(75,185)315(4,274)(67,709)
1,927
83,8391,059,105$1,142,944

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2001

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 for money 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 the needsof people and business. To develop this Social System Industry
concept, the Company has been diversifying the operation ofits services covering: home and other medical services; non-life
insurance services; information and communication services
including cyber security services, software development andsystem integration activities; Geographic Information Systemservices using aerial surveying technology; school education
systems; development and sale of real estate and other services.
Moreover, the Company is currently expanding its business into
broadband services using cable television networks through its
affiliated companies.
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 acceptedin the United States of America. These adjustments were notrecorded in the statutory books of account.
The preparation of financial statements in conformity withaccounting principles generally accepted in the United States ofAmerica requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of 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:(1) Basis of Consolidation and Investments in AffiliatedCompanies
The consolidated financial statements include the accounts ofthe parent company and those of its majority owned subsidiarycompanies. All intercompany transactions and accounts havebeen 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 theCompany’s current equity in the net income of affiliatedcompanies, after elimination of intercompany profits.
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 subsidiary or affiliated company accounted forusing the equity method may issue its shares to third parties
either in a public offering or upon conversion of convertible debt
to common stock at amounts per share in excess of or less thanthe Company’s average per share carrying value. With respect tosuch transactions, the resulting income or losses arising fromthe change in ownership interest are recorded in income for theyear the transaction occurs. With respect to sale of shares of a
subsidiary, the resulting income is recognized to the extent thatthe sale of shares is not a part of a broader corporate reorganization contemplated or planned by the Company.
(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 and reported
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.
(3) Cash Equivalents
For the purpose of the statements of cash flows, the Company
considers all highly liquid investments purchased with initial
maturities of three months or less to be cash equivalents.
(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 andequity securities which are classified as “available-for-sale” arerecorded at fair value. Unrealized gains and losses on securities
classified as “available-for-sale” are reported as part of othercomprehensive income (loss), net of tax. Debt securities thatare expected to be “held-to-maturity” are reported at amortizedcost. 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 basedon the moving-average cost method and are credited or charged
to income.

SECOM CO., LTD. Annual Report 2001 27

(5) Inventories
Inventories, consisting of security-related products, real estate,
and information and other related products, are stated at lowerof cost or net realizable value. Cost is determined, in the case ofreal estate, based on a specific identification method and, in thecase of other inventories, using the moving-average method.
(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 incurredto premiums from contracts issued to applicable unearned
premiums throughout the period of the contract.
(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 fromthe respective accounts and the net difference, less any amounts
realized on disposition, is reflected in income. Depreciation iscomputed primarily using the declining-balance method at rates
based on the estimated useful lives of the assets. Depreciation
expense was ¥39,903 million ($321,798 thousand), ¥31,217
million and ¥28,838 million for the years ended March 31, 2001,
2000 and 1999, respectively. Maintenance, repairs and renewals
are charged 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(8) Telephone and Telegraph Utility Rights
These rights are shown at the net amount of their original costless amortization thereof using the straight-line method over a
period of 20 years.
(9) Intangibles and Other
Intangibles, which principally consist of internal-use software,
are amortized on a straight-line basis over their useful lives
which are principally five years. The Company’s long-lived
assets, including goodwill and identifiable intangibles, arereviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not
be recoverable.
(10) 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 theremaining 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.
(11) Income Taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of income.
The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of

28 SECOM CO., LTD. Annual Report 2001

temporary differences between the carrying amounts and thetax bases of assets and liabilities. Valuation allowances arerecorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
(12) 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 are recognizedover the contractual period of security services after completionof the installation. The related installation costs are also capitalized and amortized over the contractual period. Previously,
installation revenues for security equipment were recognizedwhen the Company had substantially completed all of its obligations pursuant to the terms of the installation services contract.
The Company viewed its obligation under the installation services contract to be substantially completed when installation
services of security equipment were completed and recognizedrevenues at that time.
At April 1, 2000, the Company recorded a one-time non-cash
charge of ¥3,699 million ($29,831 thousand), net of tax, representing the effect of adoption of SAB No. 101. The charge has beenreflected as a cumulative effect of accounting change in theaccompanying 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.
The Company has not disclosed pro forma financial information
for prior years as if SAB No. 101 had been applied retroactively
due to immateriality.
Revenue from security services is recognized over the contractual period or, in the case of specific services, when such services
are performed. Subscribers are generally requested to prepay a
portion of service charges which are credited to deferred revenue
and taken into income ratably over the covered 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—in the case of installations, whensuch 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 the unexpired
portion of premiums written.
(13) Research and Development
Research and development costs are charged to income as
incurred.
(14) Advertising Costs
Advertising costs are charged to income as incurred, except forthe costs related to insurance policies. Advertising costs foracquiring new insurance policies are deferred and amortized

as part of insurance acquisition costs. Advertising expenses
included in selling, general and administrative expenses for theyears ended March 31, 2001, 2000 and 1999 were ¥4,864 million($39,226 thousand), ¥4,263 million and ¥4,215 million, respectively.
(15) Derivative Financial Instruments—Interest Rate Swap
Agreements
The Company enters into interest rate swap agreements inorder to limit the Company’s exposure to loss in relation tounderlying debt instruments resulting from adverse fluctuationsin interest rates or to provide higher interest income to theCompany. The related interest differentials paid or received
under these agreements are recognized over the terms of theagreements in interest expense.
(16) Earnings Per Share
Basic Earnings per Share (“EPS”) is computed based on the
average number of shares of common stock outstanding for theperiod. 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 the issuanceof common stock. Basic and diluted EPS for prior years arerestated to reflect the stock split.
(17) Free Distribution of Common StockA corporation in Japan may make free distributions of its
common stock to shareholders at the discretion of its Board of
Directors. Free share distributions are accounted for either by (i)a transfer equal to par value or more from additional paid-in
capital to the common stock account, or (ii) issuance of newshares without any change in the common stock account if thecommon stock account exceeds the aggregate par value of allissued shares including the newly issued shares. Such free share
distributions are clearly distinguished from “stock dividends”
which, under the Japanese Commercial Code, as amended effective April 1, 1991, 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 way of astock split with respect to the amount appropriated by resolutionof the Board of Directors.
A corporation in the United States of America issuing shares,
comparable to less than 25 percent free share distributions,would be required to account for them as stock dividends and thefair value of the shares would be transferred from retained earnings to the appropriate capital accounts. Such transfers, however,would have no effect on total shareholders’ equity (Note 21).
Free distributions of common stock are included in the EPS
calculation in accordance with accounting principles generally
accepted in the United States of America.
(18) Recent Pronouncements
In June 1998, the Financial Accounting Standards Board(“FASB”) issued Statement of Financial Accounting Standards(“SFAS”) No. 133 “Accounting for Derivative Instruments andHedging Activities”. In June 2000, the FASB also issued SFAS
No. 138, “Accounting for Certain Derivative Instruments andCertain Hedging Activities, an amendment of FASB Statement
No. 133”.

Both standards establish accounting reporting 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. SFAS No. 133, as
amended, and No. 138 are effective for fiscal years beginning afterJune 15, 2000. The Company adopted SFAS No. 133 and No. 138 atApril 1, 2001. The cumulative effect adjustment upon the adoption of
SFAS No. 133 and No. 138, net of related income tax effect, resulted in
an increase to other comprehensive income of approximately ¥129
million ($1,040 thousand), and was immaterial to net income.
In September 2000, the FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statements No. 125”.
This statement revises the standards for accounting for securitizations and other transfers of financial assets and collateral andrequires certain financial statement disclosures. This statement iseffective for transactions occurring after March 31, 2001 and iseffective for the recognition and reclassification of collateral anddisclosures relating to securitization transactions and collateralfor fiscal years ending after December 15, 2000. The adoption ofthis replacement standard is not anticipated to have a material
effect on the Company’s consolidated financial position andresults of operations.
(19) Reclassifications
Certain reclassifications of previously reported amounts havebeen made to conform with current classifications.
3. U.S. Dollar Amounts
U.S. dollar amounts have been included in these financial
statements solely for convenience of the reader. Thesetranslations should not be construed as representing that the yenamounts actually represent, or have been or could be converted
into U.S. dollars. The translations of yen into U.S. dollars havebeen made at the rate at March 31, 2001, ¥124=US$1.
4. Reconciliation of the Differences between Basic and
Diluted Net Income Per Share (“EPS”)
Basic and diluted EPS as well as the number of shares in the following table are restated for the year ended March 31, 1999 toreflect the two-for-one stock split that became effective on
November 19, 1999. Reconciliation of the differences between
basic and diluted EPS for the years ended March 31, 2001, 2000
and 1999 is as follows:

For the year ended March 31, 2001:
Basic EPS—
Income before cumulative effectof accounting change..................
Effect of dilutive securities—
Convertible bonds .........................
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation ............

In millionsof yenThousandsof shares

Income before
cumulative
effect ofaccountingchangeWeightedaverage shares¥47,8175¥47,822

In yenIn U.S.
dollars

EPS

233,081 ¥205.15 $1.65
211

233,292 ¥204.99 $1.65

SECOM CO., LTD. Annual Report 2001 29

For the year ended March 31, 2000:
Basic EPS—
Income before cumulative effectof accounting change .............................
Effect of dilutive securities—
Convertible bonds ....................................
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation .......................
For the year ended March 31, 1999:
Basic EPS—
Income before cumulative effectof accounting change .............................
Effect of dilutive securities—
Convertible bonds ....................................
Diluted EPS—
Income before cumulative effectof accounting change fordiluted EPS computation .......................

In millionsof yenThousandsof shares

In yenIncome before
cumulative
effect ofaccountingchangeWeightedaverage shares

EPS¥47,4329¥49,918

232,700 ¥214.51
510

233,210 ¥214.09

5. Acquisitions
In September 1998 and March 1999, the parent company subscribed, in two installments, to purchase new shares issued by
Secom Toyo General Insurance Co., Ltd. (renamed in 2000 to
Secom General Insurance Co., Ltd. “Secom Insurance”), a non-life
insurance company in Japan, for an aggregate amount of ¥9,029
million ($72,815 thousand). As a result, the parent company owns
81.7 percent of the outstanding shares of Secom Insurance at
March 31, 2001.
In August 1999, the parent company subscribed to purchasenew shares issued by Pasco Corporation (“Pasco”), which operates an aerial surveying and mapping business and Geographic
Information System services in Japan, for an aggregate amountof ¥15,000 million ($120,968 thousand). As a result, the parent
company owns 70.0 percent of the outstanding shares of Pasco
at March 31, 2001.
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 amountof ¥3,980 million ($32,097 thousand).
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 ofoutstanding shares. The difference between the purchase priceand the value assigned to the underlying net assets acquired isincluded in goodwill and amounted to ¥10,127 million ($81,669
thousand) and ¥5,768 million at March 31, 2001 and 2000, respectively. The goodwill is being amortized on a straight-line basis
over periods not exceeding 10 years.
The consolidated pro forma information that would show theresults of the Company’s consolidated operations for the years
ended March 31, 2001, 2000 and 1999 has not been disclosed

30 SECOM CO., LTD. Annual Report 2001

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2000

2001

Cash.................................................. ¥064,819 ¥067,902
Time deposits .................................. 21,944
35,203
Call loan ........................................... 35,690
11,000Investment securities ...................... 19,272
17,224¥141,725 ¥131,329$0,522,734
176,968
287,823
155,419$1,142,944

2001

220

233,103 ¥203.52¥49,927

6. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2001 and 2000 werecomprised as follows:

232,883 ¥203.67¥47,441

9

based on materiality considerations. The effort to provide
comparative pro forma financial information would not becommensurate with the benefits derived from such information.

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 default of
the financial institutions and does not anticipate any default onagreements outstanding.
7. Cash Deposits
The Company operates cash collection and deposit services forbanks relating to cash dispensers outside of bank facilities. Cashdeposit balances, mostly in cash dispensers, of ¥36,597 million($295,137 thousand) and ¥37,492 million at March 31, 2001 and
2000, 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 overdraft facilities with the related banks. Bank loans included ¥20,157 million($162,556 thousand) and ¥23,454 million at March 31, 2001 and
2000, respectively, relating to this operation. As part of its fee
arrangement for such services, the Company is reimbursed forthe interest cost of the related overdrafts.
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 “held-tomaturity” investments at March 31, 2001 and 2000 were as
follows:
In millions of yen
March 31, 2001
Gross unrealized
Cost

Gains

LossesFair value

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

¥063,883
54,168¥118,051¥8,950 ¥10,643
568
933¥9,518 ¥11,576¥062,190
53,803¥115,993

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

¥020,000¥0,223 ¥¥020,223—

In millions of yen
March 31, 2000
Gross unrealized
Cost

Gains

LossesFair value

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

¥048,499
62,702¥111,201¥40,796849¥41,645¥7,1591,523¥8,682¥082,136
62,028¥144,164

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

¥020,000¥00,836¥¥020,836—

In thousands of U.S. dollars
March 31, 2001

During the years ended March 31, 2001 and 2000, the net
unrealized gain on “available-for-sale” securities included aspart of other comprehensive income (loss), net of tax, decreasedby ¥19,601 million ($158,072 thousand) and increased by ¥4,204
million, respectively.
Proceeds from the sale of “available-for-sale” securities forthe years ended March 31, 2001, 2000 and 1999 were ¥3,749 million ($30,234 thousand), ¥17,561 million and ¥1,282 million,
respectively. On those sales, the gross realized gains and grossrealized losses, using specifically identified moving-average costbasis, for the years ended March 31, 2001, 2000 and 1999 wereas follows:

Gross unrealized
Cost

Available-for-sale:
Equity securities ........
Debt securities ...........
Total ..............................
Held-to-maturity:
Debt securities ...........

Gains

LossesFair value$515,185
436,839$952,024$72,177 $85,830
4,580
7,524
$76,757 $93,354$501,532
433,895$935,427$161,290$01,799 $$163,089—

At March 31, 2001, debt securities principally consisted ofshort-term investments in monetary trusts, Japanese government bonds, corporate bonds, U.S. treasury securities and U.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($173,790 thousand). Upon contribution of these securities, net
unrealized gains amounting to ¥21,366 million ($172,306 thousand) were realized and included in the consolidated statementof 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,
2001 are as follows:
In millions of yen
March 31, 2001
Available-for-saleDue within 1 year .........
Due after 1 year
through 5 years ..........
Due after 5 years
through 10 years ........
Due after 10 years .......
..................................

Held-to-maturity
Cost

Cost

Fair value

Fair value¥22,132¥21,993¥0

20,883

20,653

10,00010,097

6,378
4,775¥54,168

6,355
—
4,802
10,000¥53,803 ¥20,000—
10,126¥20,223—¥

March 31, 2001
Cost

Due within 1 year .........
Due after 1 year
through 5 years ..........
Due after 5 years
through 10 years ........
Due after 10 years .......
..................................

Held-to-maturity

Fair value

Cost$178,484$177,363 $—Fair value

168,411

166,556

80,64581,42751,43638,508$436,839

51,250—38,72680,645$433,895 $161,290—
81,662$163,089$

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2001

2000

1999

2001

¥1,491
255¥6,993
239

¥350
690

$12,024
2,056

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 other-thantemporary impairment, was ¥5,438 million ($43,856 thousand)and ¥4,619 million at March 31, 2001 and 2000, respectively. The
corresponding fair value at that date was not computed as such
estimation was not practicable.
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, 2001 and 2000 comprise as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2001

2000

2001

Security-related products ............... ¥07,672
Real estate........................................ 36,222
Information and other-related
products .........................................
5,819¥49,713¥06,390
40,459$061,871
292,113

5,551¥52,400

46,927$400,911—

In thousands of U.S. dollars

Available-for-sale

Gross realized gains ......
Gross realized losses.....

In millions of yen—

Work in process real estate inventories at March 31, 2001 and
2000, amounting to ¥33,731 million ($272,024 thousand) and¥34,848 million, respectively, are included in real estate.
10. Investments in Affiliated Companies
The Company has investments in affiliates that are accounted
for under the equity method. The principal investments are
Nohmi Bosai Ltd., a 28.6 percent owned affiliate, which isJapan’s largest manufacturer of fire alarms and listed on theFirst Section of the Tokyo Stock Exchange; Taiwan Secom Co.,
Ltd., a 24.9 percent owned affiliate, which is listed on the Taiwan
Stock Exchange Corp.; S1 Corporation, a 24.7 percent owned
affiliate, which is listed on the Korea Stock Exchange; Japan
Image Communications Co., Ltd., a 29.8 percent owned affiliate;
Musashino-Mitaka Cable Television Inc., a 39.0 percent owned
affiliate; and Japan Cablenet Holdings Limited, a 23.0 percent
owned affiliate.

SECOM CO., LTD. Annual Report 2001 31

Summarized financial information regarding the affiliatedcompanies accounted for under the equity method was
as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2000

2001

Current assets.................................. ¥112,313 ¥081,472
99,435
Non-current assets .......................... 103,998
Total assets .................................. ¥216,311 ¥180,907$0,905,750
838,694$1,744,444

Current liabilities ............................. ¥065,492 ¥055,994
40,427
Non-current liabilities .....................
35,964
84,486
Shareholders’ equity....................... 114,855
Total liabilities andshareholders’ equity.................. ¥216,311 ¥180,907$0,528,162
290,032
926,250

2001$1,744,444

In thousands ofIn millions of yen
U.S. dollars

11. Bank Loans and Long-Term Debt
Bank loans of ¥72,527 million ($584,895 thousand) at March
31, 2001 are represented generally by 90 to 365 day notes withinterest rates ranging from 0.58 to 1.8 percent per annum. Substantially all of these loans are with banks. The Company hasentered 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.
Long-term debt at March 31, 2001 and 2000 was comprised of
the following:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2000

2001

¥03,962
4,185$101,508
40,629

521

4,032

57
5,000
5,000

145
40,32340,323

10,58929,314

82,846309,806

5,715¥23,599

115,734$194,072

Years ended
March 31

Year ended
March 31

2001

1999

2001

Net sales......................... ¥150,005 ¥163,882 ¥155,293$1,209,718

Gross profit .................... ¥042,441 ¥042,617 ¥038,722$0,342,266

Net income..................... ¥004,318 ¥005,641 ¥003,943$0,034,823

Loans, principally from banks due
2001 to 2016 with interest rates
ranging from 0.00 to 6.60%:
Secured ........................................ ¥12,587
Unsecured ....................................
5,038
1.60% convertible bonds due 2002,
convertible currently at ¥2,667.8($21.51) for one common share,
redeemable before due date ........
500
1.60% convertible bonds due 2004,
convertible currently at ¥2,372.4($19.13) for one common share,
redeemable before due date ........
18
1.85% notes due 2002 .....................
5,000
2.05% notes due 2003 .....................
5,000
Obligations under capital leases,
due 2001 to 2026 (Note 18)........... 10,273
38,416
Less: Portion due within
one year .............................. 14,351¥24,065

2001

2000

Dividends received from affiliated companies for the years
ended March 31, 2001, 2000 and 1999 were ¥419 million ($3,379
thousand), ¥371 million and ¥154 million, respectively.
Among the affiliated companies accounted for using theequity method, the stocks of three companies carried at equityof ¥19,372 million ($156,226 thousand) and ¥18,729 million atMarch 31, 2001 and 2000, respectively, had a quoted market
value of ¥28,397 million ($229,008 thousand) and ¥40,045 million
at March 31, 2001 and 2000, respectively.
The unamortized amounts of goodwill were included in the
carrying amount of investments in affiliated companies underthe equity method. The unamortized amount of goodwill, ¥187
million ($1,508 thousand) and ¥136 million at March 31, 2001
and 2000, respectively, is being amortized on a straight-line
basis over periods not exceeding 10 years.
A summary of transactions and balances with the affiliatedcompanies accounted for using the equity method is presented
below:In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2001

2000

1999

2001

Sales ...............................

¥1,637¥1,748¥1,394$13,202

Purchases .......................

¥9,764¥6,984¥1,692$78,742

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2001

2000

2001

Notes and accounts
receivable, trade ............................

¥0,860¥00,914$06,935

Loan receivables..............................

¥0,119¥00,647$00,960

Notes and accounts
payable...........................................

¥2,931¥02,883$23,637

Guarantees forbank loans......................................

¥9,406¥10,499$75,855

32 SECOM CO., LTD. Annual Report 2001

Property, plant and equipment with a carrying amount of¥6,405 million ($51,653 thousand), inventories with a carrying
amount of ¥29,287 million ($236,185 thousand) and investment
securities with a carrying amount of ¥586 million ($4,726 thousand) were pledged as collateral for short-term and long-term
debt at March 31, 2001.
The Company has no compensating balance arrangementswith any lending bank. However, as is the customary practice inJapan, the Company had time deposits aggregating ¥1,043 million ($8,411 thousand) with such banks at March 31, 2001.
The convertible bonds can be converted into common stock at
any time by the bondholders. Under the terms of each subscription and underwriting agreement for convertible bonds, the conversion price of convertible bonds is subject to adjustment incertain instances, such as for stock dividends, stock split or free
distributions of common stock, and an acceleration clause may
be invoked if the Company experiences ordinary losses (asdefined in each agreement) for three consecutive years.

Under the terms of the agreement for the 1.60 percent convertible bonds due 2002, the cumulative amount of cash dividends may not exceed ¥3,500 million ($28,226 thousand) plus
the aggregate amount of ordinary income after income taxes (asdefined in the agreement) of the Company, beginning with thefiscal year ended November 30, 1987.
An acceleration clause and limitation of cash dividends will
not be applied if the Company provides collateral which isaccepted by the trustees.
Under the terms of the agreements for the 1.60 percent
convertible bonds due 2002, a sinking fund payment is required.
The aggregate annual maturities and sinking fund requirements
on long-term debt after March 31, 2001 are as follows:
Years ending March 31

2002..........................................................
2003..........................................................
2004..........................................................
2005..........................................................
2006..........................................................
Later years ...............................................

In millions of yen

In thousands of
U.S. dollars¥14,351
8,659
9,466
866
403
4,671
¥38,416$115,734
69,83076,3396,984
3,250
37,669$309,806

12. Insurance-Related Operations
Secom Insurance maintains accounting records as noted in
Note 2 in accordance with the accounting principles andpractices prescribed by the Supervisory Authorities in Japan,
which vary in some respects from accounting principles generally accepted in the United States of America. Those differences
are principally, (a) that insurance acquisition costs are charged toincome when incurred in Japan whereas in the U.S. those costs
are deferred and amortized generally over the premium-paying
period of the insurance policies, (b) that liabilities related toincurred but not reported claims are computed based on related
regulations in Japan whereas in the U.S. those liabilities are computed based on past experience for unreported losses, and (c)that unearned premiums are calculated based on the documents
authorized by the Supervisory Authorities in Japan whereas in
the U.S. 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 thatprovide refunds at maturity, such as personal injury and fire, thepolicyholder receives a refund if premiums have been fully paid
unless a substantial settlement (as defined in the policy) has
occurred. The Company has provided for such 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 suchitems in accordance with accounting principles generally
accepted in the United States of America.
The amount of net equity of Secom Insurance at March 31,
2001 and 2000 was ¥21,426 million ($172,790 thousand) and¥25,175 million, respectively.

13. 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 for employees with three to 10 service years anddetermined by reference to current basic rates of pay, length ofservice and conditions under which the termination occurs.
The parent company and certain Japanese subsidiaries
maintain a contributory defined benefit welfare pension plan,
covering substantially all of their employees. The pension
benefits thereunder are determined by reference to current basic
rates of pay, length of service and conditions under which thetermination occurs. The welfare pension plan is funded in conformity with the funding requirements of the Japanese Welfare
Pension Insurance Law.
To supplement the above welfare pension plan, the parent
company and its major Japanese subsidiaries act as trustees for
non-contributory defined benefit pension plans which cover substantially all of the eligible employees having 10 years or moreof service. The benefits are in the form of lump-sum and/or pension payments and are determined by formula based 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 to limitations on
deductibility imposed by Japanese income tax laws.
Net pension and severance costs under Statement of Financial
Accounting Standards (“SFAS”) No. 87, “Employers’ Accounting
for Pensions” for the years ended March 31, 2001, 2000 and 1999
were as follows:

2001

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2000

1999

Net pension and severance
costs (credit):
Service cost .......................... ¥(6,898 ¥(5,638 ¥(5,413
Interest cost .......................... 3,755 3,390 2,952
Expected return onplan assets.......................... (3,962) (2,712) (2,463)
Amortization of(46)
transition assets .................
(46)
(46)
Amortization of prior
105
service cost (benefit)..........
(37)
105
Recognized actuarial loss....
606
804 1,200
Net periodic benefit cost ......... ¥(7,214 ¥(7,179 ¥(7,161

2001$(55,629
30,282(31,952)
(371)
(298)
4,887
$(58,177

SECOM CO., LTD. Annual Report 2001 33

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

The changes in benefit obligation and plan assets, funded
status and composition of amount recognized in the consolidated balance sheet were as follows:

March 31

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

Year ended
March 31

2000

2001

2001

Change in benefit obligation:
Benefit obligation
at beginning of year ...................... ¥109,529 ¥094,376
Benefit obligation for Pasco
at the date of acquisition ..............
—
5,839
Service cost......................................
6,898
5,638
Interest cost .....................................
3,755
3,390
Plan participants’ contributions .....
1,266
2,087
Actuarial loss ...................................
14,427582
Amendments ...................................
(2,049)—Benefits paid ....................................
(2,739) (2,383)
Benefit obligation
at end of year................................. 131,087 109,529
Change in plan assets:
Fair value of plan assets
at beginning of year ......................
86,948 64,030
Fair value of plan assets for
Pasco at the date of acquisition ...
—2,927Actual return on plan assets........... (16,179) 14,584
Employer contribution ....................
25,938
5,403
Plan participants’ contributions .....
1,266
2,087
Benefits paid ....................................
(2,254) (2,083)
Fair value of plan assets
at end of year.................................
95,719 86,948$0,883,298—
55,62930,282
10,210116,347(16,524)(22,089)
1,057,153

701,193—(130,476)
209,177
10,210(18,177)
771,927

Funded status.....................................
35,368 22,581
285,226
Unrecognized actuarial loss.............. (45,048) (11,085)(363,290)
Unrecognized transition assets ........
181
227
1,460
Unrecognized prior service
benefit (cost).....................................
1,266
(746)
10,209Net amount recognized ..................... (¥008,233)¥010,977 ($0,066,395)
Amounts recognized in
the consolidated balance sheets
consist of:
Accrued pension andseverance costs ............................. ¥021,340 ¥012,293 $0,172,097
Intangible assets..............................
(124)—(1,000)
Accumulated othercomprehensive income (loss) ...... (29,449) (1,316)(237,492)
Net amount recognized ..................... (¥008,233)¥010,977 ($0,066,395)

34 SECOM CO., LTD. Annual Report 2001

2001

Discount rate.........................................
3.0%
Expected long-term rate of
return on plan assets........................
4.0%
Long-term rate of salary increase ....... 2.2–3.5%

2000

1999

3.5%

3.5%

4.0%
5.0%
2.7–2.8% 2.5–2.8%

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 sheets of an additional minimum pension liability andrelated intangible assets for pension plans with an accumulated
benefit obligation in excess of plan assets. The additional minimum pension liability which exceeded the unrecognized priorservice cost was recorded as a component of accumulated othercomprehensive income (loss), net of tax, of ¥17,110 million($137,984 thousand) and ¥765 million at March 31, 2001 and
2000, 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¥131,087 million ($1,057,153 thousand), ¥114,622 million($924,371 thousand) and ¥95,719 million ($771,927 thousand),
respectively, at March 31, 2001, and ¥109,529 million, ¥95,115
million and ¥86,948 million, respectively, at March 31, 2000.
As discussed in Note 8, in September 2000, the parent company
contributed certain marketable equity securities to an employee
retirement benefit trust, which is included in plan assets.
Most subsidiaries outside Japan have various retirement
plans, which are primarily defined contribution plans, covering
substantially all of their employees. The funding policy for thedefined contribution plans is to annually contribute an amountequal to a certain percent of the participants’ annual salaries.
The contributions to the defined contribution pension plans forthe years ended March 31, 2001, 2000 and 1999 were ¥19 million($153 thousand), ¥25 million and ¥19 million, respectively.
14. Exchange Gains and Losses
Interest and other revenue for the year ended March 31, 2001
include net exchange gains of ¥313 million ($2,524 thousand). Other
expenses for the years ended March 31, 2000 and 1999 include net
exchange losses of ¥631 million and ¥178 million, respectively.

15. Income Taxes
Total income taxes for the years ended March 31, 2001, 2000
and 1999 were allocated as follows:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2001

2000

1999

2001

Income.............................. ¥ 35,670
Cumulative effect ofaccounting change ....... (3,528)
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Net unrealized gain
(loss) in debt andequity securities ........ (13,419)
Additional minimum
pension liabilities
adjustments............... (11,788)¥ 06,935¥22,669¥32,373$ 287,661——(28,452)

3,070

5,367

5,809
¥31,548815¥38,555(108,218)(95,064)$ 55,927

The Company is subject to a number of different income taxes
which, in the aggregate, indicate a statutory tax rate in Japan ofapproximately 41.9 percent for the years ended March 31, 2001
and 2000, and approximately 47.5 percent for the year ended
March 31, 1999, respectively.
Reconciliations of the differences between income taxes
computed at statutory tax rates and consolidated income tax
expense were as follows:

2001

Income taxes computed
at statutory tax rate of
41.9% in 2001 and 2000,
47.5% in 1999................. ¥34,634
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions ....................
1,176
Reversal of valuation
allowance due
to utilization ofoperating loss
carryforwards ............ (2,504)
Amortization of
non-deductible
goodwill .....................
699
Effect of change innormal statutory tax
rate in Japan..............
—
Other, net.....................
1,665
Consolidated
income taxes ......... ¥35,670

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2000

1999

2001

¥30,506¥39,279$279,306

1,344

1,936

9,484

(8,689)(8,713)(20,194)

118

1,213

5,637

—
(610)

(4)
(1,338)—13,428¥22,669¥32,373$287,661

The significant components of deferred tax assets and liabilities
at March 31, 2001 and 2000 were as follows:
In millions of yen
March 31

In thousands of
U.S. dollars
March 31

2000

2001

2001

Deferred tax assets:
Loss carryforwards...................... ¥20,965 ¥22,331
Accrued pension and2,752
severance costs ......................... 17,327—
Deferred revenue......................... 11,076
4,560Intercompany profit.....................
3,961
3,244
Insurance reserve ........................
1,300
Research and development
1,707
expenses ....................................
1,213
Enterprise and state income
1,273
taxes ...........................................
1,575
Allowance for doubtful
1,823
accounts .....................................
1,209
1,070
Accrued bonus.............................
1,728
882
Vacation accrual ..........................
1,594
305
Inventory devaluation .................
388
2,894
Other.............................................
3,723
42,841Gross deferred tax assets ....... 66,059
Less: Valuation allowance....... (19,764) (19,841)
23,000Total deferred tax assets......... 46,295
Deferred tax liabilities:
Gain on securities contribution
to employee retirement—
benefit trust................................
(8,952)—
Deferred installation costs ..........
(7,404)
Unrealized gain on securities .....
(2,621) (16,114)
Unearned premiums and other(3,917)insurance liabilities....................
(1,235)
Reversal of securities(1,659)devaluation ................................
(1,558)(1,547)
Other.............................................
(1,303)Gross deferred tax liabilities... (23,073) (23,237)
Net deferred tax assets(liabilities) ............................... ¥23,222 (¥ 237)

$169,073
139,734
89,323
31,943
10,484
9,782
12,702
9,750
13,935
12,8553,129
30,024
532,734(159,387)
373,347(72,193)(59,710)(21,137)(9,960)(12,565)(10,508)(186,073)$187,274

The valuation allowance principally relates to deferred tax
assets of the subsidiaries with operating loss carryforwards, fortax purposes, that are not expected to be realized. The net change
in the total valuation allowance for the year ended March 31,
2001 was a decrease of ¥77 million ($621 thousand).
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 berealized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible.
The Company management considered the scheduled reversal ofdeferred tax liabilities, projected future taxable income and tax
planning strategies in making this assessment. Based upon thelevel of historical taxable 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 of thesedeductible differences, net of the existing valuation allowance
at March 31, 2001 and 2000.

SECOM CO., LTD. Annual Report 2001 35

No deferred income taxes have been provided on undistributed
earnings of overseas subsidiaries totaling ¥2,359 million ($19,024
thousand) at March 31, 2001 because they are not expected to beremitted in the foreseeable future.
At March 31, 2001, tax loss carryforwards of domestic subsidiaries amounted to ¥47,162 million ($380,339 thousand)and are available for offset against future taxable earnings ofsuch subsidiaries for up to five years as follows:
Expires in the years ending March 31

In millions of yen

2002 ............................................................
2003 ............................................................
2004 ............................................................
2005 ............................................................
2006 ............................................................

¥05,373
2,332
35,3881,937
2,132¥47,162

In thousands of
U.S. dollars$043,331
18,806285,387
15,621
17,194$380,339

The tax loss carryforwards of overseas subsidiaries at March 31,
2001 amounted to ¥6,007 million ($48,444 thousand), a part ofwhich will begin to expire in the year 2002.
16. Shareholders’ Equity(1) Stock Split
On September 14, 1999, the Board of Directors approved a
two-for-one stock split on the Company’s common stock, which
was distributed on November 19, 1999, to shareholders of record
on September 30, 1999. The number of shares issued was
116,409,647. There was no increase in the common stock
account because the new shares were distributed from the portion of previously issued shares accounted for as excess of parvalue in the common stock account in accordance with theJapanese Commercial Code.
(2) Retained Earnings
The Japanese Commercial Code provides that an amount equal
to at least 10 percent of cash dividends and other distributions
from retained earnings paid in cash by the parent company andits Japanese subsidiaries be appropriated as a legal reserve until
such reserve equals 25 percent of the common stock account. The
only changes in the legal reserve during the years ended March
31, 2001, 2000 and 1999 consisted of such appropriations made by
the parent company and its Japanese subsidiaries.
The Japanese Commercial Code requires that dividends atyear end, which the Board of Directors resolved to declare customarily in the first month following year end, be approved at
the general shareholders’ meeting to be held within threemonths after the end of accounting period.
Subsequent to March 31, 2001, the Company’s Board of
Directors declared an annual cash dividend of ¥9,324 million($75,194 thousand) to shareholders of record on March 31, 2001.
The dividend declared is subject to approval at the generalshareholders’ meeting scheduled for June 28, 2001. Dividends
are recorded in the period they are declared.

36 SECOM CO., LTD. Annual Report 2001

(3) Accumulated Other Comprehensive Income (Loss)
An analysis of the changes in accumulated other comprehensive income (loss) for the years ended March 31, 2001, 2000 and1999 is as follows:

Pre-tax
amount

For the year ended March 31, 2001:
Unrealized gain (loss) on securities—
Unrealized holding loss
arising during the period .............. (¥10,490)
Less: Reclassification
Less: adjustment for gain
Less: included in net income........
(22,530)
Minimum pension
liabilities adjustments......................
(28,133)
Foreign currencytranslation adjustments...................
4,670
Other comprehensive
income (loss)............................... (¥56,483)
For the year ended March 31, 2000:
Unrealized gain on securities—
Unrealized holding gain
arising during the period ..............
Less: Reclassification
Less: adjustment for gain
Less: included in net income........
Minimum pension
liabilities adjustments......................
Foreign currencytranslation adjustments...................
Other comprehensive
income (loss)...............................
For the year ended March 31, 1999:
Unrealized gain on securities—
Unrealized holding gain
arising during the period ..............
Less: Reclassification
Less: adjustment for gain
Less: included in net income........
Minimum pension
liabilities adjustments......................
Foreign currencytranslation adjustments...................
Other comprehensive
income (loss)...............................

In millions of yen
Tax(expense) Net-of-tax
or benefit
amount¥03,994(¥06,496)

9,425(13,105)

11,788(16,345)—

4,670¥25,207(¥31,276)¥08,436(¥03,557)¥04,879(1,162)

487

(675)

13,863(5,809)8,054(5,638)—(5,638)¥15,499(¥08,879)¥06,620¥11,381(¥05,381)¥06,000

(29)

14

(15)

(73)

(815)

(888)

(4,832)—(4,832)¥ 6,447(¥06,182)¥00,265

In thousands of U.S. dollars
Tax
Pre-tax (expense) Net-of-tax
amountor benefit
amount

For the year ended March 31, 2001:
Unrealized gain (loss) on securities—
Unrealized holding loss
arising during the period .............. ($084,597) $032,210 ($052,387)
Less: Reclassification
Less: adjustment for gain
Less: included in net income........ (181,693)
76,008 (105,685)
Minimum pension
liabilities adjustments...................... (226,879)
95,064 (131,815)
Foreign currencytranslation adjustments...................
37,661—
37,661Other comprehensive
income (loss)............................... ($455,508) $203,282 ($252,226)

17. Research and Development Expenses
Research and development expenses included in selling, general and administrative expenses for the years ended March 31,
2001, 2000 and 1999 were ¥5,328 million ($42,968 thousand),¥5,970 million and ¥4,820 million, respectively.
18. Leased Assets
The Company leases certain office space, employee residential
facilities, and computer and transportation equipment. Someleased computer and transportation equipment are held undercapital leases. Other leases are classified as operating leases.
On April 23, 1996, the Company entered into a long-term leaseagreement for a building and land in Mitaka, Tokyo. The leaseagreement 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 ($41,016 thousand) has
been recorded in the building and improvements 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, 2001 were ¥8,212 million ($66,226 thousand).
A summary of leased assets under capital leases at March 31,
2001 and 2000 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2001

2000

2001

Buildings and improvements ......... ¥05,086
Machinery, equipment
and automobiles............................ 11,718
Intangible and others ......................
172
Accumulated depreciation..............
(7,308)¥09,668¥05,086$(41,016

11,349222(6,620)¥10,037

94,5001,387(58,935)$(77,968

Depreciation expenses under capital leases for the years ended
March 31, 2001, 2000 and 1999 were ¥2,890 million ($23,306
thousand), ¥2,527 million and ¥2,426 million, respectively.
The following is a schedule by year of future minimum lease
payments under capital leases together with the present value ofthe net minimum lease payments at March 31, 2001:
Years ending March 31

2002..........................................................
2003..........................................................
2004..........................................................
2005..........................................................
2006..........................................................
Later years ...............................................
Total minimum lease payments ............
Less: Amount representing interest ......
Present value of net minimum lease
payments (Note 11) ..............................
Less: Current obligations .......................
Long-term capital lease obligations ......

In millions of yen

In thousands of
U.S. dollars¥02,878
2,067
1,358
804
480
7,173
14,7604,487$023,210
16,66910,951
6,484
3,871
57,847
119,032
36,186

10,273
2,469¥07,804

82,846
19,911$062,935

Rental expenses under operating leases for the years ended
March 31, 2001, 2000 and 1999 were ¥12,151 million ($97,992
thousand), ¥12,534 million and ¥10,458 million, respectively. A
significant portion of such rentals relates to cancelable short-termleases for office space and employee residential facilities, manyof which are renewed upon expiration.

On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The leaseagreement extends for 20 years beginning December 8, 2000.
For financial reporting purposes, the lease has been classified as
an operating lease. Based on the agreement, annual lease payments for the site are approximately ¥1,339 million ($10,798
thousand) over a 20-year period.
The future minimum lease payments required under operatingleases that have initial or remaining non-cancelable lease terms
in excess of one year at March 31, 2001 are as follows:
Years ending March 31

In millions of yen

2002 ............................................................
2003 ............................................................
2004 ............................................................
2005 ............................................................
2006 ............................................................
Later years..................................................
Total future minimum lease payments ...

¥01,801
1,744
1,686
1,667
1,666
26,245¥34,809

In thousands of
U.S. dollars$014,524
14,065
13,597
13,444
13,435
211,653$280,718

19. Financial Instruments
The Company has certain financial instruments including
financial assets and liabilities and off-balance-sheet financial
instruments incurred in the normal course of business. Although
the Company may be exposed to losses in the event of nonperformance by counterparties, it does not anticipate significant
losses due to the nature of its counterparties.
Following are explanatory notes regarding the financial assets
and liabilities and off-balance-sheet financial instruments
excluding debt and equity securities which are disclosed in
Note 8.
(1) Cash and Cash Equivalents; Time Deposits; Cash Deposits;
Notes and Accounts Receivable, Trade; Due from Subscribers;
Short-Term Receivables; Bank Loans; Notes and Accounts
Payable, Trade; Deposits Received; and Accrued Payrolls
The carrying amounts approximate fair value because of
the short maturities of such instruments.
(2) Long-Term Receivables
Long-term receivables include loans to real estate investmentcompanies of ¥43,769 million ($352,976 thousand) at March 31,
2001, which are primarily mortgage loans on land and commercial buildings. The mortgage loans are scheduled to mature overa period from two to 10 years with interest rates ranging from
6.0 to 7.0 percent. The fair values of long-term receivables would
need to be calculated based on the present value of the future
cash flows based on estimated maturity and estimated market
discount rates. However, these estimated market discount rates
are subjective in terms of each borrower’s credit risks and involve
uncertainties and matters of significant judgement. Therefore, it is
not practicable to estimate the fair value of long-term receivables
to the Company.
(3) Long-Term Debt including Current Portion
The fair value of long-term debt including current portion was
estimated based on the discounted amounts of future cash flows
using the Company’s current incremental borrowing rates for
similar liabilities. The estimated fair values of total long-term

SECOM CO., LTD. Annual Report 2001 37

debt including current portion and excluding obligations undercapital lease at March 31, 2001 and 2000 were ¥29,027 million($234,089 thousand) and ¥18,982 million, respectively.
As long-term interest rates have not fluctuated significantly inrecent years in Japan, the carrying amounts of obligations undercapital lease approximate estimated fair value.
(4) Interest Rate Swap Agreements
An overseas subsidiary enters into interest rate swap agreements to manage interest rate exposures arising in the normal
course of business. These agreements, amounting to ¥10,000 million ($80,645 thousand), are designed to limit exposures to losses
resulting from fluctuations in LIBOR-based interest rates related toinvestment securities and notes debt. These agreements arescheduled to mature in 2002 and 2003.
On December 22, 1999, the parent company and its two
Japanese subsidiaries entered into interest rate swap agreements,
amounting to ¥10,000 million ($80,645 thousand) related to
LIBOR-based floating interest rate investment securities, whereby
the parent company and its two Japanese subsidiaries pay a
LIBOR-based floating rate of interest and receive a long-termbased floating swap rate. The Company believes that the longterm based 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 the investment securities. This agreement is scheduled to mature in 2004.
The total notional value of interest rate swap agreements ineffect at March 31, 2001 and 2000 totaled ¥21,118 million($170,306 thousand) and ¥21,183 million, respectively, of which¥5,000 million ($40,323 thousand) will mature by 2002, ¥5,000
million ($40,323 thousand) will mature by 2003, ¥10,000 million($80,645 thousand) will mature by 2004 and ¥1,118 million($9,016 thousand) will mature by 2010. The amounts to be paidor received under the interest rate swap agreements are recognized over the terms of the agreements. The estimated fair valuesof such agreements, based on the discounted future cash flowsof the differentials, were insignificant at March 31, 2001 and 2000,
respectively.
20. Commitments and Contingent Liabilities
Commitments outstanding at March 31, 2001 for the purchaseof property, plant and equipment approximated ¥1,463 million($11,798 thousand).
Contingent liabilities at March 31, 2001 for guarantees given in
the ordinary course of business amounted to approximately¥52,546 million ($423,758 thousand).
On May 21, 2001, the Japan Fair Trade Commission concluded
a one year investigation and advised 11 companies including
one of the Company’s subsidiaries, Pasco, to remove unfair competitive practices concerning the tender for aerial surveying andmapping services which was placed an order by Miyagi and
Fukushima prefecture bureaus. On May 30, 2001, Pasco accepted
the advice. The advice resulted in the suspension of Pasco’s rightto submit tenders for certain government agency projects. The
Company management considers that this suspension will nothave a material adverse effect on the Company’s future consolidated results of operations and consolidated financial position,

38 SECOM CO., LTD. Annual Report 2001

although Pasco’s results of operations may be affected. The
Company management has reinforced its organization to ensurethat its business practices rigorously conform with commercial
laws and regulations.
21. 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 theCompany accounted for such free share distributions made during the period from 1974 to 1990 in the manner used by companies in the United States of America, ¥98,388 million ($793,452
thousand) would have been transferred from retained earnings
to the appropriate capital accounts. However, there would be noeffect on total shareholders’ equity.
22. Gain on Sale of Subsidiaries’ Shares
On August 31, 1998, The Westec Security Group, Inc.
(“Westec”), a wholly owned subsidiary in the United States ofAmerica, sold all of the outstanding shares of Westec Residential
Security, Inc. and all of the outstanding shares of Valley Burglar& Fire Alarm Company, Inc. to Edison Select for an aggregate
sales price of ¥37,025 million ($298,589 thousand) in cash. The
sale resulted in a gain in the aggregate of ¥22,828 million($184,097 thousand).
On October 1, 1998, the parent company sold all of theoutstanding shares of Tokyo Internet Corporation to PSINet
Japan Inc. for ¥17,834 million ($143,823 thousand). The sale
resulted in a gain of ¥13,054 million ($105,274 thousand). The
Company recognized a further gain of ¥496 million ($4,000 thousand) for the year ended March 31, 2001 in accordance with thefinal sales price.
On October 15, 1999, Secom Techno Service Co., Ltd. (“Secom
Techno”), a 98.3 percent owned subsidiary, completed an initialpublic offering on the Second Section of the Tokyo Stock
Exchange. In conjunction with the offering, the parent company
sold 2,000,000 outstanding shares of Secom Techno for a sales
price of ¥4,512 million ($36,387 thousand). Through a secondaryoffering, Secom Techno issued an additional 2,000,000 shares for
total proceeds of ¥4,512 million ($36,387 thousand). As a result of
these transactions, the parent company’s ownership in Secom
Techno declined to 67.8 percent. The resulting pre-tax gains on thesale of subsidiary shares and new issuance of Secom Techno’s
shares of ¥2,313 million ($18,653 thousand) and ¥1,978 million($15,952 thousand), respectively, are recognized in the consolidated statement of income for the year ended March 31, 2000.
In the consolidated statement of cash flows for the year ended
March 31, 2000, the gain on sale of subsidiary shares are
excluded from cash flows from operating activities and therelated cash proceeds are classified in the cash flows frominvesting activities. The cash proceeds from the new issuance bySecom Techno to minority shareholders are classified in the
cash flows from financing activities.
On April 28, 2000, Westec sold all of the outstanding shares ofWestec Business Security, Inc. to ADT Security Services, Inc. foran aggregate sales price of ¥1,016 million ($8,194 thousand) in
cash. The sale resulted in a gain of ¥571 million ($4,605 thousand).
The sales price is subject to a final sales price adjustment.

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

2001

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

1999

2001

Cash paid during the year for:
Interest................................. ¥01,883 ¥ 01,509 ¥001,599

2000$015,185

Income taxes....................... ¥25,762 ¥ 30,841 ¥037,209$207,758

Non-cash investing andfinancing activities:
Conversion of convertible
bond to common stock andadditional paid-in capital ... ¥00,060 ¥ 00,774 ¥000,766$000,484

Additions to obligations
under capital leases.......... ¥02,654 ¥ 03,344 ¥002,032$021,403

Acquisition—
Fair value of assets
acquired .......................... ¥07,550 ¥ 48,579 ¥112,362
Cash paid for capitalstock ................................ (3,980) (15,000) (9,029)
Minority shareholders’interest ............................
— (4,541) (3,739)
Net liabilities
assumed ....................... ¥03,570 ¥ 29,038 ¥099,594

net exchange gains and dividend income from companies unaffiliated with the parent company or Westec, a wholly owned
subsidiary as a holding company in the United States ofAmerica. Corporate expenses include general and administrative
expenses, amortization of deferred assets and net exchange
losses of 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, 2001, 2000 and 1999 is as follows:(1) Business Segment Information$060,887(32,097)—$028,790

24. Segment Information
Effective for the year ended March 31, 1999, the Company
adopted Statement of Financial Accounting Standards No. 131,
“Disclosures about Segments of an Enterprise and RelatedInformation”, which requires disclosure of financial and descriptive information about the Company’s reportable operating segments. The operating segments reported below are the segmentsof the Company for which separate financial information is available and for which operating profit/loss amounts are evaluatedregularly 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, and informationand 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 and medical datatransmission services by utilizing the Company’s network. The
insurance services segment represents non-life insurance-related
underwriting business in the Japanese market. The informationand communication related and other services segment represents the Company’s network business, aerial surveying andmapping services, and Geographic Information System services
as well as development and sale of real estate services. The
Company develops real estate, principally condominiums, forconsumers, to promote a network of integrated communication
systems to create synergies with home security services. These
communication services are considered a subset or an integrated
part of the real estate package.
Revenues and other income by segment include interest
income and other revenue reasonably allocated to the segments.
Corporate revenues include interest income, investment income,2001

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2000

1999

Revenue and otherincome:Security services—
Customers ................... ¥316,139 ¥295,834 ¥293,104
Intersegment ...............
1,285
3,305
975
317,424 299,139 294,079
Medical services—
Customers ...................
6,347
1,326
1,075
Intersegment ...............
147
140
117
6,494
1,466
1,192
Insurance services—
Customers ...................
22,68130,435
4,775Intersegment ...............
2,030
2,250
2,099
24,711
32,685
6,874
Information andcommunication
related and otherservices—
Customers ...................
92,552
72,68455,367
Intersegment ...............
5,715
1,821
2,989
98,26774,50558,356
Total................................ 446,896 407,795 360,501
Eliminations ...................
(9,177) (7,516) (6,180)
Corporate items .............
29,952
12,11839,825
Consolidated revenue
and other income ........ ¥467,671 ¥412,397 ¥394,146
Income (loss) before
income taxes:
Security services............ ¥077,389 ¥076,073 ¥069,890
Medical services ............
(1,522)(566) (1,053)
Insurance services .........
(1,627)
4,455
265
Information andcommunication
related and otherservices.........................
366
2,137
(978)
Total................................
74,60682,09968,124
Corporate items andeliminations .................
9,865(8,063) 15,647
Interest expense ............
(1,812) (1,229) (1,078)
Consolidated income
before income taxes.... ¥082,659 ¥072,807 ¥082,693

2001$2,549,508
10,3632,559,871
51,186
1,185
52,371
182,911
16,371
199,282

746,387
46,089792,476
3,604,000(74,008)
241,548$3,771,540$0,624,104(12,274)(13,121)2,952
601,661
79,557(14,613)$0,666,605

SECOM CO., LTD. Annual Report 2001 39

2001

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

1999

2001

2000

Assets:Security services............ ¥369,582 ¥322,681 ¥311,339
Medical services ............
11,241
2,061
1,462
Insurance services ......... 199,308 142,289 113,210
Information andcommunication
related and otherservices......................... 137,362 154,045
51,396
Total................................ 717,493 621,076 477,407
Corporate items ............. 118,292 133,522 141,037
Investments in andloans to affiliatedcompanies....................
32,41924,95025,010Total assets .................... ¥868,204 ¥779,548 ¥643,454

2001$2,980,500
90,653
1,607,323

1,107,758
5,786,234
953,968

261,443$7,001,645

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2000

1999

Depreciation andamortization:
Security services............ ¥39,005 ¥31,361 ¥28,913
94
Medical services ............
546
69
(625)
Insurance services .........
381
3
Information andcommunication
related and other
3,234
services.........................
4,039
1,315
34,064
Total................................
43,97130,300168
Corporate items .............
804
242
Total depreciation
and amortization.......... ¥44,775 ¥34,232 ¥30,542
Capital expenditures:
Security services............ ¥48,220 ¥36,459 ¥42,758
132
Medical services ............
376
79
278
Insurance services .........
61—
Information andcommunication
related and other3,449
services.........................
3,634
1,119
40,318
Total................................
52,291
43,956983
Corporate items .............
2,769
1,542
Total capital
expenditures ................ ¥55,060 ¥41,301 ¥45,498

2001$314,556
4,403
3,073

2001

32,573354,605
6,484$361,089

Years ended
March 31

Year ended
March 31

2000

2001

1999

$1,860,992
29,411
259,710
121,847
277,548$2,549,508

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

1999

2001

Revenue and otherincome:Japan............................. ¥455,001 ¥398,838 ¥349,702
4,330
3,585
United States ................
33,5809,229
9,085
Others............................
10,864
Total .............................. ¥467,671 ¥412,397 ¥394,146$3,669,363
28,911
73,266$3,771,540

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

1999

2001

Long-lived assets:
Japan............................. ¥232,325 ¥191,628 ¥169,737
497
United States ................
536
584
5,924
Others............................
6,134
6,627
Total .............................. ¥238,746 ¥198,298 ¥176,948$1,873,589
4,008
47,774$1,925,371

2001$444,032

In thousands of
U.S. dollars(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, 2001, 2000 and 1999 was as follows:$388,872
3,032
492

29,306
421,70222,330In millions of yen

Electronic security
services:
Commercial security
and home security ..... ¥230,763 ¥221,765 ¥219,670
Large-scale
proprietary systems ...
3,647
3,773
4,223
Other security services:
Static guard services....
32,204
31,66330,178
Armored car services...
15,10913,54012,275Merchandise and other ...
34,41625,09326,758
Total security services ..... ¥316,139 ¥295,834 ¥293,104

2001

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 for morethan 10 percent of total revenue.

40 SECOM CO., LTD. Annual Report 2001

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 segment by
the Company’s management.

2000

2000

There are no individually material countries with respect torevenue and other income and long-lived assets included inother areas.
25. Subsequent Event
On June 27, 2001, the parent company issued a 0.53 percent
fixed rate straight bond, aggregating ¥30,000 million ($241,935
thousand), due on June 27, 2006 in compliance with the Board
resolution on June 5, 2001. The proceeds are to be used forcapital expenditures and operating activities.

INDEPENDENT AUDITORS’ REPORTThe Board of Directors and Shareholders
Secom Co., Ltd.:We have audited the accompanying consolidated balance sheet of Secom Co., Ltd. and subsidiaries as of March 31, 2001,
and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the year thenended, 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 audit.
The accompanying consolidated financial statements of Secom Co., Ltd. and subsidiaries as of March 31, 2000 and for eachof the two years in the period then ended, were audited by other auditors whose report dated May 15, 2000, expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.
In our opinion, the fiscal 2001 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, 2001, and the results of their operations andtheir cash flows for the year then ended in conformity with accounting principles generally accepted in the United Statesof America.
As discussed in Note 2 (12) to the consolidated financial statements, the Company changed its method of revenue
recognition in fiscal 2001.
The accompanying consolidated financial statements as of and for the year ended March 31, 2001 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 yen have been translated into United States dollars on the basis set forthin Note 3 of the notes to consolidated financial statements.

Tokyo, JapanMay 15, 2001, except as to Notes 20 and 25, which are as of May 30, 2001 and June 27, 2001, respectively

SECOM CO., LTD. Annual Report 2001 41

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

In millions of yen
2001

Composition of consolidated revenue
and other income by segment
Revenue and other income .........................................................
Security services: .....................................................................
As a percentage of revenue and other income...........
Electronic security services—
Commercial security and home security ........................
As a percentage of revenue and other income...........
Large-scale proprietary systems......................................
As a percentage of revenue and other income...........
Subtotal ......................................................................
Other security services—
Static guard services.........................................................
As a percentage of revenue and other income...........
Armored car services........................................................
As a percentage of revenue and other income...........
Subtotal ......................................................................
Merchandise and other ........................................................
As a percentage of revenue and other income...........
Medical services .......................................................................
As a percentage of revenue and other income...........
Insurance services....................................................................
As a percentage of revenue and other income...........
Information and communication related
and other services ..................................................................
As a percentage of revenue and other income...........
Corporate items........................................................................
As a percentage of revenue and other income...........
Net income, cash dividends andshareholders’ equity
Net income ...................................................................................
Cash dividends (paid)(3) ................................................................
Shareholders’ equity ...................................................................
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans .............................................................................
Current portion of long-term debt.......................................
Convertible bonds ................................................................
Other long-term debt............................................................
Total debt...........................................................................
Shareholders’ equity................................................................
Total capitalization ............................................................
Return on total assets (percent) (a) ............................................
Return on equity (percent) (b).....................................................
Percent 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) ..................

1999

1998

1997

1996

¥467,671
316,13967.6%¥412,397
295,83471.8%¥394,146
293,104
74.4%¥322,804
282,066
87.3%¥303,796
266,20987.7%¥281,547
248,406
88.2%

230,763
49.3
3,647
0.8
234,410

221,765
53.8
3,773
0.9
225,538

219,670
55.7
4,223
1.1
223,893

209,855
65.0
4,264
1.3
214,119

199,498
65.7
3,980
1.3
203,478

184,657
65.6
4,028
1.4
188,685

32,204
6.9
15,1093.2
47,31334,416
7.4
6,347
1.4
22,681
4.8

31,663
7.7
13,5403.3
45,20325,093
6.1
1,326
0.3
30,435
7.4

30,178
7.7
12,275
3.1
42,45326,758
6.8
1,075
0.3
4,775
1.2

28,852
8.9
11,522
3.6
40,37427,573
8.5
855
0.3
5,365
1.7

26,487
8.7
10,5583.5
37,04525,686
8.5
681
0.2
4,633
1.5

24,768
8.8
9,566
3.4
34,33425,387
9.0
532
0.2
3,917
1.4

92,552
19.8
29,952
6.4

72,68417.6
12,1182.955,36714.0
39,825
10.1

30,910
9.6
3,608
1.1

29,301
9.7
2,972
0.9

19,353
6.9
9,339
3.3

¥ 44,118
9,323
377,532¥ 47,432
8,146
373,912¥ 49,918
7,555
327,147¥ 18,990
6,972
283,840¥ 22,798
5,719
284,634¥ 23,264
5,459
260,854

14.9
2.9
0.1
4.8
22.7
77.3
100.0
5.1
11.7

15.7
1.2
0.1
4.8
21.8
78.2
100.0
6.1
12.7

8.4
2.5
0.3
5.2
16.4
83.6
100.0
7.8
15.3

5.7
1.7
0.6
6.4
14.4
85.6
100.0
4.0
6.7

8.3
2.3
0.7
3.7
15.0
85.0
100.0
4.9
8.0

8.8
5.2
0.9
3.4
18.3
81.7
100.0
5.3
8.9

9.6
2.6

8.3
3.0

7.8
2.7

9.2
3.2

9.5
3.4

11.5
3.7

61.5
2.36
46.6
15.1

63.8
2.42
60.2
14.5

62.1
2.53
77.7
19.1

61.7
2.15
50.3
12.5

60.8
2.27
46.4
12.7

60.6
2.22
37.8
11.6

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

42 SECOM CO., LTD. Annual Report 2001

2000

2001

2000

1999

1998

1997

1996

Number of shares outstanding
Issued ............................................................................................. 233,099,744 233,075,442 116,392,109 116,233,393 116,203,824 114,378,620
11,817
Owned by the Company...............................................................
510
4,840
3,185
2,926
2,016
Balance........................................................................................... 233,099,234 233,070,602 116,380,292 116,230,208 116,200,898 114,376,604
Per share information(1)Basic net income per share (in yen)(2) .........................................
¥ 214.51¥ 189.28¥ 203.67¥ 81.70¥ 98.69¥ 102.09
Cash dividends paid per share (in yen)(3) ....................................
32.50
40.00
35.00
30.00
25.00
24.00
1,405.51
Shareholders’ equity per share (in yen)(4) ...................................
1,619.62
1,604.29
1,221.03
1,224.75
1,140.33
310.76341.38310.63177.01
193.68219.14
Cash flow per share (in yen)(2) (e) ..................................................
3.99
4.38
5.49
3.34
2.84
3.06
Price/Book value ratio ...................................................................
26.15
37.51
43.21
49.88
35.21
34.23
Price/Earnings ratio.......................................................................
18.05
20.80
28.33
23.02
17.94
15.95
Price/Cash flow ratio .....................................................................
5,610
Stock price at year-end (in yen) ...................................................
7,100
8,800
4,075
3,475
3,495
(1)

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 each period

(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, 2001, cash dividends of ¥9,324 million (¥40
per share) were approved at the general shareholders‘ meeting on
June 28, 2001 (see Note 16 of the accompanying notes toconsolidated financial statements).
Per share amounts are based on the number of shares outstandingat the end of each period, minus treasury stock.

COMMON STOCK DATASECOM CO., LTD.
Years ended March 31

SHAREHOLDER INFORMATION
Number of shareholders ...........................................................
Common shares held by:
Financial institutions...............................................................
Securities firms .......................................................................
Other corporations..................................................................
Foreign investors ....................................................................
Individuals and others ............................................................
Total......................................................................................

2001

2000

1999

1998

1997

1996

15,621

15,019

9,458

9,911

10,84911,22344.44%
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%42.57%
1.31
14.05
27.03
15.04
100.00%40.00%
1.35
14.49
28.04
16.12
100.00%

SECOM CO., LTD. Annual Report 2001 43

PRICE INFORMATION (TOKYO STOCK EXCHANGE)
Price per share

1999

2000

2001

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

Nikkei stock average

High

Low

High

Low

¥13,370
22,15012,64011,490
9,380
8,800
9,050
7,900

¥10,630
8,150
9,300
7,650
6,880
6,050
6,700
6,050

¥17,782.79
18,532.58
18,934.34
20,706.65
20,833.21
17,614.66
16,149.08
14,032.42¥15,972.68
16,821.06
17,254.17
18,168.27
16,008.14
15,626.96
13,423.21
11,819.70

Note: Price amounts have not been adjusted to reflect a two-for-one stock split, which was reflected in the market from September 27, 1999.

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

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

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¥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—
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*——

Remarks

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

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.

44 SECOM CO., LTD. Annual Report 2001

SUPPLEMENTAL NONCONSOLIDATED FINANCIAL DATACONTENTSNONCONSOLIDATED BALANCE SHEETS ............................................ 46
NONCONSOLIDATED STATEMENTS OF INCOME ............................... 48

SECOM CO., LTD. Annual Report 2001 45

NONCONSOLIDATED BALANCE SHEETSSECOM CO., LTD.
As of March 31
In millions of yen

ASSETS

2001

2000

1999

1998

1997

1996

Current assets:
Cash on hand and in banks .......................................................... ¥077,581
Notes receivable............................................................................
538
Due from subscribers ...................................................................
7,073
Accounts receivable, trade ...........................................................
5,089
Receivables—other .......................................................................
3,123
Marketable securities....................................................................
6,313
Common stock in treasury ...........................................................
3
Merchandise ..................................................................................
6,625
Supplies .........................................................................................
1,326
Prepaid expenses ..........................................................................
1,606
Deferred income taxes..................................................................
3,064
Short-term loans ...........................................................................
28,898Other current assets......................................................................
2,683
Allowance for doubtful accounts.................................................
(2,246)
Total current assets ............................................................... 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¥095,566
481
5,034
3,010
1,512
26,115
19
3,972
821
1,221
—
17,263
1,413(102)
156,325¥097,630
436
4,111
3,636
1,603
20,250
13
2,939
726
570
—
17,023
2,601(114)
151,424

Fixed assets:
Tangible assets:
Buildings and improvements ...................................................
Automobiles...............................................................................
Signal equipment on subscribers’ premises...........................
Control station signal equipment.............................................
Machinery and equipment........................................................
Tools, furniture and fixtures .....................................................
Land ............................................................................................
Construction in progress ..........................................................
Other...........................................................................................

23,007680
51,876
18,635
4,105
3,317
37,8382,327
1623,697579
47,15818,6672,907
2,335
35,153
1,616
18

24,295
737
44,244
18,442
1,509
2,167
34,9971,693
1923,617815
36,57919,1601,535
2,167
34,5251,630
1121,247925
32,637
21,2591,584
2,269
27,297
1,459
12

22,148816
30,97422,0301,121
2,087
27,3431,577
14Intangible assets:
Telephone rights and other ......................................................
Telephone and telegraph utility rights ....................................
Software .....................................................................................

4,702
804
11,423

6,518
1,157
3,314

4,533
1,976
—

4,458
2,957
—

4,141
4,047
—

3,891
5,220
—

10,706

12,519

5,535

5,674

5,655

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

99,603
3,238
6,572
6,820
—
4,232
(33)
242,983¥399,308

91,223
896
6,570
7,265
—
3,854
(6)
232,678¥384,102

Investments and other:
Investment securities ................................................................
27,285Investments in subsidiaries andaffiliated companies ................................................................ 145,227
Long-term loans receivable ......................................................
11,242
Lease deposits ...........................................................................
8,698
Long-term prepaid expenses....................................................
1,263
Deferred income taxes ..............................................................
—
Other investments .....................................................................
11,423
Allowance for doubtful accounts .............................................
(1,205)
Total fixed assets ................................................................... 362,663
Total assets ............................................................................ ¥504,339

46 SECOM CO., LTD. Annual Report 2001

In millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

2001

Current liabilities:
Accounts payable.......................................................................... ¥ 1,908
Bank loans .....................................................................................
20,157
Current portion of long-term debt ...............................................
—
Payables—other ............................................................................
10,722
Accrued expenses .........................................................................
5,714
Deposits received..........................................................................
15,682
Deferred revenue—service charges ............................................
19,583
Income taxes payable ...................................................................
13,904
Payables—construction ................................................................
4,328
Other current liabilities .................................................................
2,438
Total current liabilities...........................................................
94,436

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

2000

¥

1999

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

1,671
21,058
5
6,707
5,356
25,44018,735
13,771
3,173
2,211
98,127518
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

1998

¥

1,256
10,193
394
5,640
6,248
17,54818,087
14,8083,326
4,157
81,657

1997

¥

1996

1,032
20,884
—
5,018
5,621
16,081
16,64013,9183,474
1,787
84,455¥

1,273
21,137
14,296
4,029
5,545
17,165
15,53013,3313,188
1,906
97,4001,724
14,194—397——
16,31597,972

2,266
12,821—409——
15,49699,951

2,850
11,480—424——
14,754112,154

Shareholders’ equity:
Common stock ..............................................................................
Statutory reserve:
Additional paid-in capital..........................................................
Legal reserve..............................................................................
Total statutory reserve ..........................................................

66,12766,09765,71065,32765,25359,86582,303
8,077
90,38082,273
7,127
89,40081,782
6,294
88,076

78,1105,521
83,631

78,036
4,805
82,841

72,6504,216
76,866

Voluntary reserve:
Reserve for systems development...........................................
Reserve for tax deferral on assets replacement .....................
General reserve .........................................................................
Total voluntary reserve .........................................................

800
30
2,212
3,042

800
31
2,212
3,043

800
56
2,212
3,068

800
58
2,212
3,070

800
60
2,212
3,072

800
62
2,212
3,074

Unappropriated earned surplus................................................... 226,776
Net unrealized gain in debt and equity securities ......................
4,575
Total shareholders’ equity .................................................... 390,900
Total liabilities and shareholders’ equity ............................ ¥504,339

206,629—
365,169¥474,727

181,875—
338,729¥453,745

164,308—
316,336¥414,308

148,191—
299,357¥399,308

132,143—
271,948¥384,102

SECOM CO., LTD. Annual Report 2001 47

NONCONSOLIDATED STATEMENTS OF INCOME

SECOM CO., LTD.
Years ended March 31
In millions of yen
2001

2000

1999

1998

1997

1996

Revenue: ........................................................................................ ¥257,009
Percent change from prior year............................................
6.0%
Service charges ......................................................................... 230,723
Percent change from prior year............................................
5.4
Sales of merchandise................................................................
26,286Percent change from prior year............................................
11.9¥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)¥212,887
6.4%
191,465
6.4
21,4225.7¥200,165
7.3%
179,902
4.9
20,263
34.2

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

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

113,495
53.3
98,381
51.4
15,114
70.6

105,153
52.5
91,15750.7
13,996
69.1

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.......................................

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

99,392
46.7
93,084
48.6
6,308
29.4

95,01247.5
88,745
49.3
6,267
30.9

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

62,48524.3

60,21224.8

58,186
25.1

61,572
27.7

58,627
27.6

57,115
28.6

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

53,214
20.7

51,66421.3

50,13921.7

43,16819.4

40,76519.1

37,897
18.9

Other income (expenses)
Interest dividends ......................................................................
Interest expense ........................................................................
Other expense............................................................................

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

3,731
(101)
(3,091)

3,653
(606)
(2,215)

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

53,23920.7

52,03721.5

50,51521.8

43,47519.5

41,30419.4

38,72919.3

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

23,247

5,427

12,073

—

—

7,036

Extraordinary loss .........................................................................

(24,570)(5,810)(12,168)——(7,040)

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

51,91620.2

51,65421.3

50,42021.8

43,47519.5

41,30419.4

38,725
19.3

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

21,32041.1

21,382
41.4

24,34348.3

19,49144.8

18,77345.5

17,71045.7

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

30,59611.9
1.1

30,272
12.5
16.1

26,07711.3
8.7

23,98410.8
6.4

22,531
10.6
7.2

21,01510.5
8.9

48 SECOM CO., LTD. Annual Report 2001

CORPORATE INFORMATION

Headquarters:
Independent auditors:
Transfer agent:

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG
The Mitsubishi Trust and Banking Corporation,
11-1, Nagata-cho 2-chome, Chiyoda-ku, Tokyo 100-8212, JapanCONSOLIDATED SUBSIDIARIES(As of July 31, 2001)
Issued capital(In millions of yen)

Percentage ofequity/voting rights¥3,105
201
15
50
45
30
100
40
10
10
10
100
10
50
50
50
48
24
10
308
10
10
100
2,358
23
20
20
10
20
499
60
200
271
100
100
10
100
45

62.0%
59.1
70.0
51.0
57.3
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)
100.0
82.5(100.0)(100.0)60.0
67.8(52.2)(100.0)(76.6)(100.0)(100.0)100.0(100.0)
82.0
100.0
55.0
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
Installation of security equipment
Maintenance of equipment
Maintenance of equipment
Manufacture of electronic detection products
Manufacture of automatic electronic control equipment
Manufacturing and sales of security systems
Sales of equipment
Sales and installation of fire equipment
Printing services
Publication of magazines on security
Specialized security services
Car maintenance

400
200
80
200
20
10
10
10
10
95

100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0

Home health-care service
Management of nursing homes
Dispatch of personal-care staff
Pharmacy management
Home nursing care services
Maintenance of medical facilities
Sales of medical and other supplies
Management of real estate
Sales of medical and other supplies
Sales of medical equipment

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 Kansai Co., Ltd.
Secom Jastic Sanin Co., Ltd.
Secom Static Hokkaido Co., Ltd.
Secom Static Tohoku Co., Ltd.
Secom Static Nishi-Nihon Co., Ltd.
Secom Hiroshima Co., Ltd.
SP Alarm Sado Co., Ltd.
Secom FD Co., Ltd.
Chuo Bohan Co., Ltd.
Chuo Bohan Act Service Co., Ltd.
JK. Siress Co., Ltd.
Japan Safety Guard Co., Ltd.
Secom Techno Service Co., Ltd.
Secom Tech Sanin Co., Ltd.
Secom Techno Miyazaki Co., Ltd.
Secom Techno Joshinetsu Co., Ltd.
Secom Maintenance Joshinetsu Co., Ltd.
TES Co., Ltd.
Secom Industries Co., Ltd.
Cosmo Keiso Co., Ltd.
Otec Electronics Co., Ltd.
Secom Equipment Sales Corporation
Secom Pasec Co., Ltd.
Secom Corporation
Security World Co., Ltd.
Secom HGS Co., Ltd.
Secom Auto Service Co., Ltd.
<Medical services>

Secom Home Medical System Co., Ltd.
Secom Royal Stage Co., Ltd.
Secom Care Service Co., Ltd.
Secom Kampo System Co., Ltd.
Japan Home Nursing System Co., Ltd.
Seisho Corporation
Koyu Co., Ltd.
Kyokushin Shoji Co., Ltd.
Veritas Medical Service Co., Ltd.
Mac Corporation• ( ) 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.

(Continued)

SECOM CO., LTD. Annual Report 2001 49

CONSOLIDATED SUBSIDIARIES(As of July 31, 2001)
Issued capital(In millions of yen)

Percentage ofequity/voting rights

Lines of business<Insurance services>

Secom Insurance Service Co., Ltd.
Secom General Insurance Co., Ltd.

¥ 50
5,611

100.0% Non-life insurance agency
81.8 Non-life insurance<Information and communication related and other services>

Secom Trust.net Co., Ltd.

1,469

75.9

Secom Information System Co., Ltd.
SIS Development Co., Ltd.
Secom Security Solutions Co., Ltd.
Laboratory for Innovators of Quality of Life
Secom Wintech Yamanashi Co., Ltd.
President Channel Network Co., Ltd.
Cable Net Niigata Co., Ltd.
Pasco Corporation
Pasco International Corporation
Pasco Road Center Co., Ltd.
GIS Hokkaido Co., Ltd.
Ject Co., Ltd.
Ject Kansai Co., Ltd.
Ject Chugoku Co., Ltd.
Ject Kyushu Co., Ltd.
Land Readjustment Co., Ltd.
Secom Lines Co., Ltd.

5,000
300
150
100
20
206
1,692
8,758
100
50
50
54
80
80
50
50
1,398

100.0
100.0
100.0
(94.5)(100.0)100.0(89.8)
70.0(54.3)(61.0)(100.0)(100.0)(100.0)(100.0)(100.0)(90.0)
95.6

Masterpiece Co., Ltd.
Kansai Lines Co., Ltd.
Secom Home Life Co., Ltd.
Secom Credit Co., Ltd.
Secom High-Plant Co., Ltd.

21
50
3,700
400
400

(100.0)(96.0)
99.9
100.0(100.0)

Wonder Dream Co., Ltd.
Secom Staff Service Co., Ltd.
Next Wave Co., Ltd.
La Pisara Co., Ltd.
Secom Aqua Co., Ltd.
ACM Enterprise Co., Ltd.

490
50
300
100
400
40

100.0
(100.0)
100.0
84.0
100.0
(72.5)

Information and communication andcyber security services
Software development
Software development
Software development
Research and planning social life
Internet provider
Development and sale of CATV systems
CATV broadcasting service
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Computer mapping
Sales of educational systems using a personal
computer network
Sales and development of software
Sales of educational systems
Development of residential buildings
Credit services
Development and sale of high-technology
agricultural products
Employee welfare for SECOM Group
Employment agency
Management of entertainment facilities
Management of leisure facilities
Sales of water-treatment equipment
Management of soccer school

US$0.3 thousand
US$0.01 thousand
US$95 thousand—
US$9 thousand
US$100 thousand£39,126 thousand£7.7 thousand£0.1 thousand
Rmb292,814 thousand
Rmb17,228 thousand
Rmb16,938 thousand
Rmb29,122 thousand
Rmb20,792 thousand
Rmb8,298 thousand
HK$3,500 thousand
US$3,750 thousand
Rp2,000 million
THB300 million
A$31.5 million
A$32.0 million

100.0(100.0)(100.0)(100.0)(92.8)(100.0)100.0(100.0)(100.0)100.0(95.0)(100.0)(90.0)(80.0)(80.0)
100.0
80.0(80.0)
94.7
100.0(100.0)Holding company
Holding company
Security services
Financing
Security services
Selling franchises with Westec trademark
Security services
Security services
Security services
Holding company
Security services
Security services
Security services
Security services
Security services
Export–import
Security services
Security services
Security services
Holding company
Security services

DFL0.5 million
S$1,000 thousand
US$8,470 thousand
US$5,000 thousand
US$10,649 thousand
PHP8,400 thousand

100.0
100.0
68.1
(100.0)(58.5)(70.0)

Holding company
Non-life insurance agency
Holding company
Housing-related business
Software development
Computer mapping

Overseas<Security services>

The Westec Security Group, Inc.
SA Oklahoma, Inc.
Westec Security, Inc.
Westec Finance Company
Westec Interactive Security, Inc.
Westec Franchising, Inc.
Secom Plc
Carroll Security Group Ltd.
Carroll Security Ltd.
Secom (China) Co., Ltd.
Dalian Secom Security Co., Ltd.
Hainan Secom Security Co., Ltd.
Shanghai Secom Security Co., Ltd.
Beijing Jingdun Secom Electronic Security Co., Ltd.
Qingdao Secom Security Co., Ltd.
Secom Trading (Hong Kong) Ltd.
P.T. Secom Indopratama
P.T. Secom Bhayangkara
Thaisecom Pitakkij Co., Ltd.
Secominter (Australia) Pty., Ltd.
Secom Australia Pty., Ltd.
<Other services>

Secominter Europe B.V.
SIS Insurance Pte Ltd.
Asia Pacific Business Link Ltd.
Shanghai Asia Pacific Property Co., Ltd.
P.T. Nusantara Systems International
Pasco Certeza Computer Mapping Corporation• ( ) indicates the percentage of equity/voting rights held by both SECOM and certain of its subsidiaries, or by certain subsidiaries independently.
• Subsidiaries are categorized into segments above according to their major lines of business.

50 SECOM CO., LTD. Annual Report 2001

SECOM’S BASIC BUSINESS AREAS

SECOM offers a wide range of security systems andproducts that help provide peace of mind in today’s
rapidly changing society.
The Company’s centralized and localized systems meet the security-related needs of homes, businesses and public institutions.
Centralized on-line systems initiate immediate response byhighly trained professionals, while self-contained proprietary
security and building management systems facilitate on-site
automated monitoring.
SECOM and its subsidiaries manufacture key components andresearch, develop, install and maintain all systems to ensure that
customers receive consistent, high-quality services. The accompanying diagram outlines SECOM’s comprehensive products andtop-notch services, which are backed by the resources and skillsof the entire SECOM Group.

Centralized Systems● Commercial Use
SECOM SXSECOM SX meets the special needs of small commercial buildings
and offices.

Dispatch

SECOM
Emergency
Depot

Emergency Response

SECOM TXSECOM TX provides protection for commercial buildings with morethan one tenant.
SECOM BXSECOM BX meets the exacting security requirements of financial
institutions.

SECOM
Control Center

Alarm Sent

Subscribers

Merchandise
Access-Control Systems
SECURILOCKSECURILOCK uses identification numbers and magnetic identification
cards, either separately or in combination, 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.
These systems employ such high-technology equipment as light-beam
and microwave activated remote control, magnetic cards and fingerprint identification devices, as well as PC-operated access-control systems. These services include advanced electronic product-tagging
systems that help store owners prevent shoplifting.
Fire Detection and Extinguishing Systems
TOMAHAWK III
TOMAHAWK III is a new high-speed fire-detection and -extinguishingsystem.
TOMAHAWK EX
TOMAHAWK EX is a compact, general-use system that automaticallydetects and extinguishes fire.
TOMAHAWK JET SERIESTOMAHAWK JET SERIES, designed for use in restaurant kitchens andductwork, is an automatic fire-detection and -extinguishing system.
TOMAHAWK MACH I
TOMAHAWK MACH I, designed for small businesses, is a highly effective and convenient fire-extinguishing system based on a central canister and flexible hose.
TOMAHAWK PS
TOMAHAWK PS, designed for use in multistory parking facilities,
features an alternative chlorofluorocarbon extinguishing agent.
Intrusion- and Fire-Detection Systems for Building Perimeters
BORDER SERIESBORDER SERIES uses infrared beams to detect intrusions into large sites
and buildings.
FLAME CHECKER
FLAME CHECKER detects fire indoors and outdoors.
Equipment for Safeguarding Cash and Valuables
PYTHAGORAS SERIESPYTHAGORAS SERIES is a large security vault composed of individual
panels for easy transport and on-site assembly.
HANKS ∑HANKS ∑ is an easily assembled, durable security booth forunattended cash dispensers and ATMs.
CD PROTECTOR
CD PROTECTOR is a specially constructed hard shell that makes cash
dispensers and ATMs virtually invulnerable to break-ins.

51 SECOM CO., LTD. Annual Report 2001

SECOM MXSECOM MX is a comprehensive security package for medium-sizedcommercial establishments and schools.

HANKS SYSTEMHANKS SYSTEM is designed to meet the security requirements ofautomated banking facilities.
SECOM CXSECOM CX monitors and manages large building complexes
around-the-clock, eliminating the need for costly on-site computersand large numbers of custodial staff.
SECOM AXSECOM AX, a new-generation on-line security control system withan advanced image sensor, has redefined the concept of security.

Police Department
Fire Department
Alert as Necessary

Utility Companies
Other Organizations

OthersSECOM CCTV SYSTEMSECOM CCTV SYSTEM is a sophisticated, cost-effective closed-circuit
surveillance camera system. The SUPER CCTV SYSTEM version detects
attempts to interfere with the surveillance camera.

TOTAX-T
TOTAX-T is a self-contained, local control system for industrial andbuilding complexes.

SECOM VIDEO IMAGE TRANSMISSION SYSTEM
This system makes it possible to transmit moving images to remotelocations in real-time and full-color.

SECOM MUSEUM SYSTEMSECOM MUSEUM SYSTEM provides full protection for museums andexhibition halls.

SECURICASE SERIESSECURICASE SERIES retail showcases ensure security and peace of mind.
SECOM COURIER LOCKER
Designed for condominiums, SECOM COURIER LOCKER is used to store
courier deliveries arriving in the recipient’s absence.

Local Systems

Armored Car Services
SECOM provides armored car services for the collection andtransportation of cash.

Merchandise for Home Use● Residential Use
SECOM HOME SECURITY
SECOM HOME SECURITY is a total home security system combining
basic unauthorized entry- and fire-prevention services and alarms,
as well as gas leak monintoring and emergency report 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/or contacting the appropriate authorities.
SECOM MS-1, SECOM MS-2 and MS-2S
SECOM MS-1 security system provides comprehensive building
management functions for condominiums, while SECOM MS-2 andMS-2S security systems offer these capabilities plus total safety witha centralized security system for each unit in the building.
COCO-SECOM
COCO-SECOM is an innovative system that uses GPS satellites and cellular phone base stations to locate moving subjects, such as people
and vehicles. If requested by the customer, SECOM also dispatches
emergency response personnel to physically locate the subject.
Other Security Systems

Static Guard Services
HOME PYTHAGORAS 50/20
A residential-use version of PYTHAGORAS, HOME PYTHAGORAS 50/20
is designed to safeguard money and valuables against unauthorized
entry and fire.

SECOM IXSECOM IX is an on-line visual security system for commercial
facilities offering around-the-clock service.

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

SECOM REFRIGERATION CONTROL SYSTEMSECOM REFRIGERATION CONTROL SYSTEM controls temperature
between –40C° and 70C°.

SECOM V-REX
SECOM V-REX is an integrated security package which offers ahigh-grade security management system.

SECURIPARKSECURIPARK is a security and image monitoring system forunmanned parking facilities.

SESAMO ELECTRIC LOCK SERIESSESAMO ELECTRIC LOCK SERIES features a full range of integrated
keyless electric locks.
TOMAHAWK MACH II
TOMAHAWK MACH II is a compact, residential-use fire-extinguishingsystem.
SESAMO F SERIESSESAMO F SERIES intercoms feature high-quality video and audio
functions to enable confirmation of visitors’ identities.
SENSOR LIGHTSENSOR LIGHT is a sensor-equipped light activated automatically when
the sensor detects human body temperature.
SECOM CO., LTD. Annual Report 2001 52

BOARD OF DIRECTORSFounder:
Makoto Iida
Co-Founder:
Juichi Toda
President andRepresentative
Director:
Toshitaka Sugimachi

Senior Executive
Directors:
Shohei Kimura
Nobuyuki Sasaki
Kanemasa Haraguchi

Directors:
Akio Yoshida
Kuniharu Takahashi
Yoichi Tao
Seiichi Mori
Katsuo Akiyama
Executive Directors: Kazuhiko Tsushima
Hirohisa Masahata
Seiji Yamanaka
Mitsuo Kawaguchi
Shinobu Iida
Katsuhisa Kuwahara
Tohru Fukumi
Shinichiro Hashimoto Yushiro Ito
Teruo Ogino
Fumio Obata
Seiichiro Kobayashi
Hiroshi Ito
Shigemi Tanaka
Shunji Ogahara
Shoichi Kake
Shuji Maeda

53 SECOM CO., LTD. Annual Report 2001

Corporate
Auditors:
Takeshi Motohashi
Hisaaki Tanabe
Saiji Miyauchi
Shunzo Tamai(As of August 31, 2001)