Semiannual Report 2016

SEMIANNUAL REPORT 2016

For the Six-month Period Ended September 30, 2016

PROFILE

The overarching mission of SECOM, which comprises the parent company and the companies of the SECOM Group, is to provide safety and peace of mind and help make life more comfortable and convenient. Accordingly, we are pressing forward with efforts to realize our vision for the future, the Social System Industry, which describes a framework of distinctive, integrated services and systems. To this end, we are leverag- ing our extensive business portfolio-which has expanded to encompass security services, fire protection services, medical services, insurance services, geographic information services, information and communica- tion related services, and real estate and other services-to create a solid foundation for future expansion, working not only to enhance individual businesses but also to integrate services, thereby yielding synergies that will drive growth.

Today, we are maximizing these synergies to expand the scope of our operations by promoting the "ALL SECOM" concept, which focuses on rallying Group strengths, to broaden our selection of services and systems, as well as to enhance comfort and convenience, with the aim of alleviating problems and resolving concerns. Through these efforts, we strive to make SECOM an ever-present part of customers' lives.

We have also expanded our focus beyond Japan. Currently active in 21 countries and territories in Asia, Europe, Oceania and the Americas, where we offer distinctive security services, fire protection services, medical services and geographic information services, we continue to strengthen and grow our overseas operations.

Notes: 1. Comparisons of operating results in this semiannual report are between the six-month periods ended September 30, 2016 and 2015.

2. SECOM's semiannual report presents information on its consolidated operating results, calculated in accordance with accounting principles generally accepted in Japan (Japanese GAAP).

SECOM CO., LTD. and Subsidiaries Six-month periods ended September 30, 2016, 2015 and 2014

In millions of yen

In thousands of U.S. dollars

Notes: 1. Net income per share figures are in exact yen and U.S. dollars.

1. All dollar figures herein refer to U.S. currency. Yen amounts have been translated, solely for the convenience of the reader, at the rate of ¥101=US$1, the rate prevailing on the Tokyo Foreign Exchange Market on September 30, 2016.

2. Net income per share amounts are based on the average number of shares outstanding during each period.

(In billions of yen)

500

400

300

200

100

(In billions of yen)

50

40

30

20

10

0

12 13 14 15 16

0

12 13 14 15 16

Operating Results

Despite an improvement in the employment situation, the outlook for the Japanese economy remained unclear in the six months ended September 30, 2016, as corporate earnings stagnated amid concern over growing uncertainty in overseas economies and fluctuations in the financial and capital markets.

In this environment, we continued working to address ever more diverse and sophisticated needs for safety and peace of mind, focusing on offering high-grade services and systems that respond to customers' needs in our security services segment, as well as in our fire protection services, medical services, insurance services, geographic information services, information and communication related services, and real estate and other services segments. We also proceeded with efforts to apply the ALL SECOM concept, which emphasizes cooperation among our various independent businesses to strengthen the Group as a whole. In addition, we continued to chart further growth by pushing ahead with the development of innovative services and systems that anticipate social changes in line with three key themes-security, a super-aged society and disaster preparedness/business continuity planning (BCP)/environmental preservation.

Calculated according to accounting principles generally accepted in Japan (Japanese GAAP), consolidated revenue in the period under review rose 7.6%, to an all-time high of ¥440.0 billion, reflecting

the inclusion of results for Asahi Security Co., Ltd., consolidated in December 2015. We reported a 3.2% increase in consolidated operat- ing profit, to ¥62.1 billion, also a record. Consolidated ordinary profit was up 6.8%, to ¥67.3 billion, owing mainly to a ¥2.9 billion net gain on private equity investments, principally in the United States, compared with a ¥168 million net loss on such investments in the corresponding period of the previous fiscal year. Consolidated net income attributable to owners of the parent advanced 2.0%, to ¥40.8 billion.

In light of our solid performance in the period under review, with the aim of enhancing returns to shareholders, on November 9, 2016, the Board of Directors approved the payment of an interim dividend of ¥70.00 per share, up ¥5.00 from the interim dividend paid in the previous fiscal year.

Segment Results

Security Services

The security services segment comprises electronic security services, other security services, and merchandise and other. Electronic security services consist of on-line commercial and home security systems and large-scale proprietary security systems. Other security services include static guard and armored car services. The merchandise and

other category encompasses sales of a wide range of security products, including security camera systems, access control systems, automated fire extinguishing systems and external monitoring systems. We also offer high-quality security services in overseas markets through a network of local subsidiaries and affiliates.

In the period under review, revenue in this segment increased 11.7%, to ¥262.2 billion, while operating profit edged up 0.4%, to ¥56.4 billion. Principal factors behind these results included brisk sales of on- line security systems for commercial and residential use and of access control systems, security camera systems and other merchandise.

For commercial subscribers in Japan, we stepped up marketing of high-value-added on-line security systems such as SECOM LX, which combines an on-line security system with access control functions

that help improve the efficiency of personnel management, and SECOM FX, an on-line security system with energy-saving facility control functions. For home security subscribers, we sought to expand sales of SECOM Home Security G-Custom, which combines home security with a variety of lifestyle support features-to deliver not

only safety and peace of mind, but also comfort and convenience-to accommodate an ever more diverse range of residential environments and family configurations.

Fire Protection Services

This segment focuses on automatic fire alarm systems, fire extinguish- ing systems and other fire protection systems for a wide range of applications, including office buildings, plants, tunnels, cultural proper- ties, ships and residences. Segment revenue declined 6.9%, to ¥53.1 billion, and operating profit decreased 5.9%, to ¥4.2 billion, largely because major orders for these systems for electric power generating facilities, among others, inflated results in the six months ended September 30, 2015. Income in this segment tends to be concentrated toward the end of the fiscal year, as the fire protection services business is influenced significantly by trends in the construction industry.

Medical Services

The medical services segment encompasses home medical services, which center on pharmaceutical dispensing and home nursing ser- vices, as well as sales of medical equipment, pharmaceuticals and other products, the operation of residences for seniors, the provision of remote image diagnosis support services, electronic medical report systems and personal care services, and the leasing of real estate for hospitals and healthcare-related institutions. Although the segment reported a 7.2% increase in revenue, to ¥32.6 billion, reflecting brisk sales of pharmaceuticals and of medical equipment and other prod- ucts, operating profit dipped 0.1%, to ¥2.7 billion, owing to a higher cost ratio.

Insurance Services

We believe that both security services, which are preventative by nature, and non-life insurance, which looks after people should misfortune strike, are essential to our ability to provide customers with safety and peace of mind. Our extensive lineup includes fire insurance policies for commercial premises and homes, a compre- hensive automobile insurance policy and MEDCOM, an unrestricted cancer treatment policy that covers the entire cost of medical treat- ment. Revenue in this segment advanced 3.6%, to ¥20.1 billion, underpinned by firm sales of MEDCOM, among others. Operating profit climbed 163.8%, to ¥1.1 billion, bolstered by such factors as a decrease in losses attributable to natural disasters.

Geographic Information Services

The geographic information services segment includes the use of high-precision measuring equipment and surveying technologies to provide a variety of geospatial information services to public sector entities, including national and local governments, and private sector

customers in Japan. We also provide geospatial information services to government agencies overseas, including in emerging economies and developing countries. With revenue from services for both public sec- tor and overseas entities down, segment revenue declined 3.9%, to

¥21.9 billion. The segment reported an operating loss of ¥511 million,