Year ended March 31, 2007

In response to changing customer needs,
SECOM is working to realize its vision for the
future— t h e S o c i a l S y s t e m I n d u s t r y —by
providing comprehensive, integrated
services and systems that make life moresecure, convenient and comfortable.

ProfileE

stablished in 1962, SECOM CO., LTD., is a pioneer in Japan’s security services industry. Since its founding date, SECOM has sought to offer innovative products and services that benefit society, in line with its mission, whichis to contribute to society through its business activities. These efforts haveenabled SECOM to provide security and peace of mind, and achieve steady
growth.
Today, SECOM—the parent company and the companies of the SECOM
Group—continues to pursue a wide range of initiatives aimed at realizing its vision
for the future, namely the Social System Industry—a framework comprising integrated packages of products and services designed to make life more secure,convenient and comfortable. SECOM has maximized the network it has built up
through its efforts to provide security systems to offer a wide range of products
and services crucial to corporate and residential customers. Now, SECOM isexpanding its focus beyond security services to include fire protection services,
medical services, insurance services, geographic information services, and information and communication related and other services. SECOM is building on its
capabilities in these areas to provide comprehensive packages that encouragecustomers to turn to SECOM and inspire confidence that doing so will enhance
security, convenience and comfort.
SECOM has also expanded into overseas markets, establishing a network of
subsidiaries and joint venture operations in 11 countries and territories, where
it has earned a solid reputation for providing security services of the same highquality as it offers in Japan. In particular, SECOM is focusing on the high-growthmarket of the People’s Republic of China (PRC), and is establishing a businessfoundation by setting up operations in key coastal cities as part of a larger effort
to expand its presence in the country.

Contents
Our Philosophy ......................................................................... 1
A Message to Shareholders .................................................... 2
Business Index ..................................................................... 5
SECOM Today .......................................................................... 6
Financial Review ....................................................................... 22
Audited Financial Statements ................................................. 27
Other Financial Data ................................................................ 58
Supplemental Consolidated
Financial Data (Based on Japanese GAAP) ......................... 63
Supplemental Nonconsolidated
Financial Data (Based on Japanese GAAP) ......................... 67
Corporate Information ............................................................. 71
SECOM Group’s Basic Business Areas .................................. 75
Directors, Corporate Auditorsand Executive Officers ........................................................... 77
Note: Unless specified otherwise, all figures contained in this annual report are based on the financial
statements, which have been calculated and are presented in accordance with accounting principles
generally accepted in the United States (U.S. GAAP).

Highlights

This table shows key financial highlights calculated using accounting principles generally accepted in the UnitedStates (U.S. GAAP).

In millions of yen

In thousandsof U.S. dollars

Years ended March 31

Year ended
March 31

U.S. GAAPSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007...........................................................

2007

2006

2005

2007

Net sales and operating revenue....... ¥ 0,6 3 6 , 6 7 8
94,418Operating income ...............................
55,889Net income...........................................
1,241,182
Total assets...........................................
551,732
Total shareholders’ equity ..................

¥0,580,526
81,89350,331
1,225,228
508,696¥0,552,354
75,55852,133
1,164,204
457,837$05,395,576
800,153473,636
10,518,492
4,675,695

In yenIn U.S. dollars¥0,231.66
45.00
2,034.63$ 2.11
0.51
20.78

Pursuant to applicable Japanese law, SECOM is required to publish results in line with accounting principles
generally accepted in Japan (Japanese GAAP). Key financial highlights calculated using Japanese GAAP are
shown below for reference.

In millions of yen

In thousandsof U.S. dollars

Years ended March 31

Year ended
March 31

Japanese GAAPSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007................................................................

2007

2006

2005

2007

Revenue................................................ ¥ 0,6 1 3 , 9 7 697,840Operating profit...................................
102,720
Ordinary profit .....................................
58,299Net income...........................................
1,169,182
Total assets...........................................
—
Total shareholders’ equity ..................
601,116
Total net assets ....................................

¥ 567,315
94,10996,66952,994
1,149,377
496,164—¥ 547,230
83,04383,47848,517
1,097,548
441,927—$ 5,203,186
829,153
870,508
494,059
9,908,322—
5,094,203

In yenIn U.S. dollars¥ 214.41
45.00
1,962.74—$ 2.20
0.51
—
20.35

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

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

¥ 248.42
60.00
2,452.47¥ 223.69
50.00
2,261.00

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the rate of¥118=US$1, the rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2007.
2. Net income per share of common stock is based on the average number of shares outstanding during each period.
3. Shareholders’ equity per share of common stock is based on the number of shares outstanding at the end of eachperiod, minus treasury stock.
4. The Company recorded record-high net sales and operating revenue, operating income, and net income, in the year
ended March 31, 2007.
5. Cash dividends per share of common stock shown are based on dividends approved and paid in each period.
Subsequent to March 31, 2007, cash dividends of ¥80.00 per share were approved at the general shareholders’meeting held on June 27, 2007 (see Note 18 of the accompanying Notes to Consolidated Financial Statements).

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

¥ 259.14
60.00—
2,400.91¥ 234.28
50.00
2,204.06—

Note: The Company reported record-high revenue, operating profit, ordinary profit and net income based onJapanese GAAP in the year ended March 31, 2007. Cash dividends per share of common stock shown are basedon dividends approved and paid in each period. Subsequent to March 31, 2007, cash dividends of ¥80.00 per
share were approved at the general shareholders’ meeting held on June 27, 2007.

Net Income (U.S. GAAP)Net Income (Japanese GAAP)(In billions of yen)

(In billions of yen)

60

60

50

50

40

40

30

30

20

20

10

10
0

0
02

03

04

05

06

07

Note: Net income in the year ended March 31, 2007, rose ¥5.6 billion, to ¥55.9 billion. This result was due tocontinued growth in net sales and operating revenue, particularly in the security services segment, and a
decline in selling, general and administrative expenses.
In the year ended March 31, 2006, net income declined ¥1.8 billion, to ¥50.3 billion. This result was
despite a ¥9.4 billion increase in income from continuing operations, to ¥51.2 billion, reflecting increases
in operating income and gains on sales of securities, net, and was primarily attributable to the absence of¥9.9 billion in income from discontinued operations, net of tax, recorded in the previous period, owing to
the sale of the Company’s education services business and certain real estate properties for lease.
Net income in the year ended March 31, 2005, rose ¥28.7 billion, to ¥52.1 billion. This result reflected¥9.9 billion in income from discontinued operations, net of tax, and the absence of ¥8.8 billion in losses
recorded in the previous period owing to a revision of pension plans.

02

03

04

05

06

07

Note: In the year ended March 31, 2002, the Company revised its pension plans and changed the accounting
method for unrecognized actuarial gains and losses. Unrecognized actuarial gains and losses, which had
been amortized using the straight-line method over the average remaining service period prior to theyear ended March 31, 2002, were charged to income on an “as-incurred” basis. The Company also
recorded unrecognized transition assets/obligations as a one-time charge to income. In addition, priorservice costs were charged to income on an as-incurred basis. This resulted in a decrease in income
before income taxes of ¥35.0 billion.
One-time recognition on an as-incurred basis for pension benefits is not permitted under U.S. GAAP.
Accordingly, unrecognized actuarial gains and losses, unrecognized transition assets/obligations and priorservice costs were amortized on the basis of the average remaining service period in the accompanying
consolidated financial statements prepared under U.S. GAAP.

Our Philosophy

Formulated in accordance with its mission of contributing to society throughits business activities, SECOM’s corporate philosophy acts as a guideline for
employees and has enabled them to channel their abilities and efforts in thesame direction, resulting in steady growth and development.
The key components of SECOM’s corporate philosophy are its emphasis on
striving to do what is appropriate and challenging accepted norms. Striving to
do what is appropriate does not mean striving to do what is good for SECOM;
rather, it means judging the legitimacy of our actions based on whether they
are beneficial for society. Challenging accepted norms means not being content with the status quo, but instead maintaining the drive and the conviction
to move forward by constantly seeking better and more suitable solutions.
In the future, this philosophy will continue to guide our efforts to increase
corporate value through our business activities. By offering products and services that make life more secure, convenient and comfortable, we will continue
aspiring to grow and evolve.

A Message to Shareholders

Makoto Iida
Founder

Consolidated Operating Results

and the absence of a settlement loss of benefit

Although consumer spending continues to lackobligation on transfer to defined contribution

vibrancy, economic conditions in Japan remain

pension plan registered in the previous period.

on a steady upward trend as buoyant corporate

Net income advanced 11.0%, or ¥5.6 billion, to

profits support higher capital investment and¥55.9 billion.

an improvement in the employment situation.

Calculated according to accounting princi-

In this environment, SECOM continues toples generally accepted in Japan, consolidated

cater to its customers’ needs for security andrevenue rose 8.2%, to ¥614.0 billion, whilepeace of mind by providing value-added

operating profit, ordinary profit and net income

products and services that are aimed at realiz-reached ¥97.8 billion, ¥102.7 billion and ¥ 58.3

ing the Social System Industry vision. We arebillion, respectively—all record highs.

stepping up efforts to expand our core security

With the aim of providing returns to share-

services business—by introducing new prod-

holders that more accurately reflect our operat-

ucts and services, and building new branch

ing performance, we shifted the basis foroffices while relocating existing ones—as welldetermining dividends, which are calculated

as our medical, insurance, geographic informa-using Japanese accounting principles, totion, and information and communication

consolidated results, from nonconsolidated

related and other services. In December 2006,

results. Shareholders adopted a resolution to

we acquired new shares offered by Nohmi

raise cash dividends by ¥20.00, to ¥80.00 per

Bosai Ltd., an affiliated company listed on theshare at the general shareholders’ meeting onFirst Section of the Tokyo Stock Exchange, andJune 27, 2007.

consequently Nohmi Bosai became a consolidated subsidiary. This move has allowed us to

Maximizing Comprehensive Capabilities tomake a decisive entry into the market for fireRespond to Customer Needs

protection services, providing automatic fire

The needs that prompt people to take advan-

alarm, fire extinguishing and other fire protec-

tage of security services are growing increas-tion systems for a broad range of applications,ingly diverse and sophisticated. In recent years,

including office buildings, plants, tunnels,

customers have come to favor security services

cultural properties, ships and residences.

providers able to deliver not only outstanding

In the fiscal year ended March 31, 2007, weservices, but also flexible and suitable solutions

recorded record-high consolidated net sales andthat relieve apprehensions and tackle dangers

operating revenue, operating income and netthat arise in daily life. This change in customer

income. Owing to favorable results in all seg-

perception has become a key consideration inments and contributions from our fire protec-

determining which security services are chosen.

tion services business, included in consolidated

As an example, tenders for security services

results during the period under review, net

contracts for key facilities are judged increas-

sales and operating revenue increased 9.7%,

ingly on service content, rather than simply onor ¥56.2 billion, to ¥636.7 billion. Operatingcompetitive pricing. We endeavor to capitalize

income rose 15.3%, or ¥12.5 billion, to ¥94.4

on our years of accumulated know-how andbillion, reflecting the increase in net sales andexperience, as well as our comprehensive

operating revenue, as well as a decline incapabilities, to accurately identify customers’

selling, general and administrative expenses

security requirements and, by adopting theAnnual Report 20072

customer’s perspective, propose services that

Toward Further Growthoffer truly effective solutions. We recognize

We are pursuing various initiatives aimed atthat the Japanese government’s decision tofurther accelerating growth. The consolidation

award a contract to construct, maintain andof affiliated company Nohmi Bosai in December

operate a private finance initiative (PFI) correc-

2006 has facilitated our entry into the fire pro-tional facility in the city of Mine, Yamaguchi

tection services market. We were alreadyPrefecture to a SECOM-led consortium,

Nohmi Bosai’s principal shareholder, andreflected the government’s high evaluation of

consolidation will reinforce this relationship.

the consortium’s proposal, which focused not

The integration of our expertise in security

only on price, but also on substance and thesystems with Nohmi Bosai’s fire protection

outstanding level of security offered.

technologies will enable us to develop highly

The scope of security needs is also expand-competitive, original products that help us toing. Our security services subscribers include

cultivate new markets. This move will also

companies that have come looking for help incontribute to more efficient operations byformulating a business continuity plan (BCP) toallowing us to concentrate related manage-facilitate the resumption of business as quickly

ment resources in a manner that capitalizes on

as possible in the event of occurrences such as

our strengths, including consigning the manu-

major natural disasters, as well as provide

facture of fire alarms and security systems towhatever disaster response support services are

Nohmi Bosai, and to promote joint development

necessary. BCPs are increasingly being recog-of products and services.

nized as a crucial component of corporate risk

In the area of home security services, we will

management. With the aim of actively support-

continue to augment our lineup by offeringing the efforts of corporate subscribers to

new products and services that deliver

manage risk, we have been quick to offer aenhanced security and peace of mind. Brutal

variety of disaster response support services bycrimes perpetrated when people are at homemaximizing our strengths. Most notable is thehave been on the increase in recent years. In

SECOM Safety Confirmation Service, which

addition to regular services that protect homes

helps companies to promptly confirm thewhen occupants are away, the SECOM Home

whereabouts and safety of employees and their

Security on-line security system also includes

families and collect and share disaster-related

functions to ensure security for occupants when

information.

they are at home as standard features. We also

In response to these and other changes inoffer a wide range of products, including high-the security services market, we continue toimpact, breakage-resistant window glass andbuild on our comprehensive capabilities—

residential monitoring cameras, which reinforce

which reflect our ability to effectively apply thehome security. Looking ahead, we will also

expertise and management resources we havecontinue to reinforce our competitive position

accumulated in a variety of businesses—toin the area of home security by applying theprovide products and services that deliver value

extensive know-how and management

and satisfy customers. Going forward, we will

resources we have accumulated to date to thealso strive to cultivate new markets by helping

provision of various products and services.

customers find effective solutions.

Shohei Kimura
ChairmanIn the area of geographic information services,
the recent launch of a German commercial

SECOM Co., Ltd.

3

Kanemasa Haraguchi
President andRepresentative Director

A Message to Shareholders

satellite has made it possible for us to obtain

Shortly after SECOM was established, wehigh-resolution geographical data in only apublished the SECOM Employee Code, con-fraction of the time required with conventional

taining an employee code of conduct thatsatellites. Pasco Corporation, SECOM’s

embodied our corporate philosophy. With thegeographic information services firm, has

expansion and diversification of our businessobtained exclusive rights in Japan and nonex-

portfolio, we revised the SECOM Employee

clusive rights worldwide to sell image data

Code in December 2006 and renamed it theoffered by the satellite’s operator. In the years

SECOM Group Code of Employee Conduct, toahead, Pasco will continue to build on its accu-

ensure that all employees, regardless of theirmulated surveying and measuring technologies

occupation, embrace our corporate philosophy,

and geographic information system (GIS) capa-

and to establish a foundation from which we canbilities, as well as its newly acquired access toaddress future challenges together. We are also

high-resolution satellite image data, to broaden

reinforcing the swift communication of criticalits service lineup and achieve new growth.

information to management in the event ofsignificant occurrences, either internal or exter-

Reinforcing Our Corporate Philosophy

nal, thereby strengthening our corporate struc-Groupwide

ture to facilitate cohesive Group management.

Today, SECOM has an extensive business

These efforts will position us to leverage theportfolio that encompasses security services,Group’s strengths and accelerate growth. We

fire protection services, medical services,

are also striving to enhance operating efficiency

insurance services, geographic informationin an effort to further reduce costs. Finally, we

services, and information and communication

continue to actively implement measures aimed

related and other services. Accordingly, toat realizing the Social System Industry andmaximize our comprehensive capabilities andmaximizing our corporate value. In these and all

realize our Social System Industry vision, weof our endeavors, we look forward to yourrecognize the need to ensure that employees

continued support.

conduct themselves in a disciplined mannerand hold common values.

Makoto Iida
FounderJune 27, 2007

Shohei Kimura
Chairman

Annual Report 2007

Kanemasa Haraguchi
President and Representative Director

4

Business Index

6

Commercial Security Services

12

Home Security Services

15

Other Security Services

16

Security Services in Overseas Markets

17

Fire Protection Services

18

Medical Services

19

Insurance Services

20

Geographic Information Services

21

Information and Communication Related
and Other Services
Percentage of consolidated net sales and operating revenue*1

Security Services

Fire Protection Services*2

Medical Services

Insurance Services

Geographic
Information Services

Information andCommunication Related
and Other Services

65.3%

4.3%

7.2%

5.0%

5.7%

12.5%

*1. Excluding intersegment transactions*2. In December 2006, SECOM established a new business segment, fire protection services, owing to the acquisition of Nohmi Bosai.

SECOM Co., Ltd.

5

SECOM Today

Commerc i a l S e c u r i t y S e r v i c e s

Solutions for Businesses

Tokyo Midtown, which had its grandopening in March 2007, is an exciting
new development in Tokyo’s trendy
Roppongi district. Tokyo Midtown
consists of six buildings, including
the Midtown Tower, the central
structure, which has five floors below
ground and 54 above. Developed inline with the concept of “enrichingurban lifestyles,” this multipurpose
complex features selected leading
global fashion and interior decor
shops, restaurants and other retailers,
as well as an art museum, a hotel,
offices, condominiums, a medical
center and a park.
SECOM provides static guard
services for Tokyo Midtown. The
complex also uses the SECOM AED
Package Service.
Photo courtesy of Tokyo Midtown Management Co., Ltd.

Annual Report 2007

6

Drawing on its years of accumulated exper tise and the tr ust of its subscribers,
S E C O M s t r i v e s t o o ff e r n e w p ro d u c t s a n d s e r v i c e s t h a t re s p o n d t o t h e n e e d s o f
c u s t o m e r s a n d c a p i t a l i z e o n i t s s e c u r i t y s e r v i c e s a n d o p e r a t i n g s t re n g t h s .

Responding to the Sophisticated Security
Needs of Large Complexes
The recent wave of urban redevelopment andthe trend toward large complexes are nolonger limited to Tokyo, but have spread toother major urban areas, notably Osaka andNagoya. The effective management of suchcomplexes demands sophisticated, diversified
security systems that protect people and property from crime and other dangers. In responseto the needs of these large urban complexes,
we drew on our extensive, accumulated experience and know-how and in November 2006
launched a new version of the TOTAX ZETA
large-scale proprietary security system withimproved functions and a lower price targetedat the general market.
The most important feature of SECOM’s
sophisticated large-scale proprietary security
systems is that they combine the most advanced
security systems and manned services by trained
professional guards in a single sophisticatedpackage. Another feature is that basic packages
can be adapted to individual customer needs
through the addition of various products andservices. These are not limited to offerings thatenhance security, but also include such options
as the SECOM AED Package Service. This
service provides emergency lifesaving kits
featuring automated external defibrillators(AEDs)—electronic devices used to reestablish
a normal heart rhythm following cardiac
arrhythmia—to private- and public-sector officebuildings, airports, commercial facilities, hotels
and other large complexes. There have been
numerous reports of AEDs having contributed
to the saving of lives—SECOM’s commitment
thus extends beyond ensuring the security ofsuch facilities to include the safety of people
who use them.
We have also used our advanced technologies and expertise to develop SECOM Robot X,
an outdoor surveillance robot equipped withcameras that give it a 360° view. This machine

Centralized Security Services

SECOM
Control Center(2) Alert Emergency
Services andUtilities as
Necessary(2) Alert the SECOM
Emergency Depot

SECOM
Emergency
Depot(1) Alert throughTelephone
Circuit
Fire Dept.

Police Dept.

Gas Company

Subscriber(3) Dispatch SECOM Emergency
Response Personnel

SECOM Co., Ltd.

7

SECOM Today

Commerc i a l S e c u r i t y S e r v i c e s

is particularly effective when utilized in large sites
with multiple blind spots that make surveillanceusing conventional stationary cameras difficult.
Going forward, we will continue to capitalize
on our exclusive expertise and comprehensive
Group capabilities to respond to the increasingly diverse needs of customers in the market
for large complexes.

Expanding Applications for On-line
Security Systems
We offer a wide range of on-line security systems suited to a variety of structure sizes,
applications and security needs. These include
SECOM AX, a system that utilizes image recognition technology, enabling us to respondswiftly to any irregularity in the most appropriate manner. Prompted by recent crimes targeting offices and stores early in the morning andlate at night when few people are present, wehave augmented existing on-line systems with a
new feature whereby we monitor windows anddoors using sensors even when employees arepresent, thereby helping to prevent unlawfulaccess and ensure employee safety.
SECOM IX was developed to prevent therising incidence of robberies at retail facilities
open round-the-clock. This system enables store
employees to request assistance from a SECOM
image monitoring center should they see anyone
acting suspiciously or feel threatened by someone on the premises late at night. Employees
need only push an emergency/request button
to automatically transmit an image and voice inreal-time for assessment by image monitoring
center staff, who will, if necessary, broadcast a

SECOM Robot X

SECOM Emergency response personnel

Annual Report 2007

voice warning on the premises or dispatch emergency response personnel. Although initiallydeveloped for use in occupied facilities, SECOM
IX is also finding favor in apartment building
entry halls. We have also sought to broaden
applications for SECOM IX. Recently, we commenced sales of HANKS IX—a system designed
to provide enhanced security for financial
institutions during operating hours—that combines SECOM IX with the HANKS SYSTEM, an
on-line security system for financial institutions.

Growing Demand for the Protection ofImportant Information
The enforcement of Japan’s Personal Information
Protection Law in 2005 has required the stringent management of personal information.
Despite increased awareness of this problem,
incidents involving personal information leaks
have continued to occur. Consequently, an
increasing number of companies are seeking
security services around-the-clock—that is,during business hours when employees arepresent, as well as at night and other times
when premises are empty. We have responded
to these needs by developing SESAMO TRII, acomprehensive access-control system that canbe administered from a single personal computer. This system can also be integrated with
our various identification systems, including
SECURILOCK II, an access-control systemcompatible with various contactless integrated
circuit (IC) cards, and SESAMO IDj, which
identifies individuals by the veins in theirpalms. Information collected can be tabulated
according to area under management, time or

SESAMO IDj, an access-control system that identifies
individuals by the veins in their hands

8individual and can thus be used for a variety ofadministrative purposes. The function thatmonitors employee working hours is also used
to manage employee health.
Moving ahead, we will continue taking steps
to respond to the evolving needs of customers
in the area of information security by offering
effective on-line security, access-control andsurveillance camera systems.

Launching the “Setagaya Security Patrol”
Following the opening of public services contracts to private-sector firms, in April 2007 wewere contracted by Tokyo’s Setagaya Ward toassist official efforts to reduce the incidence ofcrime in the area. In response, we introduced
the Setagaya Security Patrol, which conducts
round-the-clock street and park patrols usingcars bearing the SECOM logo, thus acting as apublic service for the 800,000 residents of
Setagaya. This area is home to a high numberof subscribers to SECOM Home Security andother SECOM security systems. The Setagaya
Security Patrol is meaningful not only because it
provides residents with security and peace ofmind, but also because it enhances residents’awareness that SECOM is accessible andconvenient. This new approach, of a privatesector company providing services aimed at
reducing crime throughout an entire district,has added a new dimension to the SECOM
service lineup.

Mine Rehabilitation Program Center:
Japan’s first PFI Correctional Facility
In line with our mission to contribute to society
through our business activities, we continue toventure into challenging new areas. One example is the Mine Rehabilitation Program Center, aprivate finance initiative (PFI) correctional facility
in the city of Mine, Yamaguchi Prefecture, which
opened in April 2007. A SECOM-led consortium
secured an 18-year contract to construct, maintainand operate the facility in cooperation with the
Ministry of Justice, in general bidding. For thispurpose, the consortium established a special
firm, Social Rehabilitation Support Mine Co., Ltd.,of which SECOM is the principal shareholder.
The Mine center has many unique features,
including its name, which identifies it as a “facility
for rehabilitation,” rather than a “prison.”
Another unique feature of the Mine center isthat it capitalizes on private-sector expertisethrough joint operation by private-sector

SECOM Control Center

SECOM Co., Ltd.

9

SECOM Today

Commerc i a l S e c u r i t y S e r v i c e s
Mine Rehabilitation Program Center, Yamaguchi Prefecture

Front entrance to the Mine
Rehabilitation Program Center(above); cell block patrol by
SECOM static security guards

CCTV system installed in the center

participants and the government. Shifting thebulk of responsibility for facility operations to
the private sector enables corrections officers tofocus on their primary responsibility of providing
correctional education. We will endeavor to
support the efforts of corrections officers byusing advanced security systems to ensure thecapable, efficient management of security.
The facility is also unique in its emphasis on
rehabilitation programs for convicted offenders. In addition to offering vocational training,
including education in the area of information
technology (IT), the facility has attempted tocreate a living environment for inmates that issimilar to ordinary society by modifying inmate
uniforms and living quarters. Cells are built on
a semi-open plan and inmates are able tomove freely about the corridors, multipurpose
hall and other common areas of the cell block
except during certain hours. With the aim of
fostering self-discipline, inmates are allowed towalk within the facility unaccompanied. To help
inmates maintain relations with their families, a

process deemed essential to rehabilitation,
visits take place in rooms without barriers.
Another SECOM-led consortium hasrecently secured a contract to maintain andoperate two PFI correctional facilities locatedin the city of Sakura, Tochigi Prefecture:
Kitsuregawa Rehabilitation Program Centerand the adjacent Kurobane Prison. We willassume responsibility for the maintenance andoperation of both facilities from October 2007.
These projects will enable us to secure expertise in correctional facility management, as wellas to contribute to a society that is secure andfree from apprehension by promoting andassisting the prompt rehabilitation of inmates.

Round-the-clock monitoring from the central security office

IT training session for inmates

Annual Report 2007

10

SECOM Employee Training

We place our highest priority on earning thetrust of our customers, and we recognize that
this necessitates excellent, high-quality service
and an effective grasp of our customers’ perspectives. We have established four SECOM
HD Center training facilities in Japan. Thesefacilities offer training programs based on ahuman resources development curriculum
created in-house to cultivate capable, skilledemployees. In addition to imparting the expertise and technological skills essential for security services professionals, the program focuses
on educating employees on the importance ofacting in accordance with the SECOM Group
Code of Employee Conduct and striving to dowhat is appropriate to ensure a high level ofcorporate ethics.
By ensuring all SECOM employees approach
their work with a commitment to ethical practices, we are confident in our ability to deliver
outstanding services and contribute to society.
The solid reputation of the SECOM brand is areflection of our thorough and consistentemployee training.

Training in security equipment operation

Studying SECOM’s corporate philosophy

SECOM Co., Ltd.

11

SECOM Today

H o m e S e c u r i t y S e r vices

Peace of Mind for the Home

Annual Report 2007

12

Japan’s leading home security system, SECOM Home Security, encompasses high-qualitys e c u r i t y a n d a w i d e r a n g e o f v a l u e - a d d e d s e r vices. SECOM off e r s t a i l o re d p roposals
i n c o r p o r a t i n g a v a r i e t y o f p ro d u c t s a n d s e r v i c e s , t h e re b y h e l p i n g t o b r i n g s e c u r i t y a n d
p e a c e o f m i n d n o t o n l y t o h o m e s , b u t a l s o t o t o w n s a n d n e i g h b o r hoods.
SECOM Home Security: Responding todiverse home security needs and expanding
subscriptions
A pioneer in the provision of home security
services in Japan, SECOM has ensured the
security of its subscribers’ residences sincelaunching SECOM Home Security in 1981 andcontinues to lead the market. SECOM Home
Security is an on-line security system valued bycustomers for offering round-the-clock monitoring of homes for intruders, emergency reports,
fires, gas leaks and medical emergencies.
Our SECOM Home Security customer basehas expanded over recent years, and today
ranges from single people living on their own
to people with families and seniors. At thesame time, we have introduced a wide range ofadditional services designed to add value.
These include SECOM Medical Club, a membership-based health management service thatgives SECOM Home Security subscribers
access to telephone health counseling andInternet-based health management services
around-the-clock, thereby helping to relieve
health concerns.
We also offer SECOM Home Service, a suiteof lifestyle support services through which we
assist customers with problems arising in daily
life, including plumbing issues and lost keys,
and patrol the area around their homes. Owing
to the favorable reputation this service has

earned from subscribers, we are expanding ourmarketing focus to encompass other large
cities throughout Japan, ensuring customers
are satisfied they turned to SECOM.
The rising incidence of residential break-ins
occurring when the occupants are at home has
clearly increased the danger of physical harm.
We have enhanced the capabilities of SECOM
Home Security to ensure the security of home
both when the occupants are in and when they
are out. We also market an extensive selectionof products designed to enhance security.
These include SECOM Anshin Glass, a highimpact, breakage-resistant glass window with abuilt-in sensor, and SECOM Anshin Film, awindow glass film that improves breakageresistance. We also offer an extensive selectionof products that incorporate image recognition
technology, including SECURIFACE, an intercom system featuring a built-in face detection
function that recognizes when the person at thedoor is hiding his or her face, and the Sensor
Light Camera, a camera that detects when aperson approaches the house at night andautomatically turns on a light and takes aphotograph.
With home security increasingly being seen
as a standard feature in many homes, we
continue to reinforce our competitive advantage in the growing home security market byproviding value-added services. We are also

SECOM Home Security

SECOM Home Service

SECOM Co., Ltd.

SECOM Shop outlet

13

SECOM Today

H o m e S e c u r i t y S e r vices

expanding our network of SECOM Shop sales
outlets throughout Japan, focusing primarily
on large cities.

Responding to Rising Needs for
Town Security
In response to the increasingly brutal nature ofcrimes, we are promoting the concept of “townsecurity,” that is, security systems designed toprotect entire communities. Town security
systems involve creating high-grade, tailored
packages that combine on-line security systems
in all houses in a community with a variety of
security products. As an example, a person
entering a community with a SECOM Town
Security system must first contact the house heor she is visiting using a SECOM MS-3 systemintercom so that the occupants can open the
remote-controlled gate. At the entrance to thehouse, the visitor uses the SECURIFACE residential intercom system to gain entrance. In
contrast, occupants open the gate with theirown SECURILOCK II contactless IC cards andenter their own homes using SESAMO Home IDs,an access-control system employing fingerprint
identification installed at the entrance. Houses
in such communities have SECOM Home
Security systems installed, SECOM Anshin
Glass high-impact, breakage-resistant window
glass in all first-floor windows—each of which
has a built-in sensor—and Sensor Light
Cameras installed outside, which records
images of visitors when occupants are out.
In the future, we will continue to develop
systems that combine our comprehensive
selection of products and services to contributeto communities that are secure and free fromapprehension.

Main gate of a community with a SECOM Town Security system

Annual Report 200714

O t h e r S e c u r i t y S e r vices

In response to rising needs for mobile security, SECOM is expanding
applications for COCO-SECOM systems, as well as broadening the system’s
capabilities by combining it with other SECOM ser vices.

Rising Demand for COCO-SECOM
We launched COCO-SECOM mobile security
systems in 2001 with the aim of cultivating new
demand. Since then, COCO-SECOM has playeda key role in the prompt and safe resolution ofseveral incidents—including the recovery of stolen
vehicles and the rescue of elderly individuals who
had wandered away and become lost—andthe effective prevention of other incidents.
COCO-SECOM uses signals from Global
Positioning System (GPS) satellites and cellular
telephone base stations to pinpoint locations
with an accuracy of within five to 10 meters
under optimum circumstances. Another key
feature of COCO-SECOM is that it will dispatch
emergency response personnel around-theclock if a subscriber requests assistance. Today,
COCO-SECOM services are available forlocating people, vehicles, objects and pets.
In March 2007, we began offering the
COCO-SECOM School Commute Management
System. This system can confirm the whereabouts

of a student on the way to or from school, as
well as ascertain when the student arrives at or
departs from school and whether he or she is at
school. The system uses IC tag readers positioned at a school’s gates that pick up signals
from IC tags in COCO-SECOM transmitter
devices and transmits information when the childhas arrived at or left school via e-mail to, forexample, a cellular phone. During the child’s
school commute, COCO-SECOM provides realtime information on the child’s whereabouts. If achild senses danger, he or she can alert SECOM
simply by pressing an emergency button on the
COCO-SECOM transmitter device and, if necessary, request the dispatch of emergency response
personnel. Placement of IC tag readers at closeintervals throughout schools also enables theschools to precisely monitor where students areat any given time. With the aim of protecting
children from crimes, we will continue actively
promoting this system to schools, cram schools
and other educational facilities throughout Japan.

COCO-SECOM Operations Center

COCO-SECOM Location and Emergency Response System

GPS Satellite
Positioning
Information

COCO-SECOM
Operations
CenterCellular Telephone
Base Station
Requestfor Search(Telephone/Internet)
Transmitter Device(Vehicle-Mounted)

Subscriber

Notificationof Police(If Warranted)

SECOM
Emergency
Depot

Police Dept.
COCO-SECOM

Dispatch SECOM
Emergency Response
Personnel (If Requested)

Transmitter
Device(Portable)

COCO-SECOM School Commute
Management System, which combines
IC tags and COCO-SECOM transmitters

SECOM Co., Ltd.

15

SECOM Today

Security Ser vices in Overseas Markets
SECOM’s expanding overseas presence enables it to provide the same highgrade security ser vices as it does in Japan to customers in overseas markets.
In particular, SECOM is working to enhance growth in Asia, where securitys y s t e m s a re c o m i n g i n t o i n c re a s i n g l y w i d e u s e .
Expanding Overseas Operations byEntering the Vietnamese Market

Security Systems Begin to Find Wide
Acceptance in the PRC

In June 2006, we established a joint venturewith a local firm and began offering security
consulting services in Vietnam. With this addition, our overseas operations currently encompass businesses in Taiwan, the Republic ofKorea (ROK), the United States, the United
Kingdom, Thailand, Malaysia, Singapore,
Australia, the PRC, Indonesia and Vietnam. Ourdecision to begin offering services in Vietnamreflected the growth potential of this market asincreasing number of Japanese and otherforeign companies establish operations there.
At present, the Vietnamese security market
centers on static guard services. Our plan is toexpand our business in Vietnam by focusing
primarily on on-line security systems.

Our operations in the PRC began in 1992 withthe establishment of holding company SECOM(China) Co., Ltd. Since then, we have set up
security services companies in key cities in the
country’s high-growth coastal areas—namely
Dalian, Shanghai, Beijing, Qingdao andShenzhen. Through these companies, we offer
security services on a par with those we provide
in Japan, encompassing not only remote surveillance, but also emergency response services, an approach that continues to attract anincreasing number of subscribers. With the aimof expanding the aforementioned five companies’ operations, we are currently setting up
branches and offices in surrounding cities toexpand the companies’ business. Going forward, we plan to expand the service area
covered by the companies to approximately
20 cities, from the current 13, with a view totaking our next step in the PRC, which will be
to set up operations in key inland cities.
These and other efforts will position us tocapitalize on the increasingly wide acceptanceof security systems in the PRC by offering
distinctive SECOM products and services. By
doing so, we aim to further grow our businessin this key market.

Beijing Jingdun Secom Electronic Security Co., Ltd.

Secom Plc Control Center, UK

Annual Report 200716

F i re P ro t e c t i o n S e r vices
SECOM and Nohmi Bosai are i n t e g r a t i n g t h e i r e x t e n s i v e m a n a g e m e n t
r e s o u rc e s a n d e x p e r t i s e t o p ro v i d e e ff e c t i v e f i re p ro t e c t i o n s e r v i c e s . S a l e s o f
r e s i d e n t i a l f i re a l a r m s y s t e m s c o n t i n u e t o i n c rease.

New Law Drives Up Demand for
Residential Fire Alarm Systems

Fire extinguishing system installed toprotect a cultural property

A recent change in Japan’s Fire Protection Law
made the installation of fire alarm systems in
new homes mandatory nationwide on June 1,
2006. In the future, existing homes will also be
required to have fire alarm systems installedthat comply with rules set by local authorities.
In response, SECOM commenced sales of the
New Home Fire Sensor, a fire alarm system forresidential applications. This system is manufactured by Nohmi Bosai, the leading company inthis industry, which became a consolidated
subsidiary of SECOM in December 2006.
Developed for use in detached houses andapartment buildings, the New Home Fire Sensor
detects smoke and heat when fire starts andalerts occupants by sounding an alarm andflashing a light. The unit is battery-powered,meaning its performance is unaffected by power
failures, and freestanding, which eliminates
time-consuming wiring and facilitates easy
installation. Moreover, a battery life of 10 years,
a 10-year warranty effective from the date ofNohmi Bosai’s Menuma Factory

SECOM Co., Ltd.

receipt and round-the-clock SECOM support in
the event of a breakdown ensure prompt andeffective after-sales service. Owing to suchfeatures, the New Home Fire Sensor has
attracted praise from developers and others in
the housing construction industry, and we plan
to continue expanding sales.
To date, Nohmi Bosai has contributed to thecreation of a more secure society through theprovision of automatic fire alarm, fire extinguishing and other fire protection systems. The
company provides systems for office buildings,
plants, tunnels, cultural properties, ships,
residences and other facilities. In the future, wewill endeavor to respond to diverse and sophisticated fire protection needs and to cultivate
new markets by developing innovative productsthat integrate our security technologies withNohmi’s fire protection technologies.

Foam fire extinguishing system

17

SECOM Today

Medical Ser vices
SECOM’s medical services contribute to security and peace of mind by helping
t o re l i e v e h e a l t h c o n c e r n s . B y e x p a n d i n g i t s m e d i c a l s e r v i c e s b u s i n e s s e s , w h i c hinclude home medical ser vices and the management of nursing homes, SECOM
w i l l c o n t i n u e t o c h a r t f u r t h e r g ro w t h .
Raising the Standard of Home Nursing
Services
Our medical services business reflects ourconviction that protecting the health of customers is crucial to security and peace of mind.
We launched our medical services business in
1991, beginning with the provision of Japan’s
first home nursing services, whereby nurses
regularly visit patients in their homes andprovide nursing services, including observing
patients’ conditions and providing treatment inline with the instructions of each patient’s
physician.
We have expanded our network of SECOM
visiting nurse stations, which dispatch nurses topatients’ homes and are on call around-theclock, to 42. These nurses are highly skilled andexperienced. We have also built a new training
center for visiting nurses, with the aim offurther raising the standard of our services.
Going forward, we will continue striving toprovide home nursing services that not only
earn the trust of customers, but also surpass
their expectations.

Managing Specialized Nursing Homes
In October 2006, we opened Comfort Garden
Azamino, the first facility in our SECOMFORT
series of nursing homes, in Yokohama. Comfort
Garden Azamino brings together our expertisein such areas as security, medical care andpersonal care. We have earned a solid reputation in this field as an operator of nursing
homes that also provide personal care services,
including Sacravia Seijo, Royal Life Tama, as
well as the Alive Care Home series. Comfort
Garden Azamino draws on our specialized
knowledge in the management of nursing
homes with consideration for the advancing
needs of senior citizens in the years ahead.
Based on the concept of “comfortableaging,” Comfort Garden Azamino is designed
to provide peace of mind by enabling residents

to remain in the same place for the remainderof their lives with on-site health care and a wide
range of attentive care services provided byexpert staff. The second SECOMFORT nursing
home, Comfort Hills Rokko, is scheduled toopen in April 2009 in Kobe.
Visiting nurse training

Comfort Garden Azamino

Room in Comfort Garden Azamino

Home Medical Services

Prescription

Medical Care
Institution

Physician Guidance
Nurse Report

Coordination

Pharmaceutical Dispensingand Home Delivery Services

Home Nursing Services(SECOM Visiting Nurse Station)(SECOM Pharmacy)

Consulting
Prescription
Pharmaceutical Delivery

Patient

Visiting Nurse
Outpatient Care

Annual Report 200718

Insurance Ser vices
SECOM’s non-life insurance policies ensure peace of mind in the event of misf o r t u n e . S E C O M c o n t i n u e s t o d e v e l o p o r i g i n a l i n s u r a n c e o ff e r i n g s a n d e x p a n dinsurance ser vices sales.

Distinctive Non-Life Insurance Policies

New SECOM Anshin My Car on-site
emergency services

SECOM’s move into the non-life insurance
business reflects a conviction that combining
security services, which provide prior protection, and insurance, which looks after customers
in the event of misfortune, reinforces security
and peace of mind. Accordingly, our non-life
insurance subsidiary offers a variety of
distinctive policies
One of these is SECOM Anshin My Home,a popular policy designed for households thattakes into account the reduced risk of fire androbbery in homes that have installed home
security systems and consequently offers a
discount on premiums of up to 60%. The same
concept underlies the Security Discount Fire
Policy, which offers a discount on premiums of
up to 30% to commercial customers that haveinstalled security systems, recognizing this as arisk-mitigating factor. New SECOM Anshin My
Car is a comprehensive automobile insurance
policy that offers round-the-clock support
services from SECOM emergency response
personnel in the event of an accident.

MEDCOM nurse call center

Non-life insurance call center

SECOM Co., Ltd.

We also offer MEDCOM, an unrestricted
cancer treatment policy that covers the costof all treatments, including the cost of treatments not covered by Japan’s national healthinsurance scheme, which is normally borne by
the patients. This enables subscribers to takeadvantage of advanced treatment options
without worrying about the frequently prohibitive costs. MEDCOM also offers access to
MEDCOM Nurse Call, a service whereby staff
with nursing qualifications provides consultation and introduces medical institutions. This
enables subscribers to obtain second opinionsfrom experts aside from their own attending
physician. In August 2006, we introduced
MEDCOM One, a policy that is also available towomen who have previously had breast cancer.
Many standard cancer insurance policies do notcover individuals who have previously hadcancer. MEDCOM One is an unrestricted policythat is available to women who have had breast
cancer if they meet all of the policy’s otherrequirements.
Going forward, we will continue to work to
expand sales in the insurance services businessby developing attractive new insurance offerings.

19

SECOM Today

Geographic Infor m a t i o n S e r vices
Pasco is expanding its GIS, sur veying and measuring ser vices and operations with the aim of
becoming the world’s leading name in geospatial infor mation. The successful launch of an e w c o m m e rc i a l s a t e l l i t e h a s a l s o m a d e i t p o s s i b l e f o r P a s c o t o o ff e r s a t e l l i t e i n f o r mationbased geographic infor m a t io n s er vices.
Pasco Introduces New Geographic
Information Services

A Broad Range of Geospatial
Information Services

On June 15, 2007, a new German commercial
satellite boasting the highest resolution of any
existing commercial satellite was successfullylaunched into orbit. This satellite uses
microwaves to capture images of the earth’s
surface, meaning it can not only capture images
regardless of the weather or the time of day,but also achieve a maximum one meter-classresolution in doing so. With this satellite, it ispossible to obtain 1:25,000-scale geographicaldata for all of Japan in only one and a halfmonths—something that would take 10 years
with an aircraft and 4.5 years with a conventional optical satellite. We expect this capability
to facilitate the prompt updating of map data
and the swift provision of information on topographic changes resulting from earthquakes,
tsunamis, typhoons, volcanic eruptions andother natural disasters.
Pasco has obtained exclusive rights in Japanand nonexclusive rights worldwide to sell image
data offered by the satellite’s operator, enabling
the company to begin offering satellite-based
geographic information services. In the years
ahead, Pasco will focus its efforts on integrating
its accumulated surveying and measuring technologies, GIS capabilities and newly acquired
access to high-resolution satellite image data todevelop new geographic information services.

Pasco offers a wide range of geospatial information services, including the creation of threedimensional maps for automobile navigation
systems that incorporate a wide range of information, including the number of national
motorways and the number of lanes on the
motorways, as well as the location of filling
stations. For the public sector, Pasco provides
consulting services designed to support urban
planning and road engineering. For the private
sector, Pasco provides marketing support
services, designed to help companies formulate branch opening plans; logistics support
services, which aid efforts to develop appropriate plans for the use of trucks and other formsof transport; and disaster response services,which include a service that assesses the risk ofbuilding collapse and a service that helps
determine the safest routes between employees’ homes and workplaces in the event of adisaster. Pasco will continue to expand its
lineup of geospatial information services withthe aim of establishing itself as a global leader
in this field.

©Infoterra GmbH

Digital map superimposed with statistical data anddistance information for regional market analysis©EADS Astrium

Terra SAR-X commercial satellite and simulated image

Annual Report 200720

I n f o r mation and Communication Related and Other Ser vices
S E C O M e n d e a v o r s t o p ro v i d e s e c u r i t y a n d p e a c e o f m i n d w i t h a w i d e r a n g e o f i n f o r m a t i o n
and communication related services for today’s networked society. SECOM’s other services
include the development and sales of condominiums developed in line with a concept thatemphasizes peace of mind and quality lifestyles.
Providing Disaster Response Support
Services that Assist Corporate Risk
Management Efforts
We provide a variety of services designed toassist industrial and commercial subscribers toreopen for business as soon as possible after amajor disaster. These include the SECOM
Safety Confirmation Service, which helps companies confirm the safety of employees andtheir families, as well as to collect and shareprompt and accurate information on, for example, damage to buildings, in the event of anatural disaster, such as an earthquake or atyphoon, or a man-made disaster, such as aterrorist attack, thereby assisting them to swiftly
resume operations. We also offer the SECOM
Disaster Response Support Service, which isdesigned to assist companies in developing
effective initial response strategies, thereby
preparing them to act swiftly in the aftermath ofdisasters. The SECOM Electronic Data Storage
Service enables companies to back up andstore important data in a safe location provided
by SECOM. The swift resumption of operations
after a disaster and the formulation of a BCP tomake this possible are crucial aspects of risk
management for companies today. We are
currently taking steps to improve our disaster
response support services and enhance ourability to assist customers in the formulation ofeffective BCPs.

Support for Sophisticated Cyber Security:
The Secure Data Center
The Secure Data Center provides a highly secureenvironment for our subscribers’ servers thatcombines physical and cyber security. Physicalsecurity services include round-the-clock static
guards, access-control systems and surveillancecamera systems, while cyber security services focus
on the protection of subscribers’ valuable electronic data against Internet-based intrusion andcomputer viruses, and the provision of digitalauthentication services. Secure Data Center subscriptions continue to rise, underscoring the praise
it has attracted from prominent financial institutions and other subscribers. Going forward, we willcontinue to advance our cyber security offerings.

Secure Data Center

Condominiums with Contingency PlanningFeatures
In line with the concept of emphasizing peaceof mind and quality lifestyles, we have developed the Glorio series of condominiums, which
offer advanced security and benefit from ourcomprehensive capabilities. All units areequipped with our on-line security systems as astandard feature. The Glorio series also offers
Glorio Support 24 condominium management
services that enable residents to call a roundthe-clock customer center for assistance withdwelling-related problems, as well as questions
related to non-life insurance and medical andpersonal care. We also sell condominiums with
contingency planning features, including
earthquake-proof structural designs, as well as
a variety of emergency back-up features—
including hot water tanks that can be used tosupply emergency drinking water and emergency
toilets that use manholes—that help protect
occupants in the event of a major disaster. We
will continue to maximize our comprehensive
capabilities in security and fire protection,
among others, to develop condominiums thatearn the satisfaction of our customers.
Glorio Tower Sugamo (Tokyo)

SECOM Safety Confirmation Service

SECOM Co., Ltd.

21

Financial Review
Operating Results

Overview
In the year ended March 31, 2007, theparent company and its consolidated
subsidiaries (collectively “the Company”)
took a variety of steps aimed at reinforcing mainstay security services—including
offering new products and services, aswell as establishing new offices andrelocating existing offices—and promoting the expansion of fire protection
services, medical services, insurance
services, geographic information services, information and communication
related services, real estate development
and sales, and real estate leasing.
Favorable increases in all segments,
notably security services, and the inclusion of a new business, fire protection
services, in the Company’s consolidated
results during the period under review,supported an increase in net sales andoperating revenue of 9.7%, or ¥56.2
billion, from the previous period,to ¥636.7 billion. Higher net sales andoperating revenue, together with adecline in selling, general and administrative expenses and the absence of asettlement loss of benefit obligation ontransfer to defined contribution pension
plan recorded in the previous period,
pushed operating income up 15.3%, or¥12.5 billion, to ¥94.4 billion. Net income
advanced 11.0%, or ¥5.6 billion, to¥55.9 billion.
In December 2006, SECOM acquired
shares newly offered by Nohmi Bosai, until
then an affiliated company accounted forunder the equity method, which provides
automatic fire alarm, fire extinguishingand other fire protection systems. As aconsequence, Nohmi Bosai became aconsolidated subsidiary, and the results ofNohmi Bosai and its subsidiaries were
included in a newly established segment,
fire protection services. (For more details,
please see Notes 5 and 27 of the accompanying Notes to Consolidated Financial
Statements.)

Net Sales and Operating Revenue
Net sales and operating revenue
amounted to ¥636.7 billion, an increaseof 9.7%, or ¥56.2 billion. This result
reflected increases in net sales andoperating revenue in all segments andthe inclusion of the new fire protection
services business. (For more details,
please see Segment Information below.)
Costs and Expenses
Total costs and expenses rose 8.7%, or¥43.6 billion, to ¥542.3 billion. Cost of
sales increased 12.4%, or ¥45.3 billion, to¥410.3 billion, equivalent to 64.4% of net
sales and operating revenue, up from
62.9% in the previous period. The
increase in the cost-of-sales ratio was due
primarily to the inclusion of the new fire
protection services business, and theconsolidation at the previous fiscal yearend of three variable interest entities
engaged in the management of hospitals
and health care-related institutions.
Selling, general and administrative
expenses decreased 0.8%, or ¥1.0 billion,to ¥127.1 billion, equivalent to 20.0% of
net sales and operating revenue, downfrom 22.1% in the previous period. Thisdecline was mainly the result of adecrease in the provision for theallowance for doubtful accounts.
Impairment loss on long-lived assets
rose ¥355 million, to ¥1.2 billion, andimpairment loss on goodwill increased¥2.8 billion, to ¥3.0 billion, while losses onsales and disposal of property, plant andequipment, net, declined ¥1.4 billion, to¥781 million. In the previous period, thetransfer of a portion of the cash balance
pension plan maintained by the parent
company and certain domestic subsidiaries to a defined contribution pension plan resulted in recognition of a
portion of an unrecognized actuarial loss,
which was included as a settlement loss ofbenefit obligation on transfer to defined
contribution pension plan of ¥2.5 billion.

Annual Report 200722

Operating Income
Operating income rose 15.3%, or ¥12.5
billion, to ¥94.4 billion, and represented
14.8% of net sales and operating revenue,
up from 14.1% in the previous period.
This reflected such factors as an increasein net sales and operating revenue,
declines in selling, general and administrative expenses and losses on sales anddisposal of property, plant and equipment, net, and the absence of the settlement loss of benefit obligation on transfer
to defined contribution pension plan
recorded in the previous period. The
impact of these factors was partially offset
by an increase in cost of sales and anincrease in impairment loss on goodwill.
The security services segment, the information and communication related andother services segment and the newly
established fire protection services segment, contributed to the increase inoperating income. (For more details,
please see Segment Information below.)
Other Income and Expenses
Other income declined ¥7.5 billion, to¥8.4 billion, and other expenses
decreased ¥582 million, to ¥7.5 billion,
resulting in net other income of ¥918
million, compared with ¥7.8 billion in theprevious period. The decline in otherincome was due primarily to the absenceof a net gain on the sale of outstanding
shares of a cable television holding
company accounted for under the equity
method, which was recorded in theprevious period.
Income from Continuing Operations
before Income Taxes
Income from continuing operations
before income taxes amounted to ¥95.3
billion, an increase of 6.3%, or ¥5.6 billion,
as an increase in operating income waspartially offset by a decrease in net
other income, that is, the net of otherincome minus other expenses.

Segment Infor mation
For detailed segment information, please see Note 27 of the accompanying Notes to theConsolidated Financial Statements.

Income Taxes
Income taxes increased ¥2.7 billion, to¥40.6 billion, and were equivalent to42.6% of income from continuing operations before income taxes, up from 42.2%
in the previous period.
Minority Interests in Subsidiaries andEquity in Net Income of AffiliatedCompanies
Minority interests in subsidiaries amounted
to ¥4.6 billion, an increase of ¥722 million,
owing mainly to the inclusion of the newfire protection services business.
Equity in net income of affiliatedcompanies increased ¥2.5 billion, to¥5.8 billion, owing partially to solid
performances by affiliated companies
accounted for under the equity method
in Taiwan and the ROK.
Net Income
Income from continuing operations andincome before cumulative effect ofaccounting change were both ¥55.9
billion, an increase of 9.2%, or ¥4.7
billion, and equivalent to 8.8% of net
sales and operating revenue, the sameas in the previous period.
As a consequence of these and otherfactors, net income rose 11.0%, or ¥5.6
billion, to ¥55.9 billion. Net income pershare was ¥248.42. A resolution to raisecash dividends by ¥20.00, to ¥80.00 per
share, was approved at the generalshareholders’ meeting on June 27, 2007.
This increase in dividends reflected solid
operating results, and was in line with theCompany’s aim of ensuring returns toshareholders that accurately reflect its
operating performance by shifting thebasis for determining dividends—
calculated using Japanese accounting
principles—to consolidated results,
from nonconsolidated results, which it
previously used.

Security Services
The security services segment encompasses electronic security services, othersecurity services and merchandise andother. In the period under review, net sales
and operating revenue in the segmentrose 3.9%, or ¥15.5 billion, to ¥416.9 billion.
Excluding intersegment transactions,segment sales and operating revenue was¥415.4 billion, equivalent to 65.3% of total
net sales and operating revenue, downfrom 68.9% in the previous period.
Electronic security services include
centralized systems (on-line commercial
and home security systems) and largescale proprietary security systems, whichcenter on surveillance services at thesubscriber’s premises. Commercial andhome on-line security systems, the coreof the Company’s electronic security
services business, use sensors installedat the customer’s premises to detect
events, such as intrusions, fires andequipment malfunctions. Sensors arelinked to a SECOM control center via
telecommunications circuits to enableremote monitoring around-the-clock.
Should an event be detected, the relevant information is relayed to the control
center, where control center staff dispatch emergency response personnel.
Control center staff also notify the police
or fire department if required, while
emergency response personnel takeother appropriate measures,. To ensure
its ability to deliver the level of quality
customers expect, the Company has
established an integrated process thatallows it to maintain control over every
aspect of its electronic security services,from centralized systems research anddevelopment (R&D) to equipment manufacturing, sales, installation, 24-hourmonitoring, dispatch of emergency
response personnel and maintenance.
In the period under review, net sales
and operating income from electronic
security services amounted to ¥285.9

SECOM Co., Ltd.

23

billion, an increase of 2.9%, or ¥8.0
billion. Commercial subscriptions foron-line security systems suited to a wide
range of buildings and applications
continued to increase steadily. In thearea of home security systems, theCompany enhanced its product lineup,
thereby enabling customers to choose
the most appropriate system based on
the size and configuration of their home,
as well as positioning the Company toserve a broader range of customers.
Other security services include static
guard services, staffed by highly trained
professionals, for security situations that
require human judgment and flexible
responses, and armored car services, forthe transport of cash and valuables byspecially fitted armored cars and security
professionals. In the period under review,
net sales and operating revenue fromstatic guard services increased 1.6%, or¥664 million, to ¥42.1 billion, and thatfrom armored car services rose 4.8%, or¥939 million, to ¥20.3 billion.
The merchandise and other category
encompasses a wide range of security
products, including access-control systems, CCTV surveillance systems, fire
extinguishing systems and externalmonitoring systems, which can be usedalone or connected to on-line security
systems. In the period under review,
these products and services generated
net sales and operating revenue of ¥67.1
billion, an increase of 9.5%, or ¥5.8
billion. Increasing awareness of the needto ensure protection against crime, as
well as to properly manage information
assets, continued to support brisk salesof access-control systems and CCTV
surveillance systems.
Operating income in the security
services segment advanced 11.0%, or¥9.5 billion, to ¥96.2 billion, and theoperating margin rose to 23.1%, from
21.6% in the previous period. The
increase in segment operating income

Financial Review

was due mainly to the absence of asettlement loss of benefit obligation ontransfer to defined contribution pension
plan recorded in the previous period,
and to a decline in advertising costs.
Fire Protection Services
Fire protection services include automatic fire alarm systems, fire extinguishing systems and other fire protection
systems for a wide range of applications,
including office buildings, plants, tunnels,
cultural properties, ships and residences.
In the period under review, net sales
and operating revenue in the fire protection services segment amounted to ¥28.4
billion. Operating income was ¥1.8
billion, while the operating margin was
6.4%. Results for this segment include theoperating results of Nohmi Bosai and its
subsidiaries subsequent to its acquisitionin December 2006.
Medical Services
The medical services segment encompasses home medical services, including
pharmaceutical dispensing and delivery
and home nursing services; remote
image diagnosis support services; electronic medical report systems; sales of
medical equipment; the operation ofnursing homes; personal care services;and the leasing of real estate for medical
institutions.
In the period under review, net sales
and operating revenue in the medical
services segment amounted to ¥46.1
billion, up 16.9%, or ¥6.7 billion. Key
factors behind this result included anincrease in net sales and operating
revenue from the operation of nursing
homes and the consolidation of threevariable interest entities engaged in the
management of hospitals and healthcare-related institutions at the previous
fiscal year-end.

The segment registered an operating
loss of ¥2.9 billion in the period underreview, compared with an operating lossof ¥1.3 billion in the previous period. This
primarily reflected an increase in impairment loss on goodwill and an impairment
loss on long-lived assets.
Insurance Services
In addition to security services, which
provide prior protection, the Company
offers non-life insurance, which looks
after customers in the event of misfortune. The Company has developed andmarkets a variety of distinctive non-life
insurance policies, including Security
Discount Fire Policy, a commercial fire
insurance policy, and SECOM Anshin My
Home, a comprehensive fire insurance
policy for residences, which offer a
discount on premiums to subscribers
who have installed on-line security
systems, recognizing this as a risklowering factor. Other offerings include
New SECOM Anshin My Car, a comprehensive automobile insurance policythat offers on-site support services—
provided by the Company’s on-line
emergency response personnel—in theevent of an accident, and MEDCOM, anunrestricted cancer treatment policythat covers the entire cost of medical
treatments for cancer.
In the period under review, net sales
and operating revenue in the insurance
services segment rose 8.3%, or ¥2.6
billion, to ¥34.7 billion, owing to
expanded marketing of non-life insurance policies, which boosted net
premiums written.
The insurance services segment
posted operating income of ¥3.8 billion,
down 25.9%, or ¥1.3 billion. This result
primarily reflected an increase in net
claims paid, owing to the impact of
typhoons occurring during the period.

Annual Report 200724

Geographic Information Services
This segment encompasses a variety of
GIS services tailored to the needs of the
public and private sectors, as well as
surveying and measuring, and construction
consulting, services.
In the period under review, net sales
and operating revenue in the geographic
information services segment amounted
to ¥36.6 billion, an increase of 3.4%, or¥1.2 billion. Efforts included the provisionof high-precision national geospatial
data using laser scanners and digitalsensors. The Company also provided GIS
services tailored to the needs of privatesector customers, primarily companies.
Segment operating income fell 56.2%,
or ¥506 million, to ¥394 million, and theoperating margin slipped to 1.1%, from
2.5%. This result was due primarily to anincrease in the cost-of-sales ratio
prompted by increasingly intense pricing
competition in the market.
Information and Communication Related
and Other Services
This segment includes information andcommunications related services, including cyber security and information network system operation services, realestate development and sales, and realestate leasing.
In the period under review, net sales
and operating revenue in the informationand communication related and otherservices segment rose 7.0%, or ¥5.8
billion, to ¥88.6 billion. This result primarilyreflected a strong performance by the realestate development and sales business,bolstered by brisk sales of condominiums.
Robust results boosted operating
income in the real estate development andsales business. As a consequence, segment operating income increased 30.0%,
or ¥1.7 billion, to ¥7.3 billion, and theoperating margin rose to 8.3%, from 6.8%.

Financial Position

Total assets of the Company as of March
31, 2007, amounted to ¥1,241.2 billion, up
1.3%, or ¥16.0 billion, from the previous
fiscal year-end.
Total current assets declined 4.2%, or¥24.4 billion, to ¥554.2 billion. This mainlyreflected declines in cash and cash
equivalents (for more details, please see
Cash Flows below) and short-term investments, the latter a consequence of theredemption of public and corporate
bonds in the insurance services business,
which were partially offset by increases ininventories in the real estate development and sales business, and an increase
in inventories and notes and accounts
receivable, trade, in the fire protection
services business, newly included in the
Company’s consolidated accounts.
Owing to the decline in current assets
and an increase in current liabilities, anexplanation of which is presented below,
the current ratio edged down to 1.6
times, from 1.8 times at the previous
fiscal year-end.

Investments and long-term receivables rose 5.7%, or ¥17.8 billion, to¥328.6 billion, owing primarily to anincrease in investment securities in theinsurance services business.
Property, plant and equipment, lessaccumulated depreciation, increased
3.1%, or ¥7.4 billion, to ¥250.5 billion.
This was primarily attributable to theinclusion of the new fire protection
services business in the Company’s
consolidated accounts and the acquisition of real estate for lease in the realestate leasing business.
Other assets rose 16.3%, or ¥15.1
billion, to ¥107.9 billion. This was mainly
due to an increase in other intangible
assets related to the inclusion of the
new fire protection services business in
the Company’s consolidated accounts,
an increase in prepaid pension andseverance costs, and an increase indeferred charges attributable to anincrease in the number of security
services subscribers.

Shareholders’Equity per ShareTotal Assets(In billions of yen)

(In yen)

SECOM Co., Ltd.

25

Total liabilities of the Company
declined 7.7%, or ¥52.5 billion, to ¥628.1
billion. Total current liabilities were ¥348.1
billion, up 6.1%, or ¥20.0 billion, as
increases in bank loans in the real estatedevelopment and sales business; notes
and accounts payable, trade, in the fire
protection services business, newly
included in the Company’s consolidated
accounts; and deposits received related toarmored car services, were partially offset
by a decline in current portion of longterm debt prompted by the redemption ofbonds. The decline in total liabilities also
reflected a ¥94.4 billion decline in investment deposits by policyholders, to ¥93.4
billion, owing to the payout at maturity of
insurance policies with fixed maturities.
Total shareholders’ equity rose 8.5%,
or ¥43.0 billion, to ¥551.7 billion. Retained
earnings were ¥428.9 billion, up ¥42.3
billion. Accumulated other comprehensive income amounted to ¥11.4 billion, an
increase of ¥744 million. The equity ratiorose to 44.5%, from 41.5%.

Financial Review

Cash Flows

The Company is committed to maintaining sufficient liquidity to allow flexibility
in its operations and ensure a solid
financial foundation. To the best of its
ability, the Company is also firmly committed to financing related strategic
investments with cash generated by its
operating activities.
In the period under review, net cash
provided by operating activities
amounted to ¥67.9 billion. The principal
items contributing to this total were net
income of ¥55.9 billion and depreciation
and amortization of ¥58.2 billion, whichrose due to an increase in property, plantand equipment, while cash used inoperating activities included an increasein deferred charges of ¥18.3 billion andan increase in inventories of ¥17.3 billion.
Operating activities provided ¥10.6
billion less than in the previous period,
owing mainly to an increase in receivables
and due from subscribers, net ofDepreciation andAmortization

allowances, of ¥13.8 billion, up from ¥668
million in the previous period.
Net cash provided by investing activities amounted to ¥22.0 billion. Significant
factors included net proceeds from salesof short-term investments and investment securities of ¥62.2 billion, netproceeds from short-term and long-term
receivables of ¥8.4 billion. Payments forpurchases of property, plant and equipment totaled ¥46.4 billion, partially as aresult of the purchase of security equipment and control stations, prompted byan increase in the number of security
service subscribers. Investing activities
provided ¥18.2 billion more than in theprevious period, primarily as a consequence of the sale of short-term investments and investment securities to fundthe payout of investment deposits byinsurance policyholders.
Net cash used in financing activitieswas ¥128.4 billion. This amount includeda ¥94.4 billion decrease in investment
deposits by policyholders, a consequenceof the payout of insurance policies atmaturity, and repayments of long-term
debt—primarily the redemption ofbonds—of ¥52.3 billion. Financing activities used ¥79.6 billion more than in theprevious period, owing to the aforementioned decrease in investment deposits
by policyholders of ¥94.4 billion, compared with a decrease of ¥39.9 billion in
the previous period, and repayments oflong-term debt of ¥52.3 billion, up from
¥11.4 billion in the previous period.
As a result of the operating, investing
and financing activities of the Company
during the period under review, cash
and cash equivalents at end of year
amounted to ¥193.2 billion, down ¥37.8
billion from ¥231.0 billion at the previous
fiscal year-end.

Capital Expenditures

Cash Flows(In billions of yen)

(In billions of yen)

(In billions of yen)

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

Annual Report 200726

Audited Financial Statements

CONTENTSCONSOLIDATED FINANCIAL STATEMENTS ........................................................................ 28
CONSOLIDATED BALANCE SHEETS ............................................................................... 28
CONSOLIDATED STATEMENTS OF INCOME ................................................................. 30
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY............ 31
CONSOLIDATED STATEMENTS OF CASH FLOWS ....................................................... 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ............................................... 33
INDEPENDENT AUDITORS’ REPORT...................................................................................... 57

SECOM Co., Ltd.

27

Consolidated Financial Statements

CONSOLIDATED BALANCE SHEETSSECOM CO., LTD. and Subsidiaries
March 31, 2007 and 2006ASSETS

In millions of yen

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

March 31

March 31

2006

2007

¥0,193,215 ¥0,231,044
7,194
4,548
75,32965,187
14,892
82,13585,971
55,19527,963
26,192
98,33764,531
19,727
21,468(1,944)(1,622)
5,695
4,885
16,947
14,65910,912
10,423554,238
578,645$01,637,415
60,966638,381
126,203
728,568
236,975
833,364
167,178(16,475)
48,263
143,619
92,475
4,696,932

2007

Current assets:
Cash and cash equivalents (Note 6).............................................................................
Time deposits ...............................................................................................................
Cash deposits (Note 7) ..................................................................................................
Short-term investments (Note 8) .................................................................................
Notes and accounts receivable, trade .........................................................................
Due from subscribers ...................................................................................................
Inventories (Notes 9 and 13).........................................................................................
Short-term receivables (Note 21) .................................................................................
Allowance for doubtful accounts .................................................................................
Deferred insurance acquisition costs (Note 14) ..........................................................
Deferred income taxes (Note 17) .................................................................................
Other current assets ......................................................................................................
Total current assets................................................................................................

Investments and long-term receivables:
Investment securities (Note 8)......................................................................................
Investments in affiliated companies (Note 10) ...........................................................
Long-term receivables (Note 21)..................................................................................
Lease deposits ...............................................................................................................
Other investments .........................................................................................................
Allowance for doubtful accounts .................................................................................

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

Other assets:
Deferred charges (Note 2 (11)) .....................................................................................
Goodwill (Note 12) ........................................................................................................
Other intangible assets (Note 12).................................................................................
Prepaid pension and severance costs (Note 15).........................................................
Deferred income taxes (Note 17) .................................................................................
Total assets .............................................................................................................
See accompanying notes to consolidated financial statements.

Annual Report 2007

28

204,142
38,832
71,271
13,457
10,139(9,282)
328,559

194,174
38,07567,657
12,513
8,927(10,636)
310,710

1,730,017
329,085
603,991
114,042
85,924(78,661)2,784,398

77,273143,012233,323
69,446
5,261
528,315(277,810)
250,505

71,270131,995
222,398
59,922
8,164
493,749(250,660)
243,089

654,856
1,211,966
1,977,314
588,525
44,585
4,477,246(2,354,322)
2,122,924

45,208
41,10917,363
20,333
23,41917,273
15,817
10,9296,073
3,140
107,880
92,784¥1,241,182 ¥1,225,228

383,119
147,144
198,466
134,042
51,467914,238$10,518,492

LIABILITIES AND SHAREHOLDERS’ EQUITY

In millions of yen

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

March 31

March 31

2006

2007

¥0,126,964 ¥0,105,750
10,04444,71428,892
19,18029,903
26,43450,68941,29742,555
41,77325,023
22,372
19,047
16,05814,993
10,566348,110
328,144$ 1,075,966
85,119244,847
253,415
429,568
360,636
212,059
161,415
127,059
2,950,084

2007

Current liabilities:
Bank loans (Notes 7 and 13) .........................................................................................
Current portion of long-term debt (Notes 13 and 20).................................................
Notes and accounts payable, trade..............................................................................
Other payables...............................................................................................................
Deposits received (Note 7)............................................................................................
Deferred revenue (Note 2 (3)).......................................................................................
Accrued income taxes...................................................................................................
Accrued payrolls............................................................................................................
Other current liabilities (Note 17).................................................................................
Total current liabilities ...........................................................................................
Long-term debt (Notes 13 and 20)...................................................................................
Guarantee deposits received ...........................................................................................
Accrued pension and severance costs (Note 15) ...........................................................
Deferred revenue (Note 2 (3)) ..........................................................................................
Unearned premiums and other insurance liabilities (Note 14) .....................................
Investment deposits by policyholders (Note 14)............................................................
Deferred income taxes (Note 17) .....................................................................................
Other liabilities ..................................................................................................................
Total liabilities ........................................................................................................

40,15330,21018,446
21,71658,266
93,361
12,635
5,242
628,139

35,782
27,47912,583
20,33853,330187,785
10,481
4,686
680,608

340,280
256,017156,322
184,034
493,780
791,195
107,076
44,4255,323,213

Minority interests in subsidiaries ...................................................................................

61,31135,924

519,584

66,37879,998
9,923
428,850

66,37879,996
9,825
386,558

562,525
677,949
84,0933,634,322

8,101
(53)
—
1,272
2,113
11,433

11,127
30
(388)
—
(80)
10,68968,653(449)—
10,78017,90796,891

Common stock in treasury, at cost:
8,318,900 shares in 2007 and 8,301,997 shares in 2006 ...........................................
(44,850)(44,750)
Total shareholders’ equity.....................................................................................
551,732
508,696
Total liabilities and shareholders’ equity ............................................................. ¥1,241,182 ¥1,225,228(380,085)
4,675,695$10,518,492

Commitments and contingent liabilities (Note 24)

Shareholders’ equity (Note 18):
Common stock:
Authorized 900,000,000 shares;
issued 233,288,717 shares in 2007 and 2006 .........................................................
Additional paid-in capital..............................................................................................
Legal reserve..................................................................................................................
Retained earnings..........................................................................................................
Accumulated other comprehensive income (loss):
Unrealized gains on securities (Note 8) ...................................................................
Unrealized gains (losses) on derivative instruments (Note 23) .............................
Minimum pension liability adjustments (Note 15)..................................................
Pension liability adjustments—After application of SFAS No. 158 (Note 15).......
Foreign currency translation adjustments...............................................................

SECOM Co., Ltd.

29

Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF INCOME
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007

In millions of yen

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

Years ended March 31

Year ended March 31

2007

2006

2005

2007

Net sales and operating revenue ...................................................................... ¥636,678
Costs and expenses:
Cost of sales......................................................................................................
410,275
Selling, general and administrative expense (Notes 2 (17) and 19) ............
127,062
Impairment loss on long-lived assets (Note 11) ............................................
1,176
Impairment loss on goodwill (Note 12)..........................................................
2,966
Loss on sales and disposal of property, plant and equipment, net .............
781
Settlement loss of benefit obligation on transfer to defined
contribution pension plan (Note 15).............................................................
—
542,260
Operating income .................................................................................
94,418Other income:Interest and dividends .....................................................................................
2,993
Gain on sales of securities, net (Notes 8 and 10) ..........................................
1,772
Other (Note 16) .................................................................................................
3,672
8,437
Other expenses:
1,815Interest ..............................................................................................................
1,026
Loss on other-than-temporary impairment of investment securities..........
Other (Note 16) .................................................................................................
4,678
7,519
Income from continuing operations before income taxes ................
95,336
Income taxes (Note 17):
Current ..............................................................................................................
40,136
Deferred ............................................................................................................
430
40,566
Income from continuing operations before minority interests in
54,770subsidiaries and equity in net income of affiliated companies .....
(4,649)Minority interests in subsidiaries.......................................................................
Equity in net income of affiliated companies ...................................................
5,768
Income from continuing operations ...................................................
55,889
Income from discontinued operations, net of tax (Note 25) ...........................
—
Income before cumulative effect of accounting change ...................
55,889Cumulative effect of accounting change, net of tax(Notes 2 (2) and (10)) .........................................................................................
—Net income ............................................................................................ ¥055,889¥580,526¥552,354$5,395,576

364,932
128,077
821
149
2,164

349,212120,113
4,568
93
2,810

3,476,906
1,076,797
9,966
25,1366,618

2,490
498,633
81,893—476,796
75,558—4,595,423
800,153

2,209
10,044
3,683
15,936

2,119
276
4,171
6,566

25,36415,017
31,11971,500

1,877
2,263
3,961
8,101
89,728

1,488
227
6,136
7,851
74,273

15,381
8,695
39,64463,720807,933

34,931
2,973
37,90432,188(247)
31,941

340,136
3,644
343,780

51,824(3,927)
3,298
51,195—
51,19542,332(2,917)2,334
41,7499,877
51,626464,153(39,398)
48,881
473,636—
473,636(864)¥050,331

507¥052,133—$0,473,636

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

Years ended March 31

Year ended March 31

Per share data (Note 4):
Income from continuing operations——Basic...........................................................................................................
—Diluted........................................................................................................
Income from discontinued operations——Basic...........................................................................................................
—Diluted........................................................................................................
Cumulative effect of accounting change——Basic...........................................................................................................
—Diluted........................................................................................................
Net income——Basic...........................................................................................................
—Diluted........................................................................................................
Cash dividends per share ....................................................................................

2007

2006

2005

2007

¥248.42¥248.42¥227.53¥227.53¥185.52¥185.52

$2.11
$2.11

¥
¥

—
—

¥
¥

—
—

¥043.89¥043.89

$
$

—
—

¥
¥

—
—

¥ (3.84)¥ (3.84)¥002.25¥002.25$$——¥248.42¥248.42¥ 60.00¥223.69¥223.69¥ 50.00¥231.66¥231.66¥ 45.00

$2.11
$2.11
$0.51

See accompanying notes to consolidated financial statements.

Annual Report 2007

30

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITYSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007

In millions of yen

Balance, March 31, 2004 .....................................................................................
Comprehensive income:Net income...........................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities—
Unrealized holding gains or losses arising during the period........................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Unrealized losses on derivative instruments—
Unrealized holding gains or losses arising during the period.......................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Minimum pension liability adjustments...........................................................
Foreign currency translation adjustments .......................................................
Total comprehensive income ...............................................................................
Cash dividends.......................................................................................................
Transfer to legal reserve ........................................................................................
Conversion of convertible bonds ...........................................................................
Net changes in treasury stock ...............................................................................
Balance, March 31, 2005 .....................................................................................
Comprehensive income:Net income...........................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities—
Unrealized holding gains or losses arising during the period........................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Unrealized gains on derivative instruments—
Unrealized holding gains or losses arising during the period.......................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Minimum pension liability adjustments...........................................................
Foreign currency translation adjustments .......................................................
Total comprehensive income ...............................................................................
Cash dividends.......................................................................................................
Transfer to legal reserve ........................................................................................
Net changes in treasury stock ...............................................................................
Balance, March 31, 2006 .....................................................................................
Comprehensive income:Net income...........................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities—
Unrealized holding gains or losses arising during the period .....................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Unrealized losses on derivative instruments—
Unrealized holding gains or losses arising during the period .....................
Less: Reclassification adjustment for gains or losses
included in net income .....................................................................
Minimum pension liability adjustments...........................................................
Foreign currency translation adjustments .......................................................
Total comprehensive income ...............................................................................
Adjustments for initially applying SFAS No. 158, net of tax (Note 15)...................
Cash dividends.......................................................................................................
Transfer to legal reserve ........................................................................................
Gain on disposal of treasury stock .........................................................................
Net changes in treasury stock ...............................................................................
Balance, March 31, 2007 .....................................................................................

Number ofsharesissuedCommonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

233,281,133¥66,369¥79,987¥9,715¥305,582(¥ 1,400)(¥44,401)¥415,852

—

—

—

—

52,133——52,133

Commonstock
in treasury,at cost

Total

—

—

—

—

—

2,880

—

2,880

—

—

—

—

—

(1,840)—(1,840)

—

—

—

—

—

(91)

—

(91)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(83)
(164)
(584)

—
—
—

—
—
7,584
—
233,288,717——
9—66,378——
9—79,996

—
72
—
—
9,787

(10,127)(72)——
347,516————(1,282)

—
—
—
(157)
(44,558)

(83)
(164)
(584)
52,251(10,127)—18(157)
457,837

—

—

—

—

50,331——50,331

—

—

—

—

—

8,896

—

8,896

—

—

—

—

—

(3,356)—(3,356)

—

—

—

—

—

97

—

97

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

18
(30)
6,346

—
—
—

—
—
—
233,288,717———
66,378———79,996

—
38
—
9,825

(11,251)(38)—
386,558———
10,689——(192)(44,750)

18
(30)
6,346
62,302(11,251)—(192)
508,696

—

—

—

—

55,889——55,889

—

—

—

—

—

(1,562)—(1,562)

—

—

—

—

—

(1,464)—(1,464)

—

—

—

—

—

(113)

—

(113)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

30
(21)
2,193

—
—
—

—
—
—
—
—
233,288,717

—
—
—
—
—
¥66,378———2—¥79,998——
98——¥9,923—(13,499)(98)——¥428,850

1,681
—
—
—
—
¥11,433

—
—
—
—
(100)
(¥44,850)

30
(21)
2,193
54,952
1,681(13,499)—2(100)¥551,732

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

Balance, March 31, 2006...................................................................................................................
Comprehensive income:Net income........................................................................................................................................
Other comprehensive income (loss), net of tax (Note 18):
Unrealized gains on securities—
Unrealized holding gains or losses arising during the period ..................................................
Less: Reclassification adjustment for gains or losses
included in net income..................................................................................................
Unrealized losses on derivative instruments—
Unrealized holding gains or losses arising during the period ..................................................
Less: Reclassification adjustment for gains or losses
included in net income..................................................................................................
Minimum pension liability adjustments........................................................................................
Foreign currency translation adjustments ....................................................................................
Total comprehensive income ............................................................................................................
Adjustments for initially applying SFAS No. 158, net of tax (Note 15)................................................
Cash dividends....................................................................................................................................
Transfer to legal reserve .....................................................................................................................
Gain on disposal of treasury stock ......................................................................................................
Net changes in treasury stock ............................................................................................................
Balance, March 31, 2007 ..................................................................................................................

Commonstock

Additional
paid-in
capitalLegalreserve

Retainedearnings

Accumulated
other comprehensive
income (loss)

Commonstock
in treasury,at costTotal$562,525$677,932$83,263$3,275,915$90,585($379,237)$4,310,983

—

—

—

473,636——

473,636

—

—

—

—

(13,237)—(13,237)

—

—

—

—

(12,407)—(12,407)

—

—

—

—

(958)

—

(958)

—
—
—

—
—
—

—
—
—

—
—
—

254
(178)
18,585

—
—
—

—
—
—
—
—
$562,525

—
—
—
17
—
$677,949

—
—
830
—
—
$84,093(114,399)(830)——$3,634,322

14,247————$96,891

—
—
—
—
(848)
($380,085)

254
(178)
18,585
465,695
14,247(114,399)
—
17
(848)
$4,675,695

See accompanying notes to consolidated financial statements.

SECOM Co., Ltd.

31

Consolidated Financial Statements

CONSOLIDATED STATEMENTS OF CASH FLOWSSECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007

2007

Cash flows from operating activities:
Net income............................................................................................................................... ¥ 55,889
Adjustments to reconcile net income to net cash provided
by operating activities—
Depreciation and amortization, including amortization of deferred charges.................
58,248
Accrual for pension and severance costs, less payments ...............................................
(2,972)
Settlement loss of benefit obligation on transfer to defined contribution
pension plan (Note 15)......................................................................................................
—
Deferred income taxes, including discontinued operations ............................................
430
Loss on sales and disposal of property, plant and equipment, net ................................
781
Impairment loss on long-lived assets (Note 11) ...............................................................
1,176
Impairment loss on goodwill (Note 12) .............................................................................
2,966
Gain on sales of securities, net ..........................................................................................
(5,715)
Loss on other-than-temporary impairment of investment securities .............................
1,357
Equity in net income of affiliated companies....................................................................
(5,768)
Minority interests in subsidiaries, including discontinued operations...........................
4,649
Gain on sales of discontinued operations, net (Note 25).................................................
—
Cumulative effect of accounting change, net of tax (Notes 2 (2) and (10)) ....................
—
Changes in assets and liabilities, net of effects from acquisitions and disposals:(Increase) decrease in cash deposits ............................................................................. (10,142)
Increase in receivables and due from subscribers, net of allowances ....................... (13,798)(Increase) decrease in inventories ................................................................................. (17,264)
Increase in deferred charges .......................................................................................... (18,267)
Increase (decrease) in deposits received ......................................................................
9,022
Increase in deferred revenue..........................................................................................
2,137
Increase (decrease) in accrued income taxes ...............................................................
1,697
Increase (decrease) in guarantee deposits received ....................................................
2,318
Increase in unearned premiums and other insurance liabilities .................................
4,936(3,794)
Other, net .........................................................................................................................
Net cash provided by operating activities..................................................................

In millions of yen

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

Years ended March 31

Year ended March 31

2006

2005

2007

¥ 50,331¥052,133$ 473,636

52,339(3,209)51,450(2,619)493,627(25,187)

2,490
2,973
2,164
821
149
(14,514)3,444(3,298)
3,927
—
864

—
3,979
2,810
5,215
93
(3,457)722(2,334)
3,368(13,637)
(507)

—
3,644
6,618
9,966
25,136(48,432)
11,500(48,881)
39,398——(4,381)(668)(24,146)(16,804)
4,175
3,804
5,590
(20)
6,878
5,552

123
(9,234)
4,830(14,123)(2,718)334(1,067)(5,140)
5,088
9,805

(85,949)(116,932)(146,305)(154,805)
76,45818,11014,381
19,644
41,831(32,153)

67,88678,461

85,114575,305

Cash flows from investing activities:(Increase) decrease in time deposits .....................................................................................
(2,425)
Proceeds from sales of property, plant and equipment.......................................................
3,919
Payments for purchases of property, plant and equipment ................................................ (46,378)
Proceeds from sales of investment securities ...................................................................... 132,923
Payments for purchases of investment securities................................................................ (103,242)(Increase) decrease in short-term investments.....................................................................
32,548Acquisitions, net of cash acquired (Note 5) ..........................................................................
4,648
Payments for investments in affiliated companies (Note 10)..............................................
(5,158)(Increase) decrease in short-term receivables, net...............................................................
(474)
Payments for long-term receivables......................................................................................
(6,898)Proceeds from long-term receivables....................................................................................
15,740
Other, net .................................................................................................................................
(3,167)101
10,995(44,272)
99,889(68,597)868(1,190)—
3,065(11,338)
18,365(4,030)(638)
88,507(43,872)
66,534(96,945)(26,623)(246)—(6,670)(14,946)
16,836(5,959)(20,551)
33,212(393,034)
1,126,466(874,932)
275,831
39,390(43,712)(4,017)(58,458)
133,390(26,839)

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

22,036

3,856(24,022)

186,746

Cash flows from financing activities:
Proceeds from long-term debt ...............................................................................................
Repayments of long-term debt ..............................................................................................
Increase (decrease) in bank loans ..........................................................................................
Decrease in investment deposits by policyholders ..............................................................
Dividends paid .........................................................................................................................
Increase in treasury stock, net................................................................................................
Other, net .................................................................................................................................

12,154(52,269)
20,687(94,424)(13,499)
(100)
(920)

10,575(11,400)
4,387(39,934)(11,251)
(192)
(940)

10,163(43,695)(9,669)(2,597)(10,127)
(157)
(916)

103,000(442,958)
175,314(800,203)(114,399)(848)(7,796)

Net cash used in financing activities .......................................................................... (128,371)(48,755)(56,998)(1,087,890)

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

620

470

26

5,254

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

(37,829)
231,044

34,032
197,012

4,120
192,892(320,585)
1,958,000

Cash and cash equivalents at end of year................................................................................. ¥193,215¥231,044¥197,012$1,637,415

See accompanying notes to consolidated financial statements.

Annual Report 2007

32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SECOM CO., LTD. and Subsidiaries
Three years ended March 31, 2007

1. Nature of Operations
The parent company and its subsidiaries (collectively “theCompany”) are engaged in the areas of security services, fire
protection services, medical services, insurance services, geographic information services, and information and communication related and other services. With these services combined,
the Company is focusing on its “Social System Industry,” a network of integrated systems and services, targeted at the needs ofpeople and business.
The Company’s principal business activities are security services including on-line centralized security services for commercial and residential premises, static guard services, armored car
services for cash collection and deposit, and the development,
manufacturing and sale of various security equipment. The
Company also has been diversifying the operation of its services covering: fire protection services, including automatic
fire alarm systems and fire extinguishing systems; home andother medical services; non-life insurance services; geographic
information services using aerial surveying technology; information and communication related services, including cybersecurity services, software development and system integration
activities; development and sale of real estate; lease of realestate and other services.
2. Significant Accounting Policies
The parent company and its Japanese subsidiaries maintaintheir records and prepare their statutory financial statements inaccordance with accounting principles generally accepted inJapan. Certain adjustments and reclassifications have been
incorporated in the accompanying financial statements toconform with U.S. generally accepted accounting principles.
These adjustments were not recorded in the statutory booksof account.
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 subsidiaries.
The consolidated financial statements also include variableinterest entities to which the Company is primary beneficiary.
All significant 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
for under the equity method. Consolidated income includes
the Company’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 consolidated subsidiary or affiliated company
accounted for using the equity method may issue its shares tothird parties as either a public or private offering or upon

SECOM Co., Ltd.

conversion of convertible bonds to common stock at amounts
per share in excess of or less than the Company’s average pershare carrying value. With respect to such transactions, where
the sale of such shares is not a part of a broader corporate reorganization contemplated or planned by the Company, the resulting gains or losses arising from the change in ownership interest
are recorded in income for the year the transaction occurs.

(2) Consolidation of Variable Interest Entities
In December 2003, the Financial Accounting Standards Board(“FASB”) issued FASB Interpretation No. 46 (revised December
2003) (“FIN No. 46R”), “Consolidation of Variable Interest Entities,
an Interpretation of ARB No. 51.” FIN No. 46R addresses theconsolidation and disclosure by business enterprise of a variable interest entity (“VIE”) as defined in the Interpretation.
FIN No. 46R requires that the primary beneficiary—a party thatabsorbs a majority of the entity’s expected loss and receives amajority of the entity’s expected residual returns, or both, as aresult of holding variable interests—consolidates the VIE and an
enterprise that holds significant variable interests but is not the
primary beneficiary discloses certain required information about
the VIE. FIN No. 46R was effective immediately for all new VIEs
created or acquired after January 31, 2003. For VIEs created or
acquired prior to February 1, 2003, FIN No. 46R was effective for
the Company on April 1, 2004.
The Company adopted the provisions of FIN No. 46R for VIEs
created or acquired prior to February 1, 2003 on April 1, 2004.
Under FIN No. 46R, any difference between the net amount added
to the consolidated balance sheet and any previously recognizedinterest in the VIE shall be recognized as a cumulative effect ofaccounting change. As a result of the adoption of FIN No. 46R,
one organization managing hospitals and health care-related
institutions was consolidated and the Company recognized aone-time gain of ¥507 million as a cumulative effect of accounting change and the Company’s assets and liabilities increased by¥3,636 million and ¥3,119 million, respectively, on April 1, 2004.
The Company provides loans and guarantees to organizations
managing hospitals and health care-related institutions and to
a PFI (Private Finance Initiative) organization which was established to build, maintain and operate correctional facilities.
Certain organizations are considered as VIEs under FIN No. 46R.
In March 2006, the Company provided additional loans andacquired additional variable interests in three organizations
managing hospitals and health care-related organizations. As
a result of the acquisitions, the Company has become the primary beneficiary of these organizations and has consolidated
these organizations since March 2006. The aggregated fairvalue of current assets, goodwill, and other non-current assets
acquired are ¥1,894 million, ¥1,711 million and ¥6,795 million,
respectively, and liabilities assumed are ¥4,144 million. The
results of their operations have been included in the consolidated statements of income since the date of acquisition. The
consolidated pro forma information that would show the
Company’s consolidated results of operations for the years
ended March 31, 2006 and 2005 has not been disclosed basedon materiality considerations.

33

Consolidated Financial Statements

Total assets held by VIEs to which the Company is primary
beneficiary were ¥18,405 million ($155,975 thousand) and¥21,003 million at March 31, 2007 and 2006, respectively. Total
assets held by VIEs to which the Company holds significant
variable interests but is not primary beneficiary at March 31,
2007 and 2006 were ¥44,105 million ($373,771 thousand) and¥28,359 million, respectively. The Company’s maximum exposure to losses related to VIEs at March 31, 2007 and 2006 were
¥10,302 million ($87,305 thousand) and ¥12,552 million,
respectively.
The Company also provided loans and guarantees to realestate investment companies. Certain investment companies
were considered as VIEs under FIN No. 46R. Total assets heldby these VIEs to which the Company was primary beneficiaryat March 31, 2006 were ¥10,638 million. In September 2006,
the Company acquired 100% ownership of these VIEs and consolidated as its subsidiaries. There are no such VIEs to which
the Company holds significant variable interests but was notprimary beneficiary at March 31, 2007.

(3) Revenue Recognition
The Company generates revenue principally through sales of
security services, merchandise and software, and insurance services under separate contractual arrangements. The Company
recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered,title and risk of loss have been transferred to the customer, thesales price is fixed or determinable, and collectibility is probable.
Revenue from security services is recognized over the contractual period or, in the case of specific services, when suchservices are rendered. Subscribers are generally requested
to prepay a portion of service charges which are credited todeferred revenue and taken into income ratably over thecovered service period. Revenue from installation servicesof security equipment related to on-line centralized security
services is deferred and recognized over the contractual periodof security services after completion of the installation. The
related installation costs are also deferred and amortized overthe contractual period (Note 2 (11)).
The Company enters into arrangements with multiple elements,
which may include any combination of security equipment,
installation and security service. The Company allocates revenue to each element based on its relative fair value if suchelement meets criteria for treatment as a separate unit ofaccounting as prescribed in the Emerging Issues Task Force(“EITF”) No. 00-21, “Accounting for Revenue Arrangement with
Multiple Deliverables.” Otherwise, revenue is deferred until theundelivered elements are fulfilled as a single unit of accounting.
EITF No. 00-21 was effective for revenue arrangements enteredinto after March 31, 2004. The adoption of EITF No. 00-21 did
not have a material effect on the Company’s financial position
and results of operations.

Annual Report 2007

Revenue from sales of merchandise and software is recognizedwhen the merchandise and software are received by the customer and, in the case of installations, when such installations
are completed.
Revenue from construction contracts for fire protection services
is recognized when constructions are completed.
Revenue from long-term contracts for geographic information
services is recognized under the percentage-of-completion
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.
Revenue from sales of equipment under sales-type leases isrecognized at the inception of the lease. Unearned income onsales-type leases and direct-financing leases is recognized overthe life of each respective lease using the interest method.
Leases not qualifying as sales-type leases or direct-financing
leases are accounted for as operating leases and the related
revenue is recognized over the lease term.

(4) Foreign Currency Translation
All asset and liability accounts of foreign subsidiaries andaffiliates are translated into Japanese yen at the rates of
exchange in effect at year-end and all income and expense
accounts are translated at average rates of exchange during theyear. 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.
(5) 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.
(6) 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.” “Held-tomaturity” securities are those securities in which the company
has the ability and intent to hold the security until maturity. All
securities not included in “trading” or “held-to-maturity” areclassified as “available-for-sale” securities. Marketable debt
and equity securities which are classified as “available-for-sale”
are recorded at fair value. Unrealized holding gains and losses
on securities classified as “available-for-sale” are reported aspart of other comprehensive income (loss), net of tax. Debt
securities classified as “held-to-maturity” are reported atamortized cost.

34

A decline in the fair value of any available-for-sale securities
below cost that is deemed to be other-than-temporary results ina reduction in carrying amount to fair value. The impairment ischarged to income and a new cost basis for the securities isestablished. To determine whether an impairment is other-thantemporary, the Company periodically reviews the fair value ofavailable-for-sale securities for possible impairment by taking
into consideration the financial and operating conditions of theissuer, the general market conditions in the issuer’s industry,
the degree and period of the decline in fair value and otherrelevant factors.
Other investments in non-public companies are recorded atcost as fair value is not readily determinable. The Company periodically evaluates the values of other investments in non-publiccompanies for possible impairment by taking into consideration
the financial and operating conditions of the issuer, the generalmarket conditions in the issuer’s industry and the period of thedecline in the estimated fair value and other relevant factors. If
the impairment is determined to be other-than-temporary, otherinvestments in non-public companies are written down to their
impaired value through a charge to income.
Realized gains or losses on the sale of investments are basedon the moving-average cost method and are credited or
charged to income.

(7) Inventories
Inventories, consisting of security-related products, fire
protection-related products, real estate and information andother related products, are stated at the lower of cost or market.
Cost is determined, in the case of real estate, based on the specific identification method and, in the case of other inventories,
using the moving-average method.
(8) Allowance for Doubtful Accounts
The Company recognizes an allowance for doubtful accounts
to ensure trade and other receivables are not overstated due touncollectibility. Allowance for doubtful accounts is maintained
for all customers based on a variety of factors, including thelength of time receivables are past due, macroeconomic conditions, significant one-time events and historical experience. An
additional reserve for individual accounts is recorded when the
Company becomes aware of a customer’s inability to meet its
financial obligations, such as in the case of bankruptcy filings ordeterioration in the customer’s operating results or financial
position. If circumstances related to customers change, estimatesof the recoverability of receivables would be further adjusted.
(9) Deferred Insurance Acquisition Costs
Costs that vary with and are primarily related to acquiring
new insurance policies are deferred and are being amortizedprincipally over the premium-paying period of the related
insurance policies applying a percentage relationship of cost
incurred to premiums from contracts issued to applicable

SECOM Co., Ltd.

unearned premiums throughout the period of the contract.

(10) Property, Plant and Equipment and Depreciation
Property, plant and equipment, including significant leasehold improvements, are carried at cost. Depreciation is computed primarily using the declining-balance method at rates
based on the estimated useful lives of the assets. Assets leased
to others under operating leases are primarily depreciatedusing the straight-line method over the estimated useful lives.
Depreciation expense was ¥38,719 million ($328,127 thousand),¥33,042 million and ¥33,465 million for the years ended March
31, 2007, 2006 and 2005, respectively. Maintenance, repairs andrenewals 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 to 8 years
Machinery, equipment and automobiles 3 to 15 years
In March 2005, the FASB issued FASB Interpretation No. 47(“FIN No. 47”), “Accounting for Conditional Asset Retirement
Obligations—an interpretation of FASB statement No. 143.”
FIN No. 47 clarifies that the term “conditional asset retirement
obligation” as used in Statement of Financial AccountingStandards (“SFAS”) No. 143, “Accounting for Asset Retirement
Obligations,” refers to a legal obligation of an entity to perform
an asset retirement activity in which the timing and/or methodof settlement are conditional on a future event that may or may
not be within the control of the entity. Such an obligation to perform the asset retirement activity is unconditional even though
uncertainty exists about the timing and/or method of settlement. Accordingly, an entity is required to recognize a liability
for the value of a conditional asset retirement obligation if thefair value of the liability can be reasonably estimated. FIN No. 47
is effective no later than the end of fiscal years ended after
December 15, 2005 and required to be adopted by the Company
on March 31, 2006. The Company has determined that conditional legal obligations exist for certain of its leased facilities.
As a result of adoption of FIN No. 47, on March 31, 2006, theCompany recognized a one-time expense of ¥864 million as acumulative effect of accounting change, and the Company’s
buildings and improvements, and liabilities increased by ¥694
million and ¥2,162 million, respectively.
(11) Deferred Charges
Deferred charges primarily consist of costs related to installation services of security equipment related to on-line centralized
security services. The installation costs are deferred and amortized using the straight-line method over the contractual periodof security services after completion of the installation. Amortization expense was ¥14,474 million ($122,661 thousand), ¥14,045
million and ¥13,583 million for the years ended March 31, 2007,
2006 and 2005, respectively.

35

Consolidated Financial Statements(12) Impairment or Disposal of Long-Lived Assets
In accordance with SFAS No. 144, “Accounting for
Impairment or Disposal of Long-Lived Assets,” the Company
reviews the carrying amount of its long-lived assets held andused, other than goodwill and intangible assets with indefinite
lives, and assets to be disposed of, whenever events or changes
in circumstances indicated that the carrying amount may not berecoverable. Long-lived assets to be held and used are reviewed
for impairment by comparing the carrying amount of the assets
with their estimated future undiscounted cash flows. If it isdetermined that an impairment loss has occurred, the loss
would be recognized during the period. The impairment loss
would be calculated as the difference between the asset carrying amount and the fair value. Long-lived assets that are to bedisposed of other than by sale are considered held and useduntil they are disposed of. Long-lived assets that are to be disposed of by sale are reported at the lower of their carrying
amount or fair value less cost to sell. Reductions in carrying
amount are recognized in the period in which the long-lived
assets are classified as held for sale.
(13) Goodwill and Other Intangible Assets
Goodwill represents the excess of costs over fair value of assetsof business acquired. Pursuant to SFAS No. 142, “Goodwill andOther Intangible Assets,” goodwill and intangible assets acquired
in a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for
impairment at least annually. SFAS No. 142 also requires that
intangible assets with estimable useful lives be amortized overtheir respective estimated useful lives to their estimated residual
values, and reviewed for impairment in accordance with SFAS
No. 144. The Company conducts its annual impairment test at
the end of each fiscal year.
(14) 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.
(15) Income Taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between thefinancial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in theyears in which those temporary differences and carryforwards
are expected to be realized or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in

Annual Report 2007

income in the period that includes the enactment date. Valuation
allowances are recorded to reduce deferred tax assets when it ismore likely than not that a tax benefit will not be realized.

(16) Research and Development
Research and development costs are charged to income
as incurred.
(17) Advertising Costs
Advertising costs are charged to income as incurred, except
for the costs related to insurance policies. Advertising costs foracquiring new insurance policies are deferred and amortizedas part of insurance acquisition costs. Advertising expenses
included in selling, general and administrative expenses forthe years ended March 31, 2007, 2006 and 2005 were ¥5,348
million ($45,322 thousand), ¥6,746 million and ¥5,186 million,
respectively.
(18) Derivative Financial Instruments
The Company accounts for derivative financial instruments inaccordance with SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended.
The Company recognizes all derivative financial instrumentsin the consolidated financial statements at fair value regardlessof the purpose or intent for holding them. Changes in the fairvalue of derivative financial instruments are either recognizedperiodically in income or in shareholders’ equity as a componentof other comprehensive income (loss) depending on whether
the derivative financial instruments qualify for hedge accounting, and if so, whether they qualify as a fair value hedge or acash flow hedge. Changes in the fair values of derivative financial instruments accounted for as a fair value hedge are recorded
in income along with the portion of the change in the fair valueof the hedged item that relates to the hedged risk. Changes in
the fair value of derivative financial instruments accounted for
as a cash flow hedge, to the extent it is effective as a hedge,
are recorded in other comprehensive income (loss), net of tax.
Changes in the fair value of derivative financial instruments not
qualifying as a hedge are reported in income.
The Company meets the documentation requirements which
include their risk management objective and strategy for undertaking various hedge transactions. In addition, formal assessment
is made at the hedge’s inception and periodically on an on-goingbasis, as to whether the derivatives used in hedging activities
are highly effective in off-setting changes in fair values or cash
flow of hedged items. Hedge accounting is discontinued for
ineffective hedges, if any. Discontinued hedges are recognizedin current income.
(19) Discontinued Operations
SFAS No. 144 broadened the scope of discontinued operations to include the operating results of any component of anentity with its own identifiable operations and cash flows which
is disposed of or is classified as held for sale, and with which

36the Company will not have significant continuing involvement.
Included in reported discontinued operations are the operating
results of certain businesses and properties sold in the year ended
March 31, 2005, without significant continuing involvement.

(20) Earnings per Share
Basic Earnings per Share (“EPS”) is computed based on the
average number of shares of common stock outstanding forthe period. Diluted EPS assumes the dilution that could occur
if securities or other contracts to issue common stock were
exercised or converted into common stock, or resulted in theissuance of common stock.
Cash dividends per share shown in the accompanying consolidated statements of income are computed based on dividends
approved and paid in each fiscal year.
(21) Use of Estimates
The preparation of the consolidated financial statements
requires management of the Company to make a number of
estimates and assumptions relating to the reported amounts ofassets and liabilities and the disclosure of contingent assets andliabilities at the date of the consolidated financial statements
and the reported amounts of revenues and expenses during theperiod. Significant items subject to such estimates and assumptions include the carrying amounts of inventories, investment
securities, investments, property, plant and equipment, goodwill and other intangible assets; valuation allowances for receivables and deferred income taxes; valuation of derivative
instruments; and assets and obligations related to employee
benefits. Actual results could differ from those estimates.
(22) Recent Pronouncements
In March 2006, the FASB issued SFAS No. 156, “Accounting
for Servicing of Financial Assets.” This statement amends
SFAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities,” regarding
the accounting for separately recognized servicing assets andservicing liabilities to be initially measured at fair value, if practicable. SFAS No. 156 is effective for the fiscal years beginning
after September 15, 2006 and is required to be adopted by theCompany in the fiscal year beginning April 1, 2007. The Company
is currently evaluating the effect of adopting SFAS No. 156 on
its consolidated financial statements. It is not anticipated thatthe adoption will have a material impact on the Company’s
consolidated results of operations or financial position.
In June 2006, the FASB issued FASB Interpretation No. 48(“FIN No. 48”), “Accounting for Uncertainty in Income Taxes,
an interpretation of SFAS No. 109.” FIN No. 48 clarifies theaccounting for uncertainty in income taxes by prescribing therecognition threshold a tax position is required to meet before
being recognized in the financial statements. It also provides
guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure, and transition. FIN
No. 48 is effective for the fiscal years beginning after December

SECOM Co., Ltd.

15, 2006 and is required to be adopted by the Company as of April
1, 2007. The Company is currently evaluating the effect of adopting FIN No. 48 on its consolidated financial statements.
It is not anticipated that the adoption will have a material
impact on the Company’s consolidated results of operations
or financial position.
In September 2006, the FASB issued SFAS No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statement No. 87,
88, 106, and 132(R).” This statement amends SFAS No. 87,“Employers’ Accounting for Pensions,” SFAS No. 88, “Employers’
Accounting for Settlements and Curtailments of Defined Benefit
Pension and for Termination Benefits,” SFAS No. 106, “Employers’
Accounting for Postretirement Benefits Other Than Pension,” andSFAS No. 132(R), “Employers’ Disclosures about Pensions andOther Postretirement Benefits.” This statement requires an
employer to recognize the overfunded or underfunded status as
an asset or liability in its statement of financial position and torecognize changes in that funded status in comprehensive income(loss) in the year in which the changes occur. This statement
replaces SFAS No. 87’s requirement to report at least minimum
pension liability measured as excess at the accumulated benefit
obligation over the fair value at the plan assets. The Company
adopted SFAS No. 158 on March 31, 2007. SFAS No. 158’s provisions regarding the change in the measurement date will nothave a material impact on the Company’s consolidated resultsof operations and financial condition as the Company alreadyuses a measurement date of March 31 for the majority of its
plans. Detailed information about the impact of the adoptionof SFAS No. 158 is provided in Note 15 to the accompanying
consolidated financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value
Measurements.” SFAS No. 157 defines fair value, establishes aframework for measuring fair value, and expands disclosuresabout fair value measurements. SFAS No. 157 will be effective forfiscal years beginning after November 15, 2007, and the Company
is required to be adopted in fiscal year beginning after April 1,
2008. The Company is currently evaluating the effect of adopting
SFAS No. 157 on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities—Including anamendment of SFAS No. 115.” SFAS No. 159 provides companies
with an option to report selected financial assets and liabilities atfair value. Unrealized gains and losses on items for which the fairvalue option has been elected will be recognized in earnings. SFAS
No. 159 will be effective for the Company as of April 1, 2008. The
Company is currently evaluating the effect of adopting SFAS No. 159
on its consolidated financial statements.

(23) Reclassifications
The accompanying consolidated financial statements for the years
ended March 31, 2006 and 2005 have been reclassified to conformto the presentation used for the year ended March 31, 2007.

37

Consolidated Financial Statements

5. Acquisition
3. U.S. Dollar Amounts
In December 2006, the Company acquired 18,500,000 newly
U.S. dollar amounts have been included in these financial statements solely for the convenience of the reader. The translations of issued shares—equivalent to 30.8 percent of total outstanding
common stocks—of Nohmi Bosai Ltd. (“Nohmi Bosai”), listed
yen into U.S. dollars have been made at the rate of ¥118=US$1,
on the First Section of the Tokyo Stock Exchange and operates
the rate prevailing on the Tokyo Foreign Exchange Market on
March 31, 2007. These translations should not be construed as rep- automatic fire alarm, fire extinguishing and other fire protection
resenting that the yen amounts actually represent, or have been or systems, for an aggregate amount of ¥14,060 million ($119,153
thousand). As a result of this new share acquisition, the Company
could be converted into U.S. dollars at that rate.
owns 50.4 percent of the total outstanding common stocks ofNohmi Bosai. The operating results of Nohmi Bosai and its
4. Reconciliation of the Differences between Basic andsubsidiaries (collectively, “Nohmi Bosai group”) have been
Diluted Net Income per Share (“EPS”)
included in the consolidated financial statements since the date
Reconciliation of the differences between basic and dilutedof acquisition. The Company has been in an alliance with Nohmi
EPS for the years ended March 31, 2007, 2006 and 2005 is
Bosai, which had been accounted for under the equity method
as follows:
before this new share acquisition. Purpose of this acquisition
In millions Thousands
is to reinforce its alliance with Nohmi Bosai by integrating theof yenof shares
In yenCompany’s expertise in security systems with Nohmi Bosai’s
Income fromcontinuing
Weightedfire protection technologies.
operations average shares
EPS
The value of the transaction was determined based on the
For the year ended March 31, 2007:
average closing price of Nohmi Bosai’s common stocks on the
Basic EPS—Tokyo Stock Exchange over the one month period (from October
Income from continuing operations.........
¥55,889 224,974 ¥248.42
23, 2006 to November 21, 2006). Price per share was ¥760
Effect of dilutive securities—($6.44), which represents a 5.6% discount from the average
Convertible bonds......................................
——
share price.
Diluted EPS—
The following table summarizes the estimated fair values ofIncome from continuing operations
the assets acquired and liabilities assumed at the date of acquisifor diluted EPS computation ...................
¥55,889 224,974 ¥248.42
tion. The excess of the fair value of acquired net assets over cost
For the year ended March 31, 2006:
was deducted on a pro rata basis to all acquired assets except
Basic EPS—
financial assets other than investments accounted for under the
Income from continuing operations.........
¥51,195 225,002 ¥227.53
equity method, deferred tax assets, prepaid pension andEffect of dilutive securities—
severance costs, and any other current assets.
Convertible bonds......................................
——
Diluted EPS—
Income from continuing operations
for diluted EPS computation ...................
For the year ended March 31, 2005:
Basic EPS—
Income from continuing operations.........
Effect of dilutive securities—
Convertible bonds......................................
Diluted EPS—
Income from continuing operations
for diluted EPS computation ...................

For the year ended March 31, 2007:
Basic EPS—
Income from continuing operations.........
Effect of dilutive securities—
Convertible bonds......................................
Diluted EPS—
Income from continuing operations
for diluted EPS computation ...................

¥51,195

225,002 ¥227.53¥41,749

225,039 ¥185.52—¥41,7493

225,042 ¥185.52

In thousands Thousandsof U.S. dollarsof shares

In U.S.
dollars

Income fromcontinuing
Weightedoperations average shares

EPS$473,636

224,974——$473,636

224,974

$2.11

$2.11

Annual Report 2007

Cash and cash equivalents.................
Receivables and othercurrent assets ....................................
Investments andlong-term receivables .......................
Property, plant and equipment ..........
Intangible assets .................................
Total assets acquired ......................
Current liabilities .................................
Other liabilities ....................................
Total liabilities assumed .................
Minority interests in subsidiaries ......
Net assets acquired.........................

In millions of yen

In thousands of
U.S. dollars¥17,513$148,415

41,991355,856

9,015
5,973
4,769
79,26127,001
7,757
34,758124¥44,379

76,39850,61940,415
671,703
228,82265,737
294,559
1,051$376,093

Substantially all of the trademarks (including trade names)
assigned for ¥1,879 million ($15,924 thousand) out of total
intangible assets acquired for ¥4,769 million ($40,415 thousand)are not subject to amortization. ¥2,890 million ($24,491 thousand)of acquired intangible assets was assigned to assets subject toamortization, which have a weighted-average useful life of
approximately 16 years, including customer contracts and related
customer relationships of ¥1,908 million ($16,169 thousand) witha 20-year weighted-average useful life.

38

The following unaudited pro forma information shows theCompany’s consolidated results of operations for the year ended
March 31, 2007 and 2006 as though Nohmi Bosai group had been
consolidated at the beginning of the years.
Unaudited
In millions of yen
Years ended March 31

Pro forma net sales and operating
revenue ..............................................
Pro forma net income .........................

2007

2006

¥686,429
56,090¥653,872
50,573
UnauditedIn yenYears ended March 31

Pro forma net income per share:—Basic..............................................
—Diluted ..........................................

2007

2006

¥249.32
249.32¥224.77224.77The unaudited pro forma data is not necessarily indicative of theCompany’s consolidated results of operations that would actually have been reported if the transaction in fact had occurred at
the beginning of the years, and is not necessarily representativeof the Company’s consolidated results of operations for any
future period.
6. Cash and Cash Equivalents
Cash and cash equivalents at March 31, 2007 and 2006 werecomprised as follows:

deposit balances of ¥75,329 million ($638,381 thousand) and¥65,187 million at March 31, 2007 and 2006, respectively, aresegregated from cash and cash equivalents and are restricted
as to use by the Company. The Company funds most of the necessary cash through bank overdrafts and deposits. Bank loans
and deposits received, which relate to these operations, were¥27,668 million ($234,475 thousand) and ¥47,166 million ($399,712
thousand), respectively, at March 31, 2007, and ¥26,069 millionand ¥38,511 million, respectively, at March 31, 2006. As part ofits fee arrangement, the Company is reimbursed for the 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, 2007 and 2006 wereas follows:
In millions of yen
March 31, 2007
Gross unrealized
Cost

Gains

LossesFair value

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

¥060,394
103,173¥163,567¥19,798923¥20,721¥3,065
1,066¥4,131¥077,127
103,030¥180,157

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

¥003,526¥¥0,020¥003,506—

In millions of yen
In millions of yen

2007

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

¥140,849
34,087
15,0003,279¥193,215

In thousands of
U.S. dollars

March 31

March 31

2006

2007

¥144,024
60,34525,0001,675¥231,044$1,193,635
288,873
127,119
27,788$1,637,415

Investment securities include commercial papers and money
management funds. These agreements mature within threemonths and the carrying values approximate market. The
Company has not experienced any losses through default of
the financial institutions and does not anticipate default of any
outstanding agreements.
7. Cash Deposits
The Company operates cash collection and deposit services
for financial institutions relating to cash dispensers located outside of financial institution facilities and also operates cash collection service for entities other than financial institutions. Cash

SECOM Co., Ltd.

March 31, 2006
Gross unrealized
Cost

Gains

LossesFair value

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

¥ 60,495
152,253¥212,748¥27,463376¥27,839¥1,981
2,067¥4,048¥ 85,977
150,562¥236,539

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

¥

¥

¥

¥

3,909

—

33

3,876

In thousands of U.S. dollars
March 31, 2007
Gross unrealized
LossesFair value

Available-for-sale:
Equity securities ....... $ 511,814
Debt securities ..........
874,347
Total ........................ $1,386,161

Cost$167,779 $25,974
7,822
9,034
$175,601 $35,008$ 653,619
873,135$1,526,754

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

$

$

39

29,881Gains— $00,169

29,712

Consolidated Financial Statements

In thousands of U.S. dollars

Gross unrealized losses on, and fair value of, “available-forsale” and “held-to-maturity” securities, aggregated by investment category and the length of time that individual securities
have been in a continuous unrealized loss position, at March 31,
2007 were as follows:
In millions of yen
March 31, 2007
Less than 12 months

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
lossesAvailable-for-sale:
Equity securities .......
Debt securities ..........
Total ........................

¥ 8,104
29,456¥37,560¥ 797
344¥1,141¥ 3,580
35,627¥39,207¥2,268722¥2,990

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

¥0 0397¥¥ 2,906¥

5

15

In thousands of U.S. dollars
March 31, 2007
Less than 12 months

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

12 months or longer

Fair valueGrossunrealized
lossesFair valueGrossunrealized
losses$ 68,678
249,627$318,305$6,754
2,915$9,669$ 30,339
301,924$332,263$19,220
6,119$25,339

$

3,364

$

42

$ 24,627$

127

At March 31, 2007, 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.
The cost and fair value of “available-for-sale” and ”held-tomaturity” debt securities by contractual maturity at March 31,
2007 are as follows:
In millions of yen

March 31, 2007
Available-for-saleDue within 1 year .........
Due after 1 year
through 5 years ..........
Due after 5 years
through 10 years ........
Due after 10 years .......
..................................

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

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

Cost

Fair value

Cost

Fair value¥ 14,759

¥ 113

¥ 113

34,66435,166

3,113

3,098

43,607
10,093¥103,173

43,4889,617¥103,030—300¥3,526—295¥3,506

Annual Report 2007

Fair value$125,076$

Cost

Fair value

293,763

298,017

26,381

369,551
85,533$874,347

368,542
81,500$873,135

—
—
2,542
2,500
$29,881 $29,712

958 $

958

26,254In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2006

2005

2007

¥4,076295¥5,71674¥3,612
102$34,542
2,500

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 ¥35,351 million ($299,585 thousand)and ¥35,861 million at March 31, 2007 and 2006, respectively.
The corresponding fair value at that date was not computed assuch estimation was not practicable.

Held-to-maturity¥ 14,809

Cost$125,500

During the years ended March 31, 2007, 2006 and 2005, the net
unrealized gains on “available-for-sale” securities included aspart of other comprehensive income (loss), net of tax, decreasedby ¥3,026 million ($25,644 thousand) and increased by ¥5,541
million and ¥1,040 million, respectively.
Proceeds from the sale of “available-for-sale” securities forthe years ended March 31, 2007, 2006 and 2005 were ¥109,405
million ($927,161 thousand), ¥74,869 million and ¥17,826 million,
respectively. On those sales, the gross realized gains and grossrealized losses, using moving-average cost basis, for the years
ended March 31, 2007, 2006 and 2005 were as follows:

March 31, 2007
Available-for-sale

Held-to-maturity40

9. Inventories
Inventories at March 31, 2007 and 2006 comprised thefollowing:
In millions of yen

In thousands of
U.S. dollars

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

2007

$1,665,136

March 31

Net sales ....................... ¥196,486 ¥213,967 ¥201,253

2007

2006

2007

Gross profit................... ¥ 67,315 ¥ 71,863 ¥065,276$ 570,466

Security-related products .............. ¥ 7,603
Fire protection-related products ... 13,599
Real estate ...................................... 72,218
Information and other-related
products ........................................
4,917............................................. ¥98,337¥ 7,310—
53,112$064,432
115,246
612,017

Net income ................... ¥ 18,851 ¥ 15,371 ¥011,362$ 159,754

4,109¥64,531

41,669$833,364

March 31Work in process real estate inventories at March 31, 2007 and2006, amounting to ¥64,257 million ($544,551 thousand) and¥48,500 million, respectively, are included in real estate.
10. Investments in Affiliated Companies
The Company has investments in affiliated companies thatare accounted for under the equity method. Investments
principally consist of investments in Taiwan Secom Co., Ltd., a28.1 percent owned affiliate, which is listed on the Taiwan Stock
Exchange; S1 Corporation, a 27.4 percent owned affiliate, which
is listed on the Korea Stock Exchange; and Toyo Tech Co., Ltd.,a 25.4 percent owned affiliate newly acquired—amounting to¥5,146 million ($43,610 thousand)—in December 2006, which islisted on the Second Section of the Osaka Securities Exchange.
In December 2006, the Company additionally acquired
18,500,000 newly issued shares of Nohmi Bosai, listed on theFirst Section of the Tokyo Stock Exchange, and as a result theCompany owned 50.4 percent of its ownership. Nohmi Bosai
had been accounted for under the equity method before theacquisition and has been consolidated as its subsidiaries since
the date of acquisition. (For more details, see Note 5.)
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

2006

2007

Current assets ................................ ¥ 78,568 ¥ 89,410
Non-current assets......................... 121,889 117,499$ 665,830
1,032,958

Total assets ................................. ¥200,457 ¥206,909$1,698,788

Current liabilities ............................ ¥ 40,444 ¥ 51,740
Non-current liabilities ....................
37,55931,622
Shareholders’ equity ..................... 122,454 123,547$ 342,746
318,296
1,037,746

Total liabilities andshareholders’ equity ................ ¥200,457 ¥206,909$1,698,788

2007

SECOM Co., Ltd.

Dividends received from affiliated companies for the years
ended March 31, 2007, 2006 and 2005 were ¥2,193 million($18,585 thousand), ¥2,068 million and ¥1,524 million, respectively.
Three listed affiliated companies accounted for under theequity method with an aggregated carrying amount of ¥29,652
million ($251,288 thousand) and ¥28,839 million at March 31,
2007 and 2006, respectively, had a quoted market value of¥71,917 million ($609,466 thousand) and ¥82,385 million atMarch 31, 2007 and 2006, respectively.
The unamortized amounts of goodwill were ¥2,851 million($24,161 thousand) and ¥1,556 million at March 31, 2007 and2006, respectively.
In November 2006, the parent company sold the outstanding
shares of Miyagi Network Inc., a 39.4 percent owned affiliate,
to Mediatti Communications, Inc. for ¥1,419 million ($12,025
thousand). The sales resulted in a gain of ¥855 million ($7,246
thousand).
In March 2006, the parent company sold 23.8 percent of theoutstanding shares of Japan Cablenet Holdings Limited, a 26.0
percent owned affiliate, to KDDI Corporation for ¥12,393 million.
The sale resulted in a gain of ¥6,710 million.
A summary of transactions and balances with the affiliated companies accounted for under the equity method is presented below:
In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2007

2006

2005

2007

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

¥1,843¥1,926¥1,740$15,619

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

¥3,777¥6,077¥5,574$32,008

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2007

2006

2007

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

¥811

¥ 751

$6,873

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

¥100

¥

75

$ 847

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

¥205

¥ 594

$1,737

Guarantees for bank loans ............

¥¥1,633

$

41

9

76

Consolidated Financial Statements

11. Long-Lived Assets
The Company has assessed the potential impairment for its
long-lived assets. As a result of significant decreases in rental
rates, market prices and revenue forecasts, and changes ofassumptions regarding useful lives before sale, the Company
principally recognized impairment losses on medical services
equipment for the year ended March 31, 2007, idle properties
for the year ended March 31, 2006, properties of hotel businessfor the year ended March 31, 2005. The fair value was determined by the estimated present value of future cash flows orappraisal value.
Impairment loss on long-lived assets by business segment for
the years ended March 31, 2007, 2006 and 2005 was as follows:

In millions of yen
March 31, 2006
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software......................................
Other ...........................................
Total ........................................

¥27,391
3,787¥31,178(¥14,020)(2,580)(¥16,600)¥13,371
1,207¥14,578

Unamortized intangible assets .....

¥ 2,695¥¥ 2,695

In thousands of U.S. dollars
March 31, 2007

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

Security services.................
Fire protection services......
Medical services .................
Insurance services ..............
Geographic information
services..............................
Information andcommunication related
and other services ............
Corporate items ..................
Total .............................

Year ended
March 31

2007

2006

2005

—
32
1,134
—

¥ 63
—
—
—

¥1,350
—
25
647

10

—

—

85

—
—

59
699

2,724
469

—
—

¥1,176¥821¥5,215$9,966

¥

2007

$

—
271
9,610
—

Impairment loss on long-lived assets of the insurance service
segment was recorded in net sales and operating revenue, which
included net realized investment gains and losses of the segment.
12. Goodwill and Other Intangible Assets
The components of acquired intangible assets excluding
goodwill at March 31, 2007 and 2006 were as follows:
In millions of yen
March 31, 2007
Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software.........................................
Other...............................................
Total ...........................................

¥31,750
6,092¥37,842(¥16,370)(2,194)(¥18,564)¥15,380
3,898¥19,278

Unamortized intangible assets........

¥ 4,141¥¥ 4,141—

Annual Report 2007

—

Gross
carrying
amountAccumulated
amortization

Net
carrying
amountAmortized intangible assets:
Software......................................... $269,068
Other...............................................
51,627
Total ........................................... $320,695($138,729) $130,339(18,593)
33,034($157,322) $163,373

Unamortized intangible assets........ $ 35,093$—$ 35,093

The net carrying amount of amortized and unamortizedintangible assets acquired in a purchase business combination
were ¥2,841 million ($24,076 thousand) and ¥1,879 million($15,924 thousand), respectively, at March 31, 2007.
Aggregate amortization expense for the years ended March
31, 2007, 2006 and 2005 was ¥5,055 million ($42,839 thousand),¥5,251 million and ¥4,402 million, respectively. The weighted
average amortization period for internal use software isapproximately five years.
The estimated aggregate amortization expense for intangible
assets for the next five years is as follows:
Years ending March 31

2008 ......................................................
2009 ......................................................
2010 ......................................................
2011 ......................................................
2012 ......................................................

42

In millions of yen

In thousands of
U.S. dollars¥5,212
4,567
3,545
2,686
1,784

$44,169
38,70330,042
22,763
15,119

The changes in the carrying amount of goodwill by businesssegment for the years ended March 31, 2007 and 2006 wereas follows:
In millions of yen
Information and
Geographic communication
information
related andservicesother services

Security
services

Medicalservices

March 31, 2005 ........ ¥1,282
Goodwill acquired
during the year ......
—
Disposal ...................
—
Impairment losses...
—
Translation
adjustment.............
20
March 31, 2006 ........ 1,302
Goodwill acquired
during the year ......
—
Disposal ...................
—
Impairment losses...
—
Translation
adjustment.............
155
March 31, 2007 ........ ¥1,457¥7,234¥3,853¥5,701¥18,070

2,298
—
(149)

—
(82)
—

176
—
—

2,474
(82)
(149)

—
9,383

—
3,771

—
5,877

20
20,333——(2,336)

4
—
(152)

—
(163)
(478)

4
(163)
(2,966)—¥7,047—¥3,623—¥5,236

155¥17,363

Total

In thousands of U.S. dollars

Security
services

Medicalservices

Geographic
information
services

March 31, 2006 ........ $11,034 $79,517 $31,958
Goodwill acquired
during the year ......
——
34
Disposal ...................
———
Impairment losses...
— (19,797) (1,288)
Translation
adjustment............. 1,313——
March 31, 2007 ........ $12,347 $59,720 $30,704

Information andcommunication
related andother services

Total$49,805 $172,314—(1,381)(4,051)

these loans are borrowed from banks. The Company has enteredinto basic agreements with these banks which state that, withrespect to all present or future loans with such banks, collateral(including sums on deposit with such banks) or guarantors shallbe 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
not been requested to submit such additional security.
At March 31, 2007, Pasco Corporation (“PASCO”) and Nohmi
Bosai, subsidiaries of the parent company, had unused committedlines of credit from short-term arrangements aggregating ¥1,500
million ($12,712 thousand) and ¥4,000 million ($33,898 thousand),
respectively. The lines of credit expire in July 2007 and March
2010, respectively. PASCO has the ability and intent to extend
these lines of credit under similar terms and conditions in July
2007. Under the agreements, PASCO and Nohmi Bosai are
required to pay committed fees at an annual rate of 0.40 percent
and 0.15 percent, respectively, on the unused portion of the linesof credit. At March 31, 2007, Secom Home Life Co., Ltd. (“Secom
Home Life”), a subsidiary of the parent company, had overdraft
agreements with five banks and its unused lines of credit amounted
to ¥27,900 million ($236,441 thousand). However, Secom Home
Life incurs no fee on the unused portion of the lines of credit. The
overdraft agreements expire in the period from April 2007 to
March 2008. Secom Home Life has the ability and intent to extend
these overdraft agreements under similar terms and conditions.
Long-term debt at March 31, 2007 and 2006 comprised thefollowing:34(1,381)(25,136)—
1,313$44,373 $147,144

The Company recognized impairment loss of ¥2,336 million($19,797 thousand) for the year ended March 31, 2007 related togoodwill allocated to the reporting units in the medical services
segment due to decreases in the estimated fair value of theseorganizations mainly caused by a decrease of expected cash
flows. In addition, the Company recognized impairment losses of¥152 million ($1,288 thousand) and ¥478 million ($4,051 thousand)in the geographic information services segment and the information and communication related and other services segment,
respectively. The fair value was determined by the estimatedpresent value of future cash flows or quoted market prices.
13. Bank Loans and Long-Term Debt
Bank loans of ¥126,964 million ($1,075,966 thousand) and¥105,750 million at March 31, 2007 and 2006, respectively, aregenerally comprised of 30 to 365 day notes. Their interest rates
ranged from 0.59 to 5.37 percent and from 0.57 to 5.37 percent
at March 31, 2007 and 2006, respectively. Substantially all of

SECOM Co., Ltd.

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2006

2007

2007

Loans, principally from banks
due 2007–2025 with interest
rates ranging from 0.00 to 5.37%
in 2007 and 2006:
Secured............................................. ¥17,252 ¥20,202
Unsecured ........................................
2,456
4,281
0.53% unsecured bonds due 2006.....
— 30,000
0.46% unsecured bonds due 2007.....
1,500
1,500
0.48% unsecured bonds due 2007.....
—
1,000
0.61% unsecured bonds due 2010.....
1,050
1,350
0.91% unsecured bonds due 2010.....
880
1,100
Unsecured bonds due 2009–2014
with floating interest rates basedon 6-month TIBOR plus
0.15%–0.20% ......................................
13,8688,440
Obligations under capital leases,
due 2006–2026 (Note 20) ..................
13,191 12,623...................................................
50,197 80,496
Less:
Portion due within one year.............
10,044 44,714................................................... ¥40,153 ¥35,782

43$146,203
20,814—
12,712
—
8,899
7,458

117,525
111,788425,399
85,119$340,280

Consolidated Financial Statements

Property, plant and equipment with a carrying amount of¥52,837 million ($447,771 thousand), inventories with a carrying
amount of ¥61,532 million ($521,458 thousand), investment
securities with a carrying amount of ¥1,375 million ($11,653
thousand), time deposits of ¥420 million ($3,559 thousand),loans of ¥165 million ($1,398 thousand) and other intangible
assets and other with a carrying amount of ¥1,593 million($13,500 thousand) were pledged as collateral for bank loans
and long-term debt at March 31, 2007.
The aggregate annual maturities on long-term debt after
March 31, 2007 are as follows:
Years ending March 31

2008.....................................................
2009.....................................................
2010.....................................................
2011.....................................................
2012.....................................................
Thereafter ...........................................
............................................................

In millions of yen

In thousands of
U.S. dollars¥10,044
6,986
14,320
5,989
3,273
9,585
¥50,197$ 85,119
59,204
121,356
50,75427,737
81,229$425,399

14. Insurance-Related Operations
Secom General Insurance Co., Ltd. (“Secom Insurance”),
a subsidiary of the parent company, maintains accounting
records as noted in Note 2 in accordance with the accounting
principles and practices generally accepted in Japan, whichvary in certain respects from U.S. generally accepted accounting
principles. Those differences are principally, (a) that insurance
acquisition costs are charged to income when incurred in Japan
whereas in the United States of America those costs are deferred
and amortized generally over the premium-paying period of theinsurance policies, (b) that liabilities related to incurred but notreported claims are computed based on related regulations inJapan whereas in the United States of America those liabilities
are computed based on past experience for unreported losses,and (c) that unearned premiums are calculated based on the
documents authorized by the Supervisory Authorities in Japan
whereas in the United States of America unearned premiums
are reflected based on the lapse and surrender over thecontract period.
In addition, under certain property and casualty insurance
contracts with a refund clause and long-term insurance policies
that provide refunds at maturity, such as personal accident andfire, the policyholder receives a refund if premiums have been
fully paid unless a substantial settlement (as defined in thepolicy) has occurred. The Company has provided for suchrefundable 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.

Annual Report 2007

For purposes of preparing the consolidated financial
statements, appropriate adjustments have been made toreflect such items in accordance with U.S. generally accepted
accounting principles.
The amounts of net equity of Secom Insurance at March 31,
2007 and 2006 were ¥30,553 million ($258,924 thousand) and¥29,847 million, respectively.
Net sales and operating revenue of Secom Insurance include
net realized investment gains and losses, including the resultson sales of securities, loss on other-than-temporary impairmentof investment securities and impairment loss on long-lived
assets. Net realized investment gains for the years ended March
31, 2007, 2006 and 2005 were ¥3,612 million ($30,610 thousand),¥3,290 million and ¥2,039 million, respectively.
15. Pension and Severance Costs
Employees of the parent company and its domestic
subsidiaries whose services are terminated are, under mostcircumstances, eligible for lump-sum benefits and/or eligible forpension benefits.
The parent company and certain domestic subsidiaries haveadopted a cash balance pension plan and a defined contribution
pension plan. Benefit under the cash balance pension plan is
calculated by the amount equal to a certain percentage of
employee’s annual income over their period of service, plus
interest calculated by the 3-year average yield for 10-year
government bonds. The defined contribution pension plan wasestablished in April 2003, by transferring a portion equivalent to20 percent of the cash balance pension plan, including portions
funded in prior periods. Specified percentage of employees’
annual income is contributed to the defined contribution
pension plan.
In April 2005, the parent company and certain domestic subsidiaries transferred an additional portion of the cash balance
pension plan to the defined contribution pension plan. Accordingly, the ratio of the accumulated amount in the cash balance
pension plan and the amount of contributions to the defined
contribution pension plan changed to 70 percent and 30 percent,including portions funded in prior periods. The contribution
from the cash balance pension plan to the defined contribution
plan, which was equivalent to the benefit transferred to thedefined contribution pension plan, was ¥4,257 million. In accordance with SFAS No. 88, the Company accounted for thesetransfers as a partial settlement of benefit obligation and recognized settlement losses of ¥2,490 million as “Settlement loss ofbenefit obligation on transfer to defined contribution pensionplan” in the consolidated statements of income for the year
ended March 31, 2006.

44

On March 31, 2007, the Company adopted the recognition anddisclosure provisions of SFAS No. 158. SFAS No. 158 required
the Company to recognize the funded status (i.e., the difference
between the fair value of plan assets and the projected benefit
obligations) of its pension plans in the consolidated balance
sheet at March 31, 2007, with a corresponding adjustment toaccumulated other comprehensive income (loss), net of tax. The
adjustment to accumulated other comprehensive income (loss)
at adoption represents the unrecognized actuarial loss andunrecognized prior service benefit, both of which were previously netted against the plan’s funded status in the consolidated balance sheets pursuant to the provisions of SFAS No. 87.
These amounts will be subsequently recognized as net periodic
pension and severance costs pursuant to the Company’s historical accounting policy for amortizing such amounts. In addition,
actuarial gains and losses that arise in subsequent periods andare not recognized as net periodic pension and severance costin the same periods will be recognized as other comprehensive
income (loss). Those amounts will be subsequently recognized
as a component of net periodic pension and severance cost on
the same basis as the amounts recognized in accumulated othercomprehensive income (loss) at adoption of SFAS No. 158.
The incremental effects of adopting the provision of SFAS No. 158
on the consolidated balance sheet at March 31, 2007 are as follows:

Prepaid pension andseverance costs ............................
Deferred income taxes(Other assets) ...............................
Accrued pension andseverance costs ............................
Minority interests in subsidiaries ...
Accumulated othercomprehensive income (loss) .....

2007

Net periodic pension andseverance costs:
Service cost .....................
Interest cost.....................
Expected return onplan assets.....................
Amortization oftransition assets............
Amortization of priorservice benefit...............
Recognized actuarialloss.................................
Net periodic pension
and severance costs...

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

2007

¥3,9981,146¥3,629 ¥3,473
1,097 1,237$33,881
9,712(1,620)(1,550) (1,767)(13,729)—(1,715)
1,123¥2,932—(40)—(1,715) (1,654)(14,534)

962

907

9,517

¥2,423 ¥2,156$24,847

The changes in benefit obligation, assets and funded status
were as follows:

In millions of yen

In millions of yen

In thousands of
U.S. dollars

BeforeAfter
Application ofApplication of
SFAS No. 158 Adjustments SFAS No. 158

Years ended
March 31

Year ended
March 31

2006

2007

¥13,239¥2,578¥15,817

7,107(1,034)

6,073

17,91461,706532(395)

18,44661,311

13,114(1,681)

11,433In thousands of U.S. dollars
BeforeAfter
Application ofApplication of
SFAS No. 158 Adjustments SFAS No. 158

Prepaid pension andseverance costs ............................
Deferred income taxes(Other assets) ...............................
Accrued pension andseverance costs ............................
Minority interests in subsidiaries ...
Accumulated othercomprehensive income (loss) .....

Net periodic pension and severance costs for the years ended
March 31, 2007, 2006 and 2005 were as follows:$112,195$21,847$134,042

60,230(8,763)51,467

151,814522,931

4,508(3,347)

156,322519,584

111,138(14,247)

96,891

SECOM Co., Ltd.

2007

Change in benefit obligation:
Benefit obligation
at beginning of year .................. ¥57,975 ¥61,634
Service cost..................................
3,998
3,629
Interest cost..................................
1,146
1,097
Actuarial loss (gain).....................
208
(291)
Benefits paid ................................ (3,495)(3,958)Acquisition ................................... 11,168
247
Divestiture ....................................
—(126)
Settlement....................................
—(4,257)
Benefit obligation
at end of year ............................. 71,000
57,975
Change in plan assets:
Fair value of plan assets
at beginning of year .................. 57,118
51,695
Actual return on plan assets.......
4,685
8,100
Employer contribution ................
4,818
4,137
Benefits paid ................................ (2,518)(2,496)
Acquisition ...................................
4,268—
Divestiture ....................................
—(61)
Settlement....................................
—(4,257)
Fair value of plan assets
at end of year ............................. 68,371
57,118Funded status at the end of year ... (¥ 2,629) (¥ 857)45

$491,314
33,8819,712
1,763(29,619)
94,644——
601,695

484,051
39,70340,831(21,339)
36,169——579,415($ 22,280)

Consolidated Financial Statements

Amounts recognized in the consolidated balance sheet atMarch 31, 2007 consist of:Prepaid pension and severance costs......
Accrued pension and severance costs.....
Net amount recognized................

Weighted-average assumptions used to determine the benefit
obligation at March 31, 2007 and 2006 were as follows:

In millions of yen

In thousands of
U.S. dollars¥15,817(18,446)(¥ 2,629)$134,042(156,322)($ 22,280)

In millions of yen

In thousands of
U.S. dollars¥13,771(16,042)(¥ 2,271)$116,703(135,949)($ 19,246)

The funded status at March 31, 2006, reconciled to the net
amount recognized in the consolidated balance sheet at thatdate, is as follows:
In millions of yen

Funded status .....................................................................
Unrecognized actuarial loss ..............................................
Unrecognized prior service benefit ..................................
Net amount recognized.......................................

(¥ 857)
17,649(17,757)(¥ 965)

Amounts recognized in the consolidated balance sheet atMarch 31, 2006 consist of:
In millions of yen

Prepaid pension and severance costs ...........................
Accrued pension and severance costs ..........................
Accumulated other comprehensive income (loss),gross of tax ....................................................................
Net amount recognized.......................................

¥10,929(12,583)(¥

Discount rate............................................................
Rate of compensation increase ..............................

2006

2.0%
2.7

1.9%
2.7

Weighted-average assumptions used to determine net pension
and severance costs for the years ended March 31, 2007, 2006 and2005 were as follows:

Amounts recognized in accumulated other comprehensive
income (loss) at March 31, 2007 consist of:Actuarial loss...............................................
Prior service benefit ...................................
........................................................

March 31
2007

689
965)

The accumulated benefit obligation for the pension plan was¥65,283 million ($553,246 thousand) and ¥53,804 million atMarch 31, 2007 and 2006, respectively.
The Company recognized a minimum pension liability in the
consolidated balance sheets for pension plans with an accumulated
benefit obligation in excess of plan assets at March 31, 2006.
The minimum pension liability which exceeded the unrecognized prior service cost was recorded as a component of accumulated other comprehensive income (loss), net of tax, of ¥388
million at March 31, 2006.
The projected benefit obligation, accumulated benefit obligationand fair value of plan assets for the pension plans withaccumulated benefit obligation in excess of plan assets were¥28,207 million ($239,042 thousand), ¥25,401 million ($215,263
thousand) and ¥9,853 million ($83,500 thousand), respectively,
at March 31, 2007, and ¥16,215 million, ¥15,082 million and¥4,261 million, respectively, at March 31, 2006.
The Company uses March 31 as the measurement date forthe domestic pension plan.

Annual Report 2007

Years ended
March 31

Discount rate ...........................................
Expected return on plan assets .............
Rate of compensation increase .............

2007

2006

2005

1.9%
3.0
2.7

2.0%
3.0
2.7

2.0%
3.0
2.7

The Company determines the expected long-term rate of
return based on the expected long-term return of the various
asset categories in which it invests. The Company considers thecurrent expectations for future returns and the actual historicalreturns of each plan asset category.
The weighted-average asset allocation of the Company’s
pension plans at March 31, 2007 and 2006 were as follows:
March 31

Asset category:
Equity securities...................................................
Debt securities .....................................................
Call loan................................................................
Other .....................................................................
Total ..................................................................

2007

2006

39.9%
26.9
6.0
27.2
100.0%

39.5%
30.9
10.3
19.3
100.0%The Company’s investment policy is designed to ensure thatsufficient plan assets are available to provide future paymentsof pension benefits to the eligible plan participants. The policy
does not use target allocations for the individual asset categories. Plan assets are invested primarily in equity and debt
securities, and mutual funds with the objective to minimize risk
and achieve the expected rate of return. The investment results
are periodically monitored and asset allocation is adjusted asnecessary.
The Company expects to contribute ¥4,504 million ($38,169
thousand) to its domestic defined benefit plans in the year
ending March 31, 2008.
The following benefit payments, which reflect future services,
as appropriate, are expected to be paid.
Years ending March 31

2008.....................................................
2009.....................................................
2010.....................................................
2011.....................................................
2012.....................................................
2013–2017 ...........................................

46

In millions of yen

In thousands of
U.S. dollars¥ 5,639
5,556
4,585
4,464
4,511
22,740$ 47,788
47,08538,856
37,831
38,229
192,712

The parent company and certain subsidiaries have defined
contribution pension plans. The contributions to the defined
contribution pension plans for the years ended March 31, 2007,
2006 and 2005 were ¥1,392 million ($11,797 thousand), ¥1,365
million and ¥892 million, respectively.
The estimated prior service benefit and actuarial loss for thedefined benefit pension plans that will be amortized fromaccumulated other comprehensive income (loss) into net
periodic benefit cost over the next year are ¥1,715 million($14,534 thousand) and ¥989 million ($8,381 thousand),
respectively.
16. Exchange Gains and Losses
Other income for the years ended March 31, 2007 and 2006
includes net exchange gains of ¥76 million ($644 thousand) and¥664 million, respectively. Other expense for the year ended
March 31, 2005 includes net exchange losses of ¥177 million.
17. Income Taxes
Total income taxes for the years ended March 31, 2007, 2006
and 2005 were allocated as follows:
In thousands ofIn millions of yen
U.S. dollars
Years ended
March 31
2007

2006

2005

Income fromcontinuing operations ... ¥40,566 ¥37,904 ¥31,941
Income fromdiscontinued
operations.......................
——
931
Shareholders’ equity—
accumulated othercomprehensive
income (loss):
Unrealized gains
on securities ............... (3,437)
3,672
621
Unrealized gains(losses) on
derivative
instruments.................
(17)
79
(118)
Minimum pension
liability adjustments...
(20)
(27)
(105)
Foreign currencytranslation
adjustments ................
476
971
(904)
Adjustments for initiallyapplying SFAS No. 158 ...
897——................................... ¥38,465 ¥42,599 ¥32,366

Year ended
March 312007

$343,780

Reconciliations of the differences between income taxes
computed at statutory tax rates and consolidated income taxes
from continuing operations were as follows:

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

Income taxes computed
at statutory tax rate of
40.5% ................................ ¥38,611 ¥36,340 ¥30,081
Increase (decrease)resulting from:
Unrecognized tax
benefits fromsubsidiaries in loss
positions....................... 1,552
1,366
387
Reversal of valuation
allowance due toutilization ofoperating loss
carryforwards............... (1,629)
(642)
(316)
Per capita tax .................
713
699
709
Other, net ....................... 1,319
141
1,080
Consolidated
income taxes fromcontinuing
operations ................ ¥40,566 ¥37,904 ¥31,941

(169)
4,034
7,601
$325,975

The parent company and its domestic subsidiaries were
subject to a corporate tax of 30 percent, an inhabitants tax ofapproximately 20.3 percent, and a deductible enterprise tax ofapproximately 7.4 percent, which, in the aggregate, indicate astatutory tax rate in Japan of approximately 40.5 percent for theyears ended March 31, 2007, 2006 and 2005.

SECOM Co., Ltd.

13,153(13,805)
6,042
11,178$343,780

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2006

2007

¥12,727
10,417$111,873
80,881

4,130
2,583

43,61923,424

5,358

62,712

4,677
3,715
3,318

57,58540,51725,254

3,547
2,017
2,037
7,258
61,784(15,346)
46,43819,915
19,381
16,56875,551
577,280(132,127)445,153

2007

(144)

$327,212

The significant components of deferred tax assets and liabilities
at March 31, 2007 and 2006 were as follows:—(29,127)2007

Deferred tax assets:
Deferred revenue ....................... ¥13,201
Operating loss carryforwards ...
9,544
Adjustment of book value atthe date of acquisition—
Land and buildings.................
5,147
Other assets ............................
2,764
Accrued pension andseverance costs ........................
7,400
Property, plant andequipment................................
6,795
Accrued bonus ...........................
4,781
Investment securities .................
2,980
Allowance for doubtful
accounts ....................................
2,350
Vacation accrual .........................
2,287
Intangible assets ........................
1,955
Other ...........................................
8,915
Gross deferred tax assets ......
68,119Less: Valuation allowance ..... (15,591)
Total deferred tax assets .......
52,52847

Consolidated Financial Statements

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2006

2007

(8,286)(71,890)(5,554)(1,764)(9,427)(47,517)(14,847)(57,839)(5,748)(57,051)(4,470)(50,153)(1,194)(3,649)(40,092)¥ 6,346(19,890)(46,246)(365,433)$ 79,720

2007

Deferred tax liabilities:
Deferred installation costs.........
(8,483)Adjustment of book value atthe date of acquisition—
Land and buildings.................
(5,607)Long-term receivables ...........
(1,752)
Unrealized gains on securities ..
(6,825)Investments in affiliatedcompanies ................................
(6,732)
Prepaid pension andseverance costs ........................
(5,918)
Unearned premiums andother insurance liabilities ........
(2,347)
Other ...........................................
(5,457)Gross deferred tax liabilities... (43,121)
Net deferred tax assets ...... ¥ 9,407

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 netchange in the total valuation allowance for the years ended
March 31, 2007 and 2006 was an increase of ¥245 million($2,076 thousand) and ¥2,754 million, respectively.
In assessing the realizability of deferred tax assets, theCompany management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not
be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income during
the periods in which those temporary differences become
deductible. The Company management considered the scheduled reversal of deferred tax liabilities, projected future taxable
income and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and projections for future taxable income over the periods in which thedeferred tax assets are deductible, the Company management
believes it is more likely than not that the Company will realize
the benefits of these deductible differences, net of the existingvaluation allowance at March 31, 2007 and 2006.
Net deferred tax assets at March 31, 2007 and 2006 arereflected in the accompanying consolidated balance sheets
under the following captions:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2006

2007

¥14,659$143,619

3,140
(972)

51,467(8,290)(10,481)¥ 6,346(107,076)$ 79,720

2007

Deferred income taxes(Current assets) ............................ ¥16,947
Deferred income taxes(Other assets) ...............................
6,073
Other current liabilities ..................
(978)
Deferred income taxes(Liabilities)..................................... (12,635)
Net deferred tax assets ......... ¥ 9,407

Annual Report 2007

The Company has not recognized deferred tax liabilities of¥595 million ($5,042 thousand) for a portion of undistributed
earnings of foreign subsidiaries totaling ¥6,151 million ($52,127
thousand) at March 31, 2007 because they are not expected tobe remitted in the foreseeable future.
At March 31, 2007, the operating loss carryforwards of domestic
subsidiaries amounted to ¥19,174 million ($162,492 thousand)and are available for offsetting against future taxable earningsof such subsidiaries for up to seven years, as follows:
Expires in the years ending March 31

2008 ......................................................
2009 ......................................................
2010 ......................................................
2011 ......................................................
2012 ......................................................
2013 ......................................................
2014 ......................................................
..............................................................

In millions of yen

¥

—
71
1,606
5,094
5,579
2,707
4,117
¥19,174

In thousands of
U.S. dollars

$

—
602
13,61043,16947,28022,941
34,890$162,492

The operating loss carryforwards of overseas subsidiaries at
March 31, 2007 amounted to ¥6,245 million ($52,924 thousand), apart of which will begin to expire in the year ending March 31, 2008.
18. Shareholders’ Equity(1) Retained Earnings
The Japanese Corporate Law, enforced on May 1, 2006, provides that an amount equal to 10 percent of surplus distributedby the parent company and its Japanese subsidiaries be appropriated as a legal reserve until the aggregate amount of additional paid-in capital and legal reserve equals 25 percent of thecommon stock account.
The amount available for dividends under the JapaneseCorporate Law is based on the amount recorded in the parent
company’s nonconsolidated statutory financial statements inaccordance with the accounting principle generally accepted inJapan. Such amount was ¥331,124 million ($2,806,136 thousand)at March 31, 2007.
Subsequent to March 31, 2007, the parent company’s Boardof Directors declared an annual cash dividend of ¥17,997 million($152,517 thousand) to shareholders of record on March 31,
2007. The dividend declared was approved at the general shareholders’ meeting held on June 27, 2007. Dividends are recordedin the period they are declared.
The Japanese Corporate Law provides that a company can makedividends of surplus anytime with resolution of the shareholders.

48

(2) Other Comprehensive Income (Loss)
Components of other comprehensive income (loss) for theyears ended March 31, 2007, 2006 and 2005 is as follows:

In millions of yen

In millions of yen
Pre-tax
amount

For the year ended March 31, 2007:
Unrealized gains on securities—
Unrealized holding gains or losses
arising during the period................. (¥ 2,924)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
(3,539)Unrealized losses on derivative
instruments—
Unrealized holding gains or losses
arising during the year ....................
(132)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
32
Minimum pension
liability adjustments.............................
(41)
Foreign currencytranslation adjustments.......................
2,669
Other comprehensive
income (loss) ................................ (¥ 3,935)
For the year ended March 31, 2006:
Unrealized gains on securities—
Unrealized holding gains or losses
arising during the period.................
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
Unrealized gains on derivative
instruments—
Unrealized holding gains or losses
arising during the year ....................
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
Minimum pension
liability adjustments.............................
Foreign currencytranslation adjustments.......................
Other comprehensive
income (loss) ................................

¥14,660

Tax(expense) Net-of-tax
or benefit
amount¥1,362 (¥ 1,562)

2,075(1,464)

19

(113)

(2)

30

20

(21)

(476)

2,193

¥2,998 (¥937)(¥5,764) ¥ 8,896(5,448)2,092(3,356)

163

(66)

97

31

(13)

18

(57)

27

(30)

7,317

(971)

6,346

¥16,666(¥4,695) ¥11,971

SECOM Co., Ltd.

For the year ended March 31, 2005:
Unrealized gains on securities—
Unrealized holding gains or losses
arising during the period.................
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
Unrealized losses on derivative
instruments—
Unrealized holding gains or losses
arising during the year ....................
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
Minimum pension
liability adjustments.............................
Foreign currencytranslation adjustments.......................
Other comprehensive
income (loss) ................................

Pre-tax
amountTax(expense) Net-of-tax
or benefit
amount¥4,579(¥1,699)¥2,880(2,918)

1,078(1,840)

(152)

61

(91)

(140)

57

(83)

(269)

105

(164)

(1,488)

904

(584)

(¥ 388)

¥ 506

¥ 118

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

For the year ended March 31, 2007:
Unrealized gains on securities—
Unrealized holding gains or losses
arising during the period................. ($24,779) $11,542 ($13,237)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income............................... (29,992) 17,585 (12,407)
Unrealized losses on derivative
instruments—
Unrealized holding gains or losses
arising during the year ....................
(1,119)161(958)
Less: Reclassification
Less: adjustment for gains or
Less: losses included in
Less: net income...............................
271
(17)
254
Minimum pension
liability adjustments.............................
(347)
169
(178)
Foreign currencytranslation adjustments.......................
22,619(4,034) 18,585
Other comprehensive
income (loss) ................................ ($33,347) $25,406 ($ 7,941)

49

Consolidated Financial Statements

19. Research and Development Expenses
Research and development expenses included in selling, generaland administrative expenses for the years ended March 31, 2007,
2006 and 2005 were ¥5,875 million ($49,788 thousand), ¥4,061
million and ¥4,470 million, respectively.
20. Lessee
The Company leases certain office space, employee residential facilities, computer and transportation equipment. Someleased buildings and computer and transportation equipment
are held under capital leases. The 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 ($43,102 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, 2007 were ¥6,248 million ($52,949 thousand).
A summary of leased assets under capital leases at March 31,
2007 and 2006 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2007

2006

2007

Buildings and improvements........ ¥ 5,208
Machinery, equipment
and automobiles ..........................
16,531Other intangible assets..................
723
Accumulated depreciation ............ (10,488)................................................. ¥11,974¥ 5,185$ 44,136

14,599407(8,532)¥11,659

140,093
6,127(88,881)$101,475

Depreciation expenses under capital leases for the years
ended March 31, 2007, 2006 and 2005 were ¥3,704 million($31,390 thousand), ¥3,576 million and ¥3,146 million,
respectively.

Annual Report 2007

The following is a schedule by year of future minimum lease
payments under capital leases together with the present valueof the net minimum lease payments at March 31, 2007:
Years ending March 31

2008..........................................................
2009..........................................................
2010..........................................................
2011..........................................................
2012..........................................................
Thereafter ................................................
Total minimum lease payments............
Less: Amount representing interest......
Present value of net minimum
lease payments (Note 13) ....................
Less: Current portion..............................
Long-term capital lease obligations..

In millions of yen

In thousands of
U.S. dollars¥ 4,078
3,038
2,116
1,237
722
4,947
16,1382,947$ 34,559
25,746
17,932
10,483
6,119
41,924
136,763
24,975

13,191
3,614¥ 9,577

111,788
30,627$ 81,161

Rental expenses under operating leases for the years ended
March 31, 2007, 2006 and 2005 were ¥15,771 million ($133,653
thousand), ¥15,415 million and ¥14,616 million, respectively.
A significant portion of such rentals relates to cancelable shortterm leases for office space and employee residential facilities,
many of which are renewed upon expiration.
On December 8, 2000, the Company entered into a leaseagreement for a building and land in Shibuya, Tokyo. The 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 ($11,347
thousand) over a 20-year period.
The future minimum lease payments required under operating leases that have initial or remaining non-cancelable leaseterms in excess of one year at March 31, 2007 are as follows:
Years ending March 31

2008.........................................................
2009.........................................................
2010.........................................................
2011.........................................................
2012.........................................................
Thereafter ...............................................
Total future minimum lease
payments ..........................................

50

In millions of yen

In thousands of
U.S. dollars¥ 2,335
2,289
2,224
2,200
2,194
23,092$ 19,788
19,39818,84818,644
18,593
195,695¥34,334$290,96621. Lessor
The Company’s leasing operations consist principally of leasing of security equipment and real estate for office and medical
institutions. Most of the security equipment and certain realestate for medical institutions on lease are classified as salestype leases or direct-financing leases. The other leases areclassified as operating leases.
A summary of lease receivables under sales-type and directfinancing leases at March 31, 2007 and 2006 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2006

2007

¥29,574(1,926)$274,364(17,237)

2,160(6,559)23,249(5,122)

18,314(53,297)
222,144(53,729)¥18,127$168,415

2007

Total minimum lease payments
to be received ............................... ¥32,375
Estimated executory cost ..............
(2,034)
Estimated unguaranteed
residual value ...............................
2,161
Unearned income ..........................
(6,289)Lease receivables, net ...................
26,213
Less: Current portion .....................
(6,340)Long-term lease receivables,
net.............................................. ¥19,873

The following is a schedule by year of future minimum lease
payments to be received under sales-type leases and directfinancing leases at March 31, 2007:
Years ending March 31

In millions of yen

In thousands of
U.S. dollars¥ 7,337
6,095
5,035
3,559
1,692
8,657

$ 62,178
51,653
42,66930,161
14,33973,364¥32,375$274,364

2008.........................................................
2009.........................................................
2010.........................................................
2011.........................................................
2012.........................................................
Thereafter ...............................................
Total future minimum lease
payments to be received .................

A summary of investment in property on operating leases andproperty held for lease at March 31, 2007 and 2006 is as follows:
In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2007

2006

2007

Land ................................................ ¥25,686
Buildings and improvements........
26,299Other intangible assets..................
775
Accumulated depreciation ............
(6,881)................................................. ¥45,879¥20,928
25,737
1,158(6,324)¥41,499$217,678
222,873
6,568(58,314)$388,805

SECOM Co., Ltd.

The future minimum rentals on non-cancelable operatingleases at March 31, 2007 are as follows:
Years ending March 31

2008..........................................................
2009..........................................................
2010..........................................................
2011..........................................................
2012..........................................................
Thereafter ................................................
Total future minimum rentals ............

In millions of yen

In thousands of
U.S. dollars¥ 2,749
715
715
715
715
12,659¥18,268$ 23,297
6,059
6,059
6,059
6,059
107,281$154,814

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

(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; Other Payables; Deposits Received; andAccrued Payrolls
The carrying amounts approximate fair value because of
the short maturities of such instruments.
(2) Long-Term Receivables
The fair values of long-term receivables are based on thepresent value of future cash flows through estimated maturity,
discounted using estimated market discount rates. The carrying
amount of long-term receivables approximates fair value.
(3) Long-Term Debt Including Current Portion
The fair value of long-term debt including the current portion
was estimated based on the discounted amounts of future cash
flows of each instrument at the Company’s current incremental
borrowing rates for similar liabilities.
(4) Investment Deposits by Policyholders
The fair values of investment deposits by policyholders are
estimated by discounting future cash flows using the interest
rates currently being offered for similar contracts.
(5) Derivatives
The fair values of interest rate swaps are estimated using
current market pricing models by obtaining quotes fromfinancial institutions.

51

Consolidated Financial Statements

The carrying amounts and estimated fair values of the financial instruments excluding debt and equity securities which aredisclosed in Note 8 at March 31, 2007 and 2006 are as follows:
In millions of yen
March 31

Carrying
amountNon-derivatives:
Liabilities—
Long-term debt
including current
portion......................... ¥50,197
Investment deposits
by policyholders.........
93,361
Derivatives:
Assets—Interest rate swaps.......
8
Liabilities—
Interest rate swaps.......
84

2007

2006

Estimated
fair value

Carrying Estimatedamount fair value¥50,134 ¥ 80,496 ¥ 80,465
95,246

187,785 192,002

8

32

32

84

5

5

opportunities. The Company does not hold or issue derivative
financial instruments for trading purposes. The Company is also
exposed to credit-related losses in the event of non-perfomanceby counterparties to derivative financial instruments, but it is
not expected that any counterparties will fail to meet their obligations, because most of the counterparties are internationallyrecognized financial institutions and contracts are diversified toa number of major financial institutions.

(2) Interest Rate Risk Management
The Company’s exposure to the market risk of changes ininterest rates relates primarily to its debt obligations. The
Company principally enters into interest rate swap agreements
to manage fluctuations in cash flows resulting from changes ininterest rates. Interest rate swaps are used to change floating
rates on debt obligations to fixed rates by entering into receivefloating, pay-fixed interest rate swaps under which theCompany receives floating interest rate proceeds and makes
fixed interest rate payments, thereby effectively creating fixedrate debt.

In thousands of U.S. dollars
March 312007

Non-derivatives:
Liabilities—
Long-term debt including current
portion.....................................................
Investment deposits
by policyholders .....................................
Derivatives:
Assets—Interest rate swaps ...................................
Liabilities—
Interest rate swaps ...................................

Carrying
amountEstimated
fair value$425,399$424,864

791,195

807,169

68

68

712

712

Limitation:
Fair value estimates are made at a specific point in time
based on relevant market information and information about
the financial instruments. These estimates are subjective innature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
23. Derivative Financial Instruments(1) Risk Management Policy
The Company utilizes derivative financial instruments in thenormal course of business to reduce exposure to fluctuations ininterest rate. The Company assesses interest rate risk by continuallymonitoring changes in the exposure and by evaluating hedging

Annual Report 2007

(3) Cash Flow Hedge
The Company designates interest rate swap agreements as
cash flow hedges for variability of cash flows originated fromfloating rate borrowings. The interest rate swap agreements
mature at various dates through 2012. The effective portion ofchanges in fair values of derivative instruments designated as
cash flow hedges of these debt obligations are reported in othercomprehensive income (loss). These amounts are reclassified
into current income in the same period that hedged items affectcurrent income. The ineffective portion of changes in fair values
are reported in income immediately. The sum of the amount of
the hedge ineffectiveness and net gains or losses excluded fromthe assessment of hedge effectiveness is not material for theyears ended March 31, 2007, 2006 and 2005. Approximately¥8 million ($68 thousand) of net derivative losses included inother comprehensive income (loss), net of tax at March 31, 2007,
will be reclassified into current income within 12 months fromthat date. At March 31, 2007 and 2006, the notional principal
amounts of interest rate swap agreements designated as cash
flow hedges were ¥23,052 million ($195,356 thousand) and¥25,462 million, respectively.
(4) Derivative Instruments Not Designated as Hedges
Certain subsidiaries enter into interest rate swap agreements
to change the effective interest rates on debt securities held as
investments with the objective of increasing current interest
income. Changes in fair value of the above noted derivative
financial instruments, which are not designated as hedges, arereported in current income.

52

24. Commitments and Contingent Liabilities
The Company has commitments outstanding at March 31,
2007 for the purchase of property, plant and equipment
approximated ¥9,092 million ($77,051 thousand).
The Company provides guarantees to third parties mainlywith respect to bank loans extended to its affiliated companies
and other entities. Such guarantees are provided to enhance thecredit standing of the affiliated companies and other entities.
For each guarantee provided, the Company would have to perform under the guarantee, if the affiliated companies and otherentities default on a payment within the guaranteed period of
one to six years. The maximum amount of undiscounted payments the Company would have to make in the event of default
amounts to ¥9,131 million ($77,381 thousand) at March 31,
2007. The carrying amounts of the liabilities recognized for theCompany’s obligations under these guarantees at March 31,
2007 and 2006 were deemed insignificant.
In July 2004, Fujitsu Ltd. filed a lawsuit against Secom
Insurance in the Tokyo District Court, claiming compensation
for costs related to a systems development order in the amountof ¥2,500 million ($21,186 thousand). Secom Insurance is not
only contesting this lawsuit on the grounds that it is without
merit, but has also filed a countersuit claiming damages in theamount of ¥1,000 million ($8,475 thousand), which is pendingat March 31, 2007.
PASCO filed a lawsuit against Sumitomo Mitsui Banking
Corporation (“SMBC”) for obtaining a confirmation judgment to
the effect that it does not owe an obligation in the amount of¥2,010 million ($17,034 thousand) to SMBC with the Tokyo
District Court on October 31, 2005. SMBC alleged that it made aloan to a third party and acquired from the third party its claim
against PASCO for an alleged sale of equipment to PASCO as acollateral for the loan, and demanded PASCO to pay such claim
to SMBC. However, upon carefully investigating the case withcounsel, the Company believes that the alleged transactions
were null and void, and the Company’s pleading should be
admitted. Furthermore, on December 5, 2005, SMBC brought across action against PASCO in relation to a demand for paymentof a transferred receivable. Subsequently, both actions wereconsolidated according to a court procedure. The existence ofthe debt in the above-mentioned sum is still being disputed incourt at March 31, 2007.
25. Discontinued Operations
The Company accounted for the sale of certain businesses
and properties in accordance with SFAS No. 144.
Real estate properties used for operating leases were primarily
held by real estate investment companies as part of investment
assets of the insurance services segment and are held by thecompanies that engage in leasing services of real estate includedin the information and communication related and other services
segment. The Company reported the operating results related
to these real estate properties which were disposed of or classified as held for sale without significant continuing involvement
in discontinued operations for the year ended March 31, 2005.

SECOM Co., Ltd.

In January 2005, the Company sold the operation of its school
education systems included in the information and communication related and other services segment. In October 2004, The
Westec Security Group, Inc., a wholly owned subsidiary in the
United States of America, sold all of the outstanding shares ofWestec Interactive Security, Inc. included in the security services
segment. Accordingly, the Company reported the operating
results related to this operation in discontinued operations forthe year ended March 31, 2005.
There were no operating results which were reported indiscontinued operations for the years ended March 31, 2007
and 2006.
Discontinued operations for the year ended March 31, 2005
were as follows:
In millions of yen

Net sales and operating revenue ...............................
Loss from discontinued operations before
income taxes, net.......................................................
Gain on sales of discontinued operations, net.........
Income taxes ................................................................
Minority interests in subsidiaries...............................
Income from discontinued operations,net of tax .................................................................

¥07,491(2,378)
13,637(931)(451)¥09,877

Income from discontinued operations, net of tax, by businesssegment for the year ended March 31, 2005 were as follows:
In millions of yen

Security services ..........................................................
Insurance services .......................................................
Information and communication related andother services (Leasing services of real estate)......
Information and communication related andother services (Education services) .........................
Income from discontinued operations,net of tax .................................................................

¥0,439
2,164
3,983
3,291
¥9,877

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

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

Cash paid during theyear for:
Interest ............................... ¥ 1,865 ¥ 1,873 ¥ 2,277
Income taxes...................... 38,360 28,959 31,530
Non-cash investing andfinancing activities:
Conversion of
convertible bonds............
——
18
Additions to obligations
under capital leases ........
5,395 2,253
2,350

53

2007

$ 15,805
325,085—
45,720Consolidated Financial Statements

27. Segment Information
The Company has applied SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information,” which
requires disclosure of financial and descriptive information
about the Company’s reportable operating segments. The
operating segments reported below are the segments of theCompany for which separate financial information is available
and for which operating profit/loss amounts are evaluated regularly by management in deciding how to allocate resources andassess performance.
The Company has six reportable business segments: security
services, fire protection services, medical services, insurance
services, geographic information services, and information andcommunication related and other services. From December
2006, the Company newly established a business segment,
the fire protection services, due to the acquisition of Nohmi
Bosai group.
The security services segment provides various types of security services by utilizing the Company’s unique security systems
and manufacturing and selling security equipment. The fire protection services segment provides various types of fire protection equipment, such as automatic fire alarm and fire extinguishing and other fire protection systems for office buildings,
plants, tunnels, ships, residences and cultural monuments. The
medical services segment provides intravenous solutions topatients at home, home-based nursing care services, medical
data transmission services by utilizing the Company’s networkand leasing of real estate for medical institutions. Also the VIEs
to which the Company is primary beneficiary manage hospitals
and health care-related institutions. The insurance services segment represents non-life insurance-related underwriting business in the Japanese market. The geographic information services segment represents aerial surveying and mapping services and geographic information system services. The information and communication related and other services segment
represents the Company’s network business, development andsales of real estate and leasing of real estate, and managementof hotel business.
Corporate expenses consist principally of general andadministrative expenses of the planning, personnel and administrative departments of the parent company and administrative
departments of the foreign holding company.
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 parent company
and the foreign holding company for general and administrative
facilities, consist principally of cash and cash equivalents, shortterm investments, investment securities, land, buildings,
machinery and equipment.

Annual Report 2007

Information by business and geographic segments for theyears ended March 31, 2007, 2006 and 2005 is as follows:(1) Business Segment Information

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

Net sales and operating
revenue:
Security services—
Customers .................. ¥415,410 ¥400,044 ¥382,360
Intersegment ..............
1,491
1,317
1,362
.................................. 416,901 401,361 383,722
Fire protection
services—
Customers ..................
27,448——Intersegment ..............
944——..................................
28,392——
Medical services—
Customers ..................
45,852
39,21534,688Intersegment ..............
233
220
215
..................................
46,08539,43534,903
Insurance services—
Customers ..................
31,97829,537
26,465Intersegment ..............
2,702
2,496
2,776
..................................
34,68032,03329,241
Geographic information
services—
Customers ..................
36,43835,271
34,915Intersegment ..............
138
113
253
..................................
36,57635,38435,168
Information andcommunication
related and otherservices—
Customers ..................
79,55276,45973,926
Intersegment ..............
9,096
6,406
4,821
..................................
88,64882,86578,747
Total .............................. 651,282 591,078 561,781
Eliminations.................. (14,604) (10,552) (9,427)
Total net sales andoperating revenue....... ¥636,678 ¥580,526 ¥552,354

54

2007

$3,520,424
12,636
3,533,060

232,6108,000
240,610
388,576
1,975
390,551
271,000
22,898
293,898

308,797
1,169
309,966

674,169
77,085751,2545,519,339(123,763)$5,395,576

2007

In millions of yen

In thousands of
U.S. dollars

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

Years ended
March 31

Year ended
March 31

2006

2005

2007

¥44,942¥44,042$416,678

—
1,629
1,143

—
1,531
1,175

2,763
27,136
10,220

1,494

1,477

13,822

2,690
51,898441

2,816
51,041409

20,458491,0772,550¥52,339¥51,450$493,627¥29,351¥30,255$282,254

—
8,474
1,733

—
8,647
1,380

3,085
50,720
415

436

983

15,9497,448
47,442120

4,927
46,192
1

52,229404,652102¥47,562¥46,193$404,754

2006

2005

Operating income (loss):
Security services .............. ¥ 96,162 ¥ 86,660 ¥ 90,414
Fire protection services..
1,815
—
—
Medical services...........
(2,914) (1,321)
1,641
Insurance services........
3,752
5,061
(3,011)
Geographic information
services .......................
394
900
1,236
Information andcommunication related
and other services......
7,335
5,643
(816)
Total .............................. 106,544
96,94389,464
Corporate expenses
and eliminations......... (12,126) (15,050) (13,906)
Operating income ........ ¥ 94,418 ¥ 81,893 ¥ 75,558
Other income................
8,437
15,936
6,566
Other expenses ............
(7,519) (8,101) (7,851)
Income from continuing
operations before
income taxes................ ¥ 95,336 ¥ 89,728 ¥ 74,273

2007$ 814,932
15,381(24,695)
31,797
3,339
62,161
902,915(102,762)$ 800,153
71,500(63,720)$ 807,933

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2005

2007

2006

Assets:Security services..... ¥ 467,071 ¥ 438,989 ¥ 445,576
Fire protection
services................
77,850——
Medical services ...
105,158
102,838
91,574
Insurance services
196,798
284,911
310,159
Geographic
information
services................
55,12455,44853,004
Information andcommunication
related andother services......
178,532
145,757
124,578
Total....................... 1,080,533 1,027,943 1,024,891
Corporate items ....
121,817
159,210
99,398Investments
in and loans
to affiliatedcompanies...........
38,832
38,07539,915
Total assets........... ¥1,241,182 ¥1,225,228 ¥1,164,204

2007

2007

$ 3,958,229
659,746
891,169
1,667,780
467,153

1,512,983
9,157,060
1,032,347

Depreciation andamortization:
Security services .......... ¥49,168
Fire protection
services................
326
Medical services ........ 3,202
Insurance services ..... 1,206
Geographic
information
services..................... 1,631
Information andcommunication
related and otherservices..................... 2,414
Total ............................ 57,947
Corporate items .........
301
Total depreciation
and amortization...... ¥58,248
Capital expenditures:
Security services .......... ¥33,306
Fire protection
services................
364
Medical services ........ 5,985
Insurance services .....
49
Geographic
information
services..................... 1,882
Information andcommunication
related and otherservices..................... 6,163
Total ............................ 47,749
Corporate items .........
12
Total capital
expenditures ............ ¥47,761

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 revenues.

329,085$10,518,492

SECOM Co., Ltd.

55

Consolidated Financial Statements

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.

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2006

2005

Electronic security
services.......................... ¥285,858 ¥277,892 ¥271,872
Other security
services:
Static guard
services ......................
42,144
41,48038,302
Armored car
services ......................
20,30819,36918,462Merchandise andother ..............................
67,10061,30353,724
Total security
services ...................... ¥415,410 ¥400,044 ¥382,360

2007$2,422,525

357,153
172,102568,644$3,520,424(2) Geographic Segment Information
Net sales and operating revenue attributed to countries basedon location of customers and long-lived assets for the years
ended March 31, 2007, 2006 and 2005 were as follows:

2007

In millions of yen

In thousands of
U.S. dollars

Years ended
March 31

Year ended
March 31

2005

2007

Net sales and operating
revenue:
Japan ........................... ¥620,435 ¥564,803 ¥538,851
Other ............................
16,243
15,723
13,503
Total ......................... ¥636,678 ¥580,526 ¥552,354$5,257,924
137,652$5,395,576

In millions of yen

In thousands of
U.S. dollars

March 31

March 31

2005

2007

Long-lived assets:
Japan ........................... ¥347,546 ¥330,752 ¥316,358
Other ............................
5,023
5,609
6,079
Total ......................... ¥352,569 ¥336,361 ¥322,437$2,945,305
42,568$2,987,873

2007

2006

2006

There are no individually material countries with respect to
net sales and operating revenue and long-lived assets included
in other areas.

Annual Report 200756

Independent Auditors’ Report

The Board of Directors and Shareholders
SECOM CO., LTD.:

We have audited the accompanying consolidated balance sheets of SECOM CO., LTD. and subsidiaries as of March 31, 2007 and 2006,
and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the years in the threeyear period ended March 31, 2007, all expressed in Japanese yen. These consolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial positionof SECOM CO., LTD. and subsidiaries as of March 31, 2007 and 2006, and the results of their operations and their cash flows for eachof the years in the three-year period ended March 31, 2007, in conformity with U.S. generally accepted accounting principles.
As discussed in Note 2 of the notes to the consolidated financial statements, SECOM CO., LTD. and subsidiaries changed their
method of accounting for conditional asset retirement obligations in the year ended March 31, 2006, and their method of accounting
for variable interest entities in the year ended March 31, 2005.
The accompanying consolidated financial statements as of and for the year ended March 31, 2007 have been translated into
United States dollars solely for the convenience of the reader. We have audited the translation and, in our opinion, the consolidated
financial statements expressed in Japanese yen have been translated into United States dollars on the basis set forth in Note 3 ofthe notes to the consolidated financial statements.

Tokyo, Japan
June 27, 2007

SECOM Co., Ltd.

57

Other Financial Data

CONTENTSSUMMARY OF SELECTED FINANCIAL DATA........................................................................ 59
COMMON STOCK DATA ......................................................................................................... 61

Annual Report 200758

Summary of Selected Financial Data

SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2007

2006

2005

2004

2003

2002

Composition of consolidated net sales and operating revenue
by segment
Net sales and operating revenue ..................................................... ¥636,678 ¥580,526 ¥552,354 ¥517,435 ¥497,691 ¥475,151
400,044382,360
367,482352,985
335,867
Security services:........................................................................... 415,410
65.3%
68.9%
69.2%
As a percentage of net sales and operating revenue ......
71.0%
70.9%
70.7%
285,858
277,892
271,872
Electronic security services—263,900
257,075
246,487
44.9
47.9
49.2
As a percentage of net sales and operating revenue ......
51.0
51.6
51.8
Other security services—
42,144
41,48038,30237,53735,90834,107
Static guard services ..............................................................
6.6
7.1
6.9
As a percentage of net sales and operating revenue ......
7.2
7.2
7.2
20,30819,36918,462
Armored car services .............................................................
18,61817,261
17,001
3.2
3.3
3.4
As a percentage of net sales and operating revenue ......
3.6
3.5
3.6
62,452
60,84956,764
Subtotal............................................................................
56,15553,16951,108
67,10061,30353,724Merchandise and other..............................................................
47,42742,741
38,272
10.6
10.6
9.7
As a percentage of net sales and operating revenue ......
9.2
8.6
8.1
27,448——Fire protection services .................................................................
—
—
—
4.3
As a percentage of net sales and operating revenue ......
—
—
—
—
—
45,852
Medical services ............................................................................
39,21534,68821,147
19,637
13,300
7.2
6.7
6.3
As a percentage of net sales and operating revenue ......
4.1
3.9
2.8
31,97829,537
26,465
Insurance services .........................................................................
23,536
15,23424,8755.0
5.1
4.8
As a percentage of net sales and operating revenue ......
4.5
3.1
5.2
36,43835,271
34,915
Geographic information services .................................................
32,34639,525
38,1065.7
6.1
6.3
As a percentage of net sales and operating revenue ......
6.3
8.0
8.0
Information and communication related
79,55276,45973,92672,92470,31063,003and other services .......................................................................
12.5
13.2
13.4
As a percentage of net sales and operating revenue ......
14.1
14.1
13.3
Net income, cash dividends and shareholders’ equity
Net income......................................................................................... ¥ 55,889
13,499Cash dividends (paid)(2) .....................................................................
Shareholders’ equity......................................................................... 551,732
Consolidated financial ratios
Percentage of working capital accounted for by:
Debt—
Bank loans ..................................................................................
Current portion of long-term debt ............................................
Convertible bonds......................................................................
Straight bonds............................................................................
Other long-term debt .................................................................
Total debt ................................................................................
Shareholders’ equity .....................................................................
Total capitalization .................................................................
Return on total assets (percentage) (a) ..............................................
Return on equity (percentage) (b) .......................................................
Percentage of net sales and operating revenue absorbed by (c):Depreciation and amortization .....................................................
Rental expense under operating leases.......................................
Ratio of accumulated depreciation to depreciable
assets (percentage) .........................................................................
Net property turnover (times) (c) .......................................................
Before-tax interest coverage (times) (c) (d) ..........................................

¥ 50,331
11,251
508,696¥ 52,133
10,127457,837¥ 23,479
9,003
415,852¥ 30,275
9,330
372,518¥ 34,082
9,324
401,326

17.4
1.4
—
1.9
3.6
24.3
75.7
100.0
4.5
10.1

15.2
6.4
—
1.6
3.6
26.8
73.2
100.0
4.1
9.9

16.1
1.7
—
6.4
3.9
28.1
71.9
100.0
4.5
11.4

17.7
2.1
—
5.2
9.2
34.2
65.8
100.0
2.0
5.6

20.0
3.3
0.0
5.2
11.4
39.9
60.1
100.0
2.6
8.1

10.7
4.4
0.0
5.6
16.1
36.8
63.2
100.0
2.9
8.5

9.1
2.5

9.0
2.7

9.1
2.6

10.1
2.8

10.3
3.0

10.4
2.7

62.3
2.54
53.5

60.5
2.39
48.8

60.0
2.43
39.3

54.8
1.74
15.9

50.6
1.37
15.2

48.9
1.23
41.6

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

SECOM Co., Ltd.

59

Summary of Selected Financial Data

2007

2006

2005

2004

2003

2002

Number of shares outstanding
Issued ............................................................................. 233,288,717 233,288,717 233,288,717 233,281,133 233,281,133 233,274,769
22,512
8,318,900
8,301,997
8,266,043
Owned by the Company ...............................................
8,228,652
8,200,245
Balance ........................................................................... 224,969,817 224,986,720 225,022,674 225,052,481 225,080,888 233,252,257
Per share information¥ 248.42¥ 223.69¥ 231.66¥ 146.19
Basic net income per share (in yen) (1) .........................
¥ 104.32¥ 132.87
Cash dividends paid per share (in yen) (2) ....................
60.00
50.00
45.00
40.00
40.00
40.00
2,452.47
2,261.00
2,034.63
1,720.57
Shareholders’ equity per share (in yen) (3) ...................
1,847.80
1,655.04
427.34396.31410.29320.17294.56321.88Cash flow per share (in yen) (1) (e) ..................................
2.23
2.66
2.19
3.33
2.46
1.84
Price/Book value ratio ...................................................
22.02
26.91
19.25
39.20
43.52
22.88
Price/Earnings ratio .......................................................
12.80
15.19
10.87
17.90
15.41
9.44
Price/Cash flow ratio .....................................................
5,730
Stock price at year-end (in yen)....................................
5,470
6,020
4,460
4,540
3,040
Notes: (a) Net income/Total assets(b) Net income/Shareholders’ equity(c) Including discontinued operations(d) (Income before income taxes + Interest expense)/Interest expense(e) (Net income + Depreciation and amortization - Dividends approved) /Average number of shares outstanding during each period

Annual Report 2007

(1) Per share amounts are based on the average number of shares
outstanding during each period.
(2) Subsequent to March 31, 2007, cash dividends of ¥17,997 million(¥80.00 per share) were approved at the general shareholders‘meeting on June 27, 2007 (see Note 18 of the accompanying notes
to consolidated financial statements).
(3) Per share amounts are based on the number of shares outstandingat the end of each period, minus treasury stock.

60

Common Stock Data

SECOM CO., LTD.
As of March 31

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

2007

2006

2005

2004

2003

2002

30,68319,807

21,327

21,72020,23017,60932.21%
3.68
3.86
42.43
17.82
100.00%33.04%
2.16
3.92
43.40
17.48
100.00%34.32%
1.99
4.13
40.75
18.81
100.00%37.04%
2.19
4.29
37.22
19.26
100.00%46.14%
2.04
4.60
28.64
18.58
100.00%45.31%
1.61
13.78
24.64
14.66
100.00%

PRICE INFORMATION (TOKYO STOCK EXCHANGE)

Price per share (in yen)2005 April–June .....................................................................................................
July–September............................................................................................
October–December.......................................................................................
2006 January–March .............................................................................................
April–June .....................................................................................................
July–September............................................................................................
October–December.......................................................................................
2007 January–March .............................................................................................

SECOM Co., Ltd.

61

Nikkei Stock Average (in yen)

High

Low

High

Low

¥4,830
5,900
6,470
6,280
6,460
6,010
6,310
6,360

¥4,060
4,760
5,480
5,310
5,090
5,160
5,670
5,250

¥11,874.75
13,617.24
16,344.20
17,059.66
17,563.37
16,385.96
17,225.83
18,215.35¥10,825.39
11,565.99
13,106.18
15,341.18
14,218.60
14,437.24
15,725.94
16,642.25

Common Stock Data

COMMON STOCK ISSUES

Date

Additional
shares issued(In thousands)

Sharesoutstanding
after issue(In thousands)

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

June 15, 1974
Dec. 21, 1974
May 21, 1975
May 21, 1975
Dec. 1, 1975
May 31, 1976
June 1, 1976
Dec. 1, 1976
Nov. 30, 1977
Dec. 1, 1977
Dec. 1, 1978
June 1, 1981
Dec. 1, 1981
Jan. 20, 1983
Nov. 30, 1983
Nov. 30, 1984
Nov. 30, 1985
Jan. 20, 1986
Nov. 30, 1986
Nov. 30, 1987
Jan. 20, 1988
Nov. 30, 1988
Nov. 30, 1989
Jan. 19, 1990
Mar. 31, 1990
Mar. 31, 1991
Mar. 31, 1992
Mar. 31, 1993
Mar. 31, 1994
Mar. 31, 1995
Mar. 31, 1996
Mar. 31, 1997
Mar. 31, 1998
Mar. 31, 1999
Nov. 19, 1999
Mar. 31, 2000
Mar. 31, 2001
Mar. 31, 2002
Mar. 31, 2003
Mar. 31, 2005

1,968
2,760
1,196
1,244
4,320
1,880
2,060
6,798
2,042
6,300
7,560
3,000
4,836
5,320
194
1,418
186
6,031
2,878
1,609
3,541
439
1,808
22,986
1,446
2,949
2,035
267
6,986
477
613
1,825
29
159
116,410
273
25
175
6
8

9,200
11,96013,156
14,40018,72020,60022,66029,45831,50037,80045,36048,36053,19658,51658,71060,12860,314
66,34569,22370,832
74,37374,812
76,62099,606
101,052
104,001
106,036
106,303113,289
113,766
114,379
116,204
116,233
116,392
232,802
233,075
233,100
233,275
233,281
233,289¥00,460,000
598,000
657,800
720,000
936,000
1,030,000
1,133,000
1,472,900
1,575,000
1,890,000
2,268,000
2,418,000
2,659,800
3,000,000
3,280,942
5,329,282
5,602,945
5,602,945
11,269,932
15,021,200
15,021,200
16,063,099
21,573,139
21,573,139
25,070,104
32,244,732
37,338,751
37,991,568
56,756,263
58,214,178
59,865,105
65,253,137
65,327,060
65,709,927
65,709,927
66,096,852
66,126,854
66,360,338
66,368,827
66,377,829—
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
Conversion of convertible bonds
Conversion of convertible bonds
Conversion of convertible bonds

Notes: 1. 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.
2. As of March 31, 2007, the number of shares outstanding was 233,289 thousand and share capital was ¥66,377,829 thousand.
*One share was split into two.

Annual Report 2007

62

Supplemental Consolidated Financial Data
(Based on Japanese GAAP)CONTENTSCONDENSED CONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP)....................................................................................... 64
CONDENSED CONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP)....................................................................................... 66

SECOM Co., Ltd.

63

Supplemental Consolidated Financial Data
(Based on Japanese GAAP)CONDENSED CONSOLIDATED BALANCE SHEETS (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
As of March 31
In millions of yen

ASSETS

2007

Current assets:
Cash on hand and in banks............................................
Cash deposits for armored car services .......................
Call loans .........................................................................
Notes and accounts receivable, trade...........................
Due from subscribers .....................................................
Short-term investments .................................................
Inventories.......................................................................
Deferred income taxes ...................................................
Short-term loans receivable ..........................................
Other ................................................................................
Allowance for doubtful accounts ..................................
Total current assets .............................................

2006

2005

2004

2003

2002

¥0,181,266 ¥ 271,780 ¥0,246,693 ¥0,202,630 ¥0,175,776 ¥0,192,437
75,328—————15,00025,00010,00038,00030,00040,00083,39752,66750,18346,81343,922
46,04819,217
17,678
16,204
17,561
16,336
14,395
18,171
83,80973,252
47,34336,402
31,321
97,67064,19440,97945,47741,33955,387
11,597
9,462
8,207
9,768
7,678
9,111
5,097
15,564
46,37558,79351,35590,61019,66013,41917,676
17,205
19,65017,441(1,923)(1,617)(1,297)(4,925)(1,558)(1,501)
524,484
551,959
508,274
478,668
420,903495,251

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

87,306
63,67580,341
29,48577,27063,07065,542
28,18372,816
64,104
65,151
21,50979,07265,31580,507
19,05090,82365,02687,853
17,31368,80478,32863,547
19,321Intangible assets .............................................................

23,294

24,384

27,58233,82034,544

37,460Investments and others:
Investment securities..................................................
Long-term loans receivable........................................
Prepaid pension and severance costs .......................
Deferred income taxes................................................
Other ............................................................................
Allowance for doubtful accounts...............................
Total fixed assets .................................................
Deferred assets...................................................................
Total assets ..........................................................

243,148
231,096
243,031207,654
188,880
158,438
55,22357,56442,983
63,799102,448
86,42015,817
11,186
1,527———
15,654
11,256
18,50922,52338,05638,29945,692
41,21742,25855,52852,09837,452(15,161)(13,401)(10,292)(14,060)(8,010)(12,341)
644,478
597,370
589,183
613,211
669,034
575,731
219
47
90
187
192
207
¥1,169,182 ¥1,149,377 ¥1,097,548 ¥1,092,067 ¥1,090,131 ¥1,071,190

Annual Report 200764

In millions of yen

LIABILITIES2007

Current liabilities:
Notes and accounts payable, trade...............................
Bank loans .......................................................................
Current portion of straight bonds ...................................
Current portion of convertible bonds ............................
Payables—other..............................................................
Accrued income taxes ....................................................
Accrued consumption taxes ..........................................
Accrued expenses...........................................................
Deferred revenue ............................................................
Accrued bonuses ............................................................
Accrued bonuses to directors and corporate auditors...
Other ................................................................................
Total current liabilities.........................................
Long-term liabilities:
Straight bonds ................................................................
Convertible bonds ..........................................................
Long-term loans..............................................................
Guarantee deposits received .........................................
Deferred income taxes ...................................................
Accrued pension and severance costs..........................
Accrued retirement benefits for directors andcorporate auditors ........................................................
Investment deposits by policyholders, unearned
premiums and other insurance liabilities ...................
Other ................................................................................
Total long-term liabilities ....................................
Total liabilities ......................................................
MINORITY INTERESTS IN SUBSIDIARIES ......................
SHAREHOLDERS’ EQUITY
Common stock ................................................................
Capital surplus ................................................................
Retained earnings...........................................................
Unrealized gains (losses) on securities.........................
Foreign currency translation adjustments....................
Common stock in treasury, at cost................................
Total shareholders’ equity ..................................
Total liabilities, minority interests in
subsidiaries and shareholders’ equity ............
NET ASSETS
Shareholders’ equity:
Common stock ................................................................
Capital surplus ................................................................
Retained earnings...........................................................
Common stock in treasury, at cost................................
Total shareholders’ equity ..................................

¥0,028,469
129,169
3,356—
29,88824,9733,366
3,198
31,188
11,40980
58,665
323,766

¥

2005

2004

2003

2002

18,652 ¥0,015,693 ¥0,018,460 ¥0,015,529 ¥0,016,401
112,868
108,172
119,344
135,540
90,19432,210
690
200
—
5,000
—
—
18
—
33
26,34018,95917,743
19,58020,22922,15916,197
17,083
10,75623,002
2,588
2,698
3,792
3,444
3,030
2,085
2,275
2,304
1,837
1,828
30,74728,53228,45928,851
27,373
8,981
8,758
8,490
8,852
8,834
—
—
—
—
—
46,80544,24545,28335,14029,045
303,440
246,222
261,181259,531
224,972

13,941—
14,36332,164
2,717
17,596

11,180—13,44428,982
1,079
11,36240,940—14,51328,737423
12,61732,800—43,53029,160371
12,89932,00018
48,301
28,304459
45,21030,50018
48,671
26,174
1
49,617

2,300

1,565

—

—

—

—

160,142
1,073
244,299
568,065

245,644
1,043
314,303617,743

278,278
1,724
377,234
623,457

276,979
2,117
397,858
659,040

274,476
4,033
432,803692,335

268,519
3,164
426,666
651,639—

35,46932,16329,77028,042

27,401

—
—
—
—
—
—
—

66,377
83,054
388,077
13,230(9,825)(44,749)
496,164

66,37782,553
346,510
8,167(17,123)(44,558)
441,927

66,36882,544308,268
6,079(15,603)(44,400)
403,257

66,36882,544
276,397
116(11,386)(44,287)369,753

66,36082,536
250,400(246)(6,759)(141)392,149¥— ¥1,149,377 ¥1,097,548 ¥1,092,067 ¥1,090,131 ¥1,071,190

66,377 ¥83,056432,696(44,850)
537,279—————

10,157(51)(7,253)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

2,853

—

—

—

—

—

Minority interests in subsidiaries ....................................

60,983

—

—

—

—

—

Total net assets ....................................................
Total liabilities and net assets ............................

601,116¥1,169,182

Valuation, translation adjustments and others:
Unrealized gains on securities.......................................
Deferred losses on hedges ............................................
Foreign currency translation adjustments....................
Total valuation, translation adjustments
and others...........................................................

¥

2006

SECOM Co., Ltd.

¥

—
—

65

¥

¥

—
—
—
—
—

—
—

¥

¥

—
—
—
—
—

—
—

¥

¥

—
—
—
—
—

—
—

¥

¥

—
—
—
—
—

—
—

Supplemental Consolidated Financial Data
(Based on Japanese GAAP)CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Based on Japanese GAAP)SECOM CO., LTD. and Subsidiaries
Years ended March 31
In millions of yen
2007

2006

2005

2004

2003

2002

Revenue .............................................................................. ¥613,976
Percentage change from prior year...........................
8.2%¥567,315
3.7%¥547,2303.8%¥527,409
0.8%¥523,271
5.1%¥497,921
9.4%

Costs of revenue ................................................................
As a percentage of revenue .......................................

388,78763.3

351,02061.9

341,466
62.4

324,759
61.6

325,95262.3

319,826
64.2

Gross profit ........................................................................
As a percentage of revenue .......................................

255,18936.7

216,29438.1

205,76437.6

202,650
38.4

197,31937.7

178,09435.8

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

127,348
20.7

122,185
21.5

122,720
22.4

121,363
23.0

124,41623.8

135,071
27.2

Operating profit ..................................................................
As a percentage of revenue .......................................

97,84015.9

94,10916.6

83,04315.2

81,28615.4

72,902
13.9

43,022
8.6

Non-operating income.......................................................
Non-operating expenses ...................................................

15,087
10,207

15,792
13,232

11,942
11,507

7,798
12,841

8,672
11,512

8,088
9,569

Ordinary profit ....................................................................
As a percentage of revenue .......................................

102,720
16.7

96,66917.1

83,47815.3

76,24314.5

70,063
13.4

41,541
8.3

Extraordinary profit............................................................
Extraordinary loss ..............................................................

2,601
3,317

9,349
11,18911,381
10,10531,86024,892

13,587
15,72833,491
53,150

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

102,005
16.6

94,82916.7

84,754
15.5

83,211
15.8

67,921
13.0

21,882
4.4

Income taxes—current.......................................................
Income taxes—deferred.....................................................
Minority interest in subsidiaries .......................................

39,961(660)
4,404

34,8883,131
3,815

28,7234,145
3,367

30,9628,985
2,152

27,8082,171
2,358

37,095(23,550)(1,246)

Net income..........................................................................
As a percentage of revenue .......................................
Percentage change from prior year...........................

58,2999.5
10.0

52,9949.3
9.2

48,5178.9
18.0

41,111
7.8
15.5

35,583
6.8
271.3

9,583
1.9
(73.0)

Annual Report 2007

66

Supplemental Nonconsolidated Financial Data
(Based on Japanese GAAP)CONTENTSCONDENSED NONCONSOLIDATED BALANCE SHEETS(BASED ON JAPANESE GAAP)....................................................................................... 68
CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME(BASED ON JAPANESE GAAP)....................................................................................... 70

SECOM Co., Ltd.

67

Supplemental Nonconsolidated Financial Data
(Based on Japanese GAAP)CONDENSED NONCONSOLIDATED BALANCE SHEETS (Based on Japanese GAAP)SECOM CO., LTD.
As of March 31
In millions of yen

ASSETS

2007

2006

2005

2004

2003

Current assets:
Cash on hand and in banks............................................ ¥ 71,818
Cash deposits for armored car services .......................
67,799Notes receivable .............................................................
667
Due from subscribers .....................................................
10,972
Accounts receivable, trade.............................................
6,952
Receivables—other.........................................................
2,218
Short-term investments .................................................
452
Merchandise....................................................................
5,991
Supplies...........................................................................
1,024
Prepaid expenses............................................................
2,014
Deferred income taxes ...................................................
4,750
Short-term loans receivable ..........................................
14,374
Other ................................................................................
2,615
Allowance for doubtful accounts ..................................
(541)
Total current assets ............................................. 191,111¥167,097
—
476
9,475
6,447
3,876
451
5,928
950
1,798
4,531
12,8852,314(604)
215,630¥135,400
—
552
9,008
6,228
5,822
451
6,740
1,056
1,728
4,629
41,8972,614(2,299)213,831¥117,302
—
292
8,856
5,372
5,680
451
5,673
1,123
1,610
5,890
38,3982,526(5,216)
187,961¥093,044
—
365
8,311
4,695
3,047
7,951
6,738
1,420
1,507
4,642
53,111
2,367(3,602)
183,602¥101,946
—
741
7,726
6,719
3,536
1,479
9,563
1,649
1,857
4,096
40,6592,458(2,959)179,475

2002

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

22,124136
60,2841,364
4,216
32,0922,980
22

22,811
166
59,442
1,467
4,379
32,2001,919
32

23,943
132
59,836
1,423
4,514
35,1791,692
47

25,836
145
60,6841,427
3,990
36,4392,862
72

28,777525
60,2201,501
3,678
42,1971,463
18

20,576634
75,216
3,571
3,383
37,9072,011
25Intangible assets:
Telephone rights .........................................................
Telephone and telegraph utility rights ......................
Software.......................................................................
Other ............................................................................

—
83
4,755
3,419

0
112
6,420
83

1,946
147
6,401
84

2,134
207
8,935
457

2,033
540
10,957
800

1,997
634
10,535
1,605

46,16627,65423,874

20,79623,578150,50958,7409,006
22,175
8,670
6,206
4,893
955
(7,998)428,359¥643,990

160,440
17,305
8,816
20,335
1,257
10,4505,153
2,877(4,760)384,880¥598,711

158,279
23,3858,533
19,889—13,728
5,761
7,245(11,306)
392,586¥580,547

159,901
10,0598,489
19,709—18,3795,761
4,889(1,596)399,104¥582,707

160,870
9,748
8,504
1,025
—
19,223
5,406
6,149(1,311)
391,293¥570,769

Investments and others:
Investment securities..................................................
43,165Investments in subsidiaries andaffiliated companies.................................................. 167,914
Long-term loans receivable........................................
71,262
Lease deposits.............................................................
8,973
Long-term prepaid expenses .....................................
24,855Prepaid pension and severance costs .......................
12,213
Deferred income taxes................................................
5,139
Fund for insurance ......................................................
4,893
Other ............................................................................
983
Allowance for doubtful accounts...............................
(7,200)Total fixed assets ................................................. 463,680
Total assets .......................................................... ¥654,791

Annual Report 2007

68

In millions of yen

LIABILITIES

2007

2006

2005

2004

2003

2002

3,168
26,06930,00012,987
3,634
15,312
1,509
651
34,442
22,371
5,232
1,938
157,317¥002,113
31,473—
10,201
3,113
10,2791,306
599
31,146
21,727
4,967
1,764
118,694¥002,160
35,66318
10,358
4,666
10,5702,232
634
33,95821,2474,710
1,797
128,019¥002,121
53,503
—
9,605
3,535
6,806
2,157
576
24,74921,0484,920
1,679
130,706¥001,813
15,23433
10,167
3,514
18,163
1,839
619
20,867
20,108
4,939
933
98,234——
18,4495,370——
18,244
5,581

30,000—18,014
5,713

30,0002,300
17,0095,356

30,0183,700
16,72130,37830,018—16,44531,341

1,268
25,088160,637

1,201
25,027
182,344—
53,728172,423—
54,665
182,684—
80,818211,524—
77,805
176,039—

66,377

66,37766,36866,36866,360——83,054
83,05482,55382,55382,54482,54482,54482,54482,536
82,536

—

9,028

9,028

9,028

9,028

9,028

—

800

800

800

800

800

—
—
—
—
—
—
—
—
—

24
2,212
3,036
339,293351,3585,604(44,749)
461,646¥643,990

25
2,212
3,037
306,766
318,832
3,082(44,558)
426,288¥598,711

26
2,212
3,038
279,338
291,405
1,944(44,400)
397,862¥580,547

27
2,212
3,039
254,364
266,431124(44,287)
371,182¥582,707

28
2,212
3,040
233,263245,332642(141)
394,729¥570,769

¥

¥

¥

¥

¥

Current liabilities:
Accounts payable ........................................................... ¥002,573
Bank loans .......................................................................
27,667
Current portion of straight and convertible bonds .......
—
Payables—other..............................................................
12,596
Payables—construction..................................................
3,825
Accrued income taxes ....................................................
15,775
Accrued consumption taxes ..........................................
2,029
Accrued expenses...........................................................
639
Deposits received ...........................................................
41,603
Deferred revenue ............................................................
22,735
Accrued bonuses ............................................................
5,207
Other ................................................................................
895
Total current liabilities......................................... 135,548
Long-term liabilities:
Straight and convertible bonds .....................................
Long-term loans..............................................................
Guarantee deposits received .........................................
Accrued pension and severance costs..........................
Accrued retirement benefits for directors andcorporate auditors ........................................................
Total long-term liabilities ....................................
Total liabilities ......................................................

SHAREHOLDERS’ EQUITY
Common stock ................................................................
Capital surplus:
Additional paid-in capital ...........................................
Total capital surplus ............................................
Retained earnings:
Legal reserve ...............................................................
Voluntary reserve:
Reserve for systems development.........................
Reserve for tax deferral on
asset replacement .................................................
General reserve .......................................................
Total voluntary reserve .......................................
Unappropriated retained earnings ............................
Total retained earnings .......................................
Unrealized gains on securities.......................................
Common stock in treasury, at cost................................
Total shareholders’ equity ..................................
Total liabilities and shareholders’ equity .......... ¥NET ASSETS
Shareholders’ equity:
Common stock ................................................................ ¥ 66,377
Capital surplus:
Additional paid-in capital ...........................................
83,054
Other capital surplus...................................................
1
Total capital surplus ............................................
83,056
Retained earnings:
Legal reserve ...............................................................
9,028
Other retained earnings:
Reserve for systems development.........................
800
General reserve .......................................................
2,212
Accumulated earnings carried forward ................. 372,966
Total retained earnings ....................................... 385,006
Common stock in treasury, at cost................................
(44,850)
Total shareholders’ equity .................................. 489,590
Valuation, translation adjustments and others:
Unrealized gains on securities.......................................
4,564
Total valuation, translation adjustments
and others...........................................................
4,564
Total net assets .................................................... 494,154
Total liabilities and net assets ............................ ¥654,791

SECOM Co., Ltd.

¥

¥

—

—

—

—

—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

—

—

—

—

—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—
—
—
—
—
—

—

—

—

—

—

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

69

¥

¥

¥

¥

Supplemental Nonconsolidated Financial Data
(Based on Japanese GAAP)CONDENSED NONCONSOLIDATED STATEMENTS OF INCOME (Based on Japanese GAAP)SECOM CO., LTD.
Years ended March 31
In millions of yen
2007

2006

2005

2004

2003

2002

Revenue .............................................................................. ¥326,076
Percentage change from prior year...........................
4.1%
Service charges............................................................... 282,247
Percentage change from prior year...........................
3.4
Sales of merchandise .....................................................
43,829Percentage change from prior year...........................
9.0¥313,096
5.1%
272,876
4.2
40,22012.1¥297,782
3.2%
261,918
2.0
35,86313.5¥288,493
3.5%
256,883
2.7
31,61011.4¥278,610
1.4%
250,237
2.5
28,373(7.4)¥274,669
6.9%
244,0145.8
30,654
16.6

Costs ...................................................................................
As a percentage of revenue .......................................
Cost of service.................................................................
As a percentage of service charges...........................
Cost of sales ....................................................................
As a percentage of merchandise sales......................

183,34156.2
151,53253.7
31,80972.6

171,80354.9
142,473
52.2
29,32972.9

164,51855.2
138,298
52.8
26,21973.1

159,01855.1
136,14453.0
22,873
72.4

155,49955.8
135,315
54.1
20,184
71.1

162,42759.1
140,000
57.4
22,42773.2

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

142,73443.8
130,71546.3
12,01927.4

141,29345.1
130,40247.8
10,89027.1

133,26344.8
123,620
47.2
9,643
26.9

129,47544.9
120,738
47.0
8,736
27.6

123,11144.2
114,921
45.9
8,189
28.9

112,24140.9
104,013
42.6
8,227
26.8

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

69,33021.3

69,121
22.0

67,23222.6

65,244
22.6

68,94324.8

73,33926.7

Operating profit ..................................................................
As a percentage of revenue .......................................

73,40422.5

72,172
23.1

66,031
22.2

64,231
22.3

54,16719.4

38,901
14.2

Non-operating income.......................................................
Non-operating expenses ...................................................

7,942
4,763

6,299
7,506

6,241
6,052

4,817
6,892

4,288
4,942

4,661
4,671

Ordinary profit ....................................................................
As a percentage of revenue .......................................

76,58323.5

70,96422.7

66,21922.2

62,15621.5

53,51319.2

38,891
14.2

Extraordinary profit............................................................
Extraordinary loss ..............................................................

1,246
1,141

6,147
5,615

1,083
5,915

25,462
29,860

6,543
7,535

28,211
38,712

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

76,68823.5

71,49622.8

61,38820.6

57,75820.0

52,521
18.9

28,390
10.3

Income taxes.......................................................................
Effective tax rate..........................................................

29,443
38.4

27,617
38.6

23,684
38.6

23,475
40.6

21,73641.4

11,441
40.3

Net income..........................................................................
As a percentage of revenue .......................................
Percentage change from prior year...........................

47,245
14.5
7.7

43,87914.0
16.4

37,70412.7
10.0

34,282
11.9
11.4

30,784
11.0
81.6

16,9486.2(44.6)

Annual Report 200770

Corporate Information(As of June 30, 2007)

Headquarters:
Independent auditors:
Administrator of the registerof shareholders:

5-1, Jingumae 1-chome, Shibuya-ku, Tokyo 150-0001, Japan
KPMG AZSA & Co.
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8212, Japan

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights

Lines of business

Domestic<Security services>
Secom Joshinetsu Co., Ltd.

¥3,530(50.9)%

Security services

Secom Hokuriku Co., Ltd.

201

59.1

Security services

Secom Yamanashi Co., Ltd.

15

70.0

Security services

Secom Mie Co., Ltd.

50

51.0

Security services

Secom Sanin Co., Ltd.

286

67.0

Security services

Secom Miyazaki Co., Ltd.

30

68.3

Security services

Secom Jastic Co., Ltd.

210

100.0

Security services

Secom Jastic Joshinetsu Co., Ltd.

40

(100.0)

Security services

Secom Jastic Hokuriku Co., Ltd.

10(100.0)

Security services

Secom Jastic Miyazaki Co., Ltd.

10(100.0)

Security services

Secom Jastic Akita Co., Ltd.

10

100.0

Security services

Secom Jastic Sanin Co., Ltd.

10(100.0)

Security services

Secom Jastic Yamanashi Co., Ltd.

10(100.0)

Security services

Secom Static Hokkaido Co., Ltd.

50

100.0

Security services

Secom Static Tohoku Co., Ltd.

50

100.0

Security services

Secom Static Nishi-Nihon Co., Ltd.

50

100.0

Security services

Secom Static Kansai Co., Ltd.

50

100.0

Security services

Secom Sado Co., Ltd.

24

(52.3)

Security services

JK. Siress Co., Ltd.

10(100.0)

Security services

Japan Safety Guard Co., Ltd.

100

60.0

Security services

Meian Co., Ltd.

60

51.0

Security services

Secom Techno Service Co., Ltd.

2,358

(67.8)

Installation and maintenance of security equipment

Secom Tech Sanin Co., Ltd.

23

(52.2)

Installation of security equipment

Secom Techno Joshinetsu Co., Ltd.

20

(79.1)

Installation of security equipment

Secom Win Co., Ltd.

15

(66.7)

Installation of security equipment and facilities

Secom Maintenance Joshinetsu Co., Ltd.

10(100.0)

Maintenance of equipment

TES Co., Ltd.

20

(100.0)

Maintenance of equipment

Secom Tohoku Enterprise Co., Ltd.

100

(100.0)Design, construction and maintenance of facilities

Secom Industries Co., Ltd.

499

100.0

Manufacturing of security equipment

Otec Electronics Co., Ltd.

200

76.0

Manufacturing and sales of security systems

Secom Alpha Co., Ltd.

271

100.0

Sales of security and water-treatment equipment

Yanoshin Air Conditioning Co., Ltd.

80

(100.0)

Sales of air-conditioning equipment

Secom Mine Security Co., Ltd.

30

100.0

Security services

Social Rehabilitation Support Kitsuregawa Co., Ltd.

10

51.7

Operation of PFI correctional facilities

Secom Kitsuregawa Security Co., Ltd.

50

100.0

Security services

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

SECOM Co., Ltd.

71

(Continued )Corporate Information

MAJOR CONSOLIDATED SUBSIDIARIES
Issued capital(In millions of yen)

Percentageof equity/
voting rights

Lines of business<Fire Protection services>
Nohmi Bosai Ltd.

¥13,302(50.4)%

Manufacturing and sales of fire protection equipment(100.0)Installation of fire protection equipment
Installation of fire protection equipment

and facilities
Nohmi Setsubi Co., Ltd.

30

Ichibou Co., Ltd.

28

(73.2)

Fukuoka Nohmi Co., Ltd.

20

(100.0)

Maintenance of fire protection equipment

Chiyoda Service Co., Ltd.

20(70.0)

Building management

Bosai Engineering Corporation

40(100.0)Installation of fire protection equipment

Nohmi System Co., Ltd.

20

(100.0)

Maintenance of fire protection equipment

Iwate Nohmi Co., Ltd.

30

(100.0)Installation of fire protection equipment

Tohoku Bosai Plant Co., Ltd.

12(100.0)Installation of fire protection equipment

Aomori Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Osaka Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Nissin Bohsai Co., Ltd.

50

(100.0)Installation of fire protection equipment

Chiba Nohmi Co., Ltd.

10(100.0)Installation of fire protection equipment

Shikoku Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Nohmi Techno Engineering Co., Ltd.

40

(100.0)Installation of environmental monitoring systems

Akita Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Kyushu Nohmi Engineering Co., Ltd.

20

(100.0)Installation of fire protection equipment

Fukushima Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Tohoku Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Nohmi Plant Niigata Co., Ltd.

20

(100.0)Installation of fire protection equipment

Hokkaido Nohmi Co., Ltd.

20

(100.0)Installation of fire protection equipment

Yashima Bosai Setsubi Co., Ltd.

20

(72.3)

Installation of fire protection equipment andsales of fire protection equipment<Medical services>
Secom Medical System Co., Ltd.

200

100.0

Home health/nursing care and other medical-related services

Seisho Corporation

10(100.0)

Maintenance of medical facilities

Koyu Co., Ltd.

10(100.0)

Sales of medical and other supplies

Mac Corporation

95(100.0)

Sales of medical equipment

Yoshikikaku Co., Ltd.

20

(100.0)Operation of restaurants and shops at medical facilities

Kensei Co., Ltd.

100

(100.0)Management of pharmacies

Ryomay Royal Life Co., Ltd.

210

86.5

Management of nursing homes

Alive Medicare Co., Ltd.

50

(100.0)Management of nursing homes

Japan Life Plus Medical Co., Ltd.

10(100.0)

Medical-related services

Secom Medical Resource Co., Ltd.

10(100.0)

Medical staffing solutions

Secomfort Co., Ltd.

100

(100.0)Management of nursing homes

Secomfort West Co., Ltd.

10(100.0)Management of nursing homes

US Chemical Co., Ltd.

3(100.0)Management of pharmacies

Secom Insurance Service Co., Ltd.

225

(100.0)Non-life insurance agency

Secom General Insurance Co., Ltd.

5,611

83.3

<Insurance services>
Non-life insurance

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

Annual Report 2007

72

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

Percentageof equity/
voting rights

Lines of business<Geographic information services>
Pasco Corporation¥8,758

69.8%

Pasco Road Center Co., Ltd.

50

(72.2)

Geographic information services
Geographic information services

Urban Environmental Improvement Center Co., Ltd.

50

(95.0)

Geographic information services

GIS Hokkaido Co., Ltd.

190

(100.0)Geographic information services

GIS Tohoku Co., Ltd.

50

(84.6)

Geographic information services

GIS Hokuriku Co., Ltd.

20

(100.0)Geographic information services

GIS Kanto Co., Ltd.

40

(52.6)

Geographic information services

GIS Tokai Co., Ltd.

50

(100.0)Geographic information services

GIS Kansai Co., Ltd.

50

(100.0)Geographic information services

GIS Shikoku Co., Ltd.

30

(86.2)

Geographic information services

GIS Kyushu Co., Ltd.

50

(100.0)Geographic information services

Tokyo Digital Map Co., Ltd.

10(100.0)Geographic information services

Pasco Space Mapping Technology Co., Ltd.

25

(100.0)Geographic information services

Mid Map Tokyo Corporation15(60.0)

Geographic information services

1,469

100.0

Information, communication, cyber security services and100(94.5)

Research and planning of social life

<Information and communication related
and other services>
Secom Trust Systems Co., Ltd.

software development
Laboratory for Innovators of Quality of LifeJapan Image Communications Co., Ltd.

487

95.3

Commissioned broadcasting service

Secom Home Life Co., Ltd.

3,700

99.9

Development of residential buildings

Arai & Co., Ltd.

3,000

(93.0)

Real estate leasing

5

100.0

Management of real estate

Arai Corporation, Inc.

10

(100.0)Management of real estate

Secom Credit Co., Ltd.

400

100.0

Credit services

Secom Corporation

100

100.0

Printing services

Secom Auto Service Co., Ltd.

45

100.0

Car maintenanceWonder Dream Co., Ltd.

490

100.0

Employee welfare for SECOM Group

Secom Staff Service Co., Ltd.

50

(100.0)

Employment agency

The Windsor Hotels International Co., Ltd.

165

90.0

Hotel management

Stappy, Inc.

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

SECOM Co., Ltd.

73

(Continued )Corporate Information

MAJOR CONSOLIDATED SUBSIDIARIES
Percentageof equity/
voting rights

Lines of business£39,126 thousand

100.0%

Security services£25 thousand(100.0)

Security services¥5,550 million

100.0

Holding company

Dalian Secom Security Co., Ltd.

US$2,000 thousand(95.0)

Security services

Shanghai Secom Security Co., Ltd.

US$3,500 thousand(90.0)

Security services

Beijing Jingdun Secom

US$2,500 thousand(80.0)

Security services

Issued capital

Overseas<Security services>
Secom Plc
Security Direct Ltd.
Secom (China) Co., Ltd.

Electronic Security Co., Ltd.
Qingdao Secom Security Co., Ltd.

US$1,000 thousand(80.0)

Security services

Shenzhen Secom Security System Co., Ltd.

US$2,000 thousand(90.0)

Security services

Tianjin Secom Property Management Co., Ltd.

Rmb2,000 thousand(60.0)

Provision of comprehensive building

P.T. Secom Indopratama

US$3,950 thousand

94.9

Security services

management services
Thaisecom Pitakkij Co., Ltd.

THB379 million

70.0

Security services

Secom Australia Pty. Ltd.

AUD7,822 thousand

100.0

Security services

US$600 thousand

80.0

Security service-related consulting

US$14,300 thousand(100.0)

Manufacturing and sales of fire protection equipment

P.T. Nusantara Secom InfoTech

US$3,304 thousand(100.0)Geographic information services andPasco-Certeza Computer Mapping Corporation

PHP8,400 thousand(70.0)

Geographic information services

Suzhou Super Dimension Earth Science

Rmb1,000 thousand(92.0)

Geographic information services

Secom Vietnam Joint Venture Co.
<Other services>
Shanghai Nohmi Secom
Fire Protection Equipment Co., Ltd.

and facilities
software development

Research and Development Co., Ltd.
Pasco China Corporation

Rmb5,284 thousand(100.0)Geographic information services

Pasco (Thailand) Co., Ltd.

THB30,979 thousand(100.0)Geographic information services

FM-International Oy

EUR2,122 thousand(100.0)Geographic information services

Pasco North America Inc.

US$171 thousand(100.0)Geographic information services

Pasco Geomatics India Pvt. Ltd.

INR5,575 thousand(100.0)Geographic information services

The Westec Security Group, Inc.

US$0.3 thousand

100.0

Holding company

ClearLight Partners, LLC

US$249,137 thousand(99.7)

Investment

Asia Pacific Business Link Ltd.

US$9,670 thousand

88.6

Holding company; housing-related businessShanghai Asia Pacific Property Co., Ltd.

US$5,000 thousand(100.0)

Housing-related business

US$3 thousand(100.0)Investment

Gold Stone Investment Inc.

Notes: 1. ( ) indicates the percentage of equity/voting rights held by both SECOM Co., Ltd., and certain of its subsidiaries, or by certain subsidiaries independently.
2. Subsidiaries are categorized into segments above according to their major lines of business.

Annual Report 2007

74

SECOM Group’s Basic Business Areas
Merchandise

Centralized Security Systems

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

SECOM
Emergency
Depot

Dispatch

Emergency Response

Security Services
Centralized Security Systems
Commercial Use:
● SECOM AXSECOM AX is an on-line security system with advanced on-site image sensors
that incorporate microphones to enable the SECOM control center staff to checkthe subscriber’s premises by listening and viewing.
● SECOM IX
SECOM IX is a remote imaging security system for commercial facilities offeringround-the-clock services.
● SECOM DXSECOM DX is an on-line security system developed to meet the needs of shops,
offices, warehouses, factories and other commercial and industrial
establishments.
● SECOM TX
SECOM TX is an on-line security system for commercial buildings with more than
one tenant.
● HANKS SYSTEMHANKS SYSTEM is an on-line security system for financial institutions, including
automated banking facilities.
● SECOM CXSECOM CX offers a comprehensive building management system that monitorsand manages large building complexes.

Residential Use:
● SECOM HOME SECURITY
SECOM Home Security is a comprehensive home security system combining
basic intrusion- and fire-prevention services and emergency call services, as well
as gas leak monitoring and medical emergency call service options. The system islinked around the clock with a SECOM control center, where personnel respond
immediately in the event of a problem by dispatching emergency response
personnel and, if necessary, contacting the appropriate authorities. Subscribers
are also eligible for telephone health counseling and other services offered

Fire Protection Services● FIRE ALARM SYSTEMSThis business encompasses the assembly, installation and sale of a broad rangeof equipment and systems, including automatic fire alarm systems, environmental monitoring systems, and fire and smoke control systems, suited to buildingsof varying sizes and uses, from homes to large-scale commercial and industrial
facilities.
● FIRE EXTINGUISHING SYSTEMSSECOM offers an extensive lineup, including fire sprinklers and other water fire
extinguishing systems, foam fire extinguishing systems, dry chemical fire extinguishing systems and inert gas fire extinguishing systems, for applications
ranging from office buildings to chemical plants and tunnels.
● MAINTENANCE SERVICES
This business centers on inspection, maintenance and repair services, as wellas round-the-clock on-line monitoring and other services provided through acustomer services center.
● OTHERSThis category comprises the installation and maintenance of parking lot control
systems and the assembly and sale of printed circuit boards for manufacturers inother industries, including medical and electronics equipment.

Medical Services● HOME MEDICAL SERVICESSECOM’s medical services for patients at home include pharmaceutical services,encompassing the preparation—in the SECOM Pharmacy cleanroom—and deliveryof prescription pharmaceuticals, and home nursing services provided throughvisiting nurse stations. SECOM also provides consulting and support services forphysicians opening home medical care clinics.

SECOM Co., Ltd.

SECOM
Control Center

Subscribers

Alarm Sent

Police Department
Fire Department• Utility Companies• Other Organizations••

Alert as Necessary

through SECOM Medical Club. Subscribers in certain areas also have access to
SECOM Home Service, a suite of lifestyle support services.
● SECOM CONDOMINIUM SECURITY SYSTEMSSECOM condominium security systems provide comprehensive building management functions for condominiums and total safety with a centralized security system for each unit in the building. SECOM MS-3, the top-of-the-line system, canbe used for buildings of any size, either as a retrofit or a new installation.

COCO-SECOM

Large-Scale Proprietary Security Systems

Static Guard Services● TOTAX ZETATOTAX ZETA integrates networking capabilities and a security system into acomprehensive local control system for industrial complexes and buildings.

COCO-SECOM is an innovative system that uses signals from Global
Positioning System (GPS) satellites and cellular telephone base stations tolocate moving objects, such as people, vehicles and property. As an option,customers can also request to have emergency response personnel dispatchedto the location of the object or an emergency alert relayed to a predetermined
telephone number.

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

● SECOM CCTV SYSTEMThe SECOM CCTV system is a multifunctional, cost-effective closed-circuit
surveillance camera system. The system is fully digital, eliminating the risk ofimage degradation. It is also capable of detecting attempts to disable ordestroy the camera.
● SECURILOCK SERIESThe SECURILOCK series uses identification numbers, integrated circuit (IC)pass cards and other methods to control access to restricted areas.
● SESAMO SERIESThe SESAMO series comprises access-control systems for use in corporate
offices, factories, parking facilities and any other security-sensitive areas. Thesesystems employ such technologies as contactless IC pass cards, magnetic
cards, personal identification numbers, fingerprint identification and palm vein
identification.
● TOMAHAWK SERIESThe TOMAHAWK series is an extensive lineup of innovative extinguishingsystems, including TOMAHAWK MACH II residential-use fire extinguisher
and TOMAHAWK III high-speed automated fire extinguishing system withgas suppression.
● PYTHAGORAS SERIESPYTHAGORAS is a series of security vaults with superior protection, heat
resistance and performance.
● SENSOR LIGHTSENSOR LIGHT is a sensor-equipped light activated automatically when thesensor detects human body temperature.
● SECURIFACESECURIFACE is a residential intercom system that combines a face detection
function with SECOM Home Camera System, enhancing security for people
at home.
● PHYSICAL SECURITY PRODUCTS FOR HOMESSECOM offers a broad range of physical security products for homes. These
include SECOM Anshin Glass, a high-impact breakage-resistant window glass
designed to prevent intruders from entering through broken windows; SECOM
Window Frame, a window frame with reinforced stainless bars; and Strong
Door, a door that cannot be forced open for an extended period of time after
it has been engaged.

Armored Car Services
SECOM provides armored car services for the collection and transportation of
cash and other valuables.

● HOME-BASED PERSONAL CARE SERVICESSECOM provides patients recovering at home with caregivers to assist withpersonal hygiene, bathing, exercise and other daily activities, as well as provide
light housekeeping.
● SECOM UBIQUITOUS ELECTRONIC MEDICAL REPORT (EMR)
SECOM Ubiquitous EMR is a medical report system for home medical care aimed
at clinics and small and medium-sized hospitals. The system enables the sharingof data among members of the home-care team, including the primary physician,visiting nurse and pharmacy.
● HOSPINET
Hospinet, a remote image diagnosis support service, transmits magnetic
resonance imaging (MRI), computerized tomography (CT) and other images to
SECOM’s Hospinet center, where diagnostic experts examine them and provide
consultation to the primary physician.
● MY SPOONMy Spoon is a robot that enables people with impaired upper body mobility to
eat with minimal assistance. This is the first robot of its kind in Japan.
● SECOM AED P A C K A G E S E R V I C E
The SECOM AED Package Service is a full-service package encompassing leasing
and maintenance of emergency lifesaving kits featuring automated external
defibrillators (AEDs) to non-medical professionals.
● NURSING HOMES WITH FULL-TIME PERSONAL CARE SERVICESSECOM manages the Sacravia Seijo, Royal Life Tama, Comfort Garden Azamino
and Alive Care Home series nursing homes.
● S E C O M H E A L T H C A R E CLUBSECOM Health Care Club is a membership-based club that provides access to avariety of health management services, including testing with a PET/CT scanner.
The club is offered through an alliance with Yotsuya Medical Cube, a cuttingedge clinic in Tokyo.

75

Insurance Services

Information and Communication Related and Other Services● SECURITY DISCOUNT FIRE POLICY
Security Discount Fire Policy is a commercial fire insurance policy that features
reduced premiums for subscribers to commercial security systems.
● SECOM A N S H I N M Y H O M E
SECOM My Home is a comprehensive fire insurance policy that features
reduced premiums for subscribers to home security systems.
● MEDCOMMEDCOM is an unrestricted treatment policy that covers the cost of cancer
treatment not covered by Japan’s national health insurance scheme, as well as
the patient’s portion of the cost of medical care covered by the national healthinsurance scheme. MEDCOM also provides hospital referrals and treatmentrelated consulting services.
● NEW SECOM A N S H I N MY CAR
New SECOM Anshin My Car is a comprehensive automobile insurance policythat includes on-site emergency services in the event of an accident, as well as
discounts for drivers without a traffic violation history or on cars equipped withantitheft devices.

● SECURE DATA CENTERThe Secure Data Center provides a comprehensive service for e-business thatcombines SECOM’s expertise in both physical and cyber security.
● SECOM DATA SAFESECOM Data Safe is a high-security computer server repository that combines
advanced physical and cyber security.
● DIGITAL AUTHENTICATION SERVICESSECOM offers public key infrastructure (PKI) services that provide an effectivemeans of establishing credibility among Internet users, including issuance ofdigital certificates and a set-up and operating service for organizations thatwish to establish their own digital certificate authority.
● NETWORK SECURITY MONITORING SERVICESSECOM provides security and stability for clients’ IT systems around the clock.
SECOM monitors and reports on threats to security, and on network operating
status and network traffic.
● DISASTER RESPONSE SERVICESSECOM offers a variety of services, including SECOM Safety Confirmation
Service, which helps commercial subscribers ascertain the safety of employees
and collect and share information in the event of a major disaster, thereby
assisting them to reopen for business as soon as possible.
● SECOM FINE FOODSSECOM Fine Foods is a line of quality food products marketed through mailorder catalogs and the Internet.
● REAL ESTATE DEVELOPMENT AND SALESSECOM offers Glorio condominiums.

Geographic Information Services● PasCAL S E R I E S
Designed for local governments, the PasCAL series of comprehensive GIS services facilitate the effective use of GIS in a variety of situations.
● M a r k e t P l a n n e r SERIESThe MarketPlanner series uses a variety of data sorting and presentation
methods to support the efforts of growing companies to establish area
marketing strategies.
● SAFE ROUTE MAPPING SERVICEThis service helps companies ensure their employees are able to reach homesafely and assists crisis management efforts in the event of a major earthquake.
A version of this service is also available to individuals.

Annual Report 200776

Directors, Corporate Auditors and Executive Officers

Directors

Makoto Iida

Juichi Toda

Shohei Kimura

Kanemasa Haraguchi

Founder

Co-Founder

ChairmanPresident andRepresentative Director

Seiichiro Kobayashi

Katsuhisa Kuwahara

Shuji Maeda

Shinobu Iida

Yasuo Nakayama

Koichi Sato

Executive Director

Executive Director

Executive Director

Executive Director

Executive Director

Executive Director

Fumio Obata

Takayuki Ito

Director

Director

Corporate Auditors

Executive Officers

Teruo Ogino

Kanemasa Haraguchi

Shinobu Iida

Seiji Sakamoto

Minoru Takaoka

Tsuneo Komatsuzaki

Ken Tsunematsu

President andRepresentative Director

Executive Director

Managing Executive
Officer

Executive Officer

Executive Officer

Yoshihiro Chino

Kazuaki Anzai

Executive Officer

Executive Officer

Mamoru Sasaki

Takayuki Ito

Executive Officer

Director

Tomoo Toya

Ryohei Komatsu

Executive Officer

Executive Officer

Hiroshi Yasuda
Kohei Yamashita

Yasuo Nakayama
Katsuo Akiyama
Senior Managing Executive
Officer

Executive Director

Fumio Obata
Director

Koichi Sato
Executive Director

Seiichiro Kobayashi

Hiroshi Ito
Executive Officer

Executive Director

Yushiro Ito
Shunji Ogahara

Katsuhisa Kuwahara

Managing Executive
Officer

Seiichi Mori

Kiyomasa Sugii

Managing Executive
Officer

Executive Officer

SECOM Co., Ltd.

77

Executive Officer

Hideo Morishita

Executive Director

Shuji Maeda
Executive Director

Executive Officer(As of July 31, 2007)