We Believe the Possibilities.

Profile

Sysmex Corporation (“the Company”) got its start in 1968 as TOA
Medical Electronics Co., Ltd., a specialist manufacturer of instruments
and reagents in the hematology market. The Company then expanded
its R&D and production functions and developed a more global business. 2008 marks the 40th anniversary since Sysmex was founded.
As a global, comprehensive supplier in the diagnostics field, theCompany has now expanded its business beyond the hematology
segment to incorporate hemostasis, immunochemistry, clinical chemistry and urinalysis. In pursuit of further development, a new corporate logo was introduced in October 2008.
Sysmex has developed integrated systems encompassing everything from R&D to production, sales and after-sales support. The
Company applies a high degree of specialization and a strong technological orientation in the uncompromising pursuit of excellence inproduct development and manufacturing. Sysmex has earned an excellent reputation among medical institutions around the world bycombining technological excellence with the capability to propose
solutions that precisely meet customer needs. The Company has
established a particularly strong position as the global leader in its
core segment of hematology, in which it holds the highest market
share worldwide.
To provide products and services that satisfy the diverse market
needs of different regions around the world, Sysmex maintains a global network of business facilities spanning 38 locations in 23 countries. Through this sales and support network, the Company supplies
products and services to customers in more than 150 countries.
Sysmex is targeting further growth by developing its business on a
global basis, as well as through focused efforts to develop new proprietary technologies and operational expansion through the aggressive pursuit of alliances and M&A activities.
The Company currently seeks to leverage its extensive business
infrastructure to increase corporate value by expanding its businessdomain beyond diagnosis and treatment to encompass the broader
healthcare field that includes disease prevention and health maintenance. Sysmex is moving into new R&D fields, including hematology
disease, immunological disease, infectious diseases, diabetes andcancer. The Company will continue to provide high-value-added products and services that contribute to improving the quality of life
(QOL) for people everywhere.

1968

1978

1988

Net Sales

2008

1998

110.7
billion yen
35.6billion yen

Operating Income

2008

1998

15.0
billion yen
3.2billion yen

Overseas Sales Ratio

2008

67.5%

1998

54.1%

Number of Employees

2008

3,916

1998

1,587

1998

11-Year Consolidated Financial Data

For the years ended March 31

1998

1999

2000

2001

2002

For the year:

Net Sales¥ 35,576¥ 38,337¥ 37,244¥ 38,817¥ 47,532

Operating Income

3,178

3,400

3,618

2,975

3,417

Net Income

1,555

913

1,838

1,363

1,308

5,818

(2,562)

1,842

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents, End of Year

4,083

9,901

7,338

9,181

Capital Expenditure

2,890

2,140

3,018

2,098

2,455

Depreciation

2,310

2,359

2,316

2,541

2,810

R&D Expenditure

2,992

2,813

3,155

3,527

4,130

Total Assets

43,17242,51349,96755,21966,502

Shareholders’ Equity

31,28331,68033,596

34,10335,577

981

1,328

5,810

11,02011,606¥ 1,496.1¥ 1,515.1¥ 1,606.8¥ 1,631.0¥ 1,701.5

74.4

43.7

87.9

65.2

62.6

87.7

60.8

58.4

Cash Dividends Applicable to the Year (Yen)

20.0

22.0

22.0

22.0

22.0

Dividends Ratio (%)

26.9

50.3

25.0

33.7

35.2

Shareholders’ Equity Ratio (%)

72.5

74.5

67.2

61.8

53.5

Return on Equity (ROE) (%)

5.1

2.9

5.6

4.0

3.8

At year-end:

Interest-bearing Liabilities

Per share data:

Shareholders’ Equity (Yen)Net Income (basic) (Yen)Net Income (diluted) (Yen)

Other data:

Return on Assets (ROA) (%)

3.6

2.1

4.0

2.6

2.1

Price-Earnings Ratio (times)

15.2

42.1

36.7

42.6

35.6

Price-Book Value Ratio (times)
Number of Employees

0.8

1.2

2.0

1.7

1.3

1,587

1,757

1,809

1,985

2,530

*Including part-time employees
Notes: 1. U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥100 = U.S. $1, the approximate rate of exchange on March 31, 2008.
2. Per share data: Certain retroactive adjustments of previously reported per share information have been made to conform with the current method from the year ended March(See Note 2(u). Per Share Information on page 78 of the Notes to Consolidated Financial Statements).
3.ROA = Net Income/Total Assets (Yearly Average) x100

Operating Income
Operating Income per Net Sales

Net Sales(¥ billion)(¥ billion)

120

16

110.7
101.0

100

(%)

15.0

24

12

10

12

8

8.2 9

6

6

4

9.1
12.6
11.8 12.2

66.0
60

8
6

40

13.6 15

10

9.1

7.4

5.7 8.4
7.4

6

12

10.0

9

6.6

8.9

8

4.8
3.2
2

20

07

08

0

3

2

0

0

3.2

3.3

2.5

2.7

3.6

3.9
4

4.0
2

3

2

06

6

5.6
4.5

4

6

4

05

(¥ billion)

10.7

76.9

04

(¥ billion)

8.2
8

18

10

0

(%)
15

10

9.0

12.7

80

(¥ billion)

Capital Expenditure
Depreciation

21

14

87.9

Net Income
Net Income per Net Sales

04

05

06

07

08

0

0

04

05

06

07

08

04

05

06

07

08

0

(Thousands of
U.S. Dollars)(Millions of Yen)

2003

2004

2005

2006

2007

¥ 57,253¥ 65,970¥ 76,935¥ 87,888¥ 101,041

5,299

6,615

9,104

10,724

12,715

3,125

3,157

5,731

7,423

9,008

1,071

3,465

(3,261)

(499)

3,299

10,253

13,71810,4589,416

12,715

2,317

2,451

2,729

5,638

4,546

3,107

3,203

3,296

3,592

3,959

4,969

5,549

6,509

8,184

9,026

66,44971,983

77,66087,447

101,225

43,32551,09656,14962,647

71,344

10,893

4,175

657

695

669

2008

2008

¥ 110,724 ＄1,107,240

15,0339,132(3,044)
9,679
8,244
3,924
9,221

150,330
91,320(30,440)
96,79082,44039,24092,210109,027 ＄1,090,270
78,753
787,530
1,081
10,810(Yen)(U.S. Dollars)¥ 1,879.5¥ 2,042.7¥ 2,244.9¥ 1,251.8¥ 1,411.0¥ 1,541.0＄ 15.41

132.2

132.9

225.1

145.5*

179.6

121.8

123.1

224.0

143.8*

178.0

25.0

30.0

40.0

36.0*

36.0

1.79
1.78
0.48

18.9

22.6

17 .8

17.9*

20.0

178.9
178.3
48.0
26.8

*Two-for-one stock split in Nov. 2005
65.2

71.0

72.3

71.6

70.5

7.9

6.7

10.7

12.5

13.4

4.7

4.6

7.7

9.0

9.5

15.9

20.3

27.2

35.3

23.8

1.1

1.3

2.7

4.1

3.0

2,639

2,907

3,115

3,334

3,580

72.2
12.2
8.7
20.1
2.3
3,916

h 31, 2003.

R&D Expenditure
R&D Expenditure as % of Net Sales(¥ billion)

(%)

10

15

9.0

Total Assets
ROA

Shareholders’ Equity
ROE(¥ billion)

(%)

120

18

9.2
12

101.2

100

6.5 9.3
8.5

8.9

80

12

72.0
9.0

5.5

60

62.6
60

77.7

80

8.3 9

9.5

7.7

56.1
12.5

51.1

8.7 9

13.4

0

3

04

05

06

07

08

0

30

26.8 30

22.6

10

40

30
20.0
17.8 17.9

20

20

6

4.6

5
10

20

0

40

1

36* 36

12.2

20
2

40

40

6.7
40

(%)

2
48* 50

50

15

10.7

6

4

Figures before 2006 are adjusted for a stock split
conducted on November 18, 2005

(¥)

71.3
15

87.4
6 8.4

(%)

78.8 20

109.0

8.2
8

(¥ billion)

Cash Dividends Applicable to the Year
Dividends Ratio

10

3

04

05

06

07

08

0

0

0

04

05

06

07

08

0

04

05

06

07

08

0

Two-for-one stock split in Nov. 2005
*1:
special dividends of ¥8 commemorating*2: Including
the 40th anniversary of the Company’s foundingC o n t e n t s
5

To Our Stakeholders

q Strategy and Management

Moving to
the Next Stage

8

An Interview with the President

12

Special Feature 1:
Progress Under the Mid-Term Plan

16

Geographical Sales Activities

19

Corporate Governanceq Business Activities
27

Sysmex at a Glance

29

Business Domains

31

Major Products

33

Focus : Core Competence

q Function Structures
37

Perspective

39

Research and Development

43

Focus : Sysmex Technologies

47

Purchasing, Production and Logistics

51

Sales and After-Sales Support

q Sysmex Value
54

Socially Responsible Activities

58

Special Feature 2:
Business Challenges Over the Past 40 Years

q Financial State
63

Management’s Discussion and Analysis

71

Consolidated Financial Statements

84

Independent Auditors’ Report

q Corporate Information
85

Network

87

Consolidated Affiliates

88

Corporate Overview / Stock Information

Forward-looking Statements
Statements in this annual report, other than those ofhistorical fact, are forward-looking statements about
the future performance of Sysmex that are based on
management’s assumptions and beliefs in light of information currently available, and involve both known
and unknown risks and uncertainties. Actual eventsand results may differ materially from those anticipated in these statements.

2008

To Our Stakeholders

2008 was a watershed year for Sysmex. Our sales and operating
income were all-time highs, propelling us toward the targets set out
in our mid-term plan. And guided by our new corporate philosophy,
the "Sysmex Way," we are determined to raise our corporate
value even further.

5

Sysmex Annual Report 2008

To Our Stakeholders

Sysmex achieved record-breaking results in 2008. Sales

Turning to sales in Japan, we have actively proposed

increased 9.6% year on year to ¥110,724 million, operat-

solutions to customers in the face of difficult operating

ing income rose 18.2% to ¥15,033 million, and net in-conditions, but we experienced delays in launching newcome was up 1.4% at ¥9,132 million. 2008 was the first

products in the hemostasis and immunochemistry

year of the Company's new mid-term plan and our per-segments, and sales of our influenza test reagentsformance has set the stage for the future.

declined. As a result, Japanese sales fell 5.0% year on

The Japanese economy in 2008 continued to expand

year to ¥35,961 million. Overseas, we made integrated

gradually in the first half, supported by buoyant exports

proposals to reference laboratories and group facilities

and capital expenditures. The second half, though, saw

such as integrated health networks (IHNs) in the Ameri-both the Japanese and US economies slow, because ofcas, and expanded sales in Central and South American

rising crude oil and materials prices, combined with yen

markets. We expanded direct sales and support net-appreciation and slumping share prices triggered by theworks in Europe and increased our dealings with emerg-

US subprime loan problem. Meanwhile, European

ing markets in the Middle East and Africa. In this way,

economies remained steady on the back of strong capi-

we have grown our market share and sales coverage intal expenditures and growing personal consumption,these regions. In other developments, we bolstered ourwhile Asian economies continued growing strongly over-sales and support structures in China and the Asia Pacif-

all, especially in China and India.

ic region, by upgrading a base in Thailand and in otherIn the medical arena, healthcare reforms for curbing

ways. As a result, overseas sales rose 18.4% year on

spending made the Japanese market as difficult as ever.

year to ¥74,763 million and accounted for 67.5% of total

However, we expect to see new demand generated bysales, up 5.0 percentage points. Consolidated net sales

measures to prevent lifestyle-related diseases. One

rose 9.6% to ¥110,724 million.

recent move in April 2008 was the introduction of

On the profit front, higher SG&A expenses from thespecific health checkups and specific health education

expanded sales and support networks overseas were

measures, as part of the major shift in healthcare focus

offset by improved cost ratios and higher revenues,

from treatment to prevention. Healthcare reforms

resulting in an 18.2% year-on-year rise in operating

designed to curb spending are also being implemented

income to ¥15,033 million. Net income rose 1.4% toin the US and advanced countries in Europe. On the¥9,132 million despite the impact of foreign exchange

other hand, China, other Asian countries and Middle

losses. The full-year dividend per share totaled ¥48,

East nations are still putting in place healthcare systems

comprising a ¥40 dividend that was forecast at the be-as they grow economically.
We are working to expand our diagnostics productportfolio to respond to these marketplace dynamics. For

ginning of the year and an ¥8 commemorative dividend
payment for the Company's 40th anniversary.
Our operating environment is undergoing dramatic

instance, we are launching new products to supportchange, which has prompted us to redefine our basic

improved test result quality and efficiency. Two products

corporate policy originally formulated when the Compa-

we have high hopes for here are the XE-5000, an auto-

ny was founded. This culminated in us unveiling a new

mated hematology analyzer and the HISCL-2000i auto-

corporate philosophy, "Sysmex Way," in April 2007. Mov-

mated immunoassay analyzer. Enhancing global alliances

ing forward, we will work to ensure that every individual

is another aspect of our strategy and we have taken

employee understands the "Sysmex Way," and can prac-several strategic moves in this regard. We have renewed

tice it. The key question employees must ask is what

our overseas sales and support agreement with Swiss

they must do to ensure all stakeholders have trust incompany Roche Diagnostics; we have agreed to a sales

Sysmex.

and support contract for our urinalysis analyzer with
bioMérieux, a French market leader in microbiology test-

We hope that our actions will be worthy of yourcontinued support.

ing; and we have initiated business collaboration withIDEXX Laboratories, the US market leader in animal
health testing. We have also accelerated overseas busi-

Hisashi Ietsugu

ness development. This has included turning local distrib-

President and CEO

utors into subsidiaries in Austria, Hungary, the Czech Republic and Slovakia, and establishing a local affiliate in
Canada, in order to expand our sales and support network in non-Asian markets.
6We aim to maximize the overall corporate
value of the Group through management
robustness, better transparency andimproved management speed and efficiency.

The street where the office of Sysmex America is located,
although officially called Nelson C White Parkway,
is familiarly known by its nickname of "Sysmex Way".

7

Sysmex Annual Report 2008

An Interview
with the President

Sysmex will accelerate growth by implementing threecore strategies and anticipating qualitative changes
in the healthcare testing field.

QA

How do you rate Sysmex's
efforts and performance in 2008?

We achieved record-breaking sales and operating income for the 8th and 6th consecutive
years, respectively. Sales were given a fillip
by a further increase in the proportion of overseas
sales. In 2008, overseas sales made up 67.5% of total net sales, an increase of 5 percentage points.
Contrasting with a sales decline in Japan because ofdelayed product launches, overseas sales rose
18.4% year on year. Hematology sales rose in theUS, the world's largest market. Significantly, though,we recorded the largest sales growth in Europe because of growth in emerging countries and the moveto a more direct sales structure through, for example, the establishment of new local affiliates. We
also achieved particularly high growth rates in China
and the Asia-Pacific region. This strong growth overseas offset the sales decline in Japan, resulting inoverall sales growth across the Group.
Looking at earnings, operating income rose 18.2%
year on year. The increased sales generated higher
gross income, but SG&A expenses also rose, partly
due to the establishment of local affiliates as wemove to a more direct sales structure. We also re-corded extraordinary losses on write-downs brought
about by yen appreciation versus the dollar at theend of the term.
In terms of our efforts in 2008, we actively developed more direct sales structures in overseas markets and improved our sales and support structures.
We introduced direct sales structures in Canada andin four Central European countries—Austria, Hungary, the Czech Republic and Slovakia. In April 2008,
we also started direct sales in France and expanded
our sales coverage into the Middle East.
We successfully launched the XE-5000 automatedhematology analyzer in our core business segment.
We have received very positive feedback from overseas customers for the analyzers' ability to measure
immature cells in blood. We experienced delays thisterm in launching some new products in the hemostasis and immunochemistry segments, but expect agood earnings contribution in the future.
There were major developments in terms of alliances during the past year. Our alliance efforts resulted in an extension to the contract on hematology
analyzer sales and support with Roche Diagnostics,
as well as the new inclusion of urinalysis analyzer
sales and support. We also signed a contract with
bioMérieux for sales and support of our urinalysis
analyzer; bioMérieux will also market our urinalysis

8External environment
Global economy

Competitive environment

Healthcare environment

Advanced countries

Diagnostics field

Advanced countries● Entry of diagnostic imaging companies● Greater demand for preventive health-● Stagnant Japanese economy

q Jump in crude oil, materials prices

pursuing M&A in advanced countries● Slowing US economy● Solid European economy

Emerging countries

care due to demographic aging● Companies from emerging countries

Healthcare industry〈Japan〉
q Specific health checkups,
Specific health education● More new market entrants

Emerging countries
Life science field● Continued economic growth● Economic growth driving establish-● New technologies being

ment of healthcare infrastructure

established at a faster rate

Growth in healthcare industry is acceleratingproducts in the microbiology testing market. We
have invested in bioMérieux's Japanese affiliate andwill provide sales and support on contract for bioMérieux's microbiology products in Japan, thereby
expanding our product line-up. In the animal diagnostic testing market, we signed a basic agreement
on future collaboration with IDEXX Laboratories, aworld leader in this field.

Q

What is your view on thehealthcare industry in which
Sysmex operates?

Healthcare is one of the 21st century’s
growth industries and we expect the market
to grow even further. In advanced countries
like Japan, healthcare demand is growing as the population ages. In an environment where one of the major challenges is curbing rising healthcare spending,
we believe that diagnostics will rapidly grow in importance as the focus of healthcare in advanced countries shifts from treatment to prevention. Japan intro-

A

9

Sysmex Annual Report 2008

duced specific health checkups and specific healtheducation measures in April 2008 and we expect thisto generate new demand for preventive healthcare.
At the same time, in emerging countries, healthcare
systems are being put into place as these countries'
economies grow, so we expect market growth inthese regions, too. Countries in the Middle East andAfrica as well as Russia are also developing basic
healthcare infrastructure, generating new demand.
Healthcare needs are therefore definitely expanding.
The diagnostics industry is undergoing restructuring, with diagnostic imaging companies in the in vivo
diagnostics field moving into the in vitro diagnostics
field and companies from emerging countries pursuing M&A in advanced countries. In the life sciencefield, new technologies are being established, mainly
by bioventures.
Clearly, healthcare is a growth industry and we areconfident that this growth will accelerate further. Given the intense competition in this industry, however,
we are well aware of the need to anticipate market
changes promptly and rapidly decide on our next strategic steps.

Strategy and Management

Q

What are your strategies forfurther growth in light of thisoperating environment?

Sysmex has three key strengths that have
driven our growth thus far.
First, we recognized early on the need totake a global view of the healthcare business. As wellas actively building alliances, we have developed ourown sales and support network to provide products
and services directly to customers. Today, overseas
sales account for as much as 67.5% of total sales andthey are driving Group earnings.
Second, we pioneered a solutions business. In advanced countries, healthcare reforms are targeting
rising healthcare costs, meaning medical institutions
must rationalize operations and become more efficient. Against this backdrop, we are focusing on delivering solutions to solve customers' various problems,suggesting ways to improve the efficiency and qualityof laboratory testing. We have built an excellent reputation with medical institutions worldwide and aresteadily generating results in this field.
Third, we are a full-service diagnostics manufacturer who researches, develops, manufactures and sells

A

instruments, reagents and software. The hematology
business is unusual in that, once a customer has purchased instruments, they then continue to use ourproprietary reagents for their instruments. We also
provide maintenance and repair services. Therefore,
as the number of instruments sold rises, we record
more sales of our proprietary reagents and repair services, thereby generating a stable source of revenue.
We have expanded our business scope further to include hemostasis, clinical chemistry and other segments and we are now working on building a newmarket in the life sciences.
In order to leverage these strengths and achieve
further growth, we have defined three core strategies
in our mid-term plan that ends in 2010: these strategies are "Global Niche No.1," "Focus on Asia" and"Focus on Life Sciences." We are targeting sales of¥140 billion and operating income of ¥20 billion under
this plan.
For the Global Niche No.1 strategy, we secured theglobal hematology market leader position in 2007, but
we now want to become the market leader in all regions, including the US, so that we become the true
global leader in hematology. In terms of the second
strategy, as countries in Asia build up their healthcare
systems, we are developing a sales and support
H ig hMarket environment
surrounding Sysmex

Next Stage

EuropeHigh market growth

China

US

Mild market growth

AP
Latin
America
EasternEurope,RussiaMiddleEast

AfricaA dvanced m ar kets

P ro f it C o n tr ib u t io n to S y s m ex

Japan

E me r g in g m a r k e ts
Low

Pursuing direct or indirect sales according to local needs

10structure to meet the unique needs in this region and leveraging our strengths as a diagnostics solutions provider.
Regarding the life science strategy, we will accelerate
R&D to develop new testing technologies in the life science field. One of the central players here will be theTechno Park that was completed in 2008.

Q

The Company will mark its 40th
anniversary in 2008. What are the key
themes in this milestone year?

In the diagnostics field, we are stepping up global business development in line with a strategy
that aims to respond to regional characteristics.
In advanced countries undergoing healthcare reforms, we
are working to strengthen our solutions business. In
emerging countries experiencing rapid market growth, weare boosting our sales and support structures based on regional characteristics and responding to customer needs.
In the life science field, Sysmex obtained approval
from the Ministry of Health, Labour and Welfare in June2008 to manufacture and sell in Japan a reagent for a
rapid diagnosis system for detection of breast cancer
lymph node metastasis as an in vitro diagnostic product.
Looking ahead, we will launch as soon as possible anddisseminate this rapid diagnosis system, using both thereagent and the specialized analyzer RD-100i, to test forbreast cancer metastasis in lymph nodes. We will also
make use of this system in the metastatic diagnosis of
stomach cancer, colon cancer and other diseases. Having positioned the life sciences as a second driver ofSysmex growth, we are moving to implement viablebusinesses in this area.
In April 2007, we unveiled a new Group corporate philosophy called the “Sysmex Way,” in order to update ouroriginal basic business policy that has guided the Company since its founding in line with the changing times.
The “Sysmex Way” is guiding us at this time when
Sysmex can contribute to society in a real sense precisely because we are growing as a company and are taking
a wider view of things. We have examined how to disseminate the contents of the “Sysmex Way” to all
Group employees throughout the world. We are committed to steadily putting the “Sysmex Way” into practicefrom 2008. Furthermore, we completed the Techno Parkin 2008. This new R&D base is designed to generate organic growth in Sysmex’s contribution to the advance-A

11

Sysmex Annual Report 2008

ment of disease management. It will allow us tostrengthen our foundations as an R&D-driven company
developing world-class, innovative technologies.

QA

Do you have a closing message
for stakeholders?

Our new corporate philosophy —the “Sysmex Way”—
will keep us focused on ensuring that we are acompany that our stakeholders trust. One of ourpriority management objectives is returning profits toshareholders. In this regard, we are targeting a consolidated dividend payout ratio of 20%. At the same time,
we will ensure that we continue to make investmentsthat will maintain growth at high levels. In other words,
we are adopting a balanced approach to the use of internal reserves.
I think a company must continuously grow as well as
fulfill its social responsibilities. To do this, Sysmex iscommitted to increasing corporate value and meetingshareholder and investor expectations by contributing toa healthy and prosperous society in line with its longterm vision of being “A Unique & Global Healthcare Testing Company.”
As we celebrate the Company's 40th anniversary, we
have embarked on a program of new initiatives to takeSysmex to the next stage of growth. I ask that you havefaith in these initiatives and continue to support our endeavors.

Special Feature 1:

Progress Under
the Mid-Term Plan
Sysmex has created as its long-term vision thegoal of becoming "A Unique & Global Healthcare
Testing Company" with consolidated net sales
exceeding ¥200 billion.
In 2010, we are aiming for net sales of ¥140 billion
and operating income of ¥20 billion. We will
promote three core strategies.

Long-term Vision

A Unique & Global Healthcare Testing Company
Mi d-term Ta rge t s for 2 010

Supporting( the year en d i n g March 31, 2010)

Net Sales
Operating Income
Operating Margin
ROE
FCF

Prevention,
Early detection,
Definitive diagnoses

140 billion yen
20 billion yen
14.3%
13.6%
10.4 billion yen= 1=¥150
Approximate rate of exchange: US$1=¥115, C(Announced on May 2007)

Focus onLife Sciences
Forge newmarkets

Diagnostic
support
Focus on Asia

Global Niche
No. 1
12

Global Niche No. 1
This strategy involves building strengths that competitors cannot duplicate in niche markets,with the aim of becoming the global market leader. We aim to attain the top position in all regions,
thereby becoming the true leader in the hematology field.
The global diagnostics market where Sysmex operates isand support network in France and worked to strengthen

worth just over ¥3 trillion and is expected to continue

our operations in high-growth, emerging markets such as

growing at around 8% per annum through 2010. We are a

the Middle East and Africa.
We have already captured the market leader position incomprehensive supplier of diagnostics and achieved themarket leader position in the hematology segment inJapan and we are now working to cement our position

2007. We are now working to grow our market share fur-and gain the global market leader position not only in he-ther and cement our global position as market leader.

matology, but also in hemostasis and urinalysis. In 2008,

The Sysmex brand has penetrated the US market

our solutions business won a number of new contracts

since the introduction of a direct sales and support struc-with major institutions. We aim to build up hemostasis

ture in July 2003. In 2008, we recorded strong sales tosales in Asia and expand our urinalysis business beyond

integrated health networks* (IHNs) and blood centers

urinary sediment tests*3 where we have already cap-

and achieved real results from solutions and proposals on

tured the top share of the global market.

1

improving efficiency with the Sysmex Network Communication Systems*2 (SNCS) for reference laboratories. We

health networks (IHNs): Integrated health business en*1:Integrated
tities in the US. An organization of multiple hospitals formed tohave established a new affiliate in Canada and have ex-provide the healthcare services needed for the local population
across a large medical district.

panded sales in Central and South American markets.
In Europe, we have built a good reputation as the hematology market leader in this region. In 2008, we madeour affiliates in Austria, Hungary, the Czech Republic andSlovakia as part of our efforts to expand our direct sales
and support network. We also set up a new direct sales

SNCS: A service that connects customer products with cus*2 :tomer
support center terminals through a web interface to provide online support and online quality control.

3 : Urinary sediment test: Investigates the presence of various solid substances in urine, including red blood cells, white blood
cells and bacteria.

*

Sysmex's Share of the Global Market (Hematology Segment)

Europe

45%
54%

16%
China
Japan

50%

Americas

26%

65%

AP

40%

Note: Figures show Sysmex's share of each geographical market in 2007. (Sysmex estimates)
Figures with arrows show Sysmex targets in the Sysmex mid-term plan.

13

Sysmex Annual Report 2008

Strategy and Management

Focus on Asia
We aim to leverage the competitive advantage gained from being among the first to enter andbuild a business base in the rapidly expanding markets of the Asian region to become theleading comprehensive supplier in Asia in the diagnostics field.
We aim to be the leading comprehensive supplier in

2007, at our Wuxi Factory, our second reagent produc-

Asia. The Japanese share many similar cultural char-tion site in China,we were the first non-Chinese com-

acteristics with other Asians and there are few barri-pany in the industry to be awarded medical producters with regard to understanding of business practi-

manufacturing approval. This approval means that we

ces or communication. We have made the most of

can manufacture immunochemistry, clinical chemistry

this advantage over major western companies in ourand other types of reagents. It will ensure a reliablebusiness development activities, being quick to build

supply of reagents and improve our cost competitive-

business foundations in China and engaging in full-ness.

scale business development in Asia.

Like China, the Asia-Pacific region is characterized

In China, where the economy is growing strongly,

by healthcare environments in different areas with

we are developing business in almost all segments ofdiverse customer needs. We are therefore tailoring

the diagnostics field. We have already captured theSysmex product launches to meet local needs andregional market leader position in the hematology andare focusing on hematology instruments in particular.

hemostasis segments. Healthcare (diagnostic) sys-

In India, where we forecast rising demand for re-tems are rapidly becoming more sophisticated and ef-

agents, we completed construction of a reagent pro-ficient in China's urban areas, but a healthcare infra-

duction site at Baddi in June 2007 and have started

structure is still being put into place in rural areas

full-scale manufacturing operations.

under the direction of the government. In order to be

Business conditions remain adverse in Japan. Weable to meet the needs of these different areas, weare expanding our scheme to tailor sales to meet cus-

are building a finely tuned sales and support network

tomer needs and are working on solutions to improveand are expanding our product portfolio. We achieved

test efficiency and quality as a comprehensive suppli-

solid results in 2008 by focusing on hemostasis in-er that can provide a full package of solutions from in-strument sales and sales of integrated proposals tostruments to reagents, sales and after-sales support.

major institutions that emphasize test quality. In April

Sysmex’s Operations in Asia

Segments Covered by Region*Excluding Japan
Local affiliates

Segment

Local bases
Representative offices

Hematology

Japan

China

AP

Americas Europe

Hemostasis
Immunochemistry——

Clinical Chemistry

—

—

—

—

Urinalysis
IT
POC

—

—

Markets targeted by Sysmex.
Segments focused on in the Sysmex mid-term plan.

14

Focus on Life Sciences
Our goal is to create new test technologies by combining our diagnostics technologies withlife science technologies.

The healthcare environment is undergoing a transformation, with progress in gene sequencing technologies, increasing demand for health and longevity, and a shift in
focus from treatment to prevention by the healthcare authorities. Laboratory tests are of growing importance, as
they play a role in disease diagnosis, act as a barometerof patient health, and can provide vital information when
deciding treatment options using an evidence-based
medicine (EBM) approach or when monitoring a courseof treatment. At Sysmex, we are working to generate
new value-added test technologies by combining our diagnostics technologies with life science technologies.
In 2000, we established our Central Research Laboratories at the Techno Center as a site for life science R&D
to investigate new test technologies using bioinformatics and other cutting-edge technology platforms. In
2008, we completed work to expand the Techno Center
into the Techno Park that will be used to create new test
technologies in the life science field based on the concept of “knowledge creation and succession”.
This boost to our R&D base will allow us to develop
new test technologies in the life science field, with aparticular focus on cancer and chronic disease. Research
themes currently include predicting cancer reoccurrence, predicting anticancer effects, screening for cervi-

cal cancer, and minimally invasive glucose measurement.
The entire Group including overseas affiliates is working towards establishing viable businesses in the life science field. In Europe, Sysmex took the lead in launchinga rapid diagnosis system for detection of breast cancer
lymph node metastasis. We obtained approval fromJapan's Ministry of Health, Labour and Welfare to manufacture and sell in Japan a reagent for this diagnosis system, thereby achieving the first automated diagnosis
jointly using this reagent and specialized analytical instrument. Looking ahead, we will launch this system early inJapan and promote its dissemination. We will also makeuse of this technology in the metastatic diagnosis of
stomach cancer, colon cancer and other disease, working to win market recognition for acclaim from customers and aiming for insurance applications.
We have formed an alliance on clinical development
and sales with US DNA chip manufacturer Affymetrix,
the largest in the world. We have also developed a newin vitro cancer diagnosis technology using a special virus
in collaboration with Oncolys BioPharma.
Moving forward, we will step up our efforts to commercialize these technologies as a second driver of further growth at Sysmex.

Life Science Research Themes
CancerqRapid diagnostic test for
lymph node metastasisqTechnologies to predict cancer reoccurrence, anticancer effects

A diagnostic technology that uses a
proprietary OSNA*1 method to test
for cancer cell metastasis in lymph
nodes in only 30 minutes.

Predicting the risk of cancer reoccurrence or theeffectiveness of an anticancer agent based on thecell cycle (the mechanism by which cancer cells
proliferate).

qCervical cancer screening

RD-100i

Identification of cancer cells by analyzing a cell sample using a
Sysmex flow cytometer.

Protein chip

qJoint research and clinical development with US company Affymetrix
Joint R&D with Affymetrix to create novel diagnostic technologies in oncology and other fields.
DNA chipDiabetes
qMinimally invasive glucose measurement

qDiabetes simulation technology

Measuring interstitial fluid*2 glucose levels using ahighly sensitive sensor and almost pain-free sampling of interstitial fluid instead of collecting a blood
sample.

Computer simulation of the diabetes condition to support treatment tailored to theindividual patient.

(one-step gene amplification) method: A rapid gene amplification technology developed by Sysmex that does not involve a*1:OSNA
purification step to isolate genes from tissue samples.
*2:Interstitial fluid: Fluid that permeates from the blood capillaries found below the skin surface and fills the spaces between cells.

15

Sysmex Annual Report 2008

Strategy and Management

Geographical Sales Activities

Sysmex is using the combined strengths of all Group
companies in its global business development to generatesales tailored to regional needs and achieve its targets.
2008 Results and Future Business Targets
In 2009, we expect net sales of ¥118,000 million (up 6.6% year-on-year), operating income of ¥16,000 million (up 6.4% year-on-year) and net income of¥9,600 million (up 5.1% year-on-year). Our calculations assume full-year average foreign exchange rates of US$1/¥100 and ＝C1/¥157.

Sales Composition by Geographical Region*
China
Asia Pacific(¥ million)

2009
Business Targets

Net Sales

2008
Results
110,724

Operating Income

15,03316,000Net Income

9,132

9,600

4.5%
7.3%
Japan

118,000
Europe35.5%

Net Sales

33.9%¥110,724
millionAmericas

Net sales by geographical region refers to the sales amount made by a group company in a*particularlocation. However, net sales by destination is defined as the sales amount18.8%

recorded by group companies to customers in a particular region.
Note: Results of geographical sales activities are also described in Management's Discussion and Analysis on pages 63-70.

Geographical Segments
Japan
In 2008, Sysmex recorded growth in both net sales
and operating income on the back of rising export
sales to overseas Group affiliates. Net sales decreased 4.7% year on year to ¥37,553 million,
while operating income rose 5.9% year on year to¥7,870 million. The Company pitched solutions proposals and won some major contracts at university
hospitals and other institutions. Despite this, salesin Japan were lower than the previous fiscal year
because of weak sales of influenza test reagentsand delays in launching new products in the segments of hemostasis and immunochemistry.
In 2009, the Company will expand its productportfolio by providing sales and support on contract for bioMérieux's in vitro diagnostic products
in Japan. Sysmex will fully promote new productsin the hemostasis and immunochemistry segments
and improve its proposals for solutions that leverage Company strengths.

(¥ billion)(¥ billion)

Interarea Transfer
Sales to Customers

Operating
Income

80

16
71.2
64.9

66.9

59.4

60

31.4

12

29.3

53.4
25.5
22.6
40

18.9
7.4

7.9

8
6.6

6.5
5.7

20

34.5

36.8

39.4

37.6

2005

2006

2007

2008

39.8

0

4

0
2009
(Target)and Operating Income in Japan include those to Korea,*SalesTaiwan and internal Group affiliates.

16

Americas
In 2008, a higher proportion of sales was made throughdirect sales and support, so cost ratios improved andSysmex recorded a significant increase in operating income as well as sales. Net sales increased 8.8% year
on year to ¥20,845 million and operating income climbed 67.1% year on year to ¥991 million. In North America, the Company's excellent reputation in the market
drove strong hematology sales to integrated healthnetworks (IHNs) and blood centers. Sysmex also launched blood imaging analyzers for major commercial
laboratories. The Company also achieved solid resultsfrom its proposals on improving efficiency through theuse of the Sysmex Network Communication Systems(SNCS) launched in 2006, with over 1,000 productunits already installed. Sysmex also reported strong results in the hematology segment in Central and SouthAmerica.
In 2009, the Company plans to strengthen sales activities at IHNs and achieve full market penetration
with its new automated hematology analyzer, the XE5000. Sysmex will also start direct sales and support
in Canada via the affiliate established in October 2007
and will strengthen sales of integrated proposals
across North America.

(¥ billion)(¥ billion)

Sales

Operating
Income
3.0

25
23.0
20.8
20

2.4

19.2

15.6
15

1.8
1.8

13.6

10

1.2

1.0

0.6
5

0

0.6
0.2

0.2

2005

2006

2007

2008

2009

0

(Target)EuropeIn 2008, net sales and operating income rose by more than
20% year on year on the back of expansion of the direct
sales and support network and substantial growth inemerging markets. Net sales increased 24.0% year on yearto ¥39,175 million and operating income rose 30.3% year
on year to ¥4,621 million. Growth tailed off in Germany andthe UK because of healthcare reforms, but Sysmex recorded strong sales in Central Europe, including the Czech Republic, Austria, Hungary and Slovakia, as well as in Switzerland where a direct sales and support structure was
implemented. The market responded well to the new automated hematology analyzer, the XE-5000. Hematology
sales progressed significantly in emerging markets in the
Middle East and Africa, in line with market growth.
In 2009, Sysmex will continue to build up sales based on
integrated proposals and will start providing direct sales
and support in France. The Company will work to expand
sales of its urinalysis analyzer through the sales and support contract signed with bioMérieux in 2008. Sysmex will
also work to grow the markets in the Middle East, Africa,
Eastern Europe, Russia and other emerging regions. The
Company is pursuing a direct sales and support structure in
the Middle East where growth is particularly marked.

17

Sysmex Annual Report 2008(¥ billion)(¥ billion)

Sales

Operating
Income
8

50

39.2

40.7
5.8

37.5

6

31.6
4.6
25.4

25
21.2

4

3.5
3.0

2.3
2

12.5

0

2005

2006

2007

2008

2009
(Target)0Strategy and Management

China
In 2008, Sysmex recorded net sales and operating income growth on the back of strong sales to mediumsized and large medical facilities, after the easing of
curbs on medical institution purchasing during thehealthcare industry's "clean-up campaign" to eradicate corruption. Net sales increased 18.7% year on
year to ¥8,127 million and operating income rose
5.5% year on year to ¥824 million. Rising demand forhigh-quality healthcare in urban areas has driven
growth in the number of hematology analyzer upgrade projects. Hemostasis, urinalysis and clinicalchemistry sales were strong, but Sysmex won fewer
competitive tenders for low-end hematology analyzers, losing out to Chinese manufacturers on the basisof price.
Sysmex expects the Chinese market to grow further in 2009 as healthcare infrastructure is put into
place. The Company will launch new hemostasis products and expand its clinical chemistry portfolio. It will
also continue to build up its proposals of solutions to
medium-sized or large medical facilities.

(¥ billion)(¥ billion)

Sales

Operating
Income

10

1.5
9.0
8.1
1.2

8
1.0

6.8
6.4
6
0.8

0.9

0.8

4.8
0.6
4

0.6

0.5

0.3

2

0

2005

2006

2007

2008

2009

0

(Target)Asia Pacific
In 2008, Sysmex recorded growth in both net sales andoperating income on the back of market growth and improved sales and support structures. Net sales increased
23.9% year on year to ¥5,024 million and operating income climbed 64.3% year on year to ¥547 million. In thehematology segment, the Company won a major projectwith the Malaysian Government and recorded strong
sales of integrated hematology systems in the Philippines and Oceania. The Indian affiliate established in2006 achieved sales growth for low-end hematology
analyzers and other instruments in this segment.
In 2009, Sysmex will strengthen hematology and hemostasis sales and expand its product portfolio. The
Company will also start full-scale reagent manufacturing
at the Baddi Factory in India, which was completed in
2007, in a bid to improve cost competitiveness and prepare for further growth in demand. In the Asia-Pacific region where healthcare infrastructure differs widely in different regions, Sysmex will launch products tailored to
local needs with a particular focus on hematology instruments and will continue to propose solutions to potential customers.

(¥ billion)(¥ billion)

Sales

Operating
Income

6

0.8
5.5
5.0
0.6
0.6

4.5
4.1
0.5

3.7
0.4
3

0.4

2.8
0.3

0.3

1.5

0

0.2

0
2005

2006

2007

2008

2009
(Target)*Sales in Asia Pacific exclude Korea and Taiwan.
18Corporate Governance

Sysmex Corporation regards the strengtheningof corporate governance as an important management objective.
The Company is maximizing corporate value
throughout the Sysmex Group by increasing thesoundness, transparency, speed and efficiency
of its management.

Description of Management Organization
Sysmex has adopted the corporate auditor system. The
current management organization consists of 9 directors(8 of them are executive officers), 4 corporate auditors (including 2 external auditors), and 16 executive officers. The
Company adopted the executive officer system in order toincrease the speed of decision making in the conduct ofbusiness and respond quickly to changes in the businessenvironment.

Matters Concerning Business Execution,
Auditing, Supervision and Other Functions

Sysmex Annual Report 2008

Shareholders’ Meeting
Election/
Dismissal

Election/
Dismissal

Election/
Dismissal

Board Meeting (Directors)

Auditing

Nominating Committee

Compensation Committee

President & CEO

Global Strategic
Committee

Internal Audit Office

Steering Committee

Risk Management
Committee

Executive Officers
Divisions, Subsidiaries and Affiliates

Auditors Meeting(Corporate Auditors)

19

and exchanges information and opinions with the accounting auditors as necessary.
The Company has contracted with Deloitte Touche Tohmatsu to perform a certified public accountants audit. In
addition to conducting an audit of the entire Sysmex
Group, the Company maintains an environment thatmakes it possible to rapidly cope with changes in the accounting system. The Company has contracts with several law offices and maintains a structure to solicit andobtain advice on important matters as necessary.

Accounting Auditors

The Board Meeting consists of 9 directors. The Board
meets regularly once a month to deliberate on importantmanagement issues and convenes extraordinary meetings as necessary.
The Global Strategic Committee consists of the president and managing officers. As a rule, the Committee
meets once a month to deliberate on the Group’s management direction and important strategic issues.
The Steering Committee consists of the president,
managing officers, and executive officers. The Committee meets once a month, in principle, as a consultative
body to the president to deliberate on important mattersconcerning the Group’s business.
The Operating Committee consists of managers of divisions. The Committee meets once a month to find solutions to cross-functional problems.
In 2008, the Board met 16 times, the Global Strategic
Committee met 7 times, the Steering Committee met
17 times, and the Operating Committee met 15 times toaddress matters relating to management strategy andimportant issues facing the Group.
The Internal Audit Office, which consists of 5 employees,
confirms and evaluates internal controls, the state of management, and the execution of business from the perspective of the sound development of the Group, issues reports
based on the results of its activities, promotes appropriate
execution of business through improvements, advice, andproposals, and conducts internal audits to contribute to thesound management of the Group.
The Auditors Meeting consists of 4 corporate auditors,
2 of whom are external auditors. The corporate auditors
attend the Board Meeting and the Steering Committee
and maintain systems for appropriately supervising the
conduct of business on the part of the directors. The Auditors Meeting will continue to enhance managementsoundness by engaging in appropriate supervision of theexecution of business as stipulated by law. The Auditors
Meeting works closely with the accounting auditors on
the audit plans report (annual) and the audit results reports (each mid-term and final settlement of accounts)

Auditing

Strategy and Management

D i re c to r s
Hisashi Ietsugu

Tadashi Nakatani

President and CEO

Director and Executive Officer, New Business Development

Kenichi Yukimoto

Shigenori Ohigashi

Director and Senior Managing Officer,
Assistant to the President

Director and Executive Officer, Quality & Environmental
Management, SCM, Manufacturing

Mitsuo Waka

Yukio Nakajima

Director and Managing Officer, Administration and
CSR Promotion

Director and Executive Officer, Corporate Business Planning,
Corporate Executive Office

Tameo Iwasaki

Koji Tamura

Director and Managing Officer, Life Science Business
Development (primary in charge), R&D Strategic Planning,
Intellectual Property, Central Research Laboratories,
Diagnostic System Development,
Diagnostic Reagent Development

Director and Executive Officer, IVD Business Development,International Business Management

Masayoshi Hayashi
Director and Managing Officer, Sales & Marketing,Customer Support, Scientific Affairs

Koji Tamura

Shigenori
Ohigashi

Mitsuo Waka

TadashiNakatani

Hisashi Ietsugu

Yukio Nakajima

Kenichi
Yukimoto

Tameo Iwasaki

Masayoshi
Hayashi20Basic Policy on Internal Control Systems andTheir State of Development
1. Systems for ensuring that the execution of duties
by directors and employees is compliant with thelaw and Articles of Incorporation
Sysmex defines compliance as "the conduct of open
and aboveboard business activities on the basis ofobservance of laws and regulations and high ethicalstandards" and will maintain a system to ensure compliance as described below.
The Company is promoting and enhancing Group
compliance, as it believes compliance countermeasures are the first and most important way to maintain society’s trust and counter risk. The Company
shall implement and strengthen compliance in thecorporate group under the control of a compliance officer and compliance committee. The Company shallrigorously ensure compliance through education andtraining for directors and employees, promote therapid detection and correction of violations of the law
or the Articles of Incorporation by means of an internal compliance related reporting system, and conduct
audits of the compliance structure by means of theInternal Audit Office.
2. Systems for the retention and management of
information relating to the execution of duties
by directors
The Company shall appropriately retain and manage
information relating to the execution of duties by directors in accordance with document management
regulations and maintain the information in a stateavailable for inspection as necessary.
3. Regulations concerning the management of risk
and other systems
To maintain a structure concerning risk management,
the entire Group shall comply with risk management
regulations established by the Risk Management Committee for the integrated management of risk throughout
the Company. The Company shall endeavor to discoverforeseeable risks, select the most important of theserisks, clarify the sections responsible for coping withrisks, establish countermeasures and engage in measures to mitigate risks.
4. Systems to ensure that directors execute theirduties efficiently
The Company has positioned the Board Meeting as
the institution to make important management decisions and supervise the execution of the Company’sbusiness affairs. The Company has introduced theexecutive officer system to be capable of making
swifter operating decisions and respond quickly tochanges in the business environment.

21

Sysmex Annual Report 2008

With respect to the management of business, theCompany shall ensure the efficient execution of business in accordance with the organization regulations,scope of authority regulations, and approval procedure. The Company shall establish mid-term plans
and annual management plans, periodically confirm
the progress made with those plans, and take anynecessary measures.
5. Systems to ensure the appropriateness of business activities in the corporate group
The Company shall ensure compliance in accordancewith the compliance code applied to all the directors
and employees of companies in the Group. In conformance with regulations established with respect torisk management, the Company shall maintain Groupwide risk management systems based on those regulations. The Internal Audit Office shall conduct Groupwide internal audits.
With regard to the management of affiliated companies, the Company shall respect the autonomy of
the management of affiliated companies and ensure
the appropriateness of business activities throughout
the corporate group by such means as periodic reporting on the details of the business of affiliatedcompanies and advance discussion concerning important matters.
6. Assignment and independence of employees toassist corporate auditors
Although the Company does not assign full-time staff
to assist corporate auditors in the performance of
their duties, employees of the Internal Audit Officecooperate with the corporate auditors to conduct
efficient audits at important places of business.
At the request of the corporate auditors, the Company shall provide full-time staff to assist the Auditors
Meeting. In such case, the directors shall discusswith the corporate auditors in advance matters suchas the transfer of such support staff.
7 . Systems for reporting to the corporate auditorsand systems for ensuring effective and efficient
auditing by the corporate auditors
When the directors have discovered a violation of thelaw or the Articles of Incorporation or a material factthat poses risk of causing significant damage to theCompany, they shall promptly report such material
fact to the Auditors Meeting.
The corporate auditors shall attend the Board andother important meetings, read important documents
such as approval requests, and request explanationsof directors and employees as necessary.

Strategy and Management

C o rp o ra te Au d i to r s
Haruyoshi Kobayashi

Toshiyuki Miyauchi

Corporate Auditor(standing)Corporate Auditor(standing)
HiromuFujioka

Hiromu Fujioka

Isamu Inamasu

Corporate Auditor(external)

Corporate Auditor(external)

Toshiyuki
MiyauchiIsamu
InamasuHaruyoshi
Kobayashi

Auditor Activities

External Auditor Activities

The Company has 4 auditors, of which 2 are external
auditors. The auditors attend regular meetings of theBoard Meeting and Steering Committee, which areheld once a month, to observe whether directors are
performing their duties correctly. The auditors also liaise closely with accounting auditors, sharing information and opinions on the annual financial audit plans.
The auditors also ensure the audit process is efficientby collaborating with staff from the Internal Audit Office on key business sites and offices.

External auditors attend the Board Meeting and the
Auditors Meeting, receive reports from standing auditors and deliberate these reports with the standing auditors, participate in audits of the execution of business by directors, receive audit plans and audit reports
from the accounting auditor and deliberate these reports with the accounting auditor. In addition to participating in meetings (the Auditors Meeting, the Board
Meeting and the Steering Committee, if necessary),
external auditors obtain necessary information by accessing various databases. No specific staff is assigned to assist these auditors, but the Internal Audit
Office, an auditing office, provides support.

22

23

Compliance

Risk Management

Sysmex has established a compliance code to be observed by all executives and employees of the Sysmex
Group in Japan and overseas. The Company's view ofcompliance is defined as "the conduct of open andaboveboard business activities on the basis of observance of laws and regulations and high ethical standards". Various training activities are underway, including group-wide programs on the introduction of thecompliance code, to ensure that all employees have athorough understanding of the code. The Company has
also appointed Compliance Training Managers in eachgroup company.
In 2007, Sysmex looked to combine its complianceand risk-management systems and began managing
compliance activities on a group-wide basis under the
direction of a newly established Risk Management Officer. The Group Compliance Sub-committee meets
periodically to confirm the implementation status of
the Compliance Promotion Plan and deliberate theoverall direction of the Group's compliance activities.
To promote and supervise compliance activities,
Sysmex has established "Campanula Lines" as pointsof contact for all group employees in Japan for advice
or questions on any compliance issues. The Campanula Lines are designed to eliminate any concerns heldby the staff member seeking advice, for example byproviding a contact with a male or female manager orcontacts with external law firm consultants.
For product exports, Sysmex has established a Security Export Control Committee to ensure the Company's technologies and products are not used illegally
overseas. The Committee conducts ongoing and indepth investigations to confirm export destinations or
product usage. In 2008, the Kobe Customs Office approved Sysmex as a Designated Exporter under the
Designated Export Declaration System.
This System is designed to speed up administrative
procedures for products distribution in line with tighter
security procedures and greater international distribution of products. Only exporters with an excellent compliance record are approved as Designated Exporters.
Sysmex markets its products around the world andnow aims to improve its service by using the Designated Export Declaration System to achieve greater administrative efficiency in export procedures.
The ultimate goal in the Company's pursuit of compliance is for every Sysmex employee to be aware ofcompliance as an ongoing factor and to be able to apply this understanding in their work. Sysmex will continue to ensure thorough compliance to remain a Company that stakeholders consider highly trustworthy.

Sysmex has raised the bar on risk management bypromoting these activities from a divisional level to acompany-wide risk management system. In 2007, theCompany established a Risk Management Committee
to steadily address risk responses, prioritized according to importance.
In terms of quality, Sysmex is working to improve
internal quality assurance levels and to further improve its quality management system (QMS). Moving
toward the establishment of a group-wide QMS,
Sysmex is pursuing ISO certification centered on thequality assurance department. The Company has introduced quality training in order to promote an understanding of QMS, build individual employee awareness of these systems, and ultimately raise quality
control levels. Internal quality audits, which are conducted by a committee of internal product quality auditors selected by each department, provide periodic
checks on the operational status of the QMS.
Turning to information disclosure, Sysmex reports
information in accordance with the timely disclosure
regulations that stock exchanges have established forthis purpose. Managerial divisions create documents
on decisions*1 that have been made, issues*2 thathave arisen, and earnings reports, as well as liaisingwith the communications divisions responsible fordisseminating this information externally. Information
on Company decisions and earnings reports is disseminated quickly after deliberation by the Steering
Committee or decisions by the Board Meeting or the
President. Any issues that arise are reported to the
President, following deliberation by the Steering
Committee, before being promptly disclosed publicly.
To ensure that Sysmex continues to earn the trustof a wide range of stakeholders, the Company will reinforce its procedures for risk and quality management.

Sysmex Annual Report 2008

that have been made include decisions on mergers or*1: Decisions
stock swaps as stipulated in the Rules on Timely Disclosure of Corporate Information from the Tokyo Stock Exchange.
2: Issues that have arisen include changes in major shareholders or* lawsuit filings as stipulated in the Rules on Timely Disclosure of
Corporate Information from the Tokyo Stock Exchange.

Strategy and Management

E xe c u t i ve O ff i c e r s
Takuji Nishino

Michiaki Ishida

Yukio Hamaguchi

Executive Officer,
Vice President ofIntellectual Property

Executive Officer,
Vice President of Administration

Executive Officer,
Vice President of
Diagnostic Reagent Development

Katsuo Uhara

Kazuya Obe

Takashi Goda

Executive Officer,
Vice President of SCM

Executive Officer,
Chairman & CEO, Sysmex America, Inc.

Executive Officer,
Vice President of Sales &Marketing East/Japan

Masami Kitagawa

Mitsuru Watanabe

Executive Officer,
Vice President of Sales & Marketing

Executive Officer,
Life Science Business Development (deputy in charge),
Vice President of R&D Strategic Planning

Yukio
Hamaguchi

Takuji Nishino

Kazuya Obe

Mitsuru
Watanabe

Katsuo Uhara

Takashi Goda

Michiaki Ishida

Masami Kitagawa

24

Operating Risks
1. Overseas Sales
Sysmex sells to overseas customers through its overseas affiliates and distributors. For this reason,
Sysmex hedges against the risk of currency fluctuations through exchange contracts and other means.
Nevertheless, the Company's operating results and financial position are affected by foreign exchange fluctuations. The proportion of consolidated sales contributed by overseas sales is rising each year, from
59.7% in 2006, to 62.5% in 2007 and 67.5% in 2008.
As of the start of 2009, the Company assumes forex
rates of US$1/¥100 and ＝C/¥157.
2. The Impact of Healthcare System Reform
Against a backdrop of a sharp decline in the birthrate andrapid aging of the Japanese population, advances inmedical technology, increased demand from patients forbetter quality of life (QOL), and other changes in thehealthcare environment, healthcare system reform continues to be implemented for the purpose of optimizing
healthcare costs and efficiently providing high-quality
healthcare services.
The Company's mainstay diagnostics business could
be indirectly affected* by such healthcare system reforms.
In an environment of ongoing healthcare cost optimization measures and of demands for greater efficiency
in hospital management, more advanced medical careand new clinical testing procedures, Sysmex will boost
investment in the life science field, including definitive
diagnostic tests for cancer, and strive to meticulously respond to diversifying needs by providing total solutions
that combine instruments and reagents, IT and aftersales support.
The Japanese medical fee system is amended every other year. In*2009,
fees covering diagnostic tests should be almost unchanged
overall compared with previous years, so Sysmex expects a negligible impact on earnings compared to the previous year. Diagnostic tests are covered by a fee for the provision of the test, unlike
the fixed reimbursement prices set for pharmaceuticals. Therefore,
any changes made to test fees by amendments to the medical fee
system are not directly reflected in Company earnings.

3. Product Quality
The instruments and reagents supplied by Sysmex must
be extremely reliable, so the Company has put into placea comprehensive quality management system to ensure
product quality. However, Sysmex earnings could be affected if problems happened to arise with product quality.
To avoid this, Sysmex works to maintain product quality in accordance with international standards, such as
ISO 13485, and local laws and ordinances, such as the
Pharmaceutical Affairs Law. Sysmex reviews on a daily
basis product information from Japanese and overseas

25

Sysmex Annual Report 2008

markets, as well as from within the Company; collates
technical information that may improve design quality;
and implements rigorous quality checks at the start ofmass production and prior to product launch.
4. Stable Product Supply
Sysmex markets its products to customers in over 150
countries worldwide and has internal systems in place toensure the stable supply of these products to customers. The raw materials used in these products are
sourced from about 300 Japanese companies and about
50 overseas companies. The Company may experience
difficulties with procurement if, for example, business
operations are suspended at suppliers or the supply of
raw materials is interrupted. The stable supply of products may also become problematic if Sysmex products
are affected by environmental regulations.
For these reasons, Sysmex is improving communication with suppliers, sharing information with both suppliers and affiliates, and building a global supply network
for reagents. The Company works to respond to environmental regulations that may affect products by initiating
full-time projects to make products compliant and by responding to the demands of each regulation in order ofpriority.

5. Measures to Counter Risks AssociatedWith the Use of Information Systems
Sysmex uses information technology to perform decisionmaking procedures, such as transmitting information,
supporting our core businesses and completing approval
documents, via the Company's internal network.
The Company has therefore put countermeasures inplace to minimize the operational impact from network
or information system disruption, computer viruses, orunauthorized external access to information systems.
Sysmex has created secondary, alternate networkroutes; implements daily system administration procedures; runs security measures including virus gateways;
and works to reinforce its internal controls, for example
by controlling access through strict user management
procedures and fingerprint authorization devices.

The electronic-wave darkroom is used to test the influence ofelectromagnetic waves on instruments. The darkroom’s special
walls shut out all electronic waves from the outside.

Sysmex provides the instruments andreagents needed for diagnostic analysis ofsamples of blood, hemostasis diagnostics
and other tests to customers aroundthe world.

Each individual “ruby pellet” is precisely polished
for use in the detection chamber of a hematology analyzer.

26

Sysmex at a Glance

Sales Composition by BusinessBusiness Segments
Sysmex derives approximately 90% of its revenues
from the diagnostics field in the business of testing
samples of human body fluids, such as blood andurine, with hospital and commercial laboratories as
its principal customers. More specifically, the Company's main field of business is hematology, which
involves measuring the number and type of red andwhite blood cells and so on. This business accounts
for around 60% of net sales. Hematology uses
specific reagents and the sale of hematology instruments leads to an automatic and sustainable sourceof revenue through the sales of reagents. The Company also provides such products as influenza testing
kits for point-of-care (POC) use by general practitioners
and clinics.
Sysmex also operates in the IT field, providing testing information systems to meet demand from theintroduction of network systems to manage medical
data. There are synergies between this business andthe field of diagnostics.
Applying the specialized particle analysis technologies it has cultivated in the diagnostics field, Sysmex
is also expanding into other business categories suchas industrial and sports applications.
Profit Model of Hematology

93.7%

Diagnostics

q Hematology
61.8%
q Hemostasis
12.5%
q Immunochemistry 2.6%
q Clinical Chemistry 2.4%
q Urinalysis
6.8%
q POC Testing
3.6%
q Others
4.1%

IT 4.0%Net Sales¥110,724
million（¥ million）

120,000

110,724
101,041

100,000

87,88876,93580,00065,97060,00040,00020,000004

Automatically and continuously,
Sysmex can expect
stable earnings.

q Diagnostics

Service& support

Specific
reagent

Profitability
Instrument Reagent
Instrument

1st Year

New Business(Particle-analysis, etc) 2.3%

2nd Year

3rd Year 4th Year…

61,566q Hematology
37,643q Hemostasis
8,925
q Immunochemistry 4,712
q Clinical Chemistry 2,751
q Urinalysis
3,681
q POC Testing
2,457
q Others
1,397
IT
2,569
q
q New Business 1,834

05

06

71,761
44,176
11,195
4,613
3,179
4,748
2,578
1,272
3,222
1,952

81,75052,11812,150
4,061
3,008
5,142
3,444
1,825
3,812
2,325

07

08

93,581 103,801
60,216 68,414
14,145 13,834
2,866
3,400
2,667
2,760
7,509
6,295
3,995
3,823
4,513
2,938
4,399
4,807
2,522
2,652

(Particle-analysis, etc)

Breakdown of Diagnostics
Hematology

Clinical Chemistry

Hematology tests are a type of screening test that measures

Clinical chemistry tests involve chemical tests for enzymes,

the number of red blood cells or white blood cells and so on

sugars, and proteins in blood serum or plasma in order toin order to determine whether a more detailed examination isdetermine the body’s nutritional status, liver and kidneynecessary.

function, or whether the subject has conditions such as

Hemostasis

hyperlipidemia and arteriosclerosis.

Hemostasis involves testing for coagulation, an important

Urinalysis

function of the blood. By testing specimens of blood plasma,

Urinalysis entails testing for the presence of sugar, protein, or

it is possible to diagnose hemophilia and thrombosis and toblood cells in the urine and can be broadly divided into two

examine hepatic (liver) function.

types: qualitative urinalysis and quantitative urinalysis. Urinaly-

Immunochemistry

sis is an important screening tool that typically yields clues
useful in the diagnosis of various diseases.

Immunochemistry tests are performed on blood serum, thesupernatant fluid isolated after blood separation. Antigen-anti-

POC Testing

body reactions are used to test for the presence of hepatitis

POC is an abbreviation for point-of-care. POC testing can bevirus and so on or to investigate cancer markers.

carried out immediately in operating rooms, intensive care units,clinics or at the patient’s bedside, rather than in central
laboratories, making possible rapid diagnosis and treatment.

27

Sysmex Annual Report 2008

Business Activities

Sales Composition by Products

Sales Composition by Destination

OthersInstrument

Asia Pacific

5.9%

Maintenance Service

Reagent

Japan

China

Americas

13.4%
8.7%

Europe7.3%
35.2%

Net Sales

Net Sales¥110,724
million

35.4%

32.5%

¥110,724
million
18.9%

42.7%

（¥ million）（¥ million）

120,000

120,000

110,724

110,724

101,041
100,000
80,000101,041
100,000

87,88876,93587,88876,93580,00065,97065,97060,00060,00040,00040,00020,00020,000
0

0
04

05

06

07

08

q Instrument 22,330 27,244 30,790 37,847 38,958

q Japanq Reagent

04

05

06

07

08

31,78433,40735,41837,87335,961

31,551

34,635

39,14142,03847,297q Americas

9,182

13,633

15,762

19,227

20,908q Maintenance Service 4,266

5,486

6,773

8,127

9,668

q Europe

17,62821,23525,43831,65839,235q Others

9,569

11,182

13,027

14,800q China

4,066

4,824

6,411

6,848

8,128

q Asia Pacific

3,309

3,836

4,857

5,432

6,492

7,822

Product Segments

Regional Segments by Destination

The main feature of the Company's earnings structureis that Sysmex conducts a stock type of business inwhich it sells the instruments needed for in vitro diagnostics, offers the specific reagents needed for longterm testing, and provides support and maintenanceservices. Reagents deliver higher gross profit margins than instruments, while instrument sales driveincreased reagent usage. Therefore, this segment
should generate stable earnings growth. Sales ofreagents and the provision of maintenance services
and others currently account for approximately 60%
of net sales.
One characteristic of this industry is that instrument sales tend to rise in the second and fourth quarters of the fiscal year.

Sysmex supplies products and services to customers
in more than 150 countries. Net sales* are wellbalanced among three key regions–Japan, Europe
and North America. The Company is also accelerating
business development in China and the Asia Pacificand is generating steady sales growth in these
rapidly expanding markets.
Net sales by destination is defined as the sales amount recorded by*groupcompanies to customers in a particular region.
However, net sales by geographical region refers to the sales amount
made by a group company in a particular location.

28

Business Domains

Testing Essential to the Realization of
a Healthy Society
Clinical testing, used in medical diagnosis and treatment or in monitoring the effects of drug administration, is essential to the realization of a healthysociety. Clinical testing can be broadly divided into
two categories: in vitro diagnostics (IVD) that involves
the examination of blood, urine or cell samples takenfrom the body and in vivo tests that involve direct
examination of the body using X-rays, electrocardiograms (ECGs), or brain waves. The global in vitro diag-nostics market is worth some ¥3,000 billion (excluding emerging countries) and is projected to expand at
an annual rate of 8.0% over the next 5 years. Sysmex
provides a wide variety of products and support services, ranging from individual instruments and reagentsfor in vitro diagnostics to full laboratory information
systems.
Sysmex now ranks 10th in the world in the in vitro
diagnostics field. The Company now commands theleading share of the global hematology segment.

Diagnostics Market and Sysmex’s Position
Market share

Market Size
(Billions of JPY)

GrowthRate¥3,0008%

Hematology

180

4%

Hemostasis

120

9%

Immunochemistry

700

8%

Clinical Chemistry

750

3%

Diabetes

700

10%

Others550–

Segment

IVD Total¥3,000 billion

Roche

Becton Dickinson

Siemens (Bayer)

bioMérieux

AbbottBayer Diabetes

J&J

SysmexBeckman Coulter

Bio RadInverness

OthersThe Shift to an Aging Society andPreventive Medicine
As the societies of Japan and other advanced countries age, countries are implementing healthcare reforms to extend the healthy lifespan of their populations in a bid to rein in rising healthcare costs. Thishas brought about a worldwide shift toward preventive healthcare.
In April 2008, Japan introduced a new system of
specific health checks and specific healthcare
education, aimed at insured individuals aged between
40 and 74 years, with the goal of preventing andimproving metabolic syndrome (a collection of
metabolic risk factors for cardiovascular disease anddiabetes). The focus on metabolic syndrome involves

29

Sysmex Annual Report 2008

IVD Total(Sysmex estimates)

gaining a picture of visceral fat accumulation before
any disease onset and is aimed at preventing lifestylerelated diseases––such as diabetes, hypertension, andlipid abnormalities––that account for 30% of national
healthcare spending. As such, clinical testing is
expected to play an increasingly important role.
As well as such progress in preventive healthcare,
there is an increasing emphasis on improving patient
quality of life (QOL). Sysmex is fostering new testing
technologies that combine in vitro diagnostics andthe life sciences. Through testing products, the Company aims to contribute to improved healthcare quality and efficiency.

Business Activities

Diagnostics
qHematology
Hematology tests are performed using an instrument and specific reagents, so demand for the reagents is continuous.
The size of the global hematology segment is ¥180 billion(Sysmex estimates). Three major global suppliers dominate themarket in terms of market share: Sysmex, Beckman Coulter,and Abbott.

qClinical Chemistry
Like hematology, clinical chemistry is commonly performed
around the world not only at times of illness, but also in routine
health checkups, and the total number of examinations is extremely high.
The size of the global clinical chemistry market is ¥750 billion(Sysmex estimate). Sysmex has a high market share in Japanfor the quality control serum used with various types of general-purpose reagents.

qHemostasis
As a rule, hemostasis tests can be performed using generalpurpose reagents, rather than specific reagents. The size of the
global hemostasis segment is ¥120 billion (Sysmex estimates).
Since 1995, Sysmex has maintained a distribution agreementwith Siemens (previously called Dade Behring), the global leader in hemostasis reagents. Sysmex has the leading share of the
global market for coagulation analyzers.

qUrinalysis
Sysmex introduced the world’s first urine formed sediment analysis system––the UF series––that uses the flow cytometry
method, which contributes greatly to the automation of diagnostic routines and greater efficiency when combined withqualitative urinalysis. Sysmex's UF series enjoys an excellent
reputation with customers and has the leading share of the global market for urine sediment analysis.

qImmunochemistry
Manufacturers of analyzers apply their own measurement principles and specific reagents are used depending on the principles used. The need for immunochemistry and its importanceare increasing, owing to worldwide outbreaks of HIV and otherinfectious diseases. The size of the global immunochemistry
market is ¥700 billion (Sysmex estimates), and the market is
expected to expand in the coming years.

qPOC Testing
Sysmex has operated in the Japanese point-of-care (POC) market for many years and is expanding its line-up of POC products
for testing in the clinical setting. The Company now markets
rapid detection kits to assist in influenza diagnoses and easy-touse devices to measure intravesical urine volume.

New BusinessIT

qParticle-analysis and Healthcare
The particle-analysis segment is a new business area for
Sysmex. The Company is developing industrial applications for
its particle-analysis technology that was originally developed forthe hematology business. This technology is used in manyindustrial processes including research and quality control ofcopier toner and ceramic particles. In the healthcare segment,
peripheral artery monitoring devices that can measurehemoglobin levels without blood sampling are used at fitness
centers and various other sites. Sysmex also sells support
software for health management and childcare services.

qLaboratory Information Systems
Advances in IT have generated demand in the healthcare industry for IT-driven medical information networks, which contributeto more effective diagnoses by collecting and analyzing datafrom clinical tests and consolidating this information into a convenient database. In the future, Sysmex will continue to makeuse of IT to promote the establishment of local healthcare networks made up of hospitals and clinics and develop remote
medical care capabilities.

FutureFrom Focus on Treatment to Focus on Prevention
Current Situation
Use new technologies
to forge new markets
Promotegenetic
technologies

Curtailhealthcare
costs
Pharmaceuticals

Healthcare
costs in Japan¥33 trillion
Healthorientation

Human resources,
facilities and otherTestingPharmaceuticals

Pharmaceuticals
In vitro diagnostics +life sciences

In vitro diagnostics
Testing Testing centers
In vivo diagnostics

Testing centers TestingIn vivo diagnostics

Imaging
Physicians(interpretation)

Desire to live
healthier,longer lives

Imaging
Physicians(interpretation)

Offer new value while
contributing to better
treatment and lower
costs

Imaging
Physicians(interpretation)30

Major Products

qD ia gnos t ic s
Hematology

Specialization

SYSTEM
XE

XT

XS

High End

MiddleLow EndHSTThe HST series offers fully automated blood cell counting, including white blood cell differentials, reticulocyte
analysis, preparation of smears and staining. Multiple
system configurations are available to meet the needs ofindividual laboratory requirements.

XS-1000i

XT-2000i

XE-5000

This compact, highly functional models share thesame measurement principle, reagents, and operability as the high-end XE Series. These compact analyzers
offer the ability to analyze 5
types of white blood cells, aswell as excellent measurement data interchangeability.
For this reason, they are suitable not only for use in hospital laboratories, but also for
POC testing at clinics andemergency laboratories.

This basic, compact model
is supported by the Sysmex
Network Communication
Systems (SNCS), and features a viewer-friendly
screen and an easy-to-use
operating system.

The high-end XE series isstandardly equipped with
software for the measurement of immature cells inthe blood. The addition of afunction to measure blood
cells found in extremely
small quantities in body fluids means the fully automated measurement can becompleted within 2 minutes, compared to the 60
minutes required with a microscopic examination.

POCH

XE-Alpha N
Fully automated blood cell counting, white blood celldifferentials, reticulocyte analysis, preparation ofsmears and staining are carried out by a compact system, ensuring efficient workflow and improved test
precision. The SP-1000i Slide Preparation Unit (to theleft in the photograph) is a network-capable system
for automatically preparing hematology slides.

KX

Information Diversity

Reagents

pocH-100i

KX-21

Featuring compact size andeasy operation, this counterallows high-precision measurement results and makes it
possible to perform hematology simply in diagnostic andtherapeutic settings.

Featuring compact size andeasy operation, this analyzer
provides valuable blood test
data such as the white blood
cell, three-part differential inless than one minute.

A full lineup of reagents is available for all diagnostic
needs, including hematology, hemostasis, immunochemistry, clinical chemistry and urinalysis.

Efficiency and Handling Capability

Scale of Laboratory

Hemostasis

31CA-500 Series

CS-2000i

CA-7000

These compact, fully automated analyzers offer advantages of the CA series such as highprecision and ease of use. Operation is simple, making these analyzers ideal for emergency laboratories and for use at small andmid-size institutions that test infrequently.

The CS-2000i analyzer employs a 4th method, agglutination, in addition to the 3 fundamental measurement methods-the coagulation, chromogenic
substrate and turbidimetric immunoassay methods. Integrating all these testing methods into asingle station raises processing performance.

The top of the CA series product line makes
possible ultra-fast throughput of 500 tests/hour
possible (for simultaneous measurement of
PT/APTT). The Secure Reagent System (SRS) allows control of reagent names, lot numbers, andexpiry dates through automatic barcode reading.

Sysmex Annual Report 2008

Business Activities

Immunochemistry
PAMIA-40i

HISCL-2000i

The PAMIA-40i uses Sysmex's independently developed wholeblood measurement technology.
As preparation time needed toseparate blood serum is unnecessary, infectious disease tests that
previously required 30 minutes are
possible in only 15 minutes.

This model applies the chemiluminescence enzyme immunoassay(CLEIA) methodology in combination with the technologies developed for the Sysmex PAMIA series
to produce a highly sensitive, rapid
immunochemistry test system thatcan be used with reduced specimen quantities. The model is designed for use by medium-sized
hospitals.
*Only available in Japan.

Urinalysis

POC Testing
UF-1000i

POCTEM S Series

The UF-1000i offers fully automated, high precision, quantitative
analysis of urine sediment using
Sysmex’s proprietary technology
utilizing flow cytometry, further
improving the reliability of urinalysis.

The POCTEM S Series is a rapid
influenza diagnostic kit that employs the immunochromatography method. Samples extracted
from the body are dropped on
test paper that can simultaneously determine the presence ofInfluenza A and B.

qL ife S c ienc es

q IT

RD-100i

CNA-NetLAFIAThis gene amplification detector, which extracts and amplifies genes in lymphatic tissues in order to detect lymph-node metastasis, is the first commercial offering for clinicaluse from the Company's life science line.

CNA-Net is a laboratory-information system provided by Sysmex subsidiary Sysmex CNA. The system consists of independently operable subsystems for clinical chemistry, hematology, urinalysis
and immunology testing. When used as an independent system, CNA-Net is configured to encompass all processes from examination reception to routine testing and test results reporting.

This system files blood images together withpatients’ demographic information. Network
compliant, the system allows access to theimage database from anywhere in the hospital through a network.

q Ne w Bu s ines s (Particle-analysis, etc.)
FPIA-3000

SD-2000

The FPIA-3000 is a highly advanced
particle measuring analyzer that incorporates a CCD camera. The analyzer not only measures particle size
distribution, but it also provides agreat deal of information on particle
size and shape and makes it possible
to evaluate particulate matter thatwas previously difficult to analyze.

Through a combination of theelectric resistance method andsheath flow technology, particle
distribution is obtained withoutcomplex correction and analysis
and the sizes and numbers of particles are determined more accurately.

ASTRIM SU

PROWELL

This non-invasive blood vessel
monitor measures hemoglobin
concentrations and blood-vessel width through near-infrared
spectroscopic images simply
by placing a finger on the detector. There is no need forblood sampling.

PROWELL is a software package foruse with a service for healthcare
corners in drugstores and other outlets in Japan. The service allows individuals to perform a simple checkon their state of health by enteringsome basic body measurements
and answering questions mainly on
lifestyle and dietary habits.

32

Core CompetenceSysmex provides high-value-added products thatsatisfy customer needs through the Company's
own sales and services organizations that havebeen developed globally.

Providing high-value-added products, andimproving the efficiency and standardizingof laboratory testing
Sysmex has always put the customer first and worked to
improve and add value to its products. As a result, theCompany enjoys an excellent reputation with its customers worldwide, which is driving the current growth inmarket share.
Laboratory tests for healthcare purposes must provide
accurate results, so instruments must be of a guaran-

as mother factories for reagent production. The experi-teed quality. The Company considers quality to be of ut-

ence and expertise accumulated at these factories is be-

most importance, and conducts its own development

ing used to develop reagent production bases overseas

and manufacture of multi-function, easy-to-use and high-and to ensure a stable global supply of reagents of aperformance instruments with minimal defects, as wellstandardized high quality.

as reagents that are indispensable for making measure-

Sysmex products are capable of high-speed process-ments. Currently, instruments are manufactured undering, and the application of robotics-based transfer sys-

rigorous quality-control procedures at the Kakogawa Fac-

tems and software contribute to greater efficiency andtory and two Japanese factories have been positioned

standardization of laboratory testing.

Communication Network

Customer needs

After-sales support

Sales

Scientific support

Product value

Network(Online Support, Online Monitoring, Real Time QC, etc.)

Robotics
Quality
Instrument
Reagent

Performance&

SoftwareResearch

33

Sysmex Annual Report 2008

Easy-to-use
Function

Development

Production

Sysmex's integrated hematology system mainly comprises hematology analyzers, instruments for making smear samples* and theLaboratory Information System. In accordance with the order information, the test sample is automatically transferred to the various
instrument, thereby contributing to the increased efficiency andspeed of laboratory operations.
is a test sample which is smeared on a glass slide and then*Thisstained to create the sample to be put under a microscope.

its R&D, sales and after-sales support, and thereby generate new value-added solutions that match customer
needs. This comprehensive value-chain cycle is one ofCommunicating with customers tocreate new value

Sysmex's strengths, and is only possible because theCompany has built an integrated organization.

As an R&D-driven comprehensive manufacturer, Sysmex

Sysmex is currently developing a global system calledis building an organization to provide a full range of servi-

Sysmex Network Communication Systems (SNCS). Thisces, encompassing research and development, produc-

IT-driven network support service provides automatedtion, sales and after-sales support. The Company uses

monitoring and quality control (QC) for customers in real

this organization to communicate with customers

time. Customer use of this value-added service isaround the world. This communication allows Sysmex tospreading, particularly in geographically large countries

feed back its customers’ new challenges and ideas intolike the US and China.

Sysmex Network Communication Systems

Sysmex

Network

1.

Hospital

Online Support

Customer Support Center2.

Online Monitoring

3.

Real Time QC

Automated hematology analyzer
XE-5000 and other Sysmex instruments

4. Supply Support Information

A service that connects customer products with customer support center terminals through a web interface to provide*SNCS: online
support and online quality control.

34

The Company has also been establishing Customer Sup-

brand continues to be increasingly trusted not only inport Centers in Japan, the US, Germany, Singapore andJapan and Europe, but also in the US, where competition

China, and is able to rapidly respond to customer

is intense, and other advanced countries, and in newly

enquiries. A survey of customer satisfaction in the US

emerging countries where growth is expected. The(see below) has shown that Sysmex enjoys an excellent

Company has a steadily increasing presence in markets

reputation not only for product quality, but also for thiswhere instruments are being selected. Looking ahead,

type of daily after-sales support and scientific support.

the Company will respond to customer needs throughout

When customers select instruments, the levels of quality

the world to create new added value and make further

and after-sales support are important factors. The Sysmex

use of Sysmex's strengths.

Customer Assessment in the United States (carried out by MD Buyline) _ Hematology segment _qSurvey of customer satisfaction
A survey of customer satisfaction published in April 2008 has shown that Sysmex is ranked No.1 in the US. Sysmex
is highly regarded by customers for the performance levels and reliability of its hematology instrument, and also for
the quality and speed of its services.
April 2008
Instrument
Performance

Instrument
Reliability

Installation /Applications
Service
Service Repair*
Implementation
Training
Response Time
Quality

Sysmex

9.3

9.4

9.2

9.4

8.6

9.3

9.2

Beckman Coulter

8.6

8.5

9.1

8.8

8.2

8.6

8.6

Abbott

7.8

8.1

8.4

8.1

8.1

8.4

8.2

Siemens

8.4

7.3

8.8

8.5

8.4

8.3

8.3

Composite

Best results in each assessment category“MD BUYLINE MARKET OUTLOOK”

Installation / Implementation: Assessments covering stages*frominstallation of instrument to operation.

© All Rights Reserved. MD Buyline, Inc. 2007

qAssessment of instrument selection
It revealed that the frequency of Sysmex's hematology instrument being selected as a purchase candidate by customers has been steadily increasing at the final stages of selection after Sysmex's instruments have been
evaluated highly.

4%

Sysmex12%

Beckman Coulter

13%

Abbott

12%

2007

39%

2008

44%

Other

41%

35%

Assessment period:
From May 12, 2006 until May 12, 2007

Assessment period:
From May 12, 2007 until May 12, 2008

Note: The results do not show
market shares or the frequency
that a company was finally selected when instruments were purchased: the results show the frequency that a company's
instruments were selected as
candidates for purchase.

“What a Difference a Year Makes” By Dennis Matricardi, MD Buyline Clinical Analyst, 2008.5.15©All Rights Reserved. MD Buyline, Inc. 2007
MD Buyline is a leading US assessment and consultancy company located in Dallas that mainly supports decision making by healthcare-related institutions (hospitals, testing laboratories, etc.) regarding the purchase and installation of instrument.

35

Sysmex Annual Report 2008

As a comprehensive diagnostics supplier,Sysmex has built an integrated businessencompassing R&D, production, sales andafter-sales support to provide products andservices to healthcare facilities around theworld.

Techno Park in Kobe

36

Perspective

By integrating R&D, production, sales andafter-sales support, Sysmex works to build
greater customer satisfaction, peace of mind
and trust.

Sysmex is a comprehensive supplier of the instru-

needs and discuss the future of testing. Sysmex ap-

ments, reagents and software necessary for diagnos-

plies the ideas and information that emerge throughtic testing. With operations at 38 locations in 23 coun-

this communication toward the selection of newtries, Sysmex provides products and services toresearch themes and the development of new prod-

customers in more than 150 countries. By integratingucts, services and solutions, as the Company works

R&D, production, sales and after-sales support,

to build trust and deliver peace of mind to customers.

Sysmex works to improve the reliability of diagnostic

Sysmex manufactures reliable instruments in Japanand medical-treatment testing, thereby ensuring in-under rigorous quality control procedures for custom-

creased customer satisfaction and trust.

ers around the world. The Company ensures the sta-

Using the Company's extensive sales and support
network, Sysmex actively communicates with cus-

ble supply of reagents through local raw material
procurement and production.

tomers around the world to understand customer

Global Supply Chain
Sysmex Corporation
Research and Development

Production (Instruments)● Techno Park, Central Research

Sales and Support● Solution Center

Laboratories● R&D Center● Kakogawa Factory● 7 branches, 12 sales offices

Software Development

Production (Reagents, etc.)

Sales and Support[Japan][Japan][Japan]● Sysmex CNA● Sysmex International Reagents● Sysmex bioMérieux● Sysmex Medica[Americas]● Metropolitan Area Service Center[Overseas]● Sysmex Belgium (Belgium)
3 others● Sysmex Reagents America (US)● Sysmex Do Brasil (Brazil)
2 others● Sysmex Europe (Germany)[Europe]● Jinan Sysmex Medical Electronics (China)● Sysmex Europe (Germany)● Sysmex Wuxi (China)● Sysmex Digitana (Switzerland)● Sysmex India (India)
2 others● Sysmex South Africa (South Africa)
10 others[China]● Sysmex Hong Kong (Hong Kong)

Logistics[Japan] ● Sysmex Logistics[Overseas] ● Sysmex Logistics UK (UK)

● Sysmex Shanghai (Shanghai)
3 others[Asia Pacific]

Leasing and others[Japan] ● Sysmex TMC

37

Sysmex Annual Report 2008

● Sysmex Asia Pacific (Singapore)
6 others

Worldwide customers● Sysmex America (US)[Overseas]

Agent● Sysmex RAGlobal Network: R&D network: Instrument production: Instrument supply: Reagent production*ImageResearch andDevelopment

Sysmex maintains a trilateral R&D structure with facilities
in Japan, North America and Europe. The Company actively
collaborates with universities and research institutions
throughout the world. In 2008, the new Techno Park wascompleted as a symbol of the "Creation of 'knowledge' and
its inheritance" concept. The Techno Park will be theCompany's core R&D site used to accelerate research into
new diagnostic technologies and develop high-value-added
products.

Reagent
Production

Sysmex emphasizes local raw material procurement andproduct manufacturing, as this approach allows stableproduct supply and competitive pricing. At present, theCompany operates 9 reagent factories in 7 countries. In
2007, Sysmex completed construction of a reagent plant in
the US that has doubled production capacity. The Company
also brought a reagent plant on-stream in India to capitalize
on rapid market growth there.

: Reagent supply

Instrument
Production

The Kakogawa Factory, which produces all the Sysmex instruments shipped worldwide, provides a stable supply ofhigh-quality products that meet the strict regulatory requirements for medical devices around the world. Sysmex
products enjoy an excellent reputation with customers. The
Company ensures quality in all the processes involved in
production, from staff training to the testing and assemblyof components, product tests, and shipment.

Sales andSupportThe use of alliances in the Company's global sales and support network has allowed Sysmex to build sales and support
systems tailored to meet local characteristics. The Company
established a Canadian affiliate in 2007 and began providing
direct sales and support services in France in April 2008.
Sysmex already operates independent networks in the emerging countries of Brazil, Russia, India and China (BRICs) and is
working to step up sales activities in other areas that are expected to experience high levels of market growth, including
Central and South America, Eastern Europe and Africa.

38

Research and Development

Through its focus on improving test quality, Sysmex has
established core technologies, developed a range of"industry-first" laboratory test technologies, and is now
actively engaging in life science R&D.

Sysmex's inimitable R&D activities began in 1963
when it became the first company in Japan to commercialize hematology analyzers. Since then, theCompany has worked to improve diagnostic test quality at the microscopic level of blood cells by establishing core technologies for particle measurement orbioassays and developing a range of "industry-first"
laboratory test technologies.
Sysmex is working to develop products that bringefficiency to the increasingly complicated diagnostic
testing environment, for example by applying robotics
technologies to blood analyzers. Another goal is tocontribute to increased efficiency and lower costs not
only in the testing laboratory, but also throughout theentire hospital for customers ranging from large medical institutions to small clinics.
Sysmex is now applying its technologies beyond diagnostics. One example is noninvasive measurement
technologies. Sysmex has led the way in the development of technology for measuring blood hemoglobin
concentrations without drawing blood, a technology
expected to be applied in sports medicine and in
medical checkups for children and pregnant women.
The Company is also actively applying technologies invarious industrial segments, for instance the fusion ofparticle measurement technologies and image-processing technologies.

products that will generate new markets.
Sysmex has extended its business domains beyond
hematology to cover such laboratory test fields ashemostasis, immunochemistry, clinical chemistry and urinalysis. The Company is now working to broaden its
R&D activities even further to create new diagnostic
technologies for disease management including hematology disease, immunological diseases, infectious diseases, diabetes and cancer.

Building a technology base as an R&Ddriven company
Sysmex considers R&D to be one of the most importantfunctions and the source of company growth. Each year,
the Company invests approximately 10% of net sales in
R&D to keep its technologies at the leading edge. In
2008, the central R&D facility, the Techno Center was reborn as the new Techno Park to consolidate the R&D activities, facilitate the sharing of knowledge and expertise, and foster collaboration to generate synergies.
At the Techno Park, the creation and fusion of newtechnologies will be facilitated by interaction between
researchers and engineers with expertise in electronics,
mechanics, fluids, optics, software, biochemistry, andother areas. Sysmex will also build systems for the integrated management of research, development, and intellectual property as part of the Company's efforts todevelop revolutionary new technologies and unique

39

Sysmex Annual Report 2008

R&D Personnel Structure
Staff 16%
Survey analysis 1%
Operational
assistance 5%
Biochemistry24%

Electric 7%
Mechanics 11%
Liquids 3%
Optics 3%
Software 30%

Function Structures

Management System

R&D strategic planning

Instrument development
Research

Reagent development
Software development

Intellectual property

qR&D strategic planningThis department sets group-wide technical strategies
and product plans, manages across all developmentgroups––research, instrument development, reagent
development and software development –– and oversees various operations through to product commercialization. The department also researches and supports
registration under the Pharmaceutical Affairs Law andother Japanese and overseas regulations when introducing products into the marketplace.
Sysmex is working toward the establishment of a
global R&D structure through such activities as collaborative research with domestic and overseas universities
and research institutions and broad-ranging support for
the establishment of overseas development bases.
qResearch
The Central Research Laboratories are key to theCompany's research into novel diagnostic technologies in the life science field to meet global demandfor better patient QOL. Sysmex is currently working
to formulate new diagnostic methods in the areas ofcancer and diabetes. One research theme is the development of a genetic testing system to rapidly detect cancer metastasis in the lymph nodes that involves the use of proprietary soluble reagents andone-step nucleic acid amplification (OSNA).
At the Business Support Center for Biomedical Research Activities (BMA) in Kobe, Sysmex researchers
are working on the development of protein chips
based on protein analysis technology and also on
predicting the effect of anti-cancer drugs. These efforts are all part of the Company's focus on developing novel cancer diagnostic technologies.
qInstrument development
Sysmex employs a matrix system that draws teammembers from mechanics, fluids, optics, electrics,
and other specialties. Team members can share expertise and experiences outside their areas of specialty. This flexible development structure allows theCompany to meet market needs.

qReagent development
In 2002, Sysmex made International Reagents Corporation (currently Sysmex International Reagents) awholly owned subsidiary, fusing International Reagent’s technology development capabilities in immunochemistry and clinical chemistry with Sysmex’s
strengths in hematology and hemostasis to construct one of the most advanced reagent development organizations in Japan. Sysmex is pursuing cutting-edge R&D through close collaboration between
the reagent development and instrument development operations.
qSoftware development
An essential consideration in diagnostics is a mechanism for accurately and rapidly providing test data tophysicians. Sysmex has long focused attention on
the introduction of information technology into
testing operations and has developed software tointegrate test data management. In this segment,
Sysmex possesses highly specialized technologies
unmatched by any other company. The Company has
established an organization for providing localized
software by setting up software development units
in China and Oceania.
qIntellectual property
The results from the Company's development activities are rapidly converted into valuable intellectual
property by securing the rights to and making use of
these intellectual properties. In collaboration withthe research department and the instrument, reagent, software, and other developments, the intellectual property department devises patent application strategies, identifies inventions, and provides
appropriate responses to third-party intellectual property rights. It also actively raises awareness of intellectual property issues and supports Sysmex inmaintaining its globally competitive edge by enabling
the Company to freely develop its business.

40

R&D Facilities

Sysmex creates high-value-added diagnostic technologies and develops
instruments and reagents mainly at the core Techno Park facility.
By enhancing links with research centers in Japan and overseas, Sysmex
works to develop innovative technologies that will generate new markets.

Techno Park

Sysmex AsanoLaboratory

BMA
Laboratoryq Techno Park

Sysmex CNA

q Sysmex CNA
Sysmex CNA is the specialist IT company within theSysmex Group. Sysmex CNA specializes in medical
information systems over a broad range of fields andhas built up a strong reputation domestically in theclinical laboratory test field.
At present, the company is
responding to innovations in
the field of IT by developing
products that will enable it
to offer total solutions for
medical institutions.

41

Sysmex Annual Report 2008

Sysmex works to create cutting-edge and high-value-added diagnostic technologies in order to grow its healthcare business. The Company's core R&D facility, theTechno Center, was unveiled in 2008 as the new Techno
Park. The Techno Park will be used to accelerate research into disease and biology and produce further developments in life science technologies. The Company
will also step up its development of instrument, reagent,and software technologies and will combine these withlife science technologies in a bid to develop value-addedlaboratory and diagnostic tests. The Techno Park will provide an R&D environment where talented researchersand engineers can exchange information and freely generate innovative ideas. It will also support further collaboration between research facilities in Japan and overseas, as well as the BMA Laboratory and R&D Center
Europe. The main research focus is currently cancer anddiabetes with the goal of achieving novel laboratory
tests and diagnostic technologies that contribute to better patient QOL.

Techno Park in Kobe

q R&D Center Europe

R&D Center Europe

The R&D Center Europe was
opened in 2006 in Germany as theCompany's first overseas researchfacility. Sysmex is taking advantage of this European location tocooperate with research and medical treatment institutions in thedevelopment of new testing technologies targeting diseases andother problems for which few cases exist in Japan. This Center will
forge stronger links with European
research institutions with which
Sysmex is conducting joint development and accelerate the devel-

opment of blood analysis systemelements and the commercialization of other research themes. By
propelling research and clinicalevaluation efforts, the Center will
move Sysmex toward the creationof high-value tests for disease
management.

q BMA Laboratory

q Sysmex Asano Laboratory

The BMA Laboratory is located within the Business Support Center for Biomedical Research Activities (BMA), a
core facility in the Kobe Medical Industry Development Project. The Laboratory is researching methods to predict anticancer efficacy and the development of protein chips thatcan simultaneously measure protein activity and expression. The facility is
expected to serve
as Sysmex’s pointof contact for collaboration with industry, academia,
and government
agencies.

The Sysmex Asano Laboratory is a research base foundedwithin the Kobe Translational Research Informatics Center(TRI) to pursue joint research with the cell therapy research group of the Foundation for Biomedical Researchand Innovation (FBRI). Under the direction of Dr. Shigetaka Asano, Professor Emeritus, University of Tokyo (Professor, Waseda University; President, Japan Society of
Hematology; Technical Advisor, FBRI), Sysmex aims todevelop new diagnostic technologies through joint
research at the laboratory on the efficacy of cell therapy
and improved safety profiles.

42Sysmex Technologies

Hematology tests are indispensable tests for investigating the number of blood cells that are
responsible for oxygen transport or hemostasis. Blood cells comprise red blood cells, white blood
cells and platelets. Blood cells can be present in numbers ranging between several thousand andas many as several million cells per μL 1), depending on the type. Sysmex employs two basic
technologies—sheath flow DC detection and flow cytometry—in order to achieve precise
measurements at the μL level.

Basic principles underpinning Sysmex's hematology:
Sheath flow DC detection

Detection chamber

Blood cells can be broadly divided into three categories:
red blood cells, white blood cells and platelets. Althoughsmall, these blood cells are different. Platelets are thesmallest blood cells at around 2 μm2) in diameter, while
white blood cells are the largest at around 15 μm in diameter. The sheath flow DC detection method is the basic
method for measuring the number of these blood cells,
distinguishing the different types of blood cell by size.
Broadly speaking, the method comprises three different
processes.

Sheath solution (flowing
into the detection aperture)
Detection
aperture
Sheath solution(flowing out)

1) 1 μL is about 1/200 the size of a drop of water dripping from a conventional tap.
2) 1 μm is 1/1,000 of a millimeter. The thickness of a thread of a spider’s web is about 7 μm.

Accurate dilution
1
The blood must first be diluted a certain number ofPassing cells one-by-one through the detection aperture2
The measured sample (the solution that diluted thetimes to allow accurate measurement of the number
or size of blood cells. This process reduces the number of blood cells existing in a certain volume ofblood and minimizes errors caused by blood cells
piling up on top of each other. Accurate blood dilution
requires the accurate measurement of the quantity ofblood and of the solution (reagent). This process requires micro-level accuracy in the design of the measuring chamber, and uses apparatus that minimize degradation or abrasion of the material.

blood) contains numerous blood cells, regardless of how
accurately it has been diluted. The method devised to allow the cells to be counted accurately involves lining up
the cells in a row prior to counting. A stream of fluid*1
that forms a sheath around the flowing blood cells is
generated to cause the blood cells to line up in a row.
The blood cells flow along the stream*2 heading towards
the detection aperture which measures the number ofblood cells. The blood cells are made to pass throughthe center*3 of the detection aperture. To prevent the
blood cells from flowing back into the aperture after they
have passed through it, the stream*4 eliminates the
blood cells from the system in a one-way flow.

Three processes in the blood cell count1 Accurate dilution*1

cells one-by-one
2 Passingthrough the detection aperture: Red blood cell
: White blood cell43

: Platelet

Sysmex Annual Report 2008

The sampling valve is an important component that is essential for accurately determining blood quantities. Sysmex manufactures these sampling
valves itself, applying rigorous quality inspections to each one.

Development of Hematology Instruments
Fully AutomatedHematology Analyzers

Semi-AutomatedHematology Analyzers

Detection Method

CC-1001

As a constant electric current is passed through a solution, this methodmeasures the changes in electrical resistance that occur when blood cells
pass through detection aperture.

1965

CC-10021970

CC-107
CC-710CC-7101964

CC-1001

1975

CC-108

ResistanceV

CC-720Time

World's first model
to include a sampler

CC-120CC-1101980

CC-800Detection chamber
CC-800CC-700CC-700

PlateletThree processes in the blood cell count

Red
White
blood cell blood cell

E Series

E-5000E-5000 / E-4000 /E-3000 / E-2500 /E-2000Counting cells by the electric signals
3
Blood cells are substances that do not allow electric
currents to pass through easily. When blood cells
pass through the detection aperture in a test sample
through which an electric current is passed, theycause an electric resistance. The number of blood
cells can be counted by counting the number oftimes the electric resistance is generated. Larger
blood cells passing through the detection aperture
produce greater sizes of electric resistance, so thedifferences in the electric resistances allows the system to determine the different types of blood cellpresent.

CC-180CC-170CC-150CC-130CC-780Fully AutomatedHematology Analyzers

1985
NE-8000

NE Series

M-2000NE-8000 / NE-7000 /
NE-6000

F-800
F-500
F-300

K-1000K-10001990
NE-1500

K-2000

NE-1500

F-810
F-610
F-310

K-800

SE-9000
SE-9000

K-4500World's first model to use
a semiconductor laser

SF-3000

F-820
F-520

1995

KX-21N

3

XE-2100

KX-21

World's highest
processing capacity

Counting cells by the electric signals

XE Series

KX-21NHigh End

XE-2100 / XE-2100L /XE-2100D

*2

2000

4

*

XT-2000i

Middle Range

pocH-100i

XT Series*3

XT-2000i /XT-1800i

pocH-100i

Low End2007

XS Series

Stream of fluid that forms a sheath

XE-5000

2008

44

Hematology technology enabling
the capture of greater amounts of
information: Flow Cytometry
Laboratory tests must be reliable for them to be ofuse in diagnosis and treatment. The medical community needs access to measurement results that
can add value. Sysmex is addressing these needs
through a sustained program of technological innovation. The Company is currently using flow cytometry
to develop its hematology devices from cell count
instruments to devices that can analyze the internal
contents of blood cells.
With flow cytometry, the target blood cells arestained using a special reagent, and then these cells
are irradiated using a laser diode to capture information on cell size and internal cell structures. This
allows the measurement of five different types3) ofwhite blood cell and the detection of any abnormal
cells. The use of flow cytometry provides clinicallyimportant information, as the distribution of the five
types of white blood cells differs according to thedisease present.
3) 5 types of white blood cells: neutrophils, lymphocytes, monocytes,
eosinophils and basophils, each possessing different forms and functions.

Flow Cytometry
With flow cytometry, the number of red blood cells and platelets are first shrinked through the action of a surfactant. The target whiteblood cells are nucleic-acid stained and irradiated with forward-scattered light, side-scattered light and side-fluorescence using a laser
diode. The light signals are then analyzed to categorize the blood cells.

Conceptual diagram

Captured information
Side-Fluorescent light
Side-fluorescent light intensity
Information on RNA amount and DNA amount

MirrorForwardscattered light

Semiconductor
laser

Detector

45

Sysmex Annual Report 2008

Side-scattered light intensity
Information concerning the internal structure of cells(nucleus shape, presence of cell granules, etc.)

SideScattered light
Laser irradiation

Forward-scattered light intensity
Information on cell size

Leveraging technological synergies
between instruments, reagents and IT as asolutions provider in the diagnostics field
Some 40 years have passed since Sysmex started
to develop Japan's first hematology instrument.
During this period, the Company has solved a variety of technological challenges and accumulated
wide-ranging technologies and experience. As a result, the Company has been creating and devising
the technologies and ideas that are its strengths,
and focusing on the development of high-value-added products. In particular, Sysmex was able tosystematize its diagnostic testing and evolve into a
unique solutions provider in the diagnostics field,
in which the Company continues to be highly acclaimed. Sysmex will offer solutions to its customers not only by continuing to develop high-valueadded products but also by leveraging its strengths
derived from being a comprehensive manufacturer
that is involved in everything from research and development to sales and after-sales support.

Providing high-value testing thatenables the optimum treatment to be
selected for each individual patient
As a solutions provider in the diagnostics field, Sysmex is now not only involved in the hematology segment but has expanded its business to incorporate
hemostasis, immunochemistry, clinical chemistry andurinalysis. The uses of testing, which plays an important role in improving medical treatment, have beenchanging from the area of treatment support to the

Future R&D Directions
Contributions to disease management
Infectious
Hematology
diseasesdiseaseImmunologicaldiseaseDiabetes
Diagnostics
for "Prevention"
CancerDiagnostics
for "Diagnoses"

Expansion of areas covered

Life sciences

Hematology, hemostasis, etc.

Add our own value in basic technology and create new testing technologies

area of disease prevention. Sysmex is actively implementing initiatives in the life science business whichis strongly expected to contribute to preventive treatments. Based on a concept of “disease management,” which entails providing high-value testing thatenables the optimum treatment to be selected foreach individual patient, Sysmex is currently working
on the creation of new testing technologies targetingsuch illnesses as hematology disease, immunologicaldisease, infectious diseases and cancer.

46

Purchasing, Production and Logistics

Rigorous quality control and global supply chain management systems allow Sysmex to swiftly provide astable supply of products of consistently high quality
to customers in more than 150 countries.

A consistent supply of top-quality diagnostic and medical-treatment test products is essential to medical care
support. Sysmex employs a proprietary, fully automatedsystem that covers all procurement operations, giving
the Company a real-time grasp of raw material and component order, delivery, and receipt and inspection status.
This system allows Sysmex to standardize at the R&D
stage the selection of suppliers that can ensure stabledelivery of appropriate raw materials and components,
thereby achieving swifter R&D and better cost-competitiveness. For reagent production, the Company has rigorous quality control procedures in place and achieves sustained and stable product supply. The 2 factories at theJapanese subsidiary Sysmex International Reagents are
the core production facilities for reagents and have production technology and quality control systems in place.
The Company is also providing technical guidance to its
overseas production bases as it works to develop highquality and efficient production facilities around theworld.

Instruments manufactured in Japan todeliver high quality
All Sysmex instruments are manufactured in Japan.
The Company uses cutting-edge production and quality control technologies because of the sophisticatedand specialized technologies that are required, result-

47

Sysmex Annual Report 2008

ing in a system that consistently delivers high-quality
products to customers worldwide. The core Kakogawa
Factory employs proprietary manufacturing management and process control systems in all stages of the
production process, from raw material receipt to
product assembly and final delivery. The Company
also works to shorten lead times through the use ofcell production and improve production efficiencies by
Adjustments being made to the opticalaxis inside an optical unit(hematology analyzer).

Function Structures

forecasting global demand.

Global reagent manufacturing to ensure stableproduct supplies
Revising its engineering chain,
Sysmex now conducts upstream
purchasing and concurrent engineering at the R&D stage, accelerating the mass production of new
products. The Company employs information technology in its electronic purchasing the web-based system Sysmex Trade Mission (STM),
process control and quality control systems to ensure
the stable supply of high-quality products. Sysmex isalso expanding its overseas production bases to meetgrowing overseas demand and improve its ability tocompete. The Company currently has 9 production facilities in 7 countries.
The 2 core facilities are the Ono Factory and Seishin
Factory of the subsidiary Sysmex International Reagents. Sysmex has substantially cut production leadtimes, cost of sales, and inventory at these 2 plants toincrease global cost competitiveness. Sysmex is upgrading the production facilities of the Ono Factory, afacilities-driven plant, and accumulating production
technology expertise at the Seishin Factory, a knowledge-driven plant. The Company pursues productionthat capitalizes on the characteristics of each plant:
the Ono Factory is used for the mass production of reagents using automated facilities. The Seishin Factoryis used for the production of bulk biological reagentsrequiring advanced, specialized knowledge. Sysmex

seeks to strengthen and expand its global production
system by actively transferring expertise developed atthese plants to overseas reagent production bases.

Focus on quality control systems andenvironmental protection
Sysmex emphasizes quality control systems andenvironmental protection and is working to addressthese issues across the Sysmex Group. The Kakogawa
Factory, Ono Factory and Seishin Factory engage inrigorous quality control (QC) based on the Quality
Management System (QMS), a quality control standard applicable to medical instruments and pharmaceuticals, the ISO 9001 international quality control
standard, and the ISO 13485 international quality assurance standard for medical devices.
The Kakogawa Factory, the Ono Factory and Seishin
Factory of Sysmex International Reagents, Sysmex
Medica, Sysmex RA and the factories in Europe andBrazil have obtained certification for the ISO 14001 international standard for environmental management
systems.

Effect of Introducing Concurrent Engineering

Investment

Brought forward
Beforeintrodution

After
introduction

Time
BeforeComponent development
introduction

Afterintroduction

DesignPrototype

Mass-production preparations

Mass-production preparations

Mass production

Mass production

Shortened
timeframe48

Production Facilities

Sysmex factories promote upstream purchasing and are strengthening
the Company's unified development and production structure to move
forward mass production.
The Company is improving its global supply chain management systems
by reorganizing logistics locations and reconfiguring supply flow.

For instrument and reagent manufacturing, Sysmex
promotes upstream purchasing and is strengthening
the Company's unified development and production
structure to enable early-stage mass production.
Sysmex Trade Mission (STM), an electronic purchasing system that automates complex ordering activities, helps reduce procurement costs and strengthengroup-wide production management. The system enables alliances with numerous suppliers that bring
down the Company's procurement costs while maintaining high quality levels, and allows suppliers tomake proposals that play to their strengths.
For the logistics function that is responsible fordelivering final products to customers, Sysmex isimproving its global supply chain management (SCM)
system by reorganizing domestic logistics locations
and reconfiguring supply flow overseas. In the US,
the Company reorganized its reagent supply system
in 2005, creating a logistics system that encourages
direct communications with customers. In Europe,
the Company established a European parts centerand reworked its system for supplying the parts needed for maintenance services.

49

Ono Factory
Kakogawa Factory

Seishin Factory

To reinforce management of global logistics andprocurement, Sysmex has consolidated all functions
into the Solutions Center. In the future, the Company
will reinforce its IT-based logistics management system to allow the group-wide sharing of inventory andorder information.

q Kakogawa Factory (instrument production)

qOno Factory (reagent production)

qSeishin Factory (reagent production)

The Kakogawa Factory is a production
base for diagnostic instruments that uses
quality control systems to produce highly
reliable instruments based on the Quality
Management System (QMS), ISO 9001
and other quality control standards, andthe laws and regulations of destination
countries. The plant provides the capacity
to supply a wide range of products to markets around the world and employs flexible production systems. Sysmex is forging liaisons in the production technology
functions of subsidiaries in Japan that
manufacture instruments.

The Ono Factory is one of the principle
facilities at Sysmex International Reagents.
The plant is dedicated to the high-volume
production of about 400 reagents, centered on products for the hematology segment. The production lines are divided intosome types according to capacity, and thefactory seeks to simultaneously increase
quality, reduce costs, and mass-produce by
optimizing automated or manual operations
for each process from raw materials supply
to final inspection.

The Seishin Factory is the other principle
facility at Sysmex International Reagents.
This plant is mainly responsible for the
production of bulk biological reagentsand draws on wide-ranging production
technologies to produce a line of morethan 1,000 products ranging from clinicalchemistry to immunochemistry reagents,
hemostasis reagents, and reagents foruse as quality control materials. The
factory has also constructed a flexible
production system to meet requirements
for high-mix, low-volume manufacturing.

Sysmex Annual Report 2008

Function Structures

Overseas Reagent Production Bases
Sysmex has set up reagent factories in Germany,
the US, Brazil, China, Singapore and India to enable the stable and speedy supply of reagents to
global markets.

Neumünster Factory

Wuxi Factory
Chicago Factory
Jinan Factory

Singapore Factory

Baddi Factory

Brazil Factory

qNeumünster Factory (Germany)

qBaddi Factory (India)

Additions to this plant were completed in April 2007, approximately
doubling the reagent production
capacity. This expansion is aimed at
responding to increased reagent demand in line with the growing installed base of instruments in Europe.
The Company aims to reorganize
and expand its business base toallow a more stable supply of diagnostic reagents and reduce cost of
sales.

The construction of this reagent
plant in an industrial park in the
Indian state of Himachal Pradesh
was completed in June 2007. The
presence of a reagent production
base in India should allow Sysmex
to improve cost competitivenessand increase market share.

qChicago Factory (US)qWuxi Factory (China)

In response to rising demand and to
reinforce cost competitiveness,
Sysmex has built more facilities atthe site of its regional headquarters,Sysmex America. This strengtheningof reagent supply capacity will build
trust and deliver peace of mind to
our customers.

Sysmex became the first non-Chinese company to receive pharmaceutical manufacturing approval.
The Company became able tomanufacture products needed inhemostasis, clinical chemistry andsophisticated biotechnology applications.

50

Sales and After-Sales Support

Sysmex focuses on regional business needs in its
R&D, production, sales and after-sales support in 38
locations around the world. Sysmex has an excellent
reputation with customers for its global after-sales
support system.

Throughout its history, Sysmex has always set its sights

support that takes full advantage of this extensive

on overseas markets and adapted its business activities

network. It now provides such high-value-added sales

to the requirements of markets in diverse geographicaland after-sales support around the world, having built

regions. Today the Company engages in R&D, produc-

support networks tailored to the various local markets.

tion, sales and after-sales activities at 38 locations aroundthe world and supplies products to customers in more

After-Sales Support Systemthan 150 countries.
In line with the core strategy of becoming the leader inCustomer

global niche markets, Sysmex has established its position
as the market leader in the hematology segment inJapan, Europe, China, and the Asia Pacific, as well as
capturing the top share of the global market. The Company
is building on its current position by reorganizing busi-

Field
engineer

SNCS*

ness structures and working to expand market share in
the US, the world’s largest market.
Building on the foundations of its hematology busi-

Specialist
operatorness, Sysmex is working aggressively to establish itself
as a solutions provider in the diagnostics field.

Building regional sales and after-sales
support networks

ScientificsupportTechnical
supportTechnical
specialist

Scientificspecialist

Sysmex operates a network of 7 offices and 12 sales
offices in Japan and has established a sales and support structure second to none in the diagnostics market. The Company provides multifaceted solutions fortest efficiency and cost cutting, involving after-sales

51

Sysmex Annual Report 2008

Customer Support Center*SNCS: A service that connects customer products with customer

support center terminals through a web interface to provide online
support and online quality control.

Function Structures

Improving customer support by linking
call centers and service engineers
Sysmex is developing systems to enable a rapid response to customer requests. The Company alreadyhas call centers in Japan, the US, China, Germany
and Singapore, and can dispatch service engineers
to customer premises as necessary. In the US,
where customer support functions must cover extensive areas, close collaboration between call centers and service engineers allows Sysmex to respond rapidly to customer requests. This support
system is now being used in China, marking Sysmex
out from the competition.

Sponsoring scientific seminars foradvancement of healthcare
Sysmex sponsors hematology seminars around theworld to provide physicians and laboratory technologists with information on the latest trends in hematology. The Company started running annual seminars inJapan in 1978 and then expanded this program to
In Japan, the Customer Support Center responds toChina in 1998. Sysmex now runs seminars and otherinquiries around the clock, 365 days a year.* Knowl-

activities in Thailand, Indonesia and India and holds

edgeable specialists answer questions not only about

symposiums in Europe and North America.

instruments and reagents, but also about scientificmatters. Sysmex has established a rapid support
system by stepping up cooperation between the
Customer Support Center and Sysmex offices andsales offices across Japan. The Company has further
enhanced after-sales support by consolidating thecustomer after-sales support function in the Solutions
Center, which opened in 2005 and opening a service
center in the Tokyo metropolitan area in 2006.

*Service for customers who have maintenance contracts.
Online maintenance of customer
instruments
The Sysmex Network Communication Systems (SNCS)
is a support service that connects the Customer Support
Center and customers' products via the web for the online provision of remote instrument maintenance andquality control. The SNCS is used by many customers
and has earned a strong reputation. Sysmex is now
building on this success in Japan to roll out the system
globally. The Company launched the SNCS in the US in
2006 and is steadily expanding the installed base.

52

Sysmex has marked the 40 th anniversary of the Company's founding in Kobe. Currently, Sysmex hascommenced the transformation of moving to a newstage in order to fulfill its social responsibilities as acompany that contributes to bringing about a comfortable and healthy society.

Kobe is well-known as a port city surrounded by nature,especially the sea and mountains.

53

Sysmex Annual Report 2008

Socially
Responsible
Activities

As a company involved in healthcare, Sysmex considers its corporate responsibility to conduct business activities that contribute to a healthy and prosperous
society. To this end, Sysmex fosters a corporate culture where each employee
can feel a sense of fulfillment in their work and emphasizes excellent communications with all stakeholders as it conducts its corporate activities.

Commemorative photographtaken after presentation of the"Sysmex Way", the new corporate
philosophy. (Sysmex America)

Developing Human Resources
Sysmex fosters a corporate culture where
employees can feel a sense of fulfillment intheir work, based on mutual agreement
and common understanding.
Sysmex believes that recruiting, retaining, and developing human resources is one of the most fundamental of management tasks. The Company fosters a fulfilling corporate culture that draws out and maximizes
the strengths of individual employees such that employees can make the most of their abilities and feela sense of fulfillment in their work. Currently, around
40% of Sysmex employees are stationed at companies overseas. As it becomes more global, the Company will attract an even greater range of personali-

ties. range of personalities. Sysmex believes that diversity and globalization go hand in hand and thatmanagement’s responsibility is to nurture individual
strengths and incorporate them into the overall organization. Sysmex will continue to cultivate a corporate
culture where employees are fulfilled in their work,
based on a sense of mutual agreement and common
understanding among all group employees.
As part of efforts to develop a positive working environment, in 2005 Sysmex introduced flexi-time systems
to enable employees to adjust their work hours for childcare and long-term nursing care responsibilities. In thisway, the Company is working to improve its systems insupport of a better work-life balance. In 2006, the Company established a re-employment system for retirees

Attractive Company

Evolve into an attractive company by developing HR* and a culture to generate high value
HR (Enhance individual skills)

System (Respect diversity, rules)

GlobalManagement

Understanding

Transparency

Autonomy

Teamwork

Equal opportunity

Training

Foster a positive corporate climate
Create “original” value and offer “trust and confidence” to stakeholders

Offer “job satisfaction” and “ideal working conditions”

Ensure support from diverse stakeholders*HR: Human Resources

54

aimed at individuals who have passed retirement age
but still want to work and would like to continue to beengaged in fulfilling work at Sysmex. The objective isto provide a working environment that can utilize theexpertise and experience of these employees. The
Company also runs company-wide staff development
programs, including training aimed at specific employee tiers as well as global training, in a bid to raise employee skill levels.
Under the newly redefined corporate philosophy
termed the “Sysmex Way,” by dealing in products thathave characteristics in keeping with the Sysmex
brand, the Company strives to deliver creative value
and assure peace of mind, which is linked with stakeholder satisfaction.

Social Contributions
Sysmex is involved in healthcare, withroots in Kobe but conducting operations
and making social contributions on a
global scale
Sysmex contributes to the advancement of medical careand supports local communities in a manner befitting a
global healthcare testing company.
Since 1984, Sysmex has provided assistance for research into electronic measuring technology through the
Nakatani Foundation of Electronic Measuring Technology
Advancement. The Foundation's goal is to contribute to
the development of Japan's economy and society and to
improve quality of life (QOL) for the Japanese people.
The late Mr. Taro Nakatani, the Company's founder andfirst President, established the Nakatani Foundation using funds contributed by himself, Sysmex and others.
The Foundation has provided support for 243 research
projects as of 2008.
Since 2004, Sysmex has provided funds to the Kobe
University School of Medicine for an endowed course inlaboratory medicine. The purpose of the course is tocontribute to the advancement of diagnosis and medicalcare by developing evaluation methods for new clinicaltesting in advanced medical fields. Sysmex also participates in the Kobe Medical Industry Development Project, which is promoted by the city of Kobe, and in 2006
the Company committed support to the Foundation for
Biomedical Research and Innovation. These funds wereused to open the Sysmex Asano Laboratory in January
2007. Under the direction of Professor Shigetaka Asano,a leading hematology expert, the laboratory aims tocreate new diagnostic technologies for effective celltherapy.
Valuing its interaction with local communities, Sysmex
has opened its Kakogawa Factory, an instrument manufacturing facility, for a local junior high school internshipcourse. Participating since 1998 in this junior high schoolwork-study program called “Try-Yaru Week,” Sysmex

55

Sysmex Annual Report 2008

supports a weeklong student internship program eachyear in early June.
Sysmex looks to make global contributions to healthcare. In collaboration with local distributors, the Company has opened the Sysmex African Service Center in Cotonou, Benin, as a technical support base covering
Western Africa. As well as acting as a local service center, the Sysmex African Service Center works to improveskill levels in developing countries through technology
transfers to local technicians. The Company also supports improvements in medical device maintenance andmanagement skills by providing technical assistance to
the Japan International Cooperation Agency (JICA),
which runs programs to provide technical training for researchers from emerging countries.
In December 2005, the Company established the Sysmex Women’s Track & Field Team, welcoming Coach Nobuyuki Fujita, who has trained numerous athletes representing Japan, and Athens Olympic Games gold
medalist Mizuki Noguchi. The team supports the trainingof young athletes who aim to become world-class competitors.
Through its involvement in such healthcare, local community and sporting activities, Sysmex works to raise its
brand value by fulfilling its social responsibilities andthereby raising overall corporate value.

Environmental Conservation
Activities to fulfill social responsibilities forenvironmental conservation and act in harmony with the global environment
Sysmex recognizes its social responsibility toward environmental conservation as an item of management
priority. In line with the Sysmex environmental policy,
Sysmex aims to protect the environment in thecourse of product development, production and customer support and conducts a variety of other activities at its operating sites to reduce the burden the
Company places on the environment and achieve harmony with the global environment.
In 2006, Sysmex reviewed its environmental management system and improved the systems in place
to drive such activities forward. Sysmex has also acquired certification under the international ISO 14001
standard for environmental management systems at
11 principal business sites in Japan and overseas. In
addition, the Company is formulating a group-widesystem to promote environmental activities, including
an annual environmental audit. The Company has put
in place green procurement standards and works
with suppliers to promote the sourcing of raw materials in ways that have a low environmental impact. Following the implementation of the RoHS directive (which
restricts the use of certain hazardous substances in electrical and electronic instruments) by the European Union

Sysmex Value(EU) in 2006, Sysmex is successively ensuring that its
parts and components covered by the directive comeinto compliance ahead of the application of the directive
to medical devices scheduled for 2012. The Company isrunning training programs for personnel responsible for
product development and procurement to ensure the rigorous implementation of procedures to meet the RoHS
directive requirements. Sysmex has also established inhouse standards on environmentally hazardous substances for product design and is using these standards indecisions on the inclusion of RoHS-compliant parts.
Sysmex is working to make products more energy efficient. In the past, the drive to increase the functionality
and size of hematology analyzers resulted in greater energy consumption, but the Company now focuses on energy-saving designs in its product development such that
Sysmex products are the most energy-efficient in this industry. Moreover, in a bid to reduce resource usage, theCompany is working to make its products more compact
and lightweight and in 2006 completely eliminated theuse of foamed plastic and timber packaging materials,
switching instead to materials that can be recycled.
In a bid to eliminate waste and use resources effectively, Sysmex has launched zero-emissions initiatives at
its factories and promotes waste separation and recycling. The Company's offices in Japan have adopted theMinistry of the Environment’s “Cool-Biz” proposal, a program to reduce CO2 emissions by maintaining appropriate office temperatures.
Through conservation efforts that seek to achieve harmony with the global environment, Sysmex endeavors tomeet its social responsibilities toward environmental
conservation, raise its brand value, and enhance overall
corporate value.

Comparison of Hematology Analyzer
Power Consumption

Intellectual Property Activities
Creating an environment that encourages
intellectual creation and ensuring a competitive edge to support stable growth
In line with its expanding business domains and global development, Sysmex has established the Basic
Principles of Intellectual Property Activities. The
Company's goals in creating these principles wereto share fundamental thoughts on intellectual property activities and maximize group strengths. The
Company's policy on specific intellectual property
activities is to liaise with R&D divisions, formulate
filing strategies, uncover latent intellectual property
opportunities, and survey the intellectual property
rights of third parties. Through proactive intellectual
property education activities as well as an expanded
intellectual property liaison function (which supports
everything from idea generation to intellectual property management and use), Sysmex seeks to quickly
convert R&D successes into valuable intellectual
property.
The Company has in place a remuneration systemthat includes bonuses based on patent performance.
This system is targeted at patents that contribute to
Sysmex business and is designed to enhance incentives for inventors.
As an R&D-driven company, Sysmex will continue
to support the knowledge-building activities of its employees, expand its management of intellectual property, secure its position in global competition, andstrive to achieve stable growth.

Sysmex's Views on Intellectual Property Activities

(VA)
1,800

qBasic Principles
The goal of Sysmex's intellectual property activities is tosecure flexibility in R&D and business development andcontribute to the management of Sysmex's business.

NE-8000

SE-9000

1,500

1,200
E-5000900

SF- 3000600
CC-720300
0XT-2000i

XE-5000

XE-2100
K-1000K- 4500
KX-21

XS-1000i
pocH-100i

1975 1980 1985 1990 1995 2000 2005 (2007) (FY)

Note: CC-720, E-5000 etc. refer to the product brandnames; arrows show special product performanceand measurement principles.

qBasic Policy
Sysmex ensures global competitive advantage andsustains stable growth by maintaining an environment that supports intellectual creation activities by
employees, by actively securing and utilizing rights
to valuable intellectual property created by the activities of all Group companies, and by properly respecting the intellectual property rights of third parties.

56

Investor Relations Activities
Maintaining excellent communications
with shareholders and other investors
through quality investor relations
Sysmex recognizes investor relations as an important
facet of corporate management and is active in its investor relations efforts, in line with its investor relations policy. The investor relations department is located within the corporate business planning division,
which reports directly to the president. The department is charged with disclosing appropriate information in a timely manner, communicating directly withshareholders and other investors, and promptly providing feedback to management regarding the Company’s external assessment.
One focus of the Company's communications withshareholders and other investors is to explain a difficult-to-understand business in an easily understandable manner. In addition to briefing analysts and institutional investors about operating results, theinvestor relations department provides technical briefings on areas such as the life sciences and hosts
tours to research and manufacturing facilities. Overseas, the department holds investor relations meetings, attends conferences held by securities firms,
and seeks opportunities to foster an understanding of
the Company’s strengths by providing individual product explanations at industry exhibitions or tours of local factories. For individual investors and other shareholders, the department prepares corporate
brochures and shareholder reports, as well as extensive web content, all with the aim of introducing theCompany’s business in an easily understandable way.
In 2006, the Company received the Japan Investor

Relations Association’s Award for Excellence in Corporate IR. Sysmex has also received the Award for
Excellence in Internet Investor Relations, sponsoredby Daiwa Investor Relations, and the Company's website was designated as an Excellent Corporate Website according to the survey ranking listed company
websites run by Nikko Investor Relations.
To raise the level of the Company's investor relations activities further, in addition to proactive external information disclosure, Sysmex will concentrate
on responding to feedback to ensure the results of its
investor relations activities are reflected in its capital
policies and management.

Position of Sysmex IR Activities
Externally
A management strategy tool
for reinforcing the management base by ensuring appropriate share price formation
Raise corporate value(which equals market
capitalization)
Determine capital market
responses and requests

Disseminate quality
information in atimely manner
Swiftly reflect
management andIR activities

Sustainable growth and profitability improvements
Appropriate investment for future growthInternally
A management innovation toolthat works by feeding back external evaluations and requests

Investor Relations Policy

57

1. IR Goals and Basic Policy
The basic policy of Sysmex in IR activities is to disclose corporate information on performance, financial position, visions of the future, and management strategies, in a fair,
prompt, accurate and easy-to-understand manner, in an attempt to ensure accountability to shareholders and other investors and gain proper understanding about management
and business activities.

3. Methods of Information Disclosure
Sysmex releases corporate information required under theTimely Disclosure Rules via the TD-net, operated by the Tokyo Stock Exchange. The Company posts information disclosed through the TD-net on its website as swiftly as possible. The Company also provides corporate information not
subject to the Timely Disclosure Rules on its website.

2. Basis of Information Disclosure
Sysmex discloses corporate information in accordance withapplicable laws and regulations concerning securities trading, and the Rules on Timely Disclosure of Corporate Information by the Issuer of Listed Securities and the Like(“Timely Disclosure Rules”) established by the Stock Exchange. The Company also seeks to disclose corporate information not required by the Timely Disclosure Rules fairly
and promptly, in order to assist shareholders and other investors in better understanding the Company.

4. IR Quiet Period
Sysmex observes a quiet period from the day after the closing date of each quarter until the release of earnings statements. During this period, the Company will refrain from replying to questions or commenting on earnings projections.
However, in the event that results are expected to significantly deviate from the projections during the quiet period,
the Company will release the appropriate information.

Sysmex Annual Report 2008

Special Feature 2:

Business Challenges
Over the Past 40 Years
Sysmex started operating in 1968 to sellhematology analyzers manufactured by TOA
Electric Co., Ltd. (now TOA Corporation). Sysmex
has faced up to various business challenges overits 40-year history.

Mr. Taro Nakatani (right), the founder, sets out in 1959 to study overseas markets.

The Company's Founding
Overcoming the First Business Challenge"The time will come when healthy people undergo
testing and look after themselves." In the late 1950s,
Japan established its national health system and previously unheard of general checkups became commonplace. TOA Electric had already established itself
as the leading manufacturer of megaphones and waslooking to develop another core business. Therefore,
TOA Electric studied the US and decided to get involved in medical electronic devices, the market for
which was growing rapidly in the US. In the hematology segment, US-made products completely dominated the market and the detection methods used inthese hematology analyzers were protected by wellcrafted, wide-ranging global patents belonging to the
US manufacturers. The barriers to market entry were
extremely high such that business development
would prove challenging.
"How can we get around these patents and commercialize our own products?" Overcoming countless
problems, 3 young researchers worked tirelessly on
product development, finally succeeding in producing
the first automated hematology analyzer to be produced by a Japanese manufacturer in 1963.

provements, which was an extremely importantfactor in subsequent product development.
The Company had always looked beyond simple
business development in Japan with the intention ofmoving into overseas markets. The Company demonstrated their products in Europe and also aggressively
participated in exhibitions around the world to quickly
start developing opportunities for overseas businessdevelopment.
Having come this far, in 1968 TOA Electric established TOA Medical Electronics (now Sysmex Corporation) as the sales company to market TOA products inJapan instead of using distributors. TOA Medical Electronics started with 8 employees and built a sales
network. In 1972, the medical electronic device division of TOA Electric was merged into TOA Medical
Electronics such that the latter company became afull-service manufacturer with integrated development, production, and sales functions.
In 1978, 10 years after the Company was founded,
the Sysmex brand was launched to replace the TOA
brand used thus far.

Stepping Stones to Further Growth
The healthcare industry is one in which trust and reliability are always needed. Although major US companies had long track records in this business, TOA Electric's products got off to a rather fortunate start
within Japan with the Company's reputation for relatively steady product delivery. TOA Electric's customers had high hopes for this company that was battlingin a completely unknown field of business. Customers also reported their actual experience of using TOA
Electric products and made suggestions for future im-

Members of TOA Electric at the time of its founding.

58

Overseas Development
Building a Business Base and Organizationin Europe and the US
As the domestic business achieved steady earnings
growth, the Company made the long-planned moveinto overseas markets by building overseas sales bases through the establishment of affiliates in the US
in 1979 and Germany in 1980.
The Company established the UK affiliate, now
Sysmex UK in 1991, embarking on the provision of direct sales and services through a local affiliate withthe goal of achieving further growth. Sysmex UK got
off to a good start and has steadily grown earnings.
The success of this direct sales and service structurein the UK marked a significant turning point for theCompany's overseas strategy.
Also at this time, demands started to be made forthe reduction of healthcare costs by means of increased efficiency in testing throughout the entire
healthcare industry. Sysmex promoted company-wide
projects to tackle this and in 1990 became the firstcompany in the world to sell an integrated hematology
system that fully automated the entire process fromthe counting of blood cells, classifying white blood
cells, through preparation of smear samples. This resulted in the Company's products being used in large
institutions such as major hospitals and commercial
laboratories, and became a significant turning point insales strategy, moving from the existing single-product sales of instruments to sales of integrated hematology systems that matched customer needs.

Integrated hematology system

SYSMEX AMERICA

The Company's Founding

Overseas Development

Dramatic Advances●1963●1975 Oct.

●1979 Oct.

●1990 Aug.

●1995 Mar.

Successfully developed and com-

Launch of the first fully AutomatedEstablished a US affiliate,

Launch of an integrated hematolo-

Signed an agreement with DADE

mercialized Automated Hematolo-

Hematology Analyzer developed in

now SYSMEX AMERICA.

gy system that fully automated the

INTERNATIONAL a US basedgy Analyzer "CC-1001" the firstJapan.

entire process from the counting ofcompany (now Siemens) for col-●1980 Oct.

blood cells through preparation oflaboration in selling coagulation

Established a European affiliate

smear samples.

product lines.

●1991 Feb.

●1995 Jun.

Opened the Ono Factory in Japan

Established a joint venture, now

and transferred the reagent pro-

JINAN SYSMEX MEDICAL

duction division.

ELECTRONICS in China.

blood cell counter in Japan.

SYSMEX EUROPE.

CC-710●1968 Feb.

●1978 Feb.

●1991 May

●1995 Nov.

TOA ELECTRIC founded TOA MED-

Launch of the Sysmex brand to●1984 Oct.

Established the UK affiliate, now

Listed stocks on the 2nd Section

ICAL ELECTRONICS as the affiliate

mark the 10th anniversary of

Launch of the automated coagula-

SYSMEX UK.

of the Osaka Securities Exchange.

for sales of its medical electronics

founding.

tion analyzer marks entry into thehemostasis●1993 Jul.

●1995 Nov.

segment.

Completed the Neumünster Facto-

Launch of the world's first analyzer

ry, the base for reagent productionof tangible constituents of urine

in Europe.

that fully automated inspections ofdevices and instrument.

●1973 May

CA-100Established the Kakogawa Factoryin Japan.

●1978 May

●1987 Mar.

Started hematology seminar in

Launch of the immunochemistry

Japan.(now held 31 times)

analyzer, which utilized an original

urinary sediments.

immunoassay method, marks
entry into the immunochemistry
segment.
UF-100PAMIA-10

59

Sysmex Annual Report 2008

Sysmex Value

Dramatic Advances
Opening up Global Markets Through Global
Alliances
The formation of global alliances has been one factor behind Sysmex's dramatic advance into global markets. In
the past, Sysmex had developed cutting-edge technologies in the segments of hematology and hemostasis.
Then, in 1995 Sysmex proceeded to form an operational
alliance with US company Dade International (now Siemens) that made full use of both companies' strengths
in the segment of hemostasis. This alliance with the hemostasis market leader made both companies' brands
the global leaders in hemostasis. Sysmex then began to
be viewed as a global diagnostics company.
This success is prompting Sysmex to accelerate its
global alliance program. In 1998, Sysmex signed a sales
contract in the segment of hematology with Swisscompany Roche, which owns numerous healthcarecompanies around the world. The move accelerated theglobal development of Sysmex's hematology business.
Sysmex and Roche have since expanded this agreement into a long-term global alliance, covering everything from cooperation on product sales to joint development of new products, to leverage both companies'
strengths in further business development.

Sysmex has since responded to regional characteristics by developing overseas business by providing
overlapping sales and after sales support, both indirectly through an agent and directly. In 2003, the Company also formed a direct sales and support structurein the US, the world's largest market, leading to further growth in market share.
Sysmex has also worked on developing its businessin the rapidly growing Asian market. In 1995, Sysmex
established affiliate Jinan Sysmex Medical Electronics
as a reagent production base to strengthen the business structure in China, a market of enormous hidden
potential. Sysmex established affiliate Sysmex Singapore in Singapore in 1998 and Sysmex Shanghai in
Shanghai in 2000. The Company has since establishedsales and service bases in various other countries. Today, Sysmex boasts the top market share in Asia in
the hematology business.

JINAN SYSMEX MEDICAL ELECTRONICS●Management●R&D ●Production ●Marketing●1996 Jul.

●1998 Feb.

●2000 Jan.

●2003 Jun.

●2004 Apr.

Listed stocks on the 2nd Section

Established a Singaporean affiliate

Founded a Shanghai affiliate

Consolidation of two local affiliates

Acquired 50.8% of the shares inof the Tokyo Stock Exchange.

now SYSMEX ASIA PACIFIC.

SYSMEX SHANGHAI.

in the US to establish SYSMEXCNA, a medical data systems

AMERICA.

enterprise, and consolidated as anaffiliate.

●1998 May

●2000 Mar.

Rebuilding of the sales andSigned a basic agreement with

Promoted to the 1st Section of the

support structure in the US.

F. HOFFMANN-LA ROCHE ofTokyo Stock Exchange and the

Switzerland for global collaboration

Osaka Securities Exchange.

●2004 Jun.
●2004 Jan.

Established the R&D bases at theRelease for research purposes ofBusiness Support Center for Bio-●2000 Mar.

the GD-100, an instrument incor-

medical Research Activities (BMA)●1998 Oct.

Opened Central Research Labora-

porating the independently devel-on Port Island Second Stage, off

Change of company name totories in the Techno Center.

oped OSNA method that detects

shore from Kobe.

in marketing and joint R&D.

●1996 Oct.

SYSMEX CORPORATION to markcancer lymph node metastasis in a

Mr. Hisashi Ietsugu becomes president.

the 30th anniversary of founding.

short time.

●2004 Dec.
Receipt of the Japan Investor Rela-●1999 Feb.

tions Association's IR Award forLaunch of the automated hematol-

Excellence for 2004.

ogy analyzer developed for the
21st century.

(Former President
Hashimoto is on the left.)●2002 Apr.

●2004 Jan.

Consolidated SYSMEX INTERNATIONAL

Development of the world's first

REAGENTS as a wholly owned affili-

multi-protein analysis chip capable

ate through a share exchange.

of simultaneous measurement ofactivities and amounts of up to 20●2003 Apr.

proteins.

SYSMEX and TOSHIBA announce
XE-2100

development of minimal-invasive
blood glucose self-measurment
technology that does not require
blood sampling.

60

"Sysmex Way"The New Corporate Philosophy
to Drive Further Change

Moving to the Next Stage
Promoting and Applying the Sysmex Way
Through its active engagement in research and development, Sysmex has developed its hematology business and expanded its operations to encompass
hemostasis, immunochemistry, urinalysis and clinicalchemistry, as well as the field of life sciences that is
expected to act as the next driver of further growth.
Having faced up to various business challenges
over the past 40 years, Sysmex is now moving to thenext stage.
Sysmex has achieved steady growth by continuous-

ly facing up to its business challenges, such thatsales reached the ¥100 billion mark in 2007. At thesame time, the Company's operating environment
has undergone substantial change, Company stakeholders are now global in scope, and the demands
and responsibilities faced by the Company have become increasingly diverse and sophisticated.
Sysmex looks to fulfill the trust of all its stakeholders by creating new value as the Company moves
beyond the watershed mark of ¥100 billion in sales. It
does not intend to carry on along the same trajectory
as before. In April 2007, the Company defined the
new corporate philosophy of the "Sysmex Way," basedon the basic management policy that has carefully

Moving to the Next Stage●Management●R&D ●Production ●Marketing●2005 Jan.

●2006 Jan.

●2007 Apr.

●2007 Dec.

●2008 Apr.

Sysmex develops technology to

Released the XS Series, the world's

Established a Group Corporate

Started supplying hematology

Awarded MAFF manufacturing anddiagnose the risk of post-operativesmallest automated hematology

Philosophy, the "Sysmex Way".

analyzers to animal test laboratories

marketing approval for a rapid andrecurrence of early-stage cancer.

analyzers, which require only

operated by animal diagnostics

easy test kit to detect influenza

major IDEXX Laboratories.

infection in chickens.

minute quantities of blood.

●2007 Apr.

●2005 Apr.

Announced preparations for

Introduction of the executive officer

establishing a business presence●2008 Jan.

●2008 Jun.

system as a means of strengthening

in Austria, Slovakia, Hungary andFormed a commercial joint venture

Adoption of Sysmex products ascorporate governance.

the Czech Republic.

with bioMérieux for the Japanesestandard instruments by thein vitro diagnostics market.

Mongolian Ministry of Health.

●2005 May
Establishment of the Solution●2006 Apr.

●2008 Jun.

Center in Nishi-ku, Kobe andIntroduction in Europe of theAcquisition of approval from theconcentration of the marketingRD-100i gene amplification

MHLW for manufacture and sale ofplanning, customer support anddetector for detecting breast

scientific support functions.

cancer lymph-node metastasis.

gene amplification reagent as an in

SYSMEX CESKA REPUBLIKA

vitro diagnostic pharmaceutical.

●2007 Jun.
●2006 Nov.

Formed a global partnership with

●2008 Apr.

The Japan Investor Relations

bioMérieux for urinary screening inStarted direct sales and support

Association awards the Fiscal 2006

microbiology.

services in France.

IR Excellence Company Prize toSysmex.

●2007 Oct.

RD-100i

Established the US affiliate●2005 Nov.

SYSMEX CANADA.

A stock split.
SYSMEX FRANCE

61

Sysmex Annual Report 2008

Sysmex Value

guided the Company since its founding, but redefined
to suit the changes of the times.
Looking ahead, to put the Sysmex Way into practice, every Sysmex employee needs to have a company grasp of the concept and value of this corporate
philosophy, and to keep in mind during their daily
work the question of what is demanded of Sysmex
from now on to enjoy the trust of all stakeholders.
Employees should engage in ongoing discussions
about this while steadily applying the principles totheir business. To achieve this, the Company has produced a Concept Book that summarizes why a newcorporate philosophy is necessary, what the Sysmex
Way is, and how it should be implemented. The Concept Book has been distributed to all Sysmex employees. It has been produced in 8 different languages, toenable the approximately 4,000 Sysmex Group employees to share in this philosophy.
Once the Sysmex Way had been defined, President
Ietsugu personally traveled some 60,000 km in 18
separate trips to visit countries around the world andhold briefing meetings on the Sysmex Way for allgroup employees. The Company then held Sysmex
Way workshops in each division attended by personnel managers and representatives from every divisionand every company in Japan and overseas to ensure
the full-scale promotion of the Sysmex Way aroundthe world.

2008 marks the 40th year since the company was
founded. Sysmex has designated this as the year
when the Sysmex Way will be put into practice.
Accordingly, all Group employees will work toward
creating new corporate value by engaging in ongoing
discussions about what is demanded of Sysmex fromnow on to enjoy the trust of all stakeholders.

Aiming for Further Transformation—
Techno Park
Corporate Philosophy

2008, the 40th anniversary of the founding of Sysmex,
marks a turning point in the creation of new testing
technologies, as well as the year when the Sysmex
Way will be put into practice. This turning point issymbolized by the Techno Park, which will provide anenvironment for generating synergies by enabling R&D
consolidation, knowledge sharing and collaboration.
The Techno Park has been designed according to
the concept of "Knowledge creation and succession."
The Park will be used to accelerate research into disease and the body and develop new testing technologies for the promising life sciences field, now that thefocus of healthcare is switching from treatment toprevention. The Company aims to make further advances in its instrument, reagent, and software technologies and to contribute to disease management andimprove patient quality of life (QOL) through the development of novel testing and diagnostic methodologies that combine various technologies.
Having come this far in facing various businesschallenges, Sysmex will transform itself further going
forward to move to the next stage.

62

Management's Discussion and Analysis

Financial Policy
Sysmex regards increasing market capitalization with the objective of maximizing
corporate value as an important management task and pays sufficient attention tostable cash flow generation.
Sysmex believes that to increase market capitalization, it is important to sharethat management objective with all stakeholders, including shareholders, users,
business partners, local communities, and employees, while sustaining mediumSysmex website

to long-term growth. To that end, Sysmex practices transparent management tocommunicate with stakeholders on Sysmex’s current situation and the direction it
should pursue. These measures include enhancing timely disclosure, thewebsite, business reports, financial data, periodic briefings on business results,
visits to institutional investors and briefings for individual investors.
Sustaining medium- to long-term growth requires a level of R&D investment
sufficient to prevail in global competition. We must consistently create newtechnologies and products and stimulate the growth of our critical mass to absorb
the increases in SG&A expenses that come with scale expansion. In recent
years, our sales growth in overseas markets has been striking. Sysmex has

Financial data (English/Japanese)
Posted in "IR Library" on the Sysmex
websitesucceeded in increasing sales by about ¥10 billion each year through the
integration with Sysmex International Reagents and Sysmex CNA. Sysmex isaggressively making forward-looking investments not only in the hematology andother diagnostic segments, the current key business domain, but also in newforms of medical testing in the life science field.
Sysmex pays attention not only to business scale, but also to asset and capitalefficiency and liability and capital soundness. The Company obtains an A (single
A flat) issuer rating from Rating & Investment Information, Inc. (R&I) and reviews
and renews this rating each year. Having a high rating reduces the cost of raisingfunds in the capital markets and helps build trust among our shareholders andwith the world at large. To enhance its rating in the upcoming years, Sysmex will
construct a flexible and more robust financial base, paying attention to

Periodic briefings on business results

expanding business scale while considering the balance between sales andincome, and assets, liabilities and shareholders’ equity. Specifically, theCompany regards asset turnover, return on assets (ROA)* and return on equity(ROE) as important management indicators and aims to maintain a balance
between scale and efficiency by ensuring the optimal combination of sales andRating Information(As of May 31, 2008)
Rating Institution
Rating & Investment
Information Inc. (R&I)

income and of assets, liabilities and shareholders’ equity.
RatingA

Rating Symbols and Definitions:Rating A: The credit quality is high.
It is also accompanied by some excellent
factors.

*ROA = Net Income/Total Assets (Yearly Average) ×100

Results of Operations
During the first half of the fiscal year under review, the Japanese economy
continued its gradual expansion on the back of strong exports and capital
investment. In the second half, however, the economy appeared to slow due tofurther yen appreciation and slumping share prices brought about by the subprime
loan problem in the US, as well as a jump in crude oil and raw materials prices.
The US economy clearly decelerated as personal consumption stagnated and the
housing market froze. The European economy remained steady due to strong

63

Sysmex Annual Report 2008

Financial State

capital investment and increased personal consumption. High levels of overall
economic growth continued in Asia, particularly in China and India.

Net Sales(¥ million)
120,000

110,724In the medical arena, the operating environment in Japan remained problematic
because of healthcare reforms developed to limit healthcare spending. However,

101,041

100,000

Sysmex anticipates new demand from the major shift in the focus of clinicalpractice from treatment to prevention. Japan is now trying to improve preventive

87,88880,000care for lifestyle-related and other conditions, for example through the April 2008
start of specific health checkups and specific health education measures aimed at
the early detection of metabolic syndrome (visceral obesity). Reforms are also

76,93565,97060,00040,000being implemented to reduce rising healthcare spending in the US and advanced
countries in Europe, but healthcare infrastructure is still being built up in China

20,000and other Asian countries in line with the economic growth in this region.
Sysmex addressed the challenges presented by this business climate by

0

04

05

06

07

08

strengthening global alliances. We renewed our overseas sales and support
agreement with Swiss company Roche Diagnostics and revised the countries andproducts covered by this agreement, agreed a sales and support contract withmicrobiology testing major bioMérieux of France on urinalysis analyzers, andcollaborated with IDEXX Laboratories, the US market leader in animal healthtesting. In order to improve our sales and support network overseas, we made ourOperating Income(¥ million)
16,00015,033

local affiliates in Austria, Hungary, the Czech Republic and Slovakia, established alocal affiliate in Canada, and worked to speed up our business development
overseas.

12,71512,00010,724

Sales efforts in Japan focused on proposing IT-driven solutions, in light of the9,104

difficult market conditions. However, delays in launching new immunochemistry
and hemostasis products and lower sales of our influenza test reagents meant

8,000

6,615

net sales by destination for Japan fell 5.0% year on year to ¥35,961 million.
Overseas sales efforts focused on integrated proposals to major reference

4,000

laboratories and group facilities such as integrated health networks (IHNs) in theAmericas and growing sales in Central and South American markets. We
expanded our direct sales and support networks in Europe and boosted our

0

04

05

06

07

08

business in the Middle East, Africa and other emerging markets. In China and theAsia Pacific region, we reorganized our sales and support structures and focusedon solutions-driven sales. As a result of these efforts and yen depreciation, net
sales by destination for overseas grew by 18.4% year on year to ¥74,763 million,

Net Income

accounting for 67.5% of the total (up 5.0 percentage points over the previous(¥ million)term).

10,0009,008 9,132

As a result, consolidated net sales for 2008 increased 9.6% year on year to¥110,724 million, operating income rose 18.2% year on year to ¥15,033 million,

8,000

7,423

and net income rose 1.4% year on year to ¥9,132 million. The shareholders’equity ratio rose from 70.5% the previous term to 72.2% due to an increase in

6,000

5,731

net assets. Return on assets (ROA) fell from 9.5% to 8.7%, asset turnover fell
from 1.07 times to 1.05 times, and return on equity (ROE) fell from 13.4% to12.2%.

4,000

3,157
2,000

0

04

05

06

07

08

64

The fiscal year under review is the first year of the 20th mid-term plan started

Note:For details about progressunder the mid-term plan, referin April 2007 and covering the period from 2008 to 2010. The core strategies of

to pages 12-15.

"Global Niche No. 1," "Focus on Asia" and "Focus on Life Sciences" defined in theplan were implemented as described below.
1. Global Niche No. 1
In order to cement our position as the hematology market leader, we stepped up
our sales efforts in the Americas by recruiting more staff in our sales and marketing
divisions. We successfully pitched integrated proposals to major referencelaboratories and group facilities such as integrated health networks (IHNs)*, thereby
growing sales and increasing the Sysmex presence in this market. In Europe, we
acquired our sales affiliates in Switzerland and 4 Central European countries toexpand the coverage of our direct sales network. We also improved our sales

Focus on Asia

activities in the emerging markets of the Middle East and Africa.
* Integrated health networks (IHNs): Integrated health business entities in the US. An organizationof multiple hospitals formed to provide the healthcare services needed for the local population

Advanced Areas
・Provide solutions
・Encourage shift tohigher models
・Academic publicity

across a large medical district.

2. Focus on Asia
The Chinese economy is growing rapidly and we have achieved steady sales
growth on the back of strong sales of solutions to major facilities that prioritize
test quality. In other Asian regions, we won major contracts in Malaysia andEmerging Areas

Indonesia and achieved substantial sales growth. In contrast in Japan, we

・Increase sales of compact
hematology analyzers andreagents
・Academic publicity

continued to focus on solutions-driven proposals but delays in new productlaunches meant sales fell overall.
3. Focus on Life Sciences
We are working to establish new tests for use in disease management that can
provide optimal healthcare tailored to the individual patient, as part of our efforts
to support improved patient quality of life (QOL) and greater healthy life

Japan
Sales and Operating Income
by Geographical Region

expectancy. In June 2008, Sysmex obtained approval from the Ministry of Health,Labour and Welfare to manufacture and sell in Japan a reagent for a rapid

Net Sales
Operating Income(¥ million)

39,39640,00037,55336,76033,030diagnosis system for detection of breast cancer lymph node metastasis as an in
10,000disseminate this rapid diagnostic system, using both the reagent and the34,530specialized analyzer RD-100i, to test for breast cancer metastasis into the lymph
7,870 7,500

30,000

7,432

5,650

nodes. We will also make use of this system in the metastatic diagnosis of
stomach cancer, colon cancer and other diseases.

6,484
20,000 5,396

vitro diagnostic product. Looking ahead, we will launch as soon as possible and

5,000

Sysmex has engaged in activities based on regional strategies adapted tothe characteristics of each geographical region as described below.
10,000

2,500

Japan
Healthcare system reforms are currently being implemented to reduce rises in
0

04
05
06
07
08
Sales and Operating Income in Japan
include those to Korea, Taiwan and internalGroup affiliates.

65

Sysmex Annual Report 2008

0

medical costs stemming from the rapidly declining birthrate and the aging of the
population. Lower medical fees are driving the streamlining of hospitalmanagement and efforts to increase operating efficiency. Our sales efforts have

Financial Statefocused on proposing total solutions involving the utilization of clinical testing
information systems and support for ISO certification to bolster efficiency inhospital operations. We worked to enhance sales and after-sales support

Sysmex Objectives: Americas
Approach to the Commercial and Reference Lab Market
・Augment integrated hematology system
・Increasing sales of compact hemotology
analyzers to satellite laboratories

structures and, as a comprehensive supplier, engaged in sales activities directed

Commercial and Reference Lab Market

at a broad base of customers to promote sales of a number of products insegments other than hematology.
During the year, we recorded growth in both net sales and operating income on
the back of rising export sales to overseas Group affiliates. Net sales decreased
4.7% year on year to ¥37,553 million, while operating income rose 5.9% year on
year to ¥7,870 million. In Japan, the Company pitched solutions proposals andwon some major contracts at university hospitals and other institutions. Despite
this, sales in Japan were lower than the previous fiscal year because of weaksales of influenza test reagents and delays in launching new products in thesegments of hemostasis and immunochemistry.

Hospital,
Blood Center,
POL Market

Diagnostics
marketin US

Approach to the Hospital,Blood Center, POL Market
・Strengthen sales promotion based on
integated proposals
・Drive promotion of hemostasis/urinalysis
systems
・Enhance the partnership with distributors (POL)**POL: Physicians Office Laboratories

Americas
The US market accounts for about 40% of global diagnostics demand and isdivided into the hospital market (mainly IHNs) and the commercial laboratory
market. Currently, Sysmex holds the number two share of the US market and weare working to raise our ranking.
During the year, a higher proportion of sales was made through direct sales andAmericas
Sales and Operating Income
by Geographical Region
Net Sales
Operating Income(¥ million)

1,500

25,000support services, so cost ratios improved and Sysmex recorded a significant
increase in operating income as well as sales. Net sales increased 8.8% year on

20,845
19,15820,000year to ¥20,845 million and operating income climbed 67.1% year on year to ¥991
million. In North America, the Company's excellent reputation in the market drove

1,000

991
15,62015,000500

593

13,580strong hematology sales to integrated health networks (IHNs) and blood centers.
Sysmex also launched blood imaging analyzers for major commercial laboratories.

10,000 9,153

200

215

0

The Company also achieved solid results from its proposals on improving
efficiency through the use of the Sysmex Network Communication Systems

5,000(SNCS) launched in 2006, with over 1,000 product units already installed. Sysmex
also reported strong results in the hematology segment in Central and SouthAmerica.

-500

-601
0

04

05

06

07

08

-1,000* SNCS: A service that connects customer products with customer support center terminals
through a web interface to provide online support and online quality control.

Sysmex Objectives : Europe

EuropeAdvanced countries are emphasizing cost reductions and greater efficiency,
driven by reforms to reduce the rise in healthcare spending brought about by
demographic aging. In contrast, emerging countries in Eastern Europe, Russia
and Africa are expanding as they establish healthcare infrastructure. In advanced
countries, Sysmex is employing clinical information systems to extend its sales
based on integrated proposals and expand into small and medium-sized hospitals,
as well as moving into smaller markets. In emerging markets, we are reinforcing
our sales and support networks by establishing our own bases and stepping up
sales promotion efforts through distributors.

Advanced Areas

Emerging Areas

Provide solutions(to stimulate
replacement demand)

Multiply numberof instruments(installations)Greater penetration

Increased reagent
sales

During the year, net sales and operating income rose by more than 20% year
on year on the back of expansion of the direct sales and support network,66Europe
Sales and Operating Income
by Geographical Region

substantial growth in emerging markets and the benefits of the high euro. Net
sales increased 24.0% year on year to ¥39,175 million and operating income rose

Net Sales
Operating Income(¥ million)

30.3% year on year to ¥4,621 million. Growth tailed off in Germany and the UK

39,175 6,000

40,000because of healthcare reforms, but Sysmex recorded strong sales in Central
Europe, including the Czech Republic, Austria, Hungary and Slovakia, as well as in
Switzerland where a direct sales and support system was implemented. The

31,5854,500

30,0004,621
25,36921,20020,00017,586

market responded well to the new automated hematology analyzer, the XE-5000.
Hematology sales progressed significantly in emerging markets in the Middle

3,547

3,000

East and Africa, in line with market growth.

3,014

China

2,295
1,500

10,000

The government is leading a move, fueled by economic growth, to establish anddevelop healthcare infrastructure, primarily in rural areas. In urban areas, the1,328

focus has shifted from establishing infrastructure to the provision of advanced
0

04

05

06

07

0

08

rural areas and encouraging replacement purchases of high-performance

China
Sales and Operating Income
by Geographical Region

instruments in urban areas. Nowadays, we are highly rated by customers as theregional market share leader in the hematology segment. By leveraging the

Net Sales
Operating Income(¥ million)

medical care. Sysmex is promoting sales of compact hematology analyzers in

9,000

Sysmex brand, we are expanding into areas outside hematology, such as
1,200

8,127

hemostasis, urinalysis and clinical chemistry.
During the year, we recorded net sales and operating income growth on the

6,848

back of strong sales to medium-sized and large medical facilities, after the easing

6,404
6,000

824
4,823
3,867

800

781

of curbs on medical institution purchasing during the healthcare industry's "cleanup campaign" to eradicate corruption. Net sales increased 18.7% year on year to¥8,127 million and operating income rose 5.5% year on year to ¥824 million.

612

Rising demand for high-quality healthcare in urban areas has driven growth in the
495

3,000

400

362

number of hematology analyzer upgrade projects. Hemostasis, urinalysis andclinical chemistry sales were strong, but Sysmex won fewer competitive tenders
for low-end hematology analyzers, losing out to Chinese manufacturers on the

0

04

05

06

07

08

0

Asia Pacific
Sales and Operating Income
by Geographical Region

Asia Pacific
The Asia-Pacific region can be broadly divided into two markets: an advanced

Net Sales
Operating Income(¥ million)

basis of price.

6,000

segment that includes Australia, New Zealand, and Singapore and an emerging
900

segment including India and Indonesia where the government-led establishment
and development of medical care infrastructure is driving market expansion. India,

5,024

which is attracting worldwide attention along with the other emerging BRICs
members, is regarded as an especially promising market that will develop in

4,054
4,000

600

3,735

accordance with rapid economic growth.
547

During the year, we recorded growth in both net sales and operating income on

2,802

the back of market growth and improved sales and support service structures.

2,334
360

2,000

333

300

Net sales increased 23.9% year on year to ¥5,024 million and operating income
climbed 64.3% year on year to ¥547 million. In the hematology segment, the252

Company won a major project with the Malaysian Government and recorded

146

strong sales of integrated hematology systems in the Philippines and Oceania.
0

0

04
05
06
07
08
Sales in Asia Pacific exclude Korea and Taiwan.

67

Sysmex Annual Report 2008

The Indian affiliate established in 2006 achieved sales growth for compact
hematology analyzers and other instruments in this segment.

Financial StateNet Sales
During the year, sales in Japan fell year on year because of delayed productlaunches, but we grew hematology sales in the US, expanded our direct sales
network in Europe (Switzerland, Central Europe), and grew sales in emerging

Net sales by destination is defined as thesales amount recorded by group companies
to customers in a particular region.
However, net sales by geographical region
refers to the sales amount made by a groupcompany in a particular location.

regions (Middle East, Africa). Consequently, net sales grew ¥9,683 million, or
9.6% year on year, to ¥110,724 million. Sales by destination for Japan fell ¥1,912
million, or 5.0%, to ¥35,961 million, while sales by destination for overseas
jumped ¥11,595 million, or 18.4%, to ¥74,763 million. As a result, the contribution

Net Sales by destination
Japan
Overseas
Americas

EuropeChina
JAPAN
Asia Pacific32.5%

of overseas sales to total sales was 67.5%, up from 62.5% in the previous term.

5.9%

By geographical region, sales in Japan were ¥37,553 million (down ¥1,843
million or 4.7%), sales in the Americas were ¥20,845 million (up ¥1,687 million or¥35,961 million

7.3%8.8%), sales in Europe were ¥39,175 million (up ¥7,590 million or 24.0%), sales in
China were ¥8,127 million (up ¥1,279 million or 18.7%), and sales in the Asia

Net Sales¥110,724

Pacific region were ¥5,024 million (up ¥970 million or 23.9%).

millionWith regard to the effect on sales of exchange rates, the yen appreciated ¥2.74
against the US dollar, from an average of ¥117.02 the previous term to ¥114.28 in
the year ended March 31, 2008, having a ¥487 million negative impact on net

18.9%

35.4%

sales. The yen depreciated ¥11.44 against the euro, from ¥150.09 to ¥161.53,

OVERSEAS

raising net sales ¥2,181 million. The total positive impact of exchange rates on net

67.5%¥74,763 million

sales was ¥2,438 million.
Cost of Sales and SG&A Expenses

Net Sales byGeographical Region

Japan
Americas
EuropeChina
Asia Pacific

The cost of sales increased ¥1,899 million, or 4.4% year on year, to ¥45,397
million in line with the rise in sales made. The cost of sales ratio fell 2.0

4.5%
7.3%

percentage points to 41.0% due to a change in the depreciation method used anda lower cost of goods sold ratio because of the cost of sales improvements.
SG&A expenses grew ¥5,466 million, or 12.2%, to ¥50,294 million, pushed up

33.9%

Net Sales¥110,724

by expenditures to reinforce our sales networks in the Americas and acquire

millionsales affiliates in Europe. SG&A expenses as a ratio of sales rose 1.0 percentage
point, from 44.4% to 45.4%.
35.5%

18.8%

Profit and Loss
Operating income increased ¥2,318 million, or 18.2% year on year, to ¥15,033
million, as the net sales increase offset the rise in SG&A expenses, and the ratioof operating income to sales improved 1.0 percentage point, from 12.6% to13.6%. Foreign exchange contributed ¥1,829 million more to profit than during

SG&A Expenses andSG&A Ratio(¥ million / %)SG&A Expenses
SG&A Ratio

60,000120

the previous term. Net income grew ¥124 million, or 1.4%, to ¥9,132 million.
50,29444,828R&D Expenditure
Sysmex aims to develop new products to extend its portfolio and is investing

40,42540,00080

35,027

aggressively in R&D in life science and other fields offering potential growth. Total

31,414R&D expenditure for the year was ¥9,221 million, up ¥195 million. However,owing to net sales growth this expenditure decreased as a percentage of gross,45.4
20,000

47.6

45.5

46.0

44.4

04

05

06

07

falling from 8.9% in the previous fiscal year to 8.3%.

40

Dividend Policy
To continue growing at a high and steady rate, Sysmex must strike an appropriate

0

08

0

68

Net Income per Sharebalance between investing aggressively and returning profits to shareholders as(¥)

profitability increases. We are working toward this balance. Our basic policy on
300

returning profits to shareholders is to ensure a regular level of stable dividends,
with these distributions backed up by successful business performance. In
225.1

general, we aim for a 20% payout ratio on a consolidated basis.
As a basic policy, Sysmex pays twice-yearly dividends on retained earnings, an

200

179.6 178.9

interim dividend and a year-end dividend. The year-end dividend is decided upon
145.5*

132.9

approval of the annual shareholders' meeting, and the interim dividend upon
approval by the Board Meeting.

100

In accordance with this policy and in light of business performance during theyear under review, we announced dividends for the year of ¥48 per share, which
includes an interim dividend of ¥20 and a dividend of ¥8 commemorating the40th anniversary of the founding of the Company. As a result, the consolidated

0

04
05
06
07
08
*Two-for-one stock split in Nov. 2005

payout ratio for the year under review was 26.8%.

Cash Dividends Applicable to the Year
Dividends Ratio
Figures before 2006 are adjusted for a stock
split conducted on November 18, 2005(¥ / %)Cash Dividends
Applicable to the Year

Dividends Ratio

50

Going forward, Sysmex will continue to effectively invest its internal reserves in
the implementation of strongly competitive product development and global
business strategies, aiming to respond to anticipated changes in the businessenvironment.

48*2 50

Liquidity and Sources of Capital
40

40

40

36*1
30

36

Fund Procurement and Liquidity Management

30

30

26.8
20

20

22.6
17.8

and other means. Consolidated subsidiaries obtain bank loans as necessary tosecure working capital. In October 2003, the Company introduced a cash
management system (CMS) to increase efficiency by unifying financing and

20.0

17.9

The Company raises working capital as necessary through short-term bank loans

capital management at affiliates in Japan.
10

10For long-term capital requirements such as capital investment, the Company
decides the funding method after taking into account the investment recovery
0

04

05

06

07

0

08

*1: Two-for-one stock split in Nov. 2005
*2: Including special dividends of ¥8commemorating the 40th anniversaryof the Company's founding.

period and risk. During the year, the Company financed capital expenditures and
R&D activities primarily from cash provided by operating activities.
Assets, Liabilities and Shareholders’ Equity

Total Assets
ROA

On March 31, 2008, current assets were ¥802 million higher than one year
Total Assets
ROA(¥ million / %)120,000

earlier, as the total of trade notes and trade accounts grew ¥1,284 million and18

million mainly due to construction of the Techno Park, a new R&D complex for

87,447

Sysmex. Goodwill increased ¥1,056 million due to a stock swap with a subsidiary

77,66080,000inventories expanded ¥1,778 million, despite a decrease in cash and cash
equivalents of ¥3,036 million. Property, plant and equipment increased ¥5,302

109,027
101,255

12

71,983in Japan and the purchase of a sales company in Central Europe, and software
increased ¥1,040 million. As a result, total assets came to ¥109,027 million, up

9.0

9.5

¥7,802 million from one year earlier.

8.7

7.7
40,0006

Total of current liabilities and long-term liabilities rose ¥1,081 million from theprevious term, to ¥29,910 million, primarily due to increases of ¥512 million in

4.6

trade notes and accounts payable, ¥807 million in accrued expenses and ¥313
million in deferred tax liabilities.

0

69

04

05

06

Sysmex Annual Report 2008

07

08

0

Net assets grew ¥6,721 million from March 31, 2007, to ¥79,117 million, mainly

Financial Statebecause capital surplus and retained earnings increased ¥1,858 million andShareholders’ Equity
ROE¥6,942 million, respectively. These increases were offset by decreases in foreign(¥ million / %)currency translation adjustments and minority interests of ¥1,064 million and80,000Shareholders’ Equity
ROE

78,753 20¥925 million, respectively.

71,344The equity ratio rose 1.7 percentage points, from 70.5% to 72.2%.

62,64760,00015

56,14951,096

Capital Expenditures and Depreciation

13.4

12.2

12.5

Capital expenditures increased ¥3,698 million, or 81.3%, to ¥8,244 million. The
40,00010

10.7

main factor behind this rise was the construction of the Techno Park, a new R&D
complex for Sysmex. Depreciation decreased ¥35 million, or 0.9%, to ¥3,924
million.

20,000

6.7

5

Cash Flows
During the year, net cash provided by operating activities expanded, and net cash

0

04

05

06

07

0

08

used in investing activities and net cash used in financing activities increased.
Consequently, cash and cash equivalents came to ¥9,679 million on March 31,
2008, down ¥3,036 million from one year earlier, in comparison with the ¥3,299
million increase during the previous term. The main factors causing these cash

Total Equity
Shareholders’ Equity Ratio

flows are as follows: Note that an increase in cash and cash equivalents of ¥8(¥ million / %)million is not included in cash flows because the fiscal year-end dates of some

90,00090

79,117

consolidated subsidiaries have been changed.
71.0

Cash Flows from Operating Activities

Total Equity
Shareholders’ Equity Ratio

72.3

71.6 72,396
72.2
62,64760,000Net cash provided by operating activities was ¥11,635 million, up ¥1,550 million

70.5
60

56,14951,096

year on year. The principal reasons for the change were a ¥156 million increase inincome before income taxes and minority interests, to ¥13,924 million, a ¥1,930
million decline in notes and accounts receivable, to ¥2,462 million, a ¥1,620

30

30,000

million increase in inventories, to ¥1,917 million, and a ¥778 million increase innotes and accounts payable, to ¥1,469 million.
004

Cash Flows from Investing Activities

05

06

07

0

08

Cash used in investing activities was ¥12,883 million, up ¥6,253 million from thepreceding term. The chief reasons for this change were a ¥3,637 million increasein purchases of property, plant and equipment, to ¥8,265 million, a ¥973 million
increase in purchases of software and other assets, to ¥2,460 million, and a ¥782
million increase in the net purchase of shares in subsidiaries, to ¥1,315 million.
Cash Flows from Financing Activities

Capital Expenditure
Depreciation(¥ million)

Capital Expenditure
Depreciation

10,00010,000

8,244
8,000

8,000

Cash used in financing activities was ¥1,316 million, an increase of ¥858 million.
Principal factors were a ¥491 million net increase in short-term bank loans,compared with a ¥118 million net decrease in the previous year, ¥299 million

6,000

4,546

received from the issuance of shares in line with the exercise of warrants, down
¥795 million, and ¥2,032 million in cash dividends paid, up ¥428 million.

6,000

5,638

4,000

3,203
2,451

4,000

3,296
2,729

3,592 3,959

3,924

2,000

0

2,000

04

05

06

07

08

0

Note: For details about "Operating Risks" refer to page 25.
70

Consolidated Financial Statements
Consolidated Balance Sheets
Sysmex Corporation and Subsidiaries

Thousands of
U.S. Dollars (Note 1)

Millions of Yen
March 31, 2008 and 2007

2008

2007

2008

¥ 9,679¥ 12,715$ 96,790

87

121

870

ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments (Notes 3 and 12)
Receivables:
Trade notes

3,102

3,511

31,020Trade accounts

29,86428,171

298,640

229

Associated company
Other

194

231

1,940

Allowance for doubtful accounts

(500)

(508)

(5,000)Inventories (Note 4)

18,341

16,563

183,410Deferred tax assets (Note 9)

4,493

3,668

44,930Prepaid expenses and other current assets

1,663

1,420

16,63066,923

66,121

669,230

Total current assets
PROPERTY, PLANT AND EQUIPMENT:
Land

7,909

7,871

79,090

Buildings and structures

18,67017,146

186,700

Machinery and equipment

7,646

6,271

76,460Furniture and fixtures

15,958

14,976

159,580

Construction in progress

4,604

1,669

46,04054,78747,933547,870(25,705)(24,153)(257,050)

29,082

23,780290,820

3,078

2,997

30,780Total
Accumulated depreciation
Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)

7

Investment in associated company
Goodwill

1,532

476

15,320Software

4,092

3,052

40,920

Deposits

1,106

1,166

11,060Investment in real estate

2,125

2,136

21,250

256

115

2,560

Deferred tax assets (Note 9)
Other assets
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

71

Sysmex Annual Report 2008

833

1,375

8,330

13,022

11,324130,220¥ 109,027¥ 101,225$ 1,090,270

Financial State

Thousands of
U.S. Dollars (Note 1)

Millions of Yen
March 31, 2008 and 2007

2007

2008

2008

LIABILITIES AND EQUITYCURRENT LIABILITIES:
¥ 490

¥ 12

$ 4,900

56

68

560

Trade notes

1,302

1,768

13,020Trade accounts

9,942

8,964

99,420Construction and other

Short-term bank loans (Note 5)
Current portion of long-term debt (Note 5)
Payables:

2,888

3,023

28,880

Income taxes payable

2,062

3,244

20,620Accrued expenses

6,169

5,362

61,690

3

3

30

3,329

3,190

33,29026,241

25,634262,410Deferred tax liabilities (Note 9)
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Note 5)

14

82

140

Liability for retirement benefits (Note 6)

602

408

6,020

Guarantee deposits received

1,021

1,008

10,210

Deferred tax liabilities (Note 9)

1,701

1,388

17,010

331

309

3,310

3,669

3,195

36,690

Other long-term liabilities
Total long-term liabilities
CONTINGENT LIABILITIES (Note 12)
EQUITY (Notes 7 and 14):
Common stock, 149,672,000 shares authorized, 51,203,108
shares issued in 2008 and 50,654,596 shares issued in 2007

8,651

8,501

86,510Capital surplus

13,58911,731

135,890

48,795557,370
3,510

Stock acquisition rights
Retained earnings

2,360

236
55,737

Unrealized gain on available-for-sale securities

351

806

Foreign currency translation adjustments

611

1,675

6,110

Treasury stock - at cost: 95,891 shares in 2008 and 91,217 shares in 2007

(185)

(164)

(1,850)78,99071,344789,900

Total
Minority interests

127

1,052

1,270

Total equity

79,11772,396

791,170¥ 109,027¥ 101,225$ 1,090,270

TOTAL
See notes to consolidated financial statements.

72

Consolidated Statements of Income
Sysmex Corporation and Subsidiaries

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2008

2007

2008

¥ 110,724¥ 101,041$ 1,107,240

45,39743,498453,970

65,32757,543653,270

50,29444,828502,940

15,033

12,715150,330

Interest and dividend income

226

149

2,260

Interest expense

(34)

(27)

(340)

(1,049)374(10,490)

(252)

557

(2,520)Years Ended March 31, 2008 and 2007

NET SALESCOST OF SALESGROSS PROFITSELLING, GENERAL AND ADMINISTRATIVE EXPENSES
OPERATING INCOME
OTHER INCOME (EXPENSES):

Foreign exchange gain (loss) - net
Other - net
Other income (expenses) - net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS(1,109)1,053(11,090)

13,924

13,768139,240

5,246

5,139

52,460

INCOME TAXES (Note 9):
Current
Deferred
Total income taxes

(429)

(424)

(4,290)

4,817

4,715

48,170

25

(45)

250

NET INCOME¥ 9,132¥ 9,008$ 91,320

Years Ended March 31, 2008 and 2007

2008

2007

Basic net income¥ 178.94¥ 179.63$ 1.79Diluted net income

178.33177.97

1.78

Cash dividends applicable to the year

48.00

36.00

0.48

MINORITY INTERESTS IN NET INCOME

Yen

U.S. Dollars

2008

PER SHARE OF COMMON STOCK (Notes 2.u and 13):

See notes to consolidated financial statements.

73

Sysmex Annual Report 2008

Financial State

Consolidated Statements of Changes in Equity
Sysmex Corporation and Subsidiaries

Years Ended March 31, 2008 and 2007

Outstanding
Number of Sharesof Common Stock

BALANCE, APRIL 1, 2006

49,917,036

CommonStockMillions of Yen
Unrealized
Foreign
Gain onStock
Currency
Capital Acquisition Retained Available-for-Sale Translation Treasury
Rights
Earnings
Adjustments
Stock
SurplusSecurities¥41,550¥7,955 ¥11,185¥1,235¥873

Minority
Interests Total Equity

Total¥62,647¥(151) ¥62,647

Reclassified balance as of¥861

March 31, 2006 (Note 2.m)
Net income

861

9,008

9,008

9,008

(1,603)(1,603)(1,603)

Cash dividends,¥32.00 per share
Repurchase of treasury stock(2,685)

Disposal of treasury stock

28

0

649,000

546

546

50,563,379

8,501

11,731

Exercise of warrants
Net change in the year
BALANCE, MARCH 31, 2007

(160)

(160)

(13)

(13)

(13)

0

0

0

1,092

1,092

(160)

Bonuses to directors

48,795

Net income

(429)

802

806

1,675

(164)

373

191

564

71,344

1,052

72,396

9,132

9,132

(2,032)(2,032)

(21)

(21)

1

1

1

1,707

1,707

1,707

150

300

300

9,132

Cash dividends,¥40.00 per share(2,032)

Repurchase of treasury stock(4,849)

Disposal of treasury stock

175

(21)

Issuance of new shares forstock-for-stock transaction(Note 2.b)

370,912

Exercise of warrants

177,600

150

Decrease in retained
earnings due to fiscal
year-end change forsubsidiary(158)

Net change in the year
BALANCE, MARCH 31, 2008

51,107,217¥8,651 ¥13,589

(158)

(158)

¥236

(455)

(1,064)¥236 ¥55,737

¥351

¥611

¥(185)(2,208)(1,283)(925)¥78,990¥127 ¥79,117

Total

Minority
Interests Total Equity

Thousands of U.S. Dollars (Note 1)
Unrealized
Foreign
Gain onStock
Currency
Capital Acquisition Retained Available-for-Sale Translation Treasury
Rights
Earnings
Adjustments
Stock
SurplusSecurities

Year Ended March 31,2008

CommonStock

BALANCE, MARCH 31, 2007

$85,010 $117,310$487,950

Net income$8,060$16,750 $ (1,640) $713,440 $10,520 $723,960
91,32091,320(20,320)(20,320)

(210)

(210)

10

10

10

17,07017,07017,070

1,500

3,000

3,000

(1,580)(1,580)91,320Cash dividends,$0.40 per share(20,320)

Repurchase of treasury stock(210)

Disposal of treasury stock
Issuance of new shares forstock-for-stock transaction(Note 2.b)Exercise of warrants

1,500

Decrease in retained
earnings due to fiscal
year-end change forsubsidiary
Net change in the year
BALANCE, MARCH 31, 2008

(1,580)$2,360$86,510 $135,890 $2,360 $557,370(12,830) (9,250) (22,080)(4,550)(10,640)$3,510$6,110 $ (1,850) $789,900 $1,270 $791,170

See notes to consolidated financial statements.

74

Consolidated Statements of Cash Flows
Sysmex Corporation and Subsidiaries

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2008

2007

2008

¥ 13,924¥ 13,768$ 139,240

Income taxes - paid

(6,415)(4,660)(64,150)

Depreciation and amortization

4,438

4,016

44,380

Write-down of marketable and investment securities

146

39

1,460

Loss on disposal of property, plant and equipment

174

142

1,740

Increase in notes and accounts receivable(2,462)(4,392)(24,620)

Increase in inventories(1,917)(297)(19,170)

Increase in notes and accounts payable

1,469

691

14,690Years Ended March 31, 2008 and 2007

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:

Changes in assets and liabilities:

612

(510)

6,120

Other - net

1,666

1,288

16,660Net cash provided by operating activities

11,635

10,085

116,350

Purchases of property, plant and equipment(8,265)(4,628)(82,650)

Purchases of software and other assets(2,460)(1,487)(24,600)(Increase) decrease in liability for retirement benefits, net of provision

INVESTING ACTIVITIES:

Purchases of investment securities(994)

Acquisitions, net of cash acquired(1,315)

(533)

151

18

1,510

(12,883)(6,630)(128,830)

Increase (decrease) in short-term bank loans - net

491

(118)

4,910

Repayments of long-term debt

(66)

(65)

(660)

Exercise of warrants

299

1,094

2,990

(2,032)(1,604)(20,320)

(8)

235

(80)

(1,316)(458)(13,160)

Other - net
Net cash used in investing activities(9,940)(13,150)FINANCING ACTIVITIES:Dividends paid
Other - net
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON

(480)

302

(4,800)NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS(3,044)

3,299(30,440)

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

12,715

9,416

127,150

CASH AND CASH EQUIVALENTS

DECREASE IN CASH AND CASH EQUIVALENTS DUE TO
8¥ 9,679¥ 12,715$ 96,790

¥ 19

¥ 28

$ 190

ADDITIONAL CASH FLOW INFORMATION - Interest paid
See notes to consolidated financial statements.

75

80

FISCAL YEAR-END CHANGE FOR SUBSIDIARYCASH AND CASH EQUIVALENTS, END OF YEAR

Sysmex Annual Report 2008

Financial State

Notes to Consolidated Financial Statements
Sysmex Corporation and Subsidiaries

1. BASIS OF PRESENTING CONSOLIDATEDFINANCIAL STATEMENTS
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in theJapanese Financial Instruments and Exchange Law (formerly, theJapanese Securities and Exchange Law) and its related
accounting regulations and in conformity with accounting
principles generally accepted in Japan ("Japanese GAAP"),
which are different in certain respects as to application anddisclosure requirements of International Financial ReportingStandards.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside
Japan. In addition, certain reclassifications have been made in
the 2007 financial statements to conform to the classifications
used in 2008.
The consolidated financial statements are stated in Japaneseyen, the currency of the country in which Sysmex Corporation(the "Company") is incorporated and operates. The translationsof Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and havebeen made at the rate of ¥100 to $1, the approximate rate ofexchange at March 31, 2008. Such translations should not be
construed as representations that the Japanese yen amounts
could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES
a. Consolidation - The consolidated financial statements as ofMarch 31, 2008 include the accounts of the Company and 37(32 in 2007) subsidiaries (together, the "Group").
Under the control or influence concept, those companies inwhich the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise
significant influence are accounted for by the equity method.
Investment in an associated company is accounted for by theequity method.
Goodwill represents the excess of the cost of an acquisition
over the fair value of the net assets of the acquired subsidiary
and associated company at the date of acquisition, and is
carried at cost less accumulated amortization, which is
calculated by the straight-line method over 5 years.
All significant intercompany balances and transactions havebeen eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Group iseliminated.
b. Business Combination - In October 2003, the BusinessAccounting Council (the "BAC") issued a Statement of Opinion,"Accounting for Business Combinations", and on December 27,
2005, the Accounting Standards Board of Japan (the "ASBJ")
issued ASBJ Statement No. 7, "Accounting Standard for Business
Divestitures" and ASBJ Guidance No. 10, "Guidance for
Accounting Standard for Business Combinations and Business
Divestitures." These new accounting pronouncements wereeffective for fiscal years beginning on or after April 1, 2006.
The accounting standard for business combinations
allows companies to apply the pooling of interests methodof accounting only when certain specific criteria are met
such that the business combination is essentially regarded

as a uniting-of-interests.
For business combinations that do not meet the uniting-ofinterests criteria, the business combination is considered to be
an acquisition and the purchase method of accounting isrequired. This standard also prescribes the accounting for
combinations of entities under common control and for joint
ventures.
The Company has acquired the entire shares of CNA Co., Ltd.,(hereinafter CNA) on April 1, 2007 and accounted for theacquisition by the purchase method of accounting. The
Company has newly issued 370,912 common shares to theshareholders of CNA except for the Company. As a result,
Capital surplus of the Company was increased by ¥1,707 million($17,070 thousand) by the new issue of shares. The related
goodwill is systematically amortized over 5 years.
c. Cash Equivalents - Cash equivalents are short-term
investments that are readily convertible into cash and that are
exposed to insignificant risk of changes in value. Cashequivalents include time deposits, commercial paper and mutual
funds investing in bonds, all of which mature or become due
within three months of the date of acquisition.
d. Marketable and Investment Securities - Marketable andinvestment securities are classified and accounted for,depending on management's intent, as follows: i) trading
securities, which are held for the purpose of earning capitalgains in the near term are reported at fair value, and the related
unrealized gains and losses are included in earnings, ii) held-tomaturity debt securities, which are expected to be held tomaturity with the positive intent and ability to hold to maturity arereported at amortized cost and iii) available-for-sale securities,
which are not classified as either of the aforementioned
securities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate
component of equity.
Non-marketable available-for-sale securities are stated at cost
determined by the moving-average method.
For other than temporary declines in fair value, investment
securities are reduced to net realizable value by a charge toincome.
e. Allowance for Doubtful Accounts - The allowance for
doubtful accounts is stated in amounts considered to beappropriate based on the Group's past credit loss experienceand an evaluation of potential losses in the receivables
outstanding.
f. Inventories - Inventories are stated at cost determined by theaverage cost method for the Company and its domestic
subsidiaries, and at the lower of cost, determined by the first-in,
first-out method, or market for foreign subsidiaries.
g. Property, Plant and Equipment - Property, plant andequipment are stated at cost. Depreciation of property, plant andequipment is computed by the straight-line method, at rates
based on the estimated useful lives of the assets. Effective April 1,
2007, the Company and its domestic subsidiaries adopted thestraight-line method of depreciation for the assets which had
previously been depreciated by the declining-balance method.
This change was made for more appropriate periodical allocationof cost and unification of depreciation method among the Group.
The effect of this treatment was to decrease depreciation by¥660
million ($6,600 thousand) and to increase income before income
taxes and minority interests by ¥622 million ($6,220 thousand) for
the year ended March 31, 2008.

76

Property, plant and equipment of the Company and its domestic
subsidiaries had been depreciated up to 95% of acquisition costwith 5% of residual value carried until previous fiscal years.
However, such 5% portion of property, plant and equipment issystematically amortized over 5 years starting in the following year
in which the carrying value of property, plant and equipment
reaches 5% of the acquisition cost in accordance with the revised
Japanese corporate tax law. The effect of this treatment was toincrease depreciation by ¥82 million ($820 thousand) and to
decrease income before income taxes and minority interests by¥76 million ($760 thousand) for the year ended March 31, 2008.
The range of useful lives is from 31 to 50 years for buildings andstructures, and from 7 to 12 years for machinery and equipment.
h. Long-lived Assets - The Group reviews its long-lived assets
for impairment whenever events or changes in circumstanceindicate the carrying amount of an asset or asset group may not
be recoverable. An impairment loss would be recognized if thecarrying amount of an asset or asset group exceeds the sum of
the undiscounted future cash flows expected to result from thecontinued use and eventual disposition of the asset or asset
group. The impairment loss would be measured as the amountby which the carrying amount of the asset exceeds its
recoverable amount, which is the higher of the discounted cash
flows from the continued use and eventual disposition of theasset or the net selling price at disposition.
i. Software - Software to be sold is amortized at the greater of
either the proportional amount to be amortized in proportion of
the actual sales of the software to be made of the software during
the current year to the estimated total sales over the estimatedsalable years or the amount to be amortized using a straight-line
method over the estimated salable years. The estimated salable
years are principally three years.
Software for internal use is amortized by the straight-line
method over the estimated usable years. The estimated usable
years are principally five years.
j. Investment in Real Estate - Investment in real estate mainly
consists of a beneficial interest in a trust. Depreciation of
investment in real estate is computed according to property,
plant and equipment. Accumulated depreciation of theinvestment in real estate was ¥192 million ($1,920 thousand) and¥159 million as of March 31, 2008 and 2007, respectively.
k. Liability for Retirement Benefits - The Company has a noncontributory funded pension plan covering substantially all of its
employees.
The liability for employees' retirement benefits is accounted forbased on projected benefit obligations and plan assets at thebalance sheet date.
Unfunded retirement benefits for the Company and certain
subsidiaries' directors and corporate auditors are provided at theestimated amount which would be required if such individuals
retired at the balance sheet date. However, the Company
abolished its unfunded retirement benefit plan in June 24, 2005.
No additional provisions have been recorded for retirement
benefits to be paid to the Company's directors and corporate
auditors since then. The liability for director and corporate
auditor retirement benefits is the amount provided in proportion
to the term that present directors and corporate auditors had
been in place before June 24, 2005.
l. Stock Option - The ASBJ Statement No. 8, "AccountingStandard for Stock Options" and related guidance are applicableto stock options granted on and after May 1, 2006.
This standard requires companies to recognize compensation

77

Sysmex Annual Report 2008

expense for employee stock options based on the fair value atthe date of grant and over the vesting period as consideration forreceiving goods or services. The standard also requires
companies to account for stock options granted to nonemployees based on the fair value of either the stock option or
the goods or services received. In the balance sheet, the stock
option is presented as a stock acquisition right as a separate
component of equity until exercised.
The Company has applied the accounting standard for stock
options to those granted on and after May 1, 2006.
m. Presentation of Equity - On December 9, 2005, the ASBJ
published a new accounting standard for presentation of equity.
Under this accounting standard, certain items which werepreviously presented as liabilities or assets, as the case may be,
are now presented as components of equity. Such items include
stock acquisition rights, minority interests, and any deferred gainor loss on derivatives accounted for under hedge accounting.
This standard was effective for fiscal years ending on or after
May 1, 2006. The balances of such items as of March 31, 2006
were reclassified as separate components of equity as of April 1,
2006 in the consolidated statement of changes in equity.
n. Research and Development - Research and development
costs are charged to income as incurred. Such costs were
¥9,221 million ($92,210 thousand) and ¥9,026 million for theyears ended March 31, 2008 and 2007, respectively.
o. Leases - Under Japanese accounting standards for leases,
finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, while other financeleases are permitted to be accounted for as operating leasetransactions if certain "as if capitalized" information is disclosed
in the notes to the lessee's financial statements. All other leases
are accounted for as operating leases.
Finance leases of certain overseas subsidiaries are accounted
for as capital leases.
p. Bonuses to Directors - Bonuses to directors are accrued at
the year end to which such bonuses are attributable.
q. Income Taxes - The provision for income taxes is computed
based on the pretax income included in the consolidated
statements of income. The asset and liability approach is used
to recognize deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted tax
laws to the temporary differences.
Certain overseas subsidiaries provide for deferred income
taxes relating to temporary differences in accordance withaccounting principles generally accepted in each country.
r. Foreign Currency Transactions - All short-term and long-termmonetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange
rates at the balance sheet date. The foreign exchange gains andlosses from translation are recognized in the consolidated
statements of income to the extent that they are not hedged byforward exchange contracts.
s. Foreign Currency Financial Statements - The balance sheet
accounts of the consolidated foreign subsidiaries are translated into
Japanese yen at the current exchange rate as of the balance sheet
date except for equity, which is translated at the historical rate.
Differences arising from such translation were shown as "Foreign
currency translation adjustments" in a separate component of equity.
Revenue and expense accounts of consolidated foreignsubsidiaries are translated into yen at the average exchange rate.

Financial Statet. Derivatives and Hedging Activities - The Group uses foreignexchange forward contracts and interest rate swaps to manage
their exposure to fluctuations in foreign exchange and interest
rates. The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments and foreign currency transactions
are classified and accounted for as follows: a) all derivatives arerecognized as either assets or liabilities and measured at fair value,and gains or losses on derivative transactions are recognized in thestatements of income and b) for derivatives used for hedging
purposes, if derivatives qualify for hedge accounting because ofhigh correlation and effectiveness between the hedging instruments
and the hedged items, gains or losses on derivatives are deferred
until maturity of the hedged transactions.
The interest rate swaps that qualify for hedge accounting andmeet specific matching criteria are not remeasured at market value
but the differential paid or received under the swap agreements
are recognized and included in interest expense or income.
u. Per Share Information - Basic net income per share iscomputed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding forthe period, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that
could occur if securities were exercised or converted into
common stock. Diluted net income per share of common stock
assumes full conversion of the outstanding convertible notes andbonds at the beginning of the year (or at the time of issuance)with an applicable adjustment for related interest expense, net oftax, and full exercise of outstanding warrants.
Cash dividends per share presented in the accompanying
consolidated statements of income are dividends applicable to therespective years including dividends to be paid after the end of the year.
v. New Accounting Pronouncements
Measurement of Inventories - Under Japanese GAAP,
inventories are currently measured either by the cost method, orat the lower of cost or market. On July 5, 2006, the ASBJ issued
ASBJ Statement No. 9, "Accounting Standard for Measurement of
Inventories," which is effective for fiscal years beginning on orafter April 1, 2008 with early adoption permitted. This standard
requires that inventories held for sale in the ordinary course ofbusiness be measured at the lower of cost or net selling value,
which is defined as the selling price less additional estimatedmanufacturing costs and estimated direct selling expenses. The
replacement cost may be used in place of the net selling value, if
appropriate. The standard also requires that inventories held for
trading purposes be measured at the market price.
Lease Accounting - On March 30, 2007, the ASBJ issued ASBJ
Statement No. 13, "Accounting Standard for Lease Transactions,"
which revised the existing accounting standard for leasetransactions issued on June 17, 1993. The revised accounting
standard for lease transactions is effective for fiscal years
beginning on or after April 1, 2008 with early adoption permitted
for fiscal years beginning on or after April 1, 2007.
(Lessee)
Under the existing accounting standard, finance leases that deemto transfer ownership of the leased property to the lessee are to becapitalized, however, other finance leases are permitted to beaccounted for as operating lease transactions if certain "as if
capitalized" information is disclosed in the note to the lessee's
financial statements. The revised accounting standard requires that
all finance lease transactions shall be capitalized recognizing leaseassets and lease obligations in the balance sheet.

(Lessor)Under the existing accounting standard, finance leases thatdeem to transfer ownership of the leased property to the lessee
are to be capitalized, however, other finance leases are
permitted to be accounted for as operating lease transactions if
certain "as if capitalized" information is disclosed in the note to
the lessor's financial statements. The revised accounting
standard requires that all finance leases that deem to transfer
ownership of the leased property to the lessee shall berecognized as lease receivables, and all finance leases thatdeem not to transfer ownership of the leased property to thelessee shall be recognized as investments in lease.
Unification of Accounting Policies Applied to Foreign
Subsidiaries for the Consolidated Financial Statements Under Japanese GAAP, a company currently can use the financial
statements of its foreign subsidiaries which have been prepared inaccordance with generally accepted accounting principles in theirrespective jurisdictions for its consolidation process unless they areclearly unreasonable. On May 17, 2006, the ASBJ issued ASBJ
Practical Issues Task Force (PITF) No. 18, "Practical Solution on
Unification of Accounting Policies Applied to Foreign Subsidiaries
for the Consolidated Financial Statements". The new standard
prescribes: 1) the accounting policies and procedures applied to aparent company and its subsidiaries for similar transactions andevents under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements, 2)financial statements prepared by foreign subsidiaries in accordancewith either International Financial Reporting Standards or thegenerally accepted accounting principles in the United States
tentatively may be used for the consolidation process, 3) however,the following items should be adjusted in the consolidation process
so that net income is accounted for in accordance with Japanese
GAAP unless they are not material;(1) Amortization of goodwill(2) Actuarial gains and losses of defined benefit plans
recognized outside profit or loss
(3) Capitalization of intangible assets arising from development phases(4) Fair value measurement of investment properties, and therevaluation model for property, plant and equipment, andintangible assets(5) Retrospective application when accounting policies are changed(6) Accounting for net income attributable to a minority interest
The new task force is effective for fiscal years beginning on orafter April 1, 2008 with early adoption permitted.

3. SHORT-TERM INVESTMENTS AND INVESTMENT
SECURITIESShort-term investments and investment securities as of March 31,
2008 and 2007 consisted of the following:
Millions of Yen

Current:
Time deposits other thancash equivalents
Investment trust
Total
Non-current:
Marketable equity securities
Investment trust and other
Unquoted equity securities
Total

2008

2007

¥

¥

¥

15
72
87

¥2,4394635¥3,078

Thousands of
U.S. Dollars

79 $42¥ 121 $

2008

150
720
870

¥2,341 $24,390
6
40
650
6,350
¥2,997 $30,780

78The carrying amounts and aggregate fair values of investment
securities at March 31, 2008 and 2007 were as follows:
Millions of Yen

2008
Unrealized Unrealized
Gains
Losses

Cost

Available-for-sale:
Equity securities¥1,837
Investment trust and other4
Total¥1,841¥1,011

Fair
Value¥(409)¥1,011¥2,4394¥2,443¥(409)

Millions of Yen

2007
Unrealized Unrealized
Gains
Losses

Cost

Available-for-sale:
Equity securities
Investment trust and other
Total

¥974
6
¥980

¥1,419¥(52)¥1,419

¥(52)

Fair
Value

¥2,341
6¥2,3472008
Unrealized Unrealized
Gains
Losses

Cost

Fair
Value

$(4,090) $24,390
40$(4,090) $24,430

Available-for-sale securities whose fair value is not readily
determinable as of March 31, 2008 and 2007 were as follows:
Carrying AmountMillions of Yen

Available-for-sale — Equity securities

2008
¥635

2007
¥650

Thousands of
U.S. Dollars

2008$6,350Commercial paper was classified as cash equivalents.
Proceeds from sales of investment securities for the year
ended March 31, 2007 were ¥304 million. Gross realized gains,computed on the moving average cost basis, for the year ended
March 31, 2007 were ¥117 million.

4. INVENTORIESInventories at March 31, 2008 and 2007 consisted of the following:

Finished products
MerchandiseWork in process
Raw materials
Supplies
Total

Short-term bank loans were principally represented by bankoverdrafts. Weighted-average per annum interest rates of shortterm bank loans at March 31, 2008 and 2007 were 5.0% and5.0%, respectively.
Long-term debt at March 31, 2008 and 2007 consisted of the following:
Millions of Yen

Loans from banks, due through 2009, withinterest ranging from 2.2% to 9.7% for2008 (from 2.2% to 9.7% for 2007):
Collateralized
Unsecured
Total
Less current portionLong-term debt, less current portion

2008

2007

2008

¥70
70
(56)
¥14

¥3
147
150
(68)
¥82

$700
700
(560)
$140

Millions of Yen

Thousands of
U.S. Dollars

2008
2007
¥ 4,971 ¥ 4,259
8,033
7,207
1,489
1,325
3,379
3,290
469
482
¥18,341 ¥16,563

2008$ 49,710
80,33014,89033,7904,690$183,410

Year Ending March 31

Millions of Yen

2009
2010
Total

¥56
14
¥70

Sysmex Annual Report 2008

Thousands of
U.S. Dollars

$560
140
$700

6. RETIREMENT BENEFITSThe Company and its certain subsidiaries have retirement benefit
plans for employees. Under most circumstances, employees
terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination,
years of service and certain other factors. Employees areentitled to larger payments if the termination is involuntary, as
opposed to by retirement at the mandatory retirement age or bydeath.
Certain subsidiaries have unfunded lump-sum payment plans
and certain overseas subsidiaries have defined contribution
pension plans.
The liability for employees' retirement benefits at March 31,
2008 and 2007 consisted of the following:

Millions of Yen

Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial gain (loss)
Prepaid benefit cost
Net liability

2008¥8,192(6,993)
(844)
¥355

2007
¥7,791(8,916)
802
466
¥143

Thousands of
U.S. Dollars

2008$81,920(69,930)(8,440)$3,550The components of net periodic retirement benefit costs for theyears ended March 31, 2008 and 2007 are as follows:

Millions of Yen

2008
Service cost
¥1,005Interest cost
151
Expected return on plan assets(265)
Recognized actuarial (gain) loss
(197)
Net periodic retirement benefit costs ¥694

79

Thousands of
U.S. Dollars

At March 31, 2008, annual maturities of long-term debt were as
follows:

Thousands of U.S. Dollars

Available-for-sale:
Equity securities$18,370 $10,110
Investment trust and other40$18,410 $10,110
Total

5. SHORT-TERM BANK LOANS AND LONG-TERM DEBT

2007
¥959
142
(231)
29
¥899

Thousands of
U.S. Dollars

2008$10,050
1,510(2,650)(1,970)$6,940Financial State

Assumptions used for the years ended March 31, 2008 and2007 are set forth as follows:
Discount rate
Expected rate of return on plan assets
Recognition period of actuarial gain/loss

2008
2.0%
3.0%
5 years

2007
2.0%
3.0%
5 years

In addition, the Company and certain subsidiaries participate
in contributory multi-employer pension plans covering
substantially all of their employees. Under these plans, theamount of pension assets and benefit obligation wereapproximately ¥7,607 million ($76,070 thousand) and ¥7,691
million ($76,910 thousand) at March 31, 2007, the most recent
valuation date.
The Company also has recorded a liability for an unfunded
retirement benefit plan covering all of its directors and corporate
auditors in the amount of ¥247 million ($2,470 thousands), and¥265 million as of March 31, 2008 and 2007, respectively.
Payment of retirement benefits to directors and corporate
auditors is subject to approval at the shareholders' meeting.

7. EQUITY
Since May 1, 2006, Japanese companies have been subject to
the Corporate Law of Japan (the "Corporate Law"), whichreformed and replaced the Commercial Code of Japan. The
significant provisions in the Corporate Law that affect financial
and accounting matters are summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any
time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders meeting. For companies thatmeet certain criteria such as; (1) having the Board of Directors,(2) having independent auditors, (3) having the Board of
Corporate Auditors, and (4) the term of service of the directors isprescribed as one year rather than two years of normal term by
its articles of incorporation, the Board of Directors may declare
dividends (except for dividends in kind) at any time during the
fiscal year if the company has prescribed so in its articles ofincorporation. However, the Company cannot do so because it
does not meet all the above criteria.

The Corporate Law permits companies to distribute dividendsin-kind (non-cash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year
upon resolution by the Board of Directors if the articles ofincorporation of the company so stipulate. The Corporate Law
provides certain limitations on the amounts available fordividends or the purchase of treasury stock. The limitation isdefined as the amount available for distribution to theshareholders, but the amount of net assets after dividends must
be maintained at no less than ¥3 million.
(b) Increases/decreases and transfer of common stock,reserve and surplus
The Corporate Law requires that an amount equal to 10% of
dividends must be appropriated as a legal reserve (a componentof retained earnings) or as additional paid-in capital (acomponent of capital surplus) depending on the equity accountcharged upon the payment of such dividends until the total of
aggregate amount of legal reserve and additional paid-in capitalequals 25% of the common stock. Under the Corporate Law, thetotal amount of additional paid-in capital and legal reserve may
be reversed without limitation. The Corporate Law also provides
that common stock, legal reserve, additional paid-in capital,
other capital surplus and retained earnings can be transferredamong the accounts under certain conditions upon resolution of
the shareholders.

(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchasetreasury stock and dispose of such treasury stock by resolutionof the Board of Directors. The amount of treasury stock
purchased cannot exceed the amount available for distribution to
the shareholders which is determined by specific formula.
Under the Corporate Law, stock acquisition rights, which werepreviously presented as a liability, are now presented as aseparate component of equity.
The Corporate Law also provides that companies canpurchase both treasury stock acquisition rights and treasury
stock. Such treasury stock acquisition rights are presented as aseparate component of equity or deducted directly from stockacquisition rights.

8. STOCK OPTION
The stock options outstanding as of March 31, 2008 are as follows:
Stock Option

Persons
Granted2004 Stock Option

11 directors
170 employees
9 directors ofsubsidiaries
3 employees ofsubsidiaries

2007 Stock Option

9 directors
152 employees
18 directors ofsubsidiaries
42 employees ofsubsidiaries

Number of
Options Granted

Date of
Grant

Exercise
Price

Exercise Period(Shares)
1,043,400

2004.7.01¥1,685($16.85)

From July 1, 2006
to June 30, 2010

733,200

2007.7.30¥4,650($46.50)

From July 30, 2009
to July 29, 2015

80

The stock option activity is as follows:
For the year ended March 31, 2007

Non-vested
March 31, 2006 - Outstanding
GrantedCanceled
VestedMarch 31, 2007 - Outstanding
VestedMarch 31, 2006 - Outstanding
VestedExercised
Canceled
March 31, 2007 - Outstanding

For the year ended March 31, 2008

Non-vested
March 31, 2007 - Outstanding
GrantedCanceled
VestedMarch 31, 2008 - Outstanding
VestedMarch 31, 2007 - Outstanding
VestedExercised
Canceled
March 31, 2008 - Outstanding
Exercise price
Average stock price at exercise
Fair value price at grant date2004 Stock
Option2007 Stock
Option(Shares)(Shares)

The tax effects of significant temporary differences and loss
carryforwards which resulted in deferred tax assets and liabilities
at March 31, 2008 and 2007 are as follows:
Millions of Yen

1,033,000(13,400)(1,019,600)

1,019,600(649,000)
370,600

2004 Stock
Option2007 Stock
Option(Shares)(Shares)733,200(6,000)727,200
370,600(177,600)(2,000)191,000¥1,685($16.85)¥4,420($44.20)

2007

2008

¥4,650($46.50)¥98,325($983.25)

The assumptions used to measure fair value of 2007 Stock Option:
Estimate method:Black-Scholes option pricing model
Volatility of stock price:26.14%
Estimated remaining outstanding period:
five years
Estimated dividend:¥36 per share
Interest rate with risk free:
1.403%

Deferred tax assets (Current):
Unrealized intercompany profits
Inventories
Accrued bonuses
Accrued enterprise tax
Tax loss carryforwards
Other
Less valuation allowance
Total
Deferred tax assets (Non-current):
Depreciation
Liability for retirement benefits
Tax loss carryforwards
SoftwareInvestment securities
Other
Less valuation allowance
Total
Deferred tax liabilities (Current)
Deferred tax liabilities (Non-current):
Net unrealized gain on
available-for-sale securities
Revaluation of land for consolidation
Investment loss for subsidiaries
capital reduction by corporation
tax law
Other
Total
Net deferred tax assets

Thousands of
U.S. Dollars

2008¥ 1,965 ¥ 1,712 $ 19,650
1,510
219
151
8,290
818
829
1,890
194
189
670
74
67
13,130
1,385
1,313
(80)
(719)
(8)
¥ 4,506 ¥ 3,683 $ 45,060
120 ¥ 122 $ 1,200
1,870
139
187
2,030
465
203
5,420
460
542
2,840
241
284
1,030
138
103
(523) (1,270)(127)¥ 1,312 ¥ 1,042 $ 13,120
$ 160
18
¥
16 ¥
¥

¥

245
457

430
1,625
¥ 2,757¥ 3,045

¥

556
457

$ 2,450
4,570

4,300
384
16,250918¥ 2,315 $ 27,570¥ 2,392 $ 30,450

A reconciliation between the normal effective statutory tax
rates and the actual effective tax rates reflected in theaccompanying consolidated statements of income for the years
ended March 31, 2008 and 2007 is as follows:
Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Per capita levy
Research and development tax credit
Change in valuation allowance
Other - net
Actual effective tax rate

2008
40.6%
2.5
0.7
(3.3)
(6.5)
0.6
34.6%

2007
40.6%
1.4
0.9
(3.4)
(2.2)
(3.0)
34.3%

9. INCOME TAXESThe Company and its domestic subsidiaries are subject toJapanese national and local income taxes which, in theaggregate, resulted in a normal effective statutory tax rate of
approximately 40.6% for the years ended March 31, 2008 and2007. Foreign subsidiaries are subject to income taxes of thecountries in which they operate.

Certain subsidiaries have tax loss carryforwards available tooffset future taxable income as of March 31, 2008 of
approximately ¥525 million ($5,250 thousand). These tax loss
carryforwards, if not utilized, will expire mainly in 2025.

10. LEASES(Lessee)
Total lease payments under finance leases that do not transfer
ownership of the leased property to the lessee were ¥1,714
million ($17,140 thousand) and ¥1,538 million for the years
ended March 31, 2008 and 2007, respectively.
Pro forma information of leased property under finance leases
that do not transfer ownership of the leased property to the81

Sysmex Annual Report 2008

Financial Statelessee on an "as if capitalized" basis for the years ended March 31,
2008 and 2007, was as follows:
Machinery and Equipment
Millions of Yen

Acquisition cost
Accumulated depreciation
Net leased property

2008¥7,2793,605¥3,674

Thousands of
U.S. Dollars

2007
2008
¥6,216 $72,790
2,700
36,050¥3,516 $36,740

Obligations under finance leases (including imputed interest expense):
Machinery and Equipment
Millions of Yen

Due within one year
Due after one year
Total

2008
¥1,4892,191¥3,680Thousands of
U.S. Dollars

2007
2008
¥1,436 $14,890
2,088
21,910¥3,524 $36,800

Depreciation expense and interest expense under finance leases:
Millions of Yen

Depreciation expense
Interest expense

2008¥1,707
4

Thousands of
U.S. Dollars

2007
2008
¥1,528 $17,070
740

Depreciation expense and interest expense, which are notreflected in the accompanying statements of income, are computedby the straight-line method and the interest method, respectively.
The minimum rental commitments under noncancelable operatingleases at March 31, 2008 were as follows:
Millions ofYen

Due within one year
Due after one year
Total

Thousands of
U.S. Dollars¥1,267 $12,670
3,898
38,980¥5,165 $51,650(Lessor)Future rental income under operating leases (including imputed
interest income):
Millions ofYen

Due within one year
Due after one year
Total

Thousands of
U.S. Dollars

2008
2008
¥ 359 $ 3,590
809
8,090
¥1,168 $11,680

11. DERIVATIVESThe Group enters into foreign currency forward contracts andforeign currency option contracts to hedge foreign exchange risk
associated with certain assets and liabilities denominated inforeign currencies.
The Group also enters into interest rate swap contracts tomanage its interest rate exposures on certain liabilities.
All derivative transactions are entered into to hedge interestand foreign currency exposures incorporated within the Group'sbusiness. Accordingly, market risk in these derivatives isbasically offset by opposite movements in the value of hedged
assets or liabilities. The Group does not hold or issue derivatives
for trading purposes.
Because the counterparties to these derivatives are limited tomajor international financial institutions, the Group does not
anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been
made in accordance with internal policies which regulate theauthorization and credit limit amount.

The contract or notional amounts of derivatives which are
shown in the following table do not represent the amounts
exchanged by the parties and do not measure the Group's
exposure to credit or market risk.
The fair value of the Group's derivative financial instruments at
March 31, 2008 is as follows:
Millions of Yen
Contract
Fair Unrealized
AmountValue Gain/Loss

Thousands of U.S. Dollars
Contract Fair Unrealized
Amount Value Gain/Loss

Foreign currency
forward contracts:
Selling:
US dollars ¥ 734 ¥ 699 ¥35
Euro1,802 1,808
(6)
Total
¥2,536 ¥2,507 ¥29$7,340 $6,990 $ 350
18,020 18,080(60)$25,360 $25,070 $ 290

Note: Amounts for forward exchange contracts in the column entitled Fair Value
represent the notional amount of the contracts at March 31 forward currency
rates.

12. CONTINGENT LIABILITIESAt March 31, 2008, the Group had the following contingent liabilities:
Millions of Yen

Guarantees for bank loans offormer employees

Thousands of U.S. Dollars

¥1

$10

The carrying amounts of assets pledged as collateral for theabove contingent liabilities at March 31, 2008, was as follows:
Millions of Yen

Time deposits

Thousands of U.S. Dollars

¥3

$30

13. NET INCOME PER SHARE
Reconciliation of the differences between basic and diluted net
income per share ("EPS") for the years ended March 31, 2008
and 2007 is as follows:
Millions of
Yen
Net Income

Thousandsof Shares
Weighted
Average Shares

Yen

Dollars
EPS

For the year ended March 31, 2008:
Basic EPS
Net income available tocommon shareholders ¥9,132 51,032,859 ¥178.94
Effect of Dilutive Securities
175,854
Stock options
Diluted EPS
Net income for computation ¥9,132 51,208,713 ¥178.33

$1.79

$1.78

For the year ended March 31, 2007:
Basic EPS
Net income available tocommon shareholders ¥9,008 50,147,478 ¥179.63
Effect of Dilutive Securities(0)467,026
Stock options
Diluted EPS
Net income for computation ¥9,008 50,614,504 ¥177.97

14. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31,
2008 was approved at the shareholders' general meeting of theCompany held on June 20, 2008:
Year-end cash dividends,¥28.00 ($0.28) per share

Millions of Yen

Thousands of U.S. Dollars¥1,431$14,31082

15. SEGMENT INFORMATION
a. Industry Segments
The Group's main operations are to manufacture and sell laboratory testing instruments and reagents used by clinical laboratories
around the world. Under Japanese accounting regulations, the Group is not required to disclose industry segment information because
its main industry segment represented more than 90% of its operations.
b. Geographical Segments
The geographical segments of the Group for the years ended March 31, 2008 and 2007 are summarized as follows:
Millions of Yen

2008
Eliminations/
Corporate

Japan

Americas

EuropeChina

Asia Pacific

Total

Sales to customers¥ 37,553¥ 20,845¥ 39,175¥ 8,127¥ 5,024¥ 110,724

Interarea transfer

29,327

166

411

14

255

30,173¥ (30,173)

Total sales

Consolidated¥ 110,724

66,88021,011

39,586

8,141

5,279

140,897(30,173)

110,724

Operating expenses

59,01020,02034,965

7,317

4,732

126,044(30,353)

95,691

Operating income¥ 7,870¥991¥ 4,621¥547¥ 14,853¥

180¥ 15,033

Total assets¥ 80,426¥ 10,453¥ 23,598¥ 5,819¥ 3,800¥ 124,096¥ (15,069) ¥ 109,027¥

824

Millions of Yen

2007
Japan

Americas

EuropeChina

Asia Pacific

Total

Sales to customers¥ 39,396¥ 19,158¥ 31,585¥ 6,848¥ 4,054¥ 101,041

Interarea transfer

25,532

216

428

14

148

26,338

Total sales

Eliminations/
Corporate

Consolidated¥ 101,041¥ (26,338)
101,041

64,92819,37432,013

6,862

4,202

127,379(26,338)

Operating expenses

57,496

18,781

28,466

6,081

3,869

114,693(26,367)

88,326

Operating income¥ 7,432¥593¥ 3,547¥333¥ 12,686¥29¥ 12,715

Total assets¥ 77,132¥ 10,299¥ 19,102¥ 5,544¥ 3,543¥ 115,620¥ (14,395) ¥ 101,225¥

781

Thousands of U.S. Dollars

2008
Japan

Americas

EuropeChina

Asia Pacific

Sales to customers$ 375,530$ 208,450$ 391,750$ 81,270

Interarea transfer

293,270

1,660

4,110

140

2,550

Total sales

Total

Eliminations/
Corporate

Consolidated$ 1,107,240$ 50,240 $ 1,107,240
301,730 $ (301,730)

668,800

210,110395,860

81,41052,7901,408,970(301,730)

1,107,240

Operating expenses

590,100

200,200

349,650

73,17047,3201,260,440(303,530)

956,910

Operating income$ 78,700$

9,910$ 46,210$ 8,240$ 5,470 $ 148,530 $Total assets$ 804,260$ 104,530$ 235,980$ 58,190$ 38,000 $ 1,240,960 $ (150,690) $ 1,090,270

1,800 $ 150,330

Note: As discussed in Note 2.g, effective April 1, 2007, the Company and its domestic subsidiaries changed their method of depreciation from the declining-balancemethod to the straight-line method. The effect of this change was to increase operating income of Japan by ¥536 million ($5,360 thousand) for the year ended March
31, 2008.

c. Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

83

2008

2007

2008

Americas¥ 20,908¥ 19,227$ 209,080

Europe39,23531,660392,350

China

8,128

6,849

81,280Asia Pacific

6,492

5,432

64,920Total¥ 74,763¥ 63,168$ 747,630

Sysmex Annual Report 2008

Financial State

Independent Auditors’ Report84Network

Affiliates and85

Sysmex Annual Report 2008

Corporate Information(As of June 30, 2008)86

Consolidated Affiliates (As of March 31, 2008)

Japan
Americas
EuropeLocation

Main Business

Established

Paid-in Capital

SYSMEX INTERNATIONAL REAGENTS CO., LTD.

Japan

Manufacture and sales of in vitro diagnostic reagentsDec. 1969

JPY 300,000,000

100.0%SYSMEX MEDICA CO., LTD.

Japan

Manufacture of disposable products; Assembly ofimportant parts for in vitro diagnostic systems

Mar. 1978

JPY 20,000,000

100.0%SYSMEX TMC CO., LTD.

Japan

Leasing of in vitro diagnostic systems and office instrument

Jul. 1992

JPY 20,000,000

100.0%SYSMEX LOGISTICS CO., LTD.

Japan

Distribution and stock of in vitro diagnostic systems and reagentsDec. 1997

JPY 50,000,000

100.0%SYSMEX RA CO., LTD.

Japan

Development,manufacture and sales of industrial measuring and testing instrument

Mar. 1978

JPY 70,955,000

96.4%

SYSMEX CNA CO., LTD.*Japan

Development and sales of software for diagnostic information systems

Feb. 1996

JPY 80,000,000

100.0%

Sysmex bioMérieux Co., Ltd.*Japan

Sales and marketing of bioMérieux products

Apr. 2008

JPY 480,000,000

34.0%

SYSMEX AMERICA, INC.

U.S.A.

Sales of in vitro diagnostic systems and reagentsJun. 2003

USD 22,000,000

100.0%SYSMEX REAGENTS AMERICA, INC.

U.S.A.

Manufacture and sales of reagents for in vitro diagnostic systems

Dec. 1993

USD 1,500,000

100.0%SYSMEX DO BRASIL INDUSTRIA E
COMERCIO LTDA.

BrazilManufacture and sales of reagents for in vitro diagnostic systems

Dec. 1998

USD 1,001,700

100.0%SYSMEX CANADA INC.

CanadaSales of in vitro diagnostic systems and reagentsOct. 2007

CAD 2,000,000

100.0%SYSMEX EUROPE GMBH

Germany

Customer and sales support for in vitro diagnostic
systems and reagents;Manufacture and sales ofreagents for in vitro diagnostic systems

Oct. 1980

EUR 820,000

100.0%SYSMEX DEUTSCHLAND GMBH

Germany

Sales of in vitro diagnostic systems and reagentsMar. 1995

EUR 2,050,000

100.0%WELLTEC GMBH

Germany

Inspection and provision of information on foodstuffs and health for general consumers

Mar. 2002

EUR 25,000

75.2%

SYSMEX UK LIMITED

U.K.

Sales of in vitro diagnostic systems and reagents

May 1991

GBP 400,000

100.0%SYSMEX LOGISTICS UK LTD.

U.K.

Distribution and stock of in vitro diagnostic systems and reagentsDec. 2003

GBP 200,000

100.0%SYSMEX BELGIUM S.A.

Belgium

Development and sales of software for diagnostic information systems

Sep. 1997

EUR 62,000

100.0%SYSMEX FRANCE S.A.S.

FranceSales of software for diagnostic information
systems; Customer and sales support for in vitro
diagnostic systems and reagentsFeb. 2000

EUR 2,457,500

100.0%China

SYSMEX BELGIUM IT SLOVAKIA, S.R.O. Slovakia

Development and support of software for diagnostic information systems

Mar. 2001

SKK 250,000

100.0%SYSMEX POLSKA S.P.Z O. O.

PolandCustomer and sales support for in vitro diagnosic systems and reagents

May 2005

PLN 2,000,000

100.0%SYSMEX SOUTH AFRICA (PTY) LTD.

South Africa

Customer and sales support

Apr. 2006

ZAR 2,220,000

100.0%SYSMEX DIGITANA AG

Switzerland

Sales of in vitro diagnostic systems and reagents

Sep. 2006

CHF 50,000

80.0%

SYSMEX AUSTRIA GMBH

Austria

Sales of in vitro diagnostic systems and reagents

Sep. 2007

EUR 35,000

100.0%SYSMEX SLOVAKIA S.R.O.

Slovakia

Sales of in vitro diagnostic systems and reagents

Sep. 2007

SKK 200,000

100.0%SYSMEX HUNGARIA KFT.

Hungary

Sales of in vitro diagnostic systems and reagentsOct. 2007

HUF 3,000,000

100.0%SYSMEX CESKA REPUBLIKA S.R.O.

Czech

Sales of in vitro diagnostic systems and reagentsOct. 2007

CZK 200,000

100.0%SYSMEX SHANGHAI LTD.

China

Sales of in vitro diagnostic systems and reagentsJan. 2000

USD 1,000,000

100.0%JINAN SYSMEX MEDICAL ELECTRONICS CO., LTD.

China

Manufacture and sales of reagents for in vitro diagnostic systems

Jun. 1995

USD 1,800,000

100.0%SYSMEX HONG KONG LIMITED

China

Sales of in vitro diagnostic systems and reagentsDec. 1999

HKD 500,000

100.0%SYSMEX INFOSYSTEMS CHINA, LTD. China

Development and sales of software for diagnostic information systems

Jul. 2000

USD 200,000

100.0%SYSMEX WUXI CO., LTD.

Asia Pacific

China

Development, manufacture and sales of reagents for in vitro diagnostic systems

Aug. 2003

USD 3,400,000

100.0%SYSMEX ASIA PACIFIC PTE LTD.

Singapore

Customer and sales support for in vitro diagnostic systems and reagentsFeb. 1998

SGD 3,500,000

100.0%SYSMEX (MALAYSIA) SDN BHD

Malaysia

Sales of in vitro diagnostic systems and reagents

Apr. 1998

NYR 300,000

100.0%SYSMEX INDIA PVT. LTD.

India

Manufacture and sales of in vitro diagnostic systems and reagents

Jul. 1998

INR 118,000,000

75.0%

SYSMEX (THAILAND) CO., LTD.

Thailand

Sales of in vitro diagnostic systems and reagents

May 1999

THB 18,000,000

100.0%SYSMEX SAN TUNG CO., LTD.

TaiwanSales of in vitro diagnostic systems and reagents

May 2000

NTD 5,000,000

51.0%

SYSMEX NEW ZEALAND LIMITED New Zealand

Development and sales of software for diagnostic information systems

Oct. 2001

NZD 795,000

100.0%

PT. SYSMEX INDONESIA

Sales of in vitro diagnostic systems and reagentsMar. 2002

USD 350,000

100.0%* As of April 1, 2008

87

Equity Ownershipby Group

Corporate name

Sysmex Annual Report 2008

Indonesia

Corporate Information

Corporate Overview / Stock Information (As of March 31, 2008)

SYSMEX CORPORATION

Composition of Shareholders

February 20, 1968
Number of Employees 3,916 (consolidated basis)
1,774 (non-consolidated basis)
Established

Individuals and Others

Financial Institutions

39.94%

24.05%
Financial Instruments Firm

0.69%

Including part-time employees*

April 1 - March 31
Shareholders' Meeting In June
Number of Shares Authorized 149,672,000 shares
Number of Shares Issued 51,203,108 shares¥8,651 million
Paid-in Capital
Fiscal Year

Other Japanese Companies

10.61%
Foreign Investors

24.71%

Distribution of Shares by Number of Shares Held

Tokyo Stock Exchange, First Section

Stock Listings

Osaka Securities Exchange, First Section
November 1995： Listed on Osaka Securities Exchange, Second Section
July 1996: Listed on Tokyo Stock Exchange, Second Section
March 2000: Listed on Tokyo Stock Exchange, First Section
and Osaka Securities Exchange, First Section

Less than 1,000 shares 3.50%

More than 1,000 shares 3.54%

Number of shares: 1,791,968(9,361 shareholders)Number of shares: 1,813,859(977 shareholders)More than 5,000 shares 1.49%
Number of shares: 759,983(112 shareholders)More than 10,000 shares 10.70%

Ticker Code

6869

Transfer Agent

Mitsubishi UFJ Trustand Banking Corporation

Independent Auditor

Deloitte Touche Tohmatsu

More than 500,000 shares 60.66%

RatingA (Rating and Investment
Information, Inc (R&I))
Russell / Nomura Japan Equity
Indexes
FTSE Japan Index
NOMURA400
DSI (Daiwa Stock Indices)
S&P Japan 500

Number of shares: 31,061,434(22 shareholders)IndexesNumber of shares: 5,479,507(176 shareholders)

Stock Price Range & Trading Volume
10,000Common stock price range (¥)

8,000

More than 100,000 shares 20.11%
Number of shares: 10,296,357(53 shareholders)

Principal Shareholders
Shareholders
Tadako Nakatani
Japan Trustee Services Bank, Ltd.
(Trust account)Tadashi Nakatani
Nakatani Kosan, Ltd.
The Master Trust Bank of Japan, Ltd.
(Trust account)
National Mutual Insurance Federationof Agricultural Cooperatives
Kazuko Ietsugu
Taeko Wada
THE CHASE MANHATTAN BANK, N. A.
LONDON SECS LENDING OMNIBUS ACCOUNT
Kenji Itani

Number ofshares held
(thousands)

Percentage ofshareholding

4,003
3,550

7.82
6.93

2,994
2,574
2,265

5.85
5.03
4.43

1,640

3.20

1,531
1,531
1,372

2.99
2.99
2.68

1,231

2.41

6,000

Cash Dividends per Share & Dividends Ratio (Consolidated)

4,000

0

4 / ’07 5

6

7

8

（%）

(Yen)

Tokyo Price Index close

80

2,000
9

10 11 12 1/’08 2

3

4

5

6 (Month)Figures before 2006 are adjusted for a stock split
conducted on November 18, 2005

■ Cash Dividends per Share

60

26.8
22.6

20

30

20.0

17.8

17.9

30

40

36*1

36

48*2

2004

2005

2006

2007

2008

40

40

Dividends Ratio

20
10

10,000,000
Monthly trading volume (shares)

0

8,000,000*1: The shares of shareholders was split two for one on November 18, 2005.
*2: Including special dividends of ¥8 commemorating the 40th anniversary of the Company's founding.

6,000,000
4,000,000
2,000,000
004 / ’07 5

6

7

8

9

10 11 12 1/’08 2

3

4

5

6 (Month)

Policy of dividend
We have been indicating a policy of stockholders’ equity to balance bothinvestment for sustainable growth and contribution toward shareholders.
Upon this policy we raise strategy to keep dividend payout ratio as approximately 20% on consolidated financial performance.

88This report is printed on environmentally friendly paper and soy ink in a waterless printing process.