SECOM : Report 2021

SECOM REPORT

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Year ended March 31, 2021

Profile

SECOM was established in 1962 as Japan's first security services provider. Since then, the Company has sought to create pioneering services that benefit society as a whole, in line with its mission of helping achieve a society free from concerns.

Corporate Philosophy

Today, SECOM, comprising the parent company and the companies of the SECOM Group, boasts a business portfolio encompassing security services, fire protection services, medical services, insurance services, geospatial information services, business process outsourcing and information and communications technology (BPO and ICT) services, and other services. By striving to create services and systems that deliver safety and peace of mind, as well as make life more comfortable and convenient, whenever and wherever necessary, for anyone and everyone, the Company is working to realize its Social System Industry vision, which describes a framework of distinctive, integrated services and systems.

Mission

Mission (Our role and raison d'être)

We see our mission as being to help achieve a society free from concerns. Accordingly, throughout our history we have sought to create services and systems that benefit society as a whole.

In this era of amplified uncertainties, to accelerate the realization of its Social System Industry vision, SECOM has formulated the SECOM Group's Vision for 2030. Guided by this vision, the Company is collaborating with partners who share its philosophy to create the ANSHIN* Platform, a service infrastructure designed to provide peace of mind to people in their everyday lives, as well as to society as a whole, by resolving key social issues. Through these and other efforts, SECOM continues working to maximize its corporate value.

SECOM has also expanded outside Japan. Currently active in 17 countries and territories, the Group extends distinctively SECOM security services, fire protection services, medical services, geospatial information services, and BPO and ICT services customized to reflect local needs and sensibilities.

*ANSHIN is Japanese for "peace of mind."

CONTENTS

1	Corporate Philosophy	Financial Information and References
2	Financial Highlights	57	Financial Review
4	A Message to Stakeholders	62	Consolidated Financial Statements
10	The Path to Value Creation	69	Other Financial Data
12	SECOM at a Glance	73	Corporate Information
14	The Value Creation Process	77	Regarding Publication of SECOM Report 2021

1. SECOM's Core Competitive Advantages
2. Initiatives Aimed at Maximizing Income
3. The SECOM Group's Vision for 2030

1. Special Feature

1. SECOM Today

1. Sustainability

1. ESG Initiatives

1. SASB Index

	Vision (Our ideal view of SECOM in the future)
Vision	In 1989, we declared our commitment to the Social System Industry.
	We continue to promote bold initiatives with the aim of realizing this vision.

Values (Our shared beliefs and guiding principles)

Since our establishment, we have adhered to SECOM's Philosophy, which

Valuesemphasizes contributing to society through our business activities. Ideas and principles of conduct, including this philosophy, which are shared by all employees, guide everything we do and have nurtured a uniquely SECOM identity that remains crucial to our ability to achieve our mission.

The Social System Industry

Our Social System Industry vision describes a framework of innovative and integrated services and systems

that deliver safety and peace of mind, as well as make life more comfortable and convenient, whenever and

wherever necessary, for anyone and everyone.

SECOM's Philosophy

SECOM's Philosophy has been passed down through generations of employees since our

establishment and continues to be the driving force behind all we do. This philosophy

emphasizes a refusal to be content with the status quo and a commitment to doing

what is appropriate. The first element expresses our determination to provide innovative

services and systems by challenging accepted norms, while the second means judging

the legitimacy of our actions by examining whether they are just, fair and beneficial not

only to SECOM but also to society as a whole. We have published SECOM's Philosophy

in the form of a handbook, which has been distributed to employees in Japan and

overseas, and continue to capitalize on training and other opportunities to share the

philosophy and advance its implementation.

SECOM REPORT 2021

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Financial Highlights

Pursuant to the 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.

U.S. GAAP				In thousands of
SECOM CO., LTD. and Subsidiaries			In millions of yen		U.S. dollars
For the years ended/as of March 31		Years ended March 31		Year ended March 31
2021	2020	2019	2021

Japanese GAAP

SECOM CO., LTD. and Subsidiaries			In millions of yen
For the years ended/as of March 31		Years ended March 31
2021	2020	2019

In thousands of U.S. dollars

Year ended March 31

2021

Net sales and operating revenue	¥1,135,339	¥1,132,632	¥1,087,355
Operating income	135,809	129,627	123,307
Net income attributable to SECOM CO., LTD.	89,913	87,136	89,686
Total assets	2,137,806	2,081,120	1,879,710
Total SECOM CO., LTD. shareholders' equity	1,142,323	1,088,738	1,044,184

In yen

$10,228,279 1,223,505 810,027 19,259,516 10,291,198

In U.S. dollars

Revenue	¥1,035,898	¥1,060,070	¥1,013,823
Operating profit	136,925	142,858	130,213
Ordinary profit	138,990	151,356	144,889
Net income attributable to owners of the parent	74,681	89,080	92,009
Total assets	1,864,179	1,815,121	1,765,105
Total net assets	1,229,824	1,172,494	1,125,954

• 9,332,414
  1,233,559
  1,252,162

672,802

16,794,405

11,079,495

Per share of common stock:
Net income attributable to SECOM CO., LTD.	¥ 411.95	¥ 399.23	¥ 410.91	$ 3.71
Cash dividends	170.00	170.00	160.00	1.53
(Interim dividend)	85.00	85.00	80.00	0.77
SECOM CO., LTD. shareholders' equity	5,233.74	4,988.25	4,784.12	47.15

Notes: 1. Yen amounts have been translated into U.S. dollars, solely for the convenience of the reader, at the approximate rate of ¥111=US$1, the rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2021.

			In yen
Per share of common stock:
Net income	¥ 342.17	¥ 408.14	¥ 421.56
Cash dividends	170.00	170.00	165.00
(Interim dividend)	85.00	85.00	80.00
Net assets	4,958.18	4,742.58	4,562.08

In U.S. dollars

$ 3.08 1.53 0.77 44.67

1. Net income attributable to SECOM CO., LTD. per share of common stock is based on the average number of shares outstanding during each period, less treasury stock.
2. SECOM CO., LTD. shareholders' equity per share of common stock is based on the number of shares outstanding at the end of each period, less treasury stock.
3. Cash dividends per share of common stock are based on dividends approved and paid in each fiscal year. At the general shareholders' meeting held on June 25, 2021, approval was granted for a proposal to pay a year-end dividend of ¥85.00 for the year ended March 31, 2021.

Net income attributable to SECOM CO., LTD.

(U.S. GAAP)

(In billions of yen)

100
		91.4	96.6
80	84.1		89.7	87.1	89.9
60
40
20
0	2016	2017	2018	2019	2020	2021

Note: In the year ended March 31, 2021, net income attributable to SECOM CO., LTD., advanced ¥2.8 billion, to ¥89.9 billion, notwithstanding the negative impact of COVID-19 in certain areas. This reflected an increase in operating income, which was bolstered by favorable results in the insurance services, BPO and ICT services, and geospatial information services segments, as well as a gain on other-than-temporary impairment of investment securities, compared with a loss in the previous fiscal year.

In the year ended March 31, 2020, net income attributable to SECOM CO., LTD., decreased ¥2.6 billion, to ¥87.1 billion, despite operating income growth led by the fire protection services segment. This was primarily due to a loss on private equity investments, compared with a gain on such investments in the previous fiscal year, and an increase in income taxes that reflected a larger reversal of the valuation allowance in the preceding period.

In the year ended March 31, 2019, net income attributable to SECOM CO., LTD., was down ¥6.9 billion, to ¥89.7 billion. Principal factors contributing to this result included the application of a new accounting standard whereby gains or losses on equity investments are now charged to income for the period, which resulted in an increase in loss on other-than-temporary impairment of investment securities; investments to reinforce SECOM's operating foundation with the aim of ensuring sustainable growth; and the impact of multiple major natural disasters on results in the insurance services segment.

Note: Cash dividends per share of common stock are based on dividends the record dates for which fall in each fiscal year. The consolidated dividend payout ratio for the year ended March 31, 2021, was 49.7%.

Net income attributable to owners of the parent

(Japanese GAAP)

(In billions of yen)

100
		87.0	92.0	89.1
80	84.2
77.0					74.7
60
40
20
0
2016	2017	2018	2019	2020	2021

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A Message to Stakeholders

Adhering to SECOM's Philosophy and making forward-looking investments in growth to increase

corporate value

Responding to COVID-19

Returns to shareholders

Seeing the provision of fair returns to shareholders as a	distribution of profits. At the Ordinary General Meeting of
crucial management task, we determine our consolidated	Shareholders on June 25, 2021, the payment of a year-
dividend payout ratio and internal reserves based on an	end dividend of ¥85.00 per share was approved. As a
overall assessment of efforts to expand our businesses	consequence, dividends for the full term-the record dates

We would like to begin by extending our deepest sympathies to everyone who has been affected by COVID-19. As always, we are especially grateful to the medical professionals and others who are working tirelessly and at considerable danger to themselves to help curb the spread of the virus.

safety of customers and employees. We have established a COVID-19 headquarters and put in place a number of critical measures to prevent infection, thereby ensuring business continuity and our ability to provide services without interruption. We have also created the COVID-19 Risk

and trends in our consolidated operating performance,	for which fall in the period under review-amounted to
in line with our policy of ensuring a consistent and stable	¥170.00, level with the previous fiscal year.

Initiatives in the period under review and efforts to thrive in the new normal

The socioeconomic impact of the pandemic has been significant worldwide. The Basic Policies for Novel Coronavirus Disease Control, published by Japan's government, designates SECOM's medical, security, building maintenance, data center and insurance services, among others, as social infrastructure necessary for safety and security and has requested their continuation even when the country is under a state of emergency.

Against this backdrop, we believe that the greatest

contribution we can make to society is to do our utmost to maintain services while placing the highest priority on the

Response Committee, which spans our International Business Division and overseas subsidiaries, to protect the health of overseas SECOM Group employees, helping prevent infection and ensure business continuity.

Going forward, we will continue to promote stringent measures to limit the further spread of infection and to extend services as appropriate given local conditions, while not causing customers untoward trouble, in line with our abiding commitment to delivering safety and peace of mind and making life more comfortable and convenient.

Owing to the rampant spread of COVID-19, we faced significant difficulties, including restrictions on business activities such as sales and installations, and cautious customer attitudes toward purchases. In response to these difficulties, we took decisive steps to enhance the stability of business continuity, adopting a sales configuration and developing products that make effective use of information technologies (IT), and building an effective telework system.

It is also important to note that the impact of the

pandemic has not been entirely negative. In the security services business, sales of surveillance cameras, access

night, needs for security when premises are empty have risen, underscoring increased public awareness of safety and security and the firmness of demand for on-line security systems.

In our fire protection services and medical services businesses, the impact of COVID-19 has indeed largely been adverse, but our BPO and ICT services business has benefited from growing demand for data center services and special demand for contact center services arising from the emergence of new lifestyles and the greater use of telework arrangements.

Consolidated operating results

control systems and other merchandise and revenue from the installation of systems decreased, but the influence on on-line security systems and other businesses based on

With a view to thriving during COVID-19, as well as in the post-pandemic world, we continued to implement our four ongoing priority strategies, which are to expand monitoring

In the fiscal year ended March 31, 2021, the Japanese economy remained challenging, owing to a significant decline in corporate earnings attributable to COVID-19, with both trends in the spread of the pandemic worldwide and

services businesses. We also accelerated these efforts by clarifying initiatives to be implemented in line with the SECOM Group Road Map 2022 with the goal of achieving the SECOM Group's Vision for 2030.

fixed monthly fees was limited, despite concerns prompted by the integration and downsizing of retail premises. Moreover, with many convenience stores and factories that used to operate around the clock now opting to close at

services, reinforce our BPO and ICT services business, strengthen our overseas operations, and improve productivity.

fluctuations in global financial markets requiring constant monitoring. With the socioeconomic activities gradually resuming, the economy has begun to rally, despite the

Notwithstanding the negative impact of COVID-19 in certain areas of the security services, fire protection services and medical services segments, consolidated net

Promoting four priority strategies

ongoing need for strict measures to curb infections, owing to the positive impact of various strategic measures and improvements in overseas economies.

In this environment, we pressed forward with ongoing efforts to realize our Social System Industry vision, in accordance with our goal of delivering safety and peace of mind, as well as making life more comfortable and convenient, whenever and wherever necessary, for anyone and everyone. To this end, we continued to concentrate on extending high-grade services and systems optimized to meet the increasingly diverse and sophisticated needs of customers in our security services, fire protection services, medical services, insurance services, geospatial information services, BPO and ICT services, and real estate and other

sales and operating revenue in the period under review edged up 0.2%, or ¥2.7 billion, to ¥1,135.3 billion, and operating income rose 4.8%, or ¥6.2 billion, to ¥135.8 billion. This was due to an increase in the BPO and ICT services segment and to net realized investment gains (including a gain on other-than-temporary impairment of investment securities) in the insurance services segment, compared with net realized investment losses in the previous fiscal year. Despite a loss from discontinued operations, net of tax, net income attributable to SECOM CO., LTD., advanced 3.2%, or ¥2.8 billion, to ¥89.9 billion, underpinned by an increase in operating income, as well as by a gain on other-than- temporary impairment of investment securities, compared with a loss in the preceding period.

Expand monitoring services

Recognizing that needs for assistance with care for seniors vary depending on age group and have become increasingly diverse as a consequence of changes in family structure, we added a number of new selections to our lineup of remote monitoring services.

Specifically, in addition to SECOM Senior Care Phone Service, an emergency monitoring service that combines emergency medical alert, health consultation and safety confirmation functions, and Mago Channel with SECOM, a service that encourages communication with parents living apart while providing unstructured monitoring, we began offering SECOM Monitoring Service for Seniors, an option to SECOM Home Security subscribers that includes a cloud- based smartphone app.

Family members living apart can check up on their parents in a nonintrusive manner to confirm any variations in the frequency or nature of daily activities by accessing information captured by SECOM Home Security sensors installed in the parents' home. By installing an optional

dedicated sensor, subscribers can also monitor the indoor temperature and humidity changes at their parents' home from a smartphone using a dedicated application. SECOM emergency response personnel will be sent as necessary to check on the parents directly if, for example, the security sensors detect no movement over a certain period of time. Family members can also use the app to ask SECOM to dispatch emergency response personnel to check in person. We are also currently developing a new sensor that detects changes in posture, falls and whether the individual is breathing to enable more careful monitoring for parents requiring closer observation.

In addition, we are working to verify the value of new services that link SECOM Home Security with the Apple Watch, thereby making effective use of monitoring information, with the aim of achieving commercialization in the fiscal year ending March 31, 2022. One of these services stores pedometer, calorie expenditure counter, exercise time, heart rate and sleep quality data from the subscriber's Apple Watch, together with information on the frequency or nature

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A Message to Stakeholders

of daily activities detected by SECOM Home Security, in the cloud*1 for analysis and viewing. In addition to enabling family members to monitor parents living apart, these services also assist parents in managing their own health.

Monitoring services in the future will require advanced technological capabilities, in addition to the ability to promptly dispatch emergency response personnel when circumstances demand. In our drive to deliver peace of

deliver safety and peace of mind and in so doing respond to demand arising from the need to rely on others.

In ICT services, we are endeavoring to bolster sales of IT products that are also effective in differentiating our on-line security systems. We have also assigned employees with advanced IT skills to regional headquarters to oversee sales promotions, as well as to support and provide direction to regional sales staff, with the aim of expanding the scale of IT

expedite decision making and eliminate waste with the	*1	In addition to information from SECOM sensors, information from devices
objective of breaking down organizational silos. We will		in the home manufactured by other companies can be stored in the cloud
	and used to enhance monitoring of daily activities and health.
continue working as one to further improve productivity,
*2	The concept of refusing to be content with the status quo expresses our
guided by the concept of refusing to be content with the		determination to offer innovative services and systems by challenging
status quo,*2 a key element of SECOM's Philosophy.		outdated beliefs and accepted norms.

Transformation of the security services business

mind, as well as make life more comfortable and convenient, we will not only promote in-house development but also collaborate actively with various partners who have crucial technologies and devices under our strategy of open innovation. Going forward, we will continue working to help monitor the health of families by combining advanced technologies and human sensibilities to provide distinctively SECOM services that ensure our ability to be there for customers whenever we are needed.

Reinforce BPO and ICT services business

We continue to develop services to meet the diverse BPO and ICT needs of our customers and to take decisive steps in the period under review to accelerate the growth of this business. Our data center business is expanding steadily thanks to the increased use of advanced digital technologies, including artificial intelligence (AI), the Internet of Things (IoT) and cloud-based services, and we continue striving to enhance our capabilities in this area. Subsidiary At Tokyo Corporation, one of Japan's largest data center operators, opened two data centers in the Kansai region in 2020. In light of robust demand, the company also plans to open a new hyperscale urban data center in 2023, while in 2025 Secom Trust System Co., Ltd., plans to open a new data center on a site adjacent to an existing facility. Investment in the two new data centers is expected to be in the area of ¥40 billion. We will continue to expand our data center business in response to rapid digitalization to create a disaster- resilient infrastructure.

In the area of BPO services, we saw a temporary jump in demand for contact center services, including from local governments seeking to set up COVID-19 helpdesks. Telework arrangements, which have become increasingly widespread due to the pandemic, are likely to become the new normal. With the steady decline in Japan's labor force, a structural issue, expected to continue, the need to realize work style reforms and improve operational efficiency

will remain common themes for companies in the years ahead. Given such trends, we expect our BPO business to

product sales. Additionally, we are stepping up efforts to integrate BPO and ICT services with security systems to boost customer convenience.

Strengthen overseas operations

With the goal of extending the reach of our security services business in Asia, between September 2020 and February 2021, we acquired ADT Services (M) Sdn. Bhd. in Malaysia, ADT Integrated Security Solutions Pte. Ltd. in Singapore, and ADT Alarm Monitoring Hong Kong Ltd., all of which became wholly owned subsidiaries. This positions us well to expand operations in promising markets, including services for the region's growing wealthy and middle classes, and accelerate efforts to extend the scope of our overseas operations. These three companies provide cloud-based services

and systems via the Internet and will work to enhance smartphone-linked interactive and smart home functions in Asian markets.

With Japan's population expected to continue shrinking over the long term, we believe that strengthening our operations in promising overseas markets is essential to our sustainable growth going forward. In the PRC and Thailand, we have launched projects aimed at cultivating businesses and developing products suited to local needs that incorporate advanced technologies. In early 2021, we also embarked on focused marketing activities designed to broaden awareness of the SECOM brand and enlarge our customer bases in countries and territories where we already have operations.

Improve productivity

We recognize higher productivity as vital to our ability to absorb cost increases associated with additional investments in growth in the years ahead. We are advancing measures aimed at reinforcing in-house IT systems to boost the productivity of individual employees so that we are positioned to handle even a significant surge in work volume resulting from higher subscriber numbers and the expansion of services with current staffing levels.

COVID-19 has brought far-reaching, fundamental changes to society, including business practices, consumer behavior and work styles. With many of these changes likely to remain even after the pandemic has eased, our future depends on responding effectively to survive and thrive in what is emerging as the new normal. At the same time, we must also continue to address challenges associated with a super-aged society and a declining labor force. We are excited at the potential for such socioenvironmental changes to stimulate new needs and create promising business opportunities.

New needs include those for enhanced troubleshooting and security as a result of reduced staff numbers or a shift to an unattended format for retail facilities, as well as those for personnel management-related systems compatible with telework and other work style reforms, information security and document digitalization. With people spending more time at home and making frequent use of delivery services, we are also seeing increased needs for safe and secure home environments, monitoring services that help protect elderly parents and other family members, and remote healthcare. Acknowledging that we have a responsibility to advance social change in this new era, we are striving to develop and offer services that accurately address these and other emerging needs.

The security services business is expected to enter a period of fundamental transformation. Factors behind this include the spread of AI, the IoT and 5G mobile communications technologies, and rapid advances in the area of sensing technologies,*1 which are forecast to support the development of IoT services that respond to various social imperatives. The linking of these to security services will greatly expand the scope of services available to customers.

We also anticipate the realization of services that leverage data science to extract information of value from that captured by sensors installed at subscribers' premises. In the security services industry of the future, we believe

that the key to growth will be our ability to create a service framework based on a new concept that involves the use of these technologies.

During the investment phase of the SECOM Group Road Map 2022, we promoted investments to reinforce our business infrastructure and secure individuals with the high- level skills necessary to work in IT in preparation for the digital era.

We currently have more than 2.4 million on-line security subscribers in Japan. By offering a software as a service (SaaS)*2 on-demand service model, we will make it possible for subscribers to access highly convenient IoT and other new services that leverage new technologies. To this end, we must install security equipment with functions and performance features compatible with these services at subscribers' premises.

Based on the belief that the services we provide to society should both be revolutionary and utilize sophisticated technologies, we will systematically replace subscribers' existing security equipment with new models compatible with the new technologies of today and the future. This combination of state-of-the-art equipment with our around-the-clock monitoring services will continue to ensure our ability to offer new value by extending reliable services that improve convenience. In addition to enhancing customer convenience, these sophisticated technologies will also boost the efficiency of our operations.

We see this period of transformation as an important business opportunity. To ensure sustainable growth over the long term, we are working to build next-generation business models-an effort spearheaded by the Business Design Laboratory, which was established in-house in August 2020-and advancing measures to sharpen our competitive edge under the banner of "SECOM DX."

*1 Sensing technologies are technologies that measure and quantify information acquired by sensors.

*2 SaaS is a subscription-based delivery model whereby services are accessed via the Internet.

continue expanding steadily. Accordingly, core BPO services company TMJ, Inc., will spearhead further efforts to combine optimal state-of-the-art technologies with the front-line administrative competency and ability to refine services it has fostered to offer distinctively SECOM BPO services that

In the fiscal year ended March 31, 2021, we sought to optimize regional sites by merging SECOM control centers and shifting the sales and administrative functions of smaller offices to larger offices. Additionally, we reorganized sales and operational departments to clarify their roles,

Promoting ESG initiatives

Since our establishment, we have sought to fulfill our	and for society. The key to our ability to deliver safety and
responsibility to society through our business activities,	peace of mind, as well as make life more comfortable and
acknowledging the importance of sustainability for ourselves	convenient, is the human resources who are responsible

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