A MESSAGE TO SHAREHOLDERS

Consolidated Operating Results
Despite high oil prices and other causes for concern, Japan’s economy remains on a recovery
trend. Overseas economic expansion continues to stimulate exports. Capital investment is rising,bolstered by rising corporate profits, and personal consumption is steady. In this environment,
SECOM continues to cater to the needs of its customers with high-value-added services andproducts that are aimed at realizing the Social System Industry. In addition to expanding ourcore security services business with new offerings and by building or relocating branch offices,
we continue to expand our medical, insurance, geographic information, and information andcommunication related and other services businesses.
In the fiscal year ended March 31, 2006, firm gains in all segments supported a 5.1%
increase in consolidated net sales and operating revenue, to ¥580.5 billion. Operating income
rose 8.4%, to ¥81.9 billion, owing to buoyant sales and a decline in impairment loss on longlived assets. Higher operating income and a gain on sale of securities, net, supported a 22.6%
increase in income from continuing operations. Nonetheless, net income slipped 3.5%, to¥50.3 billion, primarily owing to the inclusion in the previous period of ¥9.9 billion in income
from discontinued operations, net of tax, generated by the sale of our education services
business and certain real estate properties for lease. Net income per share was ¥223.69.
Calculated according to accounting principles generally accepted in Japan, consolidated net
sales and revenue was ¥567.3 billion, up 3.7%, while operating profit, ordinary profit and net
income reached ¥94.1 billion, ¥96.7 billion and ¥53.0 billion, respectively—all record highs. Net
income per share was ¥234.28. As a consequence, a resolution to raise cash dividends ¥10.00,
to ¥60.00 per share, was approved at the general shareholders’ meeting on June 27, 2006.
At a meeting held on May 9, 2006, the Board of Directors resolved to lower our minimum
trading unit from 500 shares to 100 shares, effective from August 1, 2006, in light of current
share price trends and market expectations.

Makoto Iida
Founder

Responding to a Changing Environment
During the period under review, we witnessed several notable changes in the operating environment for our core security business in Japan. First, we saw a high frequency of changes in thebusinesses of tenants in the commercial districts. We perceive this not just as a reflection of theeconomic climate, but also as evidence of structural changes in Japan’s economy. To seize theopportunities afforded by these changes, we are striving to identify and concentrate marketing
activities on growth industries and companies, with the aim of achieving greater efficiency.
The second change was the emergence of a trend among existing security service customers to reexamine their security needs, with the aim of ensuring systems are up-to-date. As
these needs increase in complexity, it is essential to ensure an accurate grasp of our customers’
expectations so that we can respond promptly with appropriate solutions. Earning the ongoingtrust of our customers depends on the speed of our emergency response personnel and theeffectiveness of their actions.
We have built up an extensive infrastructure to support our security services in Japan thatencompasses 47 control centers and approximately 2,100 emergency depots. In addition, wehave accumulated expertise in the design, development and operation of security systems thatare backed round-the-clock by highly trained emergency response personnel. This, together
with know-how gained through the provision of security services to customers in various specialized industries, has provided us with a formidable capacity to lead the nation’s security
industry in delivering security and peace of mind to customers.

SECOM CO., LTD. ANNUAL REPORT 2006

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Toward Heightened Growth and Efficiency
We are pursuing numerous initiatives aimed at further enhancing growth and efficiency. In thesecurity services business, we are implementing organizational improvements designed to reinforce our marketing capabilities and add further value to our security services. In metropolitan
areas, where our subscriber base is expanding, we are building new offices and relocating existing ones to create operating units of optimal scale for efficient marketing and prompt customer
service. To better tap the market for security systems for large-scale buildings, we are locating
System Design Centers in regional as well as metropolitan headquarters. This will enhance oursales and proposal development capabilities and provide us with an edge in serving this sectorof the market. As another measure to boost sales, we have shifted the focus of our internal
evaluation system from subscription volume to subscription value, thereby encouraging sales
staff to target large contracts. We also enhanced our ability to win contracts and provide
higher-value-added services by acquiring shares in a major property management company.
Creating and offering new products and services is another key part of our growth equation. In May 2006, we released four new SECOM Home Security systems targeted at dwellingsof specific sizes and types. These systems provide optimal solutions to the security needs ofhomes that range in size from studio apartment to large detached house. In conjunction, welaunched SECOM Home Services, a suite of value-added support services designed to complement SECOM Home Security systems. We are rolling out these new services, which havereceived a favorable market response, initially targeting home security customers in the Tokyoand Osaka metropolitan areas.
We are also taking steps to improve efficiency. For example, we absorbed security services
subsidiary Chuo Bohan Co., Ltd., which operates primarily in Shizuoka Prefecture, allowing us
to consolidate local offices and relocate staff, thereby significantly improving operational
efficiency. We also improved efficiency by introducing a control system for keys entrusted to
us by customers that has improved control precision and greatly reduced the time required fordaily key inspections.
In addition, we are focusing on expanding security services for commercial customers overseas. Within Asia, our focus is currently on the PRC, which is experiencing rapid economicgrowth. To date, we have established subsidiaries in the economic centers of Shanghai, Dalian,Qingdao, Beijing and Shenzhen. These subsidiaries are serving an increasing number of local
companies, as well as foreign corporations. We view Asia, particularly the PRC, as one of themost promising growth markets for SECOM and will continue to build on our already strong
business foundation there to capture increasing demand.
Among our other businesses, medical services have grown steadily, becoming a major pillarof our operations. In addition to our expanding home medical services business, we have diversified into such areas as nursing home management, as part of our goal to extend peace ofmind to all members of society. Our SECOMFORT private nursing homes introduce a proactive
approach to wellness, which is a new concept in Japan’s caregiver industry.
To broaden our insurance services business, we are reinforcing our marketing capabilities,
offering seamless systems encompassing security services, which offer prior protection, andinsurance, which protects customers in the event of misfortune.
In our geographic information services business, we are establishing a system that enables
us to promptly provide highly accurate geographic information services by making use of commercial satellites for various mapping purposes. We have also taken this expertise abroad tocountries in Southeast Asia where there is significant demand for updated mapping information.
We expect overseas sales to contribute to growth in this segment in the years ahead.

Shohei Kimura
ChairmanKanemasa Haraguchi
President andRepresentative Director

SECOM CO., LTD. ANNUAL REPORT 20063

A MESSAGE TO SHAREHOLDERS

We improved the efficiency of our information and communication related and otherservices business in May 2006 by merging subsidiaries Secom Trust.net Co., Ltd., and SecomInformation System Co., Ltd. This move consolidates the operating resources of the twocompanies in the information security and information services markets, thereby eliminating
redundancies and bolstering marketing capabilities, and will pave the way for the newly
merged entity to become a comprehensive information services provider with information
security and major disaster response services at its core.
Among other initiatives this period, we divested a cable television affiliate as part of along-term strategy to build a business portfolio that will position SECOM on track for furthergrowth going forward.
The Next Step
With the aim of accelerating growth, we will seek to capitalize on the opportunities created bychanges in the business environment and increasing appreciation for security services by stepping up marketing activities. At the same time, we will continue to exploit opportunities toraise efficiency and further enhance profitability.
In today’s aging society, demand for security and medical services is on the increase. We
intend to draw upon our long-standing expertise and extensive infrastructure to develop anddeliver the services and products that protect people and companies from new dangers andanxiety.
The most important prerequisite for continued growth is trust of our customers.
Accordingly, we will do all in our power to remain a company deserving of this trust. To strive
always to do what is right is a fundamental principle of SECOM. This principle guides employees
to judge their work on the basis of what is right and equitable for society. The basic conceptbehind our corporate ethics, this principle will continue to guide our efforts to earn the trust ofour customers.
We continue to promote the realization of the Social System Industry as a comprehensive
framework of services provided by group companies. Our goal is to be a company that makes
people’s lives safe, convenient and comfortable, thereby ensuring people are confident in turning to SECOM. With this goal in mind, we will continue to expand our businesses and enhance
corporate value. We look forward to your continued support in these endeavors.
June 27, 2006

Makoto Iida
Founder

SECOM CO., LTD. ANNUAL REPORT 2006

4Shohei Kimura
ChairmanKanemasa Haraguchi
President and Representative Director