Sysmex Report 2016

Editorial Policy The Sysmex Report, an integrated report that summarizes financial and non-financial information, is intended to help stakeholders und...

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Sysmex Report 2016

Sysmex Report

2016 For the year ended March 31, 2016

1-5-1 Wakinohama-Kaigandori, Chuo-ku, Kobe 651-0073, Japan Tel +81 (78) 265-0500 Fax +81 (78) 265-0524

www.sysmex.co.jp/en/

This brochure was printed in Japan on FSC R-certified paper using vegetable oil ink.

Shaping the advancement of healthcare. Sysmex aims to contribute to the health of people around the world by creating new value. Shaping the advancement of healthcare.

We continue to create unique and innovative values, while building trust and confidence.

With passion and flexibility, we demonstrate our individual competence and unsurpassed teamwork.

Core Behaviors To Our Customers We deliver reassurance to our customers, through unmatched quality, advanced technologies, superior support, and actions that consistently reflect the viewpoint of our customers. We constantly look out for our customers’ true needs, and seek to generate new solutions to satisfy those needs.

To Our Employees We honor diversity, respect the individuality of each employee, and provide them with a workplace where they can realize their full potential. We value the spirit of independence and challenge, provide employees with opportunities for self-fulfillment and growth, and reward them for their accomplishments.

To Our Business Partners We deliver commitment to our client companies through broad-ranging partnerships. We strive to be a company that can grow in step with our trade partners, through respect and mutual trust.

To Our Shareholders Our shareholders can rest assured that we will continue to improve the soundness and transparency of our management policies, while promoting information disclosure and close communications. We commit ourselves to a consistent yet innovative style of management, in order to achieve sustainable growth and increased shareholder value.

To Society We carry out our business in strict compliance with laws and regulations, as well as in adherence to high ethical standards. As a responsible member of society, we play an active role in resolving environmental issues and other problems that impact our society today.

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Sysmex Report 2016

Sysmex Report 2016

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Editorial Policy

Contents

 Profile

 Sysmex’s Value Creation

 Striving for Sustainable Increases in Corporate Value

Corporate Philosophy of the Sysmex Group ........................... 2

Our Business Model for Creating Value ..................................... 19

Corporate Governance........................................................................ 51

A Sustained Growth Trajectory ...................................................... 5

Sysmex’s Strengths ............................................................................... 21

Members of the Managing Board .................................................. 57

Three Points Supporting Sustained Growth ............................. 7

Growth Frontiers.................................................................................... 23

Messages from Outside Members of the Managing Board .... 59 Executive Officers .................................................................................. 62

 To Our Stakeholders

 Business Activities

Human Resource Development and Cultivation .................... 63

Message from the CEO ...................................................................... 9

Business Domains and Market Positioning ............................... 29

Environmental Preservation ............................................................. 65

Medium- and Long-Term Management Plans.......................... 13

Principal Testing Fields and Products........................................... 31

Contributing to Society....................................................................... 67

Our Financial Perspective .................................................................. 15

Research and Development .............................................................. 33 Production................................................................................................. 35 Sales and Support Services................................................................ 37 Overview of Business by Geographic Region (Americas, EMEA, China, Asia Pacific and Japan).................... 39

 Financial and Other Information Consolidated Financial and Non-Financial Data (11 Years)................................................................................................... 69 Consolidated Financial Information.............................................. 71 Stock Information .................................................................................. 97 Corporate Overview ............................................................................. 98

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Sysmex Report 2016

The Sysmex Report, an integrated report that summarizes financial and nonfinancial information, is intended to help stakeholders understand Sysmex’s medium- to long-term value creation. For more detailed information, please visit our website.

Organizations Covered In principle, this report covers the Sysmex Group (including Group companies in Japan and overseas). In this report, “Sysmex” refers to the Sysmex Group as a whole. “Sysmex Corporation” refers to the Company on a stand-alone basis.

Accounting Standards The financial data shown in this report through the fiscal year ended March 31, 2016, is based on Japanese GAAP. Sysmex has voluntarily adopted the International Financial Reporting Standards (IFRS) from the first three months of the fiscal year ending March 31, 2017.

Cautionary Note Regarding Forward-Looking Statements Statements in this report pertaining to Sysmex’s future plans, strategies, business performance and other items are based on currently available information and involve certain risks and uncertainties. Actual results may differ materially from those anticipated in these statements.

Sysmex Report 2016

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 Profile

A Sustained Growth Trajectory

Since the time of our establishment, we have sustained growth by creating new value. Sysmex has expanded its operations through proactive

continuing to expand despite a variety of changes in our

research and development and has built up a global

operating environment.

Consolidated net sales in the fiscal year ended March 31, 2016:

¥253.1 billion

sales and support service network. As a result, we are

1968 (Established)

(¥ billion)

Net sales

0.15

Operating income

0.01

Overseas sales ratio (%)



R&D expenditure

1988

2008

2016

13.2

110.7

253.1

1.9 20 years

31

15.0 20 years

67

56.9 8 years

84

0.0

0.6

9.2

17.7

7

609

3,916

7,446

Employees

1968 Established TOA MEDICAL ELECTRONICS CO., LTD. (current Sysmex Corporation) Established for the purpose of marketing electronic medical equipment manufactured by TOA ELECTRIC CO., LTD.

2007 Gained the top share of the global market in the hematology field

1995*1, 1998*2 Reinforcing our global sales network through business alliances *1 Entered an alliance with current Siemens Healthcare Diagnostics Inc. in relation to hemostasis products *2 Entered an alliance with current F. Hoffman-La Roche Ltd. in hematology products

1991 Began providing direct sales and support services overseas for the first time, in the United Kingdom

1972 Established our first overseas location, in Germany 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 Overseas sales

Domestic sales

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Notes: Fiscal year-ends through 1990 concluded at the end of February. The fiscal year-end is March 31 from 1991 onward (Japanese GAAP). Information for fiscal years through the year ended March 31, 1993, are on a non-consolidated basis. From the fiscal year ended March 31, 1994, figures are on a consolidated basis.

1963 Developed Japan’s first automated hematology analyzer

1984 Entered the hemostasis field

1990 Launched the world’s first system products in the hematology field

(Developed by TOA ELECTRIC CO., LTD.)

CC-1001

CA-100

2000 Expanded R&D in the life science field Opened the Central Research Laboratories within the current Technopark

Sysmex Report 2016

2013 Expanded our technology platform with a view to personalized medicine Acquired the current Sysmex Partec and Sysmex Inostics as subsidiaries

System products in the hematology field Central Research Laboratories (at the time)

5

2001 Reinforced R&D capabilities in reagents Converted the current Sysmex International Reagents Co., Ltd., to a wholly owned subsidiary

INTERNATIONAL REAGENTS CORPORATION (current Sysmex International Reagents Co., Ltd.)

Sysmex Inostics

Sysmex Report 2016

6

 Profile

Three Points Supporting Sustained Growth

1

2

3

Point

Point

Point

Sysmex’s customers are hospitals and commercial labo-

One distinguishing feature of the healthcare market is its

Sysmex provides high-quality products and services in

ratories. Our primary business revolves around in vitro

stability; demand related to health and medical care is rel-

more than 190 countries around the world via a sales and

diagnostics (IVD), involving the analysis of blood, urine

atively unaffected by economic fluctuations. Furthermore,

support service network tailored to match the character-

and others. In addition to the field of hematology, which

in addition to instruments Sysmex derives sales from

istics of individual regions. We operate a direct sales and

analyzes white, red and other blood cells, we have the top

reagents and support services. As reagents and support

support service structure, enabling us to hear customers’

share of the world market in the hemostasis and urinalysis

services are necessary to use our instruments, we antici-

requirements directly and respond to them swiftly. To

(sediment) fields. Through proactive R&D, we are working

pate steady income.

accelerate our globalization, we also make use of indirect

High Level of Competitiveness: 90% of Sales in Fields Where We Hold a Leading Share of the Global Market

A Business Model That Facilitates Stable Growth

A Sales and Support Service Network Covering More Than 190 Countries

to create unique, high-value testing and diagnostic tech-

sales structures that are sensitive to regional business

nologies.

practices.

Top Global Market Share in Three Fields

Reagents and Support Services Make up More Than 60% of Sales

Others

Others

Instruments

12.6%

10.8%

33.9%

Global Business Development

Japan

Asia Pacific

15.7%

7.9% China

Urinalysis (sediment)

6.9%

25.8%

Sales by Product Category

Sales by Business (Fiscal year ended March 31, 2016)

Net Sales by Destination (Fiscal year ended March 31, 2016)

(Fiscal year ended March 31, 2016)

Hemostasis (including alliances)

17.4%

Hematology

63.1%

Support services

9.7%

Reagents

EMEA*

Americas

45.5%

26.9%

23.6%

*EMEA: Europe, the Middle East and Africa

7

Sysmex Report 2016

Sysmex Report 2016

8

To Our Stakeholders

We are contributing to society and enhancing corporate value by putting the “Sysmex Way” into practice.

Message from the CEO

growth and promoting transformation. (See page 13 for

Germany to meet future increases in reagent demand,

technologies toward the realization of personalized medi-

details on long-term management targets and the mid-

raising capacity to 1.5 times its former level. We are also

cine. In February 2016, we entered into an agreement with

“Shaping the advancement of healthcare” is Sysmex’s mission.

term management plan.)

expanding our reagent factory in the United States, with

Eisai Co., Ltd., to jointly develop next-generation diagnos-

construction scheduled for completion in June 2017.

tic reagents in the field of dementia. By fostering syner-

In the fiscal year ended March 31, 2016, the first year of the mid-term management plan, both operating per-

To accelerate our growth going forward, we are pro-

The “Sysmex Way,” the corporate philosophy of the

formance and our business activities progressed steadily.

actively moving ahead with research and development.

Partec and Sysmex Inostics, which became subsidiaries in

Sysmex Group, defines our mission as “shaping the

During the year, sales in the hematology and hemostasis

In addition to hematology and other mainstay testing

2013, we are stepping up efforts toward a full-scale entry

advancement of healthcare,” and we develop our business

fields were favorable overseas, in China, EMEA and other

fields, we are working to create new testing and diagnostic

into personalized medicine.

on this basis. The field of in vitro diagnostics (IVD) has

regions, leading to a 14.4% year-on-year increase in net

been the core of the Company’s business since the time of

sales, to ¥253.1 billion. Operating income grew 28.3%, to

its establishment. Going forward, we will continue to take

¥56.9 billion, thanks to the rise in sales and the impact of

on new challenges in the healthcare domain and contrib-

yen depreciation against the U.S. dollar and Chinese yuan.

ute to the creation of a fulfilling and healthy society.

Looking at business activities in the fiscal year ended

Operating Income Operating Margin

Net Sales

(¥ billion)

(¥ billion)

300

60

March 31, 2016, expanded sales of the XN-Series, the

Working Toward Our Long-Term Management Vision

200

184.5

portfolio through a business alliance with Eiken Chemical

the objectives of its long-term management vision to-

Co., Ltd. In the immunochemistry field, sales in Japan of our

ward 2020, being “A Unique & Global Healthcare Testing

proprietary reagents were robust, and sales of the HISCL™-

Company.” To realize this vision and positioning, in May

Series grew significantly in China, enabling us to make

2015 we formulated a mid-term management plan aimed

steady progress as a leading company in the IVD domain

at further reinforcing growth and profitability, investing in

in Asia. In July 2015, we expanded our reagent factory in

Sysmex Report 2016

(%) 45

Net Income Attributable to Owners of the Parent (¥ billion)

45

36.2 44.4 40

30

30

26.6

32.8

field, we launched new products and increased our product Sysmex has defined six areas of positioning to achieve

56.9

221.3

higher profitability. Performance was also strong in the hemostasis field, particularly in China. In the urinalysis

Operating income Operating margin

253.1

flagship model in our mainstay hematology field, led to

9

gies between our existing businesses and those of Sysmex

134.7

145.5

22.5

20

100

19.2 14.3

0

03/12 03/13 03/14 03/15 03/16

0

21.8

20.5

20.1 17.8

15.0

03/12 03/13 03/14 03/15 03/16

15

15

0

0

14.1 12.0

03/12 03/13 03/14 03/15 03/16

Sysmex Report 2016 10

 To Our Stakeholders

Creating Value by Addressing the Issues Society Faces

Further Enhancing Corporate Value Human Resource Diversity and Open Innovation

Applying Our Technologies to Create a Fulfilling and Healthy Society

Creating value that cannot be seen plays a major role in corporate growth, and human resources is a key factor. To

In advanced countries, as populations age the need is

achieve further growth, Sysmex is developing the capabili-

growing to reduce healthcare costs and extend healthy

ties of and fostering diverse human resources. To cultivate

lifespans. In emerging markets, demand is to increase the

the next generation of human resources and enliven

quality of healthcare, build healthcare infrastructure and

communications, in April 2015 we established the Global

enhance access to healthcare. We see Sysmex’s role as

Communication Center. Through communication, we

addressing these various societal issues by creating new

intend to encourage the mutual sharing of values and fos-

value in the IVD domain.

ter new insights that will lead to new values and deepen

To date, Sysmex has been quick to address issues as they arose along with the changing times, developing its

cultural awareness through the joining of creative forces. Another important yet unseen value lies in external

business activities accordingly. In the 1960s, an era of high

networks. In global competition, it is essential to expand

economic growth in Japan, we met the increasing need for

networks that extend beyond our own corporate scope

testing that accompanied rising health awareness, and we

and encompass a broad perspective. In addition to its own

succeeded in commercializing Japan’s first automated

direct sales and after-support system, Sysmex is mak-

hematology analyzer. Thereafter, we continued to con-

ing use of alliances to accelerate its global expansion. In

tribute to testing speed and accuracy, as well as testing

R&D, too, we are collaborating proactively with a variety

with high clinical value. In addition to instruments, we

of research institutions, companies, universities and

provide the reagents and support services needed for IVD.

other organizations such as the National Cancer Center.

Through the development of system products that promote

In December 2015, for instance, Sysmex Inostics began

higher levels of efficiency, we are meeting the increasingly

collaborating with Merck of Germany on the development

diverse needs of hospitals and other customers.

of companion diagnostics* (for research) targeting anti-

We aim to create added value that instills confidence

cancer agents for metastatic colorectal cancer. This test-

in testing among our customers and patients. For instance,

ing employs blood rather than cancer tissue, reduces the

we work to ensure consistent and accurate test results,

burden on patients and is expected to contribute to the

which are essential to physicians’ ability to provide diag-

rapid determination of treatment methods for metastatic

noses smoothly. Through our support services, we detect

colorectal cancer.

instrument errors before they arise, working to minimize

In September 2015, we also opened the Open

the downtime during which testing is not possible. In addi-

Innovation Lab within Technopark, Sysmex’s R&D hub, to

tion, to improve patient quality of life we continue to take

accelerate R&D efforts toward the realization of personal-

up the challenge of realizing liquid biopsy, which will allow

ized medicine. This lab aims to create advanced, highly

testing for cancer and other diseases by analyzing blood

valuable testing and diagnostic technologies through

and other bodily fluids rather than the affected tissue.

collaboration with researchers in Japan and overseas.

Going forward, we will continue working to create new value that exceeds customer expectations, applying proprietary expertise and technologies to resolve the issues society faces.

11 Sysmex Report 2016

* Companion diagnostics: Clinical testing performed to predict the efficacy and side effects of drugs before using them for treatment

To Our Stakeholders Sysmex has grown as the result of the high degree of

and continued to pursue M&A opportunities. With regard

trust placed in the Company by a variety of stakeholders,

to shareholder returns, we aim to maintain an appropriate

including customers and shareholders. Going forward, on

balance between proactive investment and shareholder

the corporate governance front we are making an aggres-

returns, and are targeting a consolidated dividend ratio of

sive effort to augment management soundness and trans-

30%. For the fiscal year ended March 31, 2016, we

parency and engage in dialogue with shareholders and

increased dividends ¥12 more than initially planned,

investors to achieve sustainable increases in corporate

resulting in ¥52 per share for the year. This figure amount-

value. In June 2016, we transitioned to a “company with

ed to a dividend payout ratio of 29.8%, our 14th consecu-

an Audit and Supervisory Committee” and increased the

tive year of dividend increases. We intend to maintain

number of external members of the Managing Board by

stable dividends going forward. In the fiscal year ended

three, to a total of four. This move was aimed at reinforc-

March 31, 2016, ROE came to 20.4%. We plan to raise this

ing the auditing and supervisory function of the Managing

figure while sustaining a healthy financial balance.

Board, as well as further enhancing the governance struc-

In line with its corporate philosophy, by leveraging its

ture by raising management transparency and objectivity.

strengths Sysmex will continue to enhance corporate value

Furthermore, from the first quarter of the fiscal year end-

by providing new value to society. I ask our stakeholders

ing March 31, 2017, we voluntarily adopted International

for your ongoing support of Sysmex from a medium- to

Financial Reporting Standards (IFRS) to increase the

long-term perspective as we take up these challenges.

level of convenience to Japanese and overseas investors by facilitating the international comparison of financial

September 2016

information. I am convinced that Sysmex will continue to enjoy significant growth opportunities going forward. To achieve further expansion, we will augment our technology platforms, strive to enhance our production, sales and support service structures, invest aggressively in R&D and capital,

Hisashi Ietsugu Chairman and CEO

Sysmex Report 2016 12

 To Our Stakeholders

Medium- and Long-Term Management Plans

We are pursuing a mid-term management plan and long-term management targets based on our Group corporate philosophy, the “Sysmex Way.” Vision

A Unique & Global Healthcare Testing Company Positioning

Undisputed Global Leader in Hematology, Hemostasis and Urinalysis

A Leading Global Player Making a Contribution to Personalized Medicine

(Including alliances)

Long-Term Management Targets (2020)

We will build the earnings foundation to support further Group growth in the Company’s core businesses.

A Leading Company in the Asian in Vitro Diagnostics (IVD) Market

An Attractive Company Providing Value and Confidence

We will leverage our geographic advantage to build a solid position in the Asian market in immunochemistry and other growth fields, as well as hematology.

We aim to become a highly attractive company to diverse stakeholders that offers value and reassurance.

A Unique and Competitive Player in the Immunochemistry Field

One Sysmex Carrying Out High-Speed Management

We will harness unique strengths that other companies cannot emulate and drive Group growth over the medium term.

Through optimal teamwork throughout the Group, we aim to be a corporate entity that conducts highly efficient and swift management.

Reinforce Growth and Profitability Mid-Term Management Plan (Fiscal years to March 31, 2016 to 2018) Announced in May 2015

• Hematology, hemostasis and urinalysis • Asia

Invest in Growth

• Immunochemistry, FCM* and life science

*FCM: Short for flow cytometry. A method involving the flow dispersion of minute particles and the use of laser light to optically analyze the minute flows. Used primarily to observe individual cells.

13 Sysmex Report 2016

By augmenting value in testing (diagnostics) based on leading-edge technologies, we will accelerate Group growth and establish our global position.

Promote Transformation

• Earn further trust from stakeholders • Enhance Group management

>

Financial Targets (Fiscal year ending March 31, 2018, Japanese GAAP) Net sales Operating income ROE

¥300.0 billion

(CAGR = 10.7%)

¥63.0 billion

(CAGR = 12.4%) (Operating margin: 21.0%)

18.0%

Operating cash flow

¥50.0 billion

Free cash flow

¥20.0 billion

Assumed exchange rates: 1USD = ¥115, 1EUR = ¥130, 1CNY = ¥18.5 Compound annual growth rate (CAGR): Fiscal years to March 31, 2015 to 2018 Note: We formulate three-year mid-term management plans every two years. (We plan to announce the new plan in May 2017.)

Sysmex Report 2016 14

 To Our Stakeholders

Our Financial Perspective

We invest proactively and provide appropriate shareholder returns.

Generating and Using Funds

Proactive Investments to Augment Corporate Value

Thanks to its high market share in the hematology, hemosta-

into building the immunochemistry and life science fields

sis and urinalysis fields and growth in Asia, Sysmex is rein-

into pillars of growth, as well as into putting in place

To achieve further growth, Sysmex is investing to acceler-

forcing its profitability and expanding its operating cash flow.

IT infrastructure and recruiting and developing human

ate expansion in such areas as immunochemistry and life

We proactively invest the cash we generate into R&D,

Research and Development Expenses (¥ billion)

20

resources to promote transformation. Regarding share-

science. We also concentrate investment in R&D to gener-

capital expenditure and M&A to expand further. In addition

holder returns, we aim to ensure stable ongoing dividends

ate highly valuable new testing and diagnostic technolo-

to our mainstay businesses, we are concentrating investment

and further augment ROE.

gies, capital expenditure for factory expansion to meet our

15

10

global supply responsibilities, and M&A to enhance our

Stable ongoing dividends

Target dividend payout ratio of 30%

Reinforcing Growth and Profitability

Hematology

R&D

Hemostasis

5

development expenses and capital expenditure have

0

03/06

grown over the past 10 years.

Investment

03/10

03/16

Capital Expenditure (Tangible)

M&A

R&D in Immunochemistry, Life Science and Other Fields to Accelerate Future Growth

Life science

Capital Expenditure for Factory Expansion to Meet Our Global Supply Responsibilities

15

M&A to Enhance Our Technology Platforms

10

Capital expenditure

8.1

technology platforms. As a result, our research and

Shareholder Returns

Operating Cash Flow

17.7

(¥ billion)

20

Invest in Growth Immunochemistry

Urinalysis

Invest in Promoting Transformation Human resource recruitment and IT infrastructure development, etc.

Asia

13.0

5.6 5

Shareholder Returns Sysmex aims to maintain a proper balance between

0

Dividend and Dividend Payout Ratio

aggressive investment, which is designed to sustain steady high growth, and returns to our shareholders as our earning power increases. In terms of returns to shareholders,

Dividend (converted to basis following stock split on April 1, 2014) (Annual) Dividend payout ratio (Consolidated)

(Yen)

60

52

sis and aim for a consolidated payout ratio of 30% under

29.8

40

our basic policy of sharing the successes of our operations in line with business performance.

cal year ended March 31, 2006. Going forward, we plan 30

27.7 18.9

Stable Dividend on a Continuous Basis

15 Sysmex Report 2016

20.4% 20

15 12.5%

balance.

03/03

Sustained Appropriate Shareholder Returns

5

Maintenance of a Sound Financial Base

3.125 0

14 Consecutive Years of Dividend Increases

to augment ROE while maintaining a healthy financial

25

10 15

20

Target Dividend Payout Ratio of 30%

ROE was 20.4% in the fiscal year ended March 31, 2016, an improvement of 7.9 percentage points from the fis-

we intend to provide a stable dividend on a continuous ba-

03/16

(%)

(%)

54

03/10

ROE

ROE 45

03/06

03/10

0

0

03/16 03/17

(Forecast)

Higher Income

03/06

03/10

03/16

Sysmex Report 2016 16

Sysmex’s Value Creation We contribute to a bountiful society by providing value in the in vitro diagnostics field that addresses the problems society faces.

17 Sysmex Report 2016

Sysmex Report 2016 18

 Sysmex’s Value Creation

Our Business Model for Creating Value

By leveraging our strength in the IVD domain, we will create new value to address the issues facing society.

Sysmex has set forth “Shaping the advancement of health-

new testing parameters and providing value in other ways

care” as its mission, as stated in the corporate philosophy

that address the issues faced in advanced countries and

for the Sysmex Group. We are making the most of our

emerging markets alike.

strengths to develop business in the IVD domain, which

Furthermore, by reinvesting the value generated

is considered the gateway to healthcare. To realize our

through our operations, we aim to create new value in

corporate philosophy, we are working to increase the

response to issues that evolve as society’s needs and

efficiency of testing and the quality of healthcare, creating

expectations grow.

Needs and Expectations

Issues Society Faces

Shaping the advancement of healthcare.

Generating Value Social Value

Advanced Countries

Reducing Healthcare Costs

Strengths

The Gateway to Healthcare

Advanced Countries

Income Model

IVD

Improving Testing Efficiency through Automation By Creating New Testing Parameters:

Instruments

Support Sevices

Reagents

Extending Healthy Lifespans

Meeting Needs in

Improving Access to Healthcare

Early Detection of Cancer and Other Diseases Realization of Better Preventive Medicine Reduction of Burden on Patients Emerging Markets

Emerging Markets

Putting Healthcare Infrastructure in Place

No. 1 Share of the Global Market

Hematology

Global Network

Increasing the Quality of Healthcare

・ Clinical Value ・ Speed ・ Accuracy

More than

190 Sales

Manufacturing

Support Services

No. 1*1 Share of the Global Market

Urinalysis

No. 1*2 Share of the Global Market

Countries

Provide Products and Services that Meet Regional Healthcare Needs Increase Testing Quality by Promoting Scientific Awareness Activities Help to Overcome the Three Leading Infectious Diseases

Immunochemistry

Integrated System + External Networks Research and Development

Hemostasis

Economic Value Total shareholder return

ROE

(annualized rate)

Clinical Chemistry

Sysmex TOPIX (Tokyo Stock Price Index)

20.4% +

External Networks

19.7%

Life Science

11.4% *1 Including our alliance with Siemens *2 Only in sediment urinalysis

See page 21 for Sysmex’s Strengths.

37.8%

See page 29 for Business Domains and Market Positioning.

-0.5% 03/96 03/00 03/05 03/10 03/16

Past 10 years

Past 5 years

Reinvestment

19 Sysmex Report 2016

Sysmex Report 2016 20

 Sysmex’s Value Creation

Sysmex’s Strengths

Based on a robust income model, we have created a system to quickly address customer needs and provide value around the world. Income Model

Integrated System + External Networks

IVD instruments use reagents each time testing is per-

support services. At present, reagents and support servic-

Sysmex operates its own global system spanning R&D,

As a result, we have earned a solid reputation among

formed. We also provide support services to ensure that

es account for more than 60% of net sales. Furthermore,

manufacturing, sales and support services. This structure

customers around the world.

customers can use our products with confidence. As a

the healthcare sector is relatively impervious to economic

enables us to meet complex needs and address the vari-

We are also vigorously pursuing open innovation

result, after customers purchase our instruments we

fluctuations, so Sysmex anticipates steady growth.

ous issues customers face. Through this system, in addi-

and alliances to make use of technologies and ideas from

tion to providing the high-quality instruments, reagents

outside the Company and respond promptly to changing

and software that are needed for testing, we offer high-

market needs.

continue to generate income by providing reagents and

value-added system products and online support.

Support Services

Support Services

+

Others Instruments

External Networks Reagents

Total Sales

Open Innovation, Alliances, etc.

Sales Composition

+

+ Year 1

Year 2

Year 3

Year 4

ȉȉȉȉ

Reagents

Internal Development of Instruments, Reagents and Software

Direct Sales in Response to Voice of the Customer

Proactive Investment in R&D

Indirect Sales Tailored to Regional Characteristics

Provide Value

Global Network We have built up global networks for direct and indirect

countries, we are actively developing our operations in

sales, support services and reagent manufacturing. This

emerging markets, and we currently have 63 Group com-

structure enables us to provide customers in more than

panies operating in 41 countries. In the fiscal year ended

190 countries around the world with high-quality prod-

March 31, 2016, our overseas sales ratio reached 84.3%.

+

R&D

Sales

Added Value

ucts and stable support services. In addition to advanced Subsidiaries and Affiliates Fiscal Year Ended March 31, 2006

31

companies

Net Sales by Destination Fiscal Year Ended March 31, 2016

63

companies

Fiscal Year Ended March 31, 2006

Fiscal Year Ended March 31, 2016

17.9%

Americas

23.6%

28.9%

EMEA

26.9%

7.3% 5.5%

China

40.3%

Asia Pacific

25.8%

Japan

7.9% 15.7%

Products Instruments, Reagents, Software

Manufacturing

System Products, Online Support, etc.

Support Services

—Instruments— High “Made-in-Japan” Quality

Support Services to Bolster Customer Satisfaction

—Reagents— Global Structure to Ensure Stable Supply

Scientific Activities That Help Improve the Quality of Testing

Customers (Hospitals, Laboratories, etc.)

Sysmex

Instruments

Voice of the Customer

Overseas sales ratio: 84.3% See page 39 for Overview of Business by Geographic Region.

21 Sysmex Report 2016

See page 33 for Research and Development.

See page 35 for Production.

See page 37 for Sales and Support Services.

Sysmex Report 2016 22

 Sysmex’s Value Creation

Growth Frontiers

In addition to our mainstay fields, we aim to achieve further growth by expanding our operations in the immunochemistry and life science fields. Medium-Term Growth Driver: The Immunochemistry Field

Growth Frontiers Sysmex espouses “A Unique & Global Healthcare Testing

hemostasis and urinalysis fields. We aim to build an earn-

Immunochemistry testing has a wide range of applica-

companies. Utilizing these advantages, we are develop-

Company” as the vision for its long-term management

ings foundation that will support further increases in these

tions, from the diagnosis of infectious diseases, cancers

ing our business in this field in Asia, including Japan and

targets, and the Company is working to maintain high lev-

fields and are investing aggressively in future growth in

and heart diseases to their courses of treatment. As such,

China, where demand is expected to grow.

els of growth and increase profitability further. Currently,

fields such as immunochemistry and life science.

immunochemistry testing plays an essential role in the early detection of diseases and treatments.

Sysmex is highly competitive in the hematology,

Sysmex’s strengths in the immunochemistry field include highly functional, highly sophisticated instruments

In addition to expanding our reagent parameters, we will reinforce our support service structure by utilizing online support, thereby accelerating business development in the immunochemistry field.

and unique reagent parameters not available from other

Anticipated Growth over the Medium to Long Term

Highly Functional, Highly Sophisticated Instruments Hematology, hemostasis, urinalysis: We will build the earnings foundation to support further Group growth by establishing

Our HISCL™-Series fully automated immunoassay system is

ourselves as the global leader in these core businesses.

highly sensitive and fast, being capable of measuring all parameters in 17 minutes. As these instruments can perform tests on

Immunochemistry:

minute samples, they offer superior functionality, including high

To build the immunochemistry field into a driver of growth over the medium term,

levels of operability.

we will develop unique, high-value testing parameters and reinforce our competitiveness.

HISCL™-Series Characteristics

Life science: We will contribute to the realization of personalized medicine and promote the Group’s sustained growth by enhancing value through testing (diagnostics) based on leading-edge technologies.

High sensitivity

Speed

Minute samples

Usability

HISCL™-5000

Unique Reagent Lineup Life science

Fiscal Year Ended March 31, 2016 Immunochemistry

Sales

One of Sysmex’s distinguishing features in the immunochem-

practical application of technology employing a glycosylation

istry field is its unique lineup of reagents that are not available

marker* to test hepatic fibrosis. This creation of unique reagent

from other companies. We have succeeded in the world’s first

parameters is one way in which we provide new value.

New Reagent Parameters

Hematology, hemostasis, urinalysis

HISCL™ M2BPGi™

HISCL™ TARC Reagent

Uses blood tests to quickly determine the progression of

Enables quantitative and swift measurement of pre-

hepatic fibrosis from chronic hepatitis to cirrhosis of the

treatment testing for atopic dermatitis

liver and on to hepatic cell carcinoma

Determining the Progression of Hepatic Fibrosis Previously determined through hospitalization and tissue biopsy

Can be determined only by sampling blood

Measuring Treatment Effects on Atopic Dermatitis In general, severity determined through diagnosis by a physician

Plays a role in diagnosis through objective numerical data

*Glycosylation marker: A biomarker that targets structural changes in sugar chains present in glycoproteins

23 Sysmex Report 2016

Sysmex Report 2016 24

 Sysmex’s Value Creation

Growth Frontiers

Promoting Sustainable Growth in the Life Science Field

Aiming to Provide Healthcare Optimized for Each Individual Patient through Personalized Medicine To date, medical treatment has involved providing stan-

Promoting Personalized Medicine in the Life Science Business

Liquid Biopsy Gaining Traction in Personalized Medicine

Sysmex is pursuing research and development to accu-

In recent years, it has become evident that the genes,

invasive and costly approach. This technology, known as

rately capture the trend toward personalized medicine.

proteins and cells present in blood and bodily fluids

liquid biopsy, reduces the physical and economic burden

contain information about areas affected by disease.

on the patient. It has also gained attention for its advantage in enabling repeated testing (monitoring).

To date, we have focused in particular on develop-

dardized diagnosis and treatment based on disease type. However, in the post-genome era it has become possible

ing unique testing technologies for diagnosis centering

Consequently, it is becoming possible to use sensitive

to decipher genes and analyze genes, cells and proteins

on cancer. We have created a number of technologies,

analysis of blood and bodily fluids to obtain the same level

to provide treatments optimized to individual patient and

products and services in this category, such as using the

of testing results as the conventional method of conduct-

medicine through liquid biopsy and is conducting research

disease characteristics.

OSNA™ method to test for lymph node metastasis of can-

ing physical biopsies of the affected specimen—a highly

and development to this end.

Sysmex has set the strategy of realizing personalized

cer and providing Curebest™ 95GC Breast (for research)

It is becoming possible, for instance, to conduct test-

to predict the recurrence of breast cancer.

ing that will diagnose the risk of contracting a disease and to perform testing that leads to the early detection of

We are also expanding our technology platforms in

recurrence. Similarly, there exists the potential to predict

the aim of realizing personalized medicine. To this end, in

the effectiveness of drug treatment and side effects.

2013 we acquired Inostics (now Sysmex Inostics) and are pursuing business in this field.

Such tests are making it possible to select and provide

Personalized Medicine Using Liquid Biopsy Conventionally: Tissue Analysis (Biopsy) Direct analysis of the affected specimen

Blood Analysis (Liquid Biopsy) Analysis of disease-derived components in the blood and bodily fluids

Genes

medical treatment and drugs that are optimized for indi-

Proteins

viduals. In addition to reducing the burden on patients,

Cells

such testing is expected to help curtail healthcare costs.

Realizing Personalized Medicine through Testing Conventionally: Same Treatment (Same Drug)

Personalized Medicine: Medical Treatment Appropriate for Individual Patients

Testing

Measuring Cancer Cells in Blood Sysmex Inostics is using BEAMing technology

shorten testing times and labor requirements, with a view

(OncoBEAM™), which enables highly sensitive analysis of

to standardization.

minute quantities of cancer genes circulating in the blood, and plasma sequencing technology (PSS)* to conduct

medical institutions to create testing and diagnostic tech-

groundbreaking R&D on cancer gene analysis and move

nologies employing BEAMing technology.

forward with a lab assay service.

* Plasma sequencing technology (PSS): This gene sequence analysis technology assigns a unique identifier to each DNA molecule, allowing each gene to be identified, and then amplifies the DNA, enabling a high degree of specificity and sensitivity.

Conventional cancer gene testing uses surgically re-

Sysmex Applications for Each Stage of Cancer

moved specimens, but BEAMing technology enables the Stage

Screening

Diagnosis

Recurrence Prediction

Prediction of Treatment Impacts

Monitoring

We are promoting collaboration with research and

same level of testing to be conducted on blood, thereby reducing the burden on patients. This approach facilitates repeated testing even on patients with whom removing

Application

Lymph node metastasis rapid detection system using the OSNA™ method*

Curebest™ 95GC Breast (assay service for breast cancer recurrence prediction analysis)

the affected specimen would be difficult. As a result, the technology is expected to find application in the early OncoBEAM™/PSS (analysis of minute genetic mutations)

detection of cancer recurrence and monitoring. Until now, the use of BEAMing technology largely involved manual processes, but by leveraging the expertise it has accumulated in automation, Sysmex is working to

*OSNA™ method: Abbreviation for One-Step Nucleic acid Amplification, a method developed by Sysmex. This enables metastasis of a single lymph node to be determined in approximately 30 minutes.

25 Sysmex Report 2016

Sysmex Inostics

Sysmex Report 2016 26

Business Activities Sysmex is leveraging its business in the in vitro diagnostics domain to expand its business globally.

27 Sysmex Report 2016

Sysmex Report 2016 28

 Business Activities

Business Domains and Market Positioning

We continue to grow by taking advantage of our strengths in the expanding market for in vitro diagnostics. Active in the IVD Domain, Which Is Essential to Healthcare

Examination

Diagnosis and Treatment

Recovery

Sysmex’s Core Testing Fields

Clinical Laboratory Testing

Clinical testing, used in medical diagnosis and treatment

In Vitro Diagnostics

In Vivo Diagnostics

Hematology* Hemostasis Urinalysis* Immunochemistry Clinical Chemistry* and others

X-ray/MRI Electrocardiogram measurement Respiratory function testing Electroencephalogram testing and others

or in monitoring the effects of treatment, is essential to healthcare. Clinical testing can be broadly divided into two categories: in vitro diagnostics (IVD) that involve the examination of blood, urine or cell samples taken from the body and in vivo diagnostics that involve direct examination using X-rays or electrocardiograms. Sysmex’s primary business is in the IVD domain.

Sysmex business field

Platelets Red blood cells

Hematology Testing that measures and analyzes the number, type and size of red, white and other blood cells [Anemia, leukemia, thrombocytopenia, etc.]

White blood cells (neutrophils) White blood cells (lymphocytes)

* Diagnostics used for medical checkups as well

Hemostasis Testing of blood plasma to determine the ability of blood to clot when wounded and to dissolve clots

FDP Clotting factors

Market Position

[Hemorrhagic diseases (hemophilia, etc.), thrombotic diseases (deep-vein thrombosis, etc.)]

D-Dimer

the leading company in the IVD domain.

Sysmex’s business in the IVD domain involves the proviworld, and we rank among the top 10 companies in the

meet increasing healthcare needs in advanced countries

world in the IVD domain. In the three fields of hematol-

and healthcare infrastructure being put in place in emerg-

ogy, hemostasis and urinalysis (sediment), we have the

ing markets. At the same time, global competition is grow-

leading share of the global market (including through

ing increasingly fierce, with companies from other sectors

alliances). In addition to these three fields, in Asia we are

entering our field. Sysmex is responding to this changing

developing our business in immunochemistry and other

environment by leveraging its unique strengths to maximize its corporate value and steadily increase its market position.

growth fields, as we are aiming to position ourselves as Market Scale and Sysmex’s Business Domains Market Market Growth Scale ($ million) Rate

Testing field

Composition of Sales

Share of the Hematology Market Production

(Fiscal year ended Instruments Reagents March 31, 2016)

Sales and Service Area

Other companies

3,100

6%

63.1%





Global

Roche

Hemostasis

1,800

5%

17.4%





Global

Siemens EIKEN CHEMICAL bioMérieux

1,000 320

6%

Immunochemistry

18,000

6%

6.9%





Global

3.1%





Asia



Asia

JEOL Furuno Electric

Clinical chemistry

7,400

5%

1.4%





Others (genes, blood sugar, etc.)

21,700



8.1%









IVD market

53,000

6%











Note: Sysmex’s assumptions

29 Sysmex Report 2016

Testing to determine the status of viruses, hormones and proteins, and to determine causes and types of disease

Platelets

[Infectious diseases (hepatitis, AIDS), cancer, allergies, etc.] Viruses

Clinical Chemistry

Proteins

Hormones

Testing to determine the state of metabolism-related organs by studying sugars, lipids, proteins and other components

Lipids

[Diabetes, arteriosclerosis, liver dysfunction, kidney dysfunction, etc.]

Sugars

Proteins

Sysmex

Life Science

Inorganic matter

Alliances

Hematology Urinalysis Of which, sediment urinalysis

Immunochemistry

Fbg

The IVD domain is forecast to continue growing to

sion of instruments, reagents and software around the

Hematology H

Lymph nodes

DNA

Cancer cells

ȉ Lymph node metastasis testing Testing to determine the metastasis of cancer cells to the lymph nodes ȉ Gene testing Testing to analyze genetic information, diagnose the likelihood of contracting gene-related diseases or determine drug compatibility

Urinalysis Testing for the presence of sugar, protein or blood in the urine, the presence of urinary tract stones, kidney function and signs of diabetes

 Own products  Alliances

Sysmex Report 2016 30

 Business Activities

Principal Testing Fields and Products

Hematology

Urinalysis

Immunochemistry

Urinalysis entails testing for the presence of sugar, pro-

Immunochemistry tests are performed on blood serum,

or other blood cells to determine whether a more detailed

by manufacturers from emerging markets, as well as our

tein or blood in urine and can be broadly divided into two

the supernatant fluid isolated after blood separation.

examination is necessary. In addition to instruments,

competitors in Europe and the United States. Sysmex is

types: chemistry urinalysis and sediment urinalysis. The

Antigen-antibody reactions are used to test for the pres-

these tests require specific reagents for ongoing use, such

responding by providing an extensive product portfolio,

first type involves dipping a test paper into urine to deter-

ence of HIV and the hepatitis virus and to check for

as for dilution and staining.

offering unique clinical value and differentiating itself

mine whether the abovementioned substances are pres-

cancer. These tests use specialized reagents. We are aug-

Recent years have seen the entry into this business

Hematology is a type of screening that counts red, white

from competitors with its support services. As a result, in

ent. In the second, formed elements, including blood and

menting our lineup of proprietary reagents and working

tion models, used for determining basic parameters, as

2007 we acquired the top share of the global market in the

other cells, are analyzed.

to develop our business in Asia, particularly in Japan and

well as five-part white blood cell differentiation models.

hematology field, and our share has steadily risen since.

We introduced the world’s first urine formed sedi-

In the field of animal testing, we provide IDEXX

Sysmex offers three-part white blood cell differentia-

China, through sales of the HISCL™-Series of fully auto-

ment analysis system—the UF-Series—that uses the flow

mated immunochemistry analyzers, which perform highly

deliver a high degree of clinical significance. We also offer

Laboratories, Inc., with hematology analyzers for animals

cytometry method. This series has the leading share of the

sensitive, high-speed assays on minute sample quantities.

a wide-ranging lineup of system products that can be used

on an OEM basis.

global market. Furthermore, in January 2016 we entered

Numerous reagents can be used with these models to

into a business alliance with EIKEN CHEMICAL CO., LTD.,

for rapid, high-volume testing in large-scale labs.

to expand our portfolio of analyzers of urine chemistry, (Five-part white blood cell differentiation instruments)

thereby responding to diverse urinalysis testing needs.

XN-Series

Reagents

XN-L-Series HISCL™-5000

XN-1000™

UD-10™

XN-9000™

UF-5000™

Information Diversity and Function

UC-3500™ (For overseas sale only)

XN-450™

Clinical Chemistry Clinical chemistry involves examining the enzymes, sugars and proteins in blood serum and plasma to determine the

(Three-part white blood cell differentiation instruments)

nutritional status, liver and kidney functions, and testing for contraction of conditions such as hyperlipidemia and Reagents

arteriosclerosis. Sysmex has signed agreements with JEOL Ltd. and

Reagents pocH™-80i

Life Science

Furuno Electric Co., Ltd., involving automated clinical

XP-300™

The OSNA method, which Sysmex developed, has been launched into markets for the use in systems for the rapid

Efficiency and Handling Capability

detection of lymph node metastasis of breast and other types of cancer.

Hemostasis Hemostasis involves testing the blood plasma for two

and providing support services for hemostasis products.

blood functions: coagulation, or clotting, and fibrinoly-

This combined business now accounts for the leading

sis, the process by which blood clots are broken down.

share of the global market in the hemostasis field.

This type of testing enables the diagnosis of hemophilia

selling these analyzers, leveraging its network in China and other parts of Asia.

Our BEAMing technology is also used to detect min-

Reagents

ute quantities of genes in the blood, allowing for the early detection and recurrence monitoring of cancer, monitor-

Others

ing the effects of anti-cancer drugs and the creation of Our health monitoring

new tests.

and thrombosis and the monitoring of their treatment.

chemistry analyzers and is

system measures hemo-

Furthermore, testing blood beforehand enables health-

globin levels without blood

care professionals to determine whether blood is likely to

sampling and is used as a

coagulate properly during surgery.

tool for monitoring athletic

In 1995, Sysmex concluded a business alliance with

condition.

Siemens Healthcare Diagnostics Inc. (previously, Dade Behring Inc.), forging a synergistic relationship in selling

31 Sysmex Report 2016

CS-5100™

RD-100i™

LINOAMP BC™ (reagent)

ASTRIM FIT™

Sysmex Report 2016 32

 Business Activities

Research and Development

In addition to a wide range of proprietary technologies, we are expanding the possibilities of growth by conducting R&D in collaboration with research institutions around the world. Technological prowess forms the foundation on which

Developing World-First Technologies

Sysmex has grown as a company. We consider R&D to be

Technopark and provided it with highly functional, high-

An R&D Structure That Generates Combinations of a Host of Technologies

performance testing equipment.

Sysmex’s inimitable R&D activities began in 1963 when it

the wellspring of our expansion and, accordingly, we invest

developed the CC-1001, becoming the first company in

aggressively in this area. In the fiscal year ended March 31,

The integration of different technologies employed in our

Japan to commercialize automated hematology analyzers.

2016, research and development expenses amounted to

instruments, reagents and software enables us to con-

Since then, we have developed a host of other world-first

¥17.7 billion (R&D expenses to net sales: 7.0%).

stantly incorporate voice of the customer into our product

IVD technologies. We are in the process of expanding our

offerings. At Technopark, our hub for R&D, a congregation

business from our mainstay field of hematology into the broader IVD domain. We are also working to create new diagnostic technologies toward the realization of person-

of researchers and engineers in a host of fields—electri-

Three Technology Platforms for Blood and Other Analysis

cal, mechanical, biological, chemical and IT, among oth-

Sysmex has formulated its perspectives on intellectual

ers—encourages interaction and drives the creation and

property, and the Company conducts invention identifica-

fusion of new technologies. We have built up a global R&D

tion activities, acquires intellectual property rights and

Sysmex’s efforts to improve IVD test quality at the micro-

structure comprising R&D facilities in the United States,

performs research into the intellectual property rights

scopic level and combine a wide range of technologies

Germany, China and other countries.

of third parties on a global basis. Our R&D divisions are

alized medicine.

R&D Expenses/R&D Expenses to Net Sales (%)

20

20 R&D expenses R&D expenses to net sales

17.7

15 10.7 11.2 10 9.0

12.3 11.9 12.1

13.2

14.6

15

9.2

8.9

8.3

9.6

9.7

10

9.9

8.8

8.3

5

In addition to expanding our own technology plat-

working together to strengthen liaisons and make intel-

measurement, fluid control and detection. We currently

forms, through open innovation we are pursuing collabo-

lectual property activities more meaningful. We are also

have highly sensitive next-generation technology plat-

ration with research institutes, universities and medical

bolstering the motivation of researchers by enhancing our

forms for measuring genes, cells and proteins. As we work

institutions in Japan and overseas. These efforts have

patent award systems and system of bonuses for patent

toward the realization of personalized medicine, in addi-

led to the introduction of new candidates for diagnostic

performance.

tion to our own technologies we have been redoubling

parameters and enable us to bring advanced and highly

efforts to expand our technologies through proactive

valuable diagnostic technologies and reagents to frui-

Sysmex products have been discovered in emerging mar-

M&A and alliance activities. As one aspect of these efforts,

tion more quickly. To accelerate this initiative, in 2015

kets. To ensure the reliability of test results, we are work-

in 2013 we converted German companies Inostics GmbH

we established the Sysmex Open Innovation Lab within

ing to ensure that appropriate reagents are used.

have led to the establishment of technologies for particle

(¥ billion)

7.2

6.6

7.0 5

0

0

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

In recent years, counterfeit reagents purporting to be

and Partec GmbH to our subsidiaries.

Promoting Open Innovation

Sysmex’s Technology Platforms

Technologies gaining traction in personalized medicine (high sensitivity)

OncoBEAM™ ȉ PSS

MI (molecular imaging)-FCM

Digital HISCL™

Clinical PCR*1

Clinical FCM

Ultrahigh-sensitivity HISCL™

Existing technologies

OSNA™

FCM*2

HISCL™ (chemiluminescence)

Advanced and high-value technologies (diagnostic technologies and diagnostic reagents)

Generate quickly

Fusion of technologies through open innovation

Universities Biomarkers and other candidates for highly valuable diagnostic parameters

Medical institutions Research institutions

Sysmex’s technology platforms Genes

Cells

Proteins

*1 PCR: A gene amplification technology for multiplying small quantities of DNA into large amounts *2 FCM: Method involving the flow dispersion of minute particles and the use of laser light to optically analyze the minute flows. Used primarily to observe individual cells

33 Sysmex Report 2016

Intellectual Property Activities That Increase Our Competitive Advantage in the Global Market

Genes, cells, proteins

Pharmaceutical manufacturers Venture companies

Sysmex Report 2016 34

 Business Activities

Production

Our instrument production structure is designed to ensure high levels of quality, and we are building a global reagent production structure to ensure a stable supply. Instrument Manufacturing Aimed at Realizing High “Made-in-Japan” Quality

time until customers receive our products and is lowering distribution costs. In order to respond to overseas deliver-

Advanced Technologies Underpinning Our Proprietary Manufacturing System

A Global Reagent Production Structure to Ensure a Stable Supply

ies, the factory is capable of handling processes ranging The “made-in-Japan” quality of Sysmex’s products has

from container loading to customs processing. As a result,

Sysmex has built a proprietary manufacturing support sys-

Demand for reagents is increasing in line with growth in our

earned us the trust of markets around the globe.

we ensure that products arrive at customer destinations

tem that makes use of information technology—a system

installed instrument base. Sysmex operates reagent factories

more quickly and enhance our logistics efficiency.

where technology underpins assembly tasks performed

at two locations in Japan, as well as seven locations in six oth-

by people. One of the system’s components is Smart Pro,

er countries. This network allows us to steadily meet demand

The instruments we provide must meet extremely high quality requirements, but as they involve multiple

As around 90% of our instruments are shipped over-

precision components, automated and mechanized pro-

seas, we have in place quality control systems to comply

a manufacturing activity support system we developed.

in regions around the world. We also expect global demand

duction is difficult. To address this issue, we have intro-

with different companies’ legal requirements, as well as an

In addition to supporting workers and handling process

to increase, so we are reinforcing our structure by setting up

duced leading-edge production and quality management

environmental protection system.

management and quality control, this system identifies

and expanding reagent factories in various regions. We ex-

technologies to support manual processes. The result is an

the status of an entire factory in real time, including such

panded reagent factories in China in 2012, Singapore in 2014

accurate and highly efficient production system.

information as the state of production and number of

and Germany in 2015. We are also increasing our reagent

workers, thereby controlling all manufacturing activities.

manufacturing area in the United States, an effort scheduled

boast top-class world technological capabilities to ensure

We have also introduced the 3D Move Manual, which pro-

to begin full-scale operation in September 2017.

high levels of quality from the materials and component

vides three-dimensional video to demonstrate the work

levels.

procedures involved in instrument assembly. Using IT to

dition to ensuring high levels of manufacturing quality and

support human workers in this way enables us to increase

efficiency, we make a point of preparing for future increas-

levels of both quality and productivity.

es in production items and taking the global environment

We work in cooperation with Japanese suppliers who

By producing our instruments in Japan*, we are able to deliver high-quality, high-value-added products to customers around the globe.

When we expand reagent production factories, in ad-

into account.

*Sysmex Partec products are manufactured in Germany

Instruments Manufactured in Japan for Delivery around the World Building a Global Production Structure for Reagents

Establishment of i-Square, Our New Core Instrument Factory To prepare ourselves for growing instrument demand and

Germany

substantially increase our manufacturing capacity, in June

China (Jinan)

2014 we established a core instrument factory, called

Japan (Seishin) China (Wuxi)

i-Square. The new factory, combined with our existing

Japan (i-Square)

Kakogawa Factory and two factories at affiliated compa-

United States

Japan (Ono) India

nies in Japan, has tripled the Sysmex Group’s instrument manufacturing capacity. We have established a warehouse within i-Square that

Singapore

enables the facility to handle all processes from manufacturing to shipping. This arrangement shortens the lead

35 Sysmex Report 2016

Production using the 3D Move Manual

Brazil

Instrument factories Reagent factories

Sysmex Report 2016 36

 Business Activities

Sales and Support Services

We have built a structure to provide high-quality products and support services to customers in more than 190 countries around the world.

Sysmex Inspiring Trust and Confidence through Its Sale and Support Services

Creating a Global Sales and Support Service Structure Tailored to Regional Characteristics

Providing a Testing Environment That Instills Confidence

downtime during which testing cannot be performed. In addition to advanced countries, we are steadily increasing the number of customers who employ this system in Asia

Sysmex plays an important role in supporting laboratory

Since its establishment of a subsidiary in the United

Sysmex builds support service structures that are attuned

and other emerging markets.

testing. Interrupted testing means that physicians become

Kingdom in 1991, Sysmex has expanded its direct sales

to markets. Our Customer Support Center provides sup-

*Limited to customers with whom we have entered into specific agreements

unable to diagnose their patients. We work to prevent

and support service structure globally, conducting sales

port around the clock, 365 days a year* to field inquiries

this situation by selling products and providing after-sales

and providing support services that meticulously meet

about Sysmex products and respond to any trouble. We

services and scientific information, thereby inspiring trust

customers’ needs. We are also accelerating our global

also have dedicated staff with extensive specialized knowl-

and confidence among customers around the world. As a

development through indirect sales, utilizing networks on

edge on hand to respond to scientific queries.

result, Sysmex enjoys high levels of customer satisfaction

the basis of alliances.

for its products and support service activities.

Providing New Added Value to Deliver Even Better Test Results

We have established Customer Support Centers in Japan, the United States, China, Germany and South

In providing high-quality healthcare services, it is

meeting rapidly growing demand for testing in emerging

Making proposals tailored to individual regions, we are

Korea, and service engineers visit customer locations

important for customers to have a good understanding of

out the world to augment the quality of our support ser-

markets by providing compact products that carry forward

directly, as needed.

Sysmex’s products. For this reason, in addition to commu-

vices. This information is also provided as feedback to our

the functionality and operability of our high-end products.

We are also promoting the global rollout of our

nicating information, we conduct training on actual instru-

R&D divisions to aid in future product development.

In this way, we deliver products and services that meet

network support system, SNCS™ (Sysmex Network

ments to ensure that customers know how to use Sysmex

the needs of individual regions. In advanced countries that

Communication Systems). This system, which conducts

instruments properly and analyze data.

require highly specialized testing, in addition to provid-

quality control of customers’ instruments in real time and

ing instruments and reagents we make overall laboratory

automatically monitors the operating environment, has

around the world, helping to raise level of healthcare by

proposals aimed at enhancing the efficiency of testing.

been adopted by and earned high praise from numerous

providing physicians and laboratory technologists with the

customers. By determining instrument conditions in real

most recent information on hematology. We have held

time, SNCS™ perceives errors before they arise. The sys-

scientific seminars in Japan every year since 1978. We also

tem also allows instrument diagnosis and maintenance

conduct seminars on a regular basis in other countries

to be performed via remote operation, helping to reduce

throughout Asia, including China, Thailand and Indonesia.

We share the content of customer inquiries through-

Customer Assessment in the United States Sysmex Earns Highest Customer Satisfaction Rating for Overall Service Performance for the Past 10 Years 5.6

9.5

5.4

9.0

5.2

8.5

5.0

8.0

4.8

7.5

4.6

7.0

4.4

6.5

4.2

6.0

In addition, Sysmex conducts scientific seminars

9.30 8.88

SNCS™ Network Support Service Customer Support Centers

Quality Control Measurement Data Activity Log Data

Customers (Hospitals, commercial laboratories)

(Network support services) 2007 Sysmex

2008 Competitor 1

2009 Competitor 2

Evaluations at six levels from 2007 to 2012 Evaluations at 10 levels from 2013

37 Sysmex Report 2016

2010 Competitor 3

2011 Competitor 4

2012 Industry Avg.

2013

2014

2015

2016

Source: IMV ServiceTrak™ 2016 Hematology

Online Quality Control Failure Prediction Web Information Services, etc.

Sysmex Report 2016 38

 Business Activities

Overview of Business by Geographic Region

Americas We have acquired a high market share in the hematology field in North America. We aim to achieve further growth by establishing bases in Central and South America.

Activities in the Fiscal Year Ended March 31, 2016 Sales

Growth Trajectory Urinalysis 4.2% Others 1.4% Hemostasis 5.7%

(¥ billion)

Up 20.1% year on year

60

56.4

Hematology 88.6%

47.0

Sales by Business*

45

38.5 30

19.1 20.8

25.4 26.8 23.3 23.4

29.7 *Includes sales from Japan to IDEXX (for animals)

15 Central and South America 11.8% 0

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Canada 4.1%

Sysmex commenced direct sales in the United States in

and support service network through alliances. We are

2003. Since that time, we have earned a high degree of

reinforcing our support for distributors by setting up loca-

customer satisfaction by proposing advanced services and

tions in key countries.

solutions, and our sales and market share in the region

the United States and Brazil. In preparation for further

subsidiary in Canada and began direct sales in that coun-

demand growth, we are expanding our U.S. reagent factory,

try. In Central and South America, we have built up a sales

and construction is scheduled for completion in 2017.

Market Overview North America

Central and South America

Characteristics: • The world’s largest market

Characteristics: • Medical needs increasing in line with economic growth

• Number of insured people increasing, due to reforms in the medical insurance system

United States 84.1%

• Population of approximately 620 million

• Sharply rising medical expenses, increasingly diverse medical needs, growing level of sophistication

Sales by Area

Operating Income (Segment Profit)

We produce reagents at two locations in the region—

have expanded accordingly. In 2007, we also established a

*Revision in intragroup transaction prices (¥ billion)

Initiatives

4

3.2 3

2.7

2.8 * 2.1 *

2

1.7

2.4 *

2.4 *

2.0 *

0.9

1

0.5 0

• Developing online service activities (through SNCS™, virtual training, etc.) to enhance support services Opening an office to enhance sales promotion in the • Direct Sales 70.9%

Indirect Sales 29.1%

Direct and Indirect Sales

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

1USD=¥120.1 in the fiscal year ended March 31, 2016 (1USD=¥109.9 in the previous fiscal year)

 Sales rose substantially, as service activities generating high levels of customer satisfaction and the competitiveness of the XN-Series led to higher sales of instruments, reagents and services.  Operating income decreased due to a reversal in deferred service revenue and income from the fiscal year ended March 31, 2015, and a rise in SG&A expenses to strengthen sales and support service activities in the United States.  Status in Principal Areas • In the United States, sales grew due to higher sales of system products, stemming from the acquisition of largescale projects in the hematology field. • In Central and South America, sales rose slightly, as the acquisition of a large-scale government project in Mexico overcame the impact of depreciation in the value of the real.

west coast area of the United States

• Entered agreements with distributors in 33 countries in

Central and South America, and established a sales and support service network

• Setting up bases in major countries, including Brazil and Mexico

Training studio (Sysmex America)

Achieving a High Level of Customer Satisfaction through Advanced Support Services We have customers across the vast expanse of North America. To ensure that customers are able to use our products with peace of mind wherever they are located, therefore, we are using IT to augment our support services. For instance, we can provide service using live feeds from our training studio at our regional headquarters near Chicago to offer assistance on instrument operating methods and repair procedures.

Customer

Network Allows two-way communication between the studio and a customer terminal

Aiming for Further Growth By providing advanced support services and reinforcing our sales and support service structure in the U.S. west

products in the hemostasis and urinalysis fields. The market in Central and South America is expected

coast area, we are working to achieve further growth in

to expand in line with economic growth in the region. In

the hematology field in North America.

response, we are establishing bases in major countries to

To achieve further growth going forward, we are also

further enhance our support for distributors.

working to boost competitiveness by introducing new

39 Sysmex Report 2016

Sysmex Report 2016 40

 Business Activities

Overview of Business by Geographic Region

EMEA (Europe, the Middle East and Africa) We operate in more than 100 countries in this region, including advanced countries and emerging markets. We are building sales and support service structures tailored to regional characteristics. Activities in the Fiscal Year Ended March 31, 2016

Growth Trajectory

Sales Others 14.4% (¥ billion)

80

Up 8.2% year on year 60

63.2

68.4

Hemostasis 10.8%

53.1 39.1

40

31.5

Urinalysis 4.8%

Hematology 70.0%

Sales by Business*

*Includes sales from Japan to IDEXX (for animals)

Others 5.6% Middle East, Africa 13.4% Eastern Europe, Russia 7.8%

Operating Income (Segment Profit)

Five major countries 48.3%

8.6

4.6

5.7

4.5

3.5

0

5.1 *

Direct Sales 66.8%

Indirect Sales 33.2%

2.7 *

2.5

the United Kingdom, our first time to do so overseas. We

region, in 2015 we expanded our reagent factory in

established subsidiaries in countries and regions where

Germany, creating a structure to ensure a stable supply

Advanced Countries

Emerging Markets

Region: Five major countries (Germany, the United Kingdom, France, Spain, Italy), other parts of Europe

Region: Eastern Europe, Russia, Middle East and Africa

Characteristics: • Increasingly diverse medical needs, ongoing sophistication

Direct and Indirect Sales

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

1EUR=¥132.6 in the fiscal year ended March 31, 2016 (1EUR=¥138.8 in the previous fiscal year)

 Sales increased throughout the region—in the Middle East, Russia and other emerging markets, as well as the five major countries.

as potential areas of new growth

• Population of approximately 1.7 billion

 Status in Principal Areas • In the five major countries, large-scale projects in Italy and Spain pushed up sales. • In other parts of Europe, sales increased in Denmark due to the acquisition of major projects, as well as in other countries. • Sales increased thanks to expansion in the hematology field in Poland, and in Russia due to the acquisition of a project for a large-scale commercial lab. • In the Middle East and Africa, sales increased thanks to the winning of a tender offer for facilities in Saudi Arabia operated by the country’s Ministry of Health.

• Establishing bases in markets slated for future growth, including Eastern Europe, Russia, the Middle East and Africa Off • ering compact instruments for small and mediumsized hospitals and other products and services in response to emerging market needs

Reinforcing Structures in Response to Regional Characteristics The EMEA region comprises more than 100 countries and is characterized by diverse languages and business practices, presenting the need to build structures that cater to the characteristics of individual areas. We are meeting this challenge by establishing bases in the region, setting the stage for us to strengthen customer relationships and proposal-making capabilities. In recent years, we have set up subsidiaries mainly in emerging markets, including in Turkey in 2014 and Ghana in 2015, and bringing our number of companies in the EMEA region to 27.

 Operating income fell because of the revision in intragroup transaction prices and increased operating expenses at Sysmex Partec and Sysmex Inostics.

41 Sysmex Report 2016

Characteristics: • Ongoing efforts to build medical infrastructure in line with economic development

• Amid efforts to curtail rising medical costs, continuing laboratory mergers and closures, growing needs for efficiency increases

• Proposing systemization to address the diverse issues customers face, and enhancing testing efficiency and quality Investing in the life sciences, FCM and other businesses •

7.5

5.3

In response to growing reagent demand in the EMEA

Initiatives

Other parts of Europe 24.9%

10.0

5.3

and support service structures.

distributors. In 1991, we began conducting direct sales in

Sales by Area

*Revision in intragroup transaction prices (¥ billion)

5.1

in Germany in 1972 and expanded our sales area through

of reagents.

39.4 35.3 36.4 35.2 37.0

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

5.0

markets were expected to grow and reinforced our sales

Market Overview

20

0

In the EMEA region, we established a representative office

Sysmex West and Central Africa (Ghana)

Aiming for Further Growth In advanced countries, efforts are underway to curtail medical costs, and laboratories are merging or closing. In

and support service structures and promote business. We are positioning EMEA as an important location for

response, Sysmex is suggesting ways to increase labora-

R&D in the life sciences and FCM businesses, as well as

tory efficiency and promoting high-value-added proposals.

manufacturing, and plan to accelerate these businesses.

In emerging markets, we are continuing to set up sales

Sysmex Report 2016 42

 Business Activities

Overview of Business by Geographic Region

China We have led other companies in developing a base of operations in this region. We will shore up our position as the leading company in the IVD domain. Activities in the Fiscal Year Ended March 31, 2016

Growth Trajectory

Sales (¥ billion)

80

Up 30.7% year on year

60

65.1

40

20

6.8 0

8.1

10.1 11.8

15.0

19.2

market early on. We established a reagent factory in Jinan

that approximately quintupled its production volume. We

in 1995, followed by a representative office in Shanghai in

are proactively holding scientific seminars and engaging in

1996. Through measures such as these, we led other com-

other efforts contributing to the quality of testing.

the country. In anticipation of growing demand, in 2012 Hematology 43.1%

Urinalysis 12.2%

36.2

we expanded our reagent factory, setting place a system

panies in initiatives to build a robust base of operations in Immunochemistry Others 6.5% 1.8%

49.8

Sysmex recognized the growth potential of the China

24.4

Sales by Business

We are expanding our business portfolio in China, such as by entering the immunochemistry field there in 2015.

Market Overview • In line with growing demand for healthcare, needs for heightened testing efficiency and automation are increasing, leading to a switch toward highend instruments

Characteristics: • Diverse business practices, varying by area • Chinese government investing in infrastructure to increase the quality of healthcare in the country

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Hemostasis 36.4%

• Population of approximately 1.4 billion

Operating Income (Segment Profit)

Initiatives

*Revision in intragroup transaction prices (¥ billion)

8

6.8 *

5.5

6

*

Indirect Sales 98.7%

4.1 *

4

2.7 2

0.7 0

Direct Sales (Hong Kong) 1.3%

0.8

2.4 *

2.3 *

2.3 *

Direct and Indirect Sales

1.3

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

1CNY=¥18.9 in the fiscal year ended March 31, 2016 (1CNY=¥17.8 in the previous fiscal year)

 Sales in the hematology, hemostasis and immunochemistry fields pushed up net sales substantially.  Operating income was down year on year due to impact of the revision in intragroup transaction prices and higher SG&A expenses to reinforce activities in the immunochemistry field.  Status of Principal Fields • In the hematology field, sales were up year on year, reflecting robust sales of instruments in the XN-Series for system proposals. In • hemostasis, sales were up significantly due to strong sales of the CS-Series and increased demand for fibrin parameter reagents. • Sales were flat in the urinalysis segment, due in part to the effect of a period of transition to new products. • In the immunochemistry field, sales increased due to expanded sales of theHISCL-Series, commencing in the fiscal year ended March 31, 2015.

43 Sysmex Report 2016

• Entered in agreement with more than 200 sales distributors, and building our business base • Making inroads in immunochemistry, as well as hema-

• Establishing an advantage in this market, which has a need for high-end instruments

tology, hemostasis and urinalysis fields

Moving into the Immunochemistry Field Leveraging the geographic advantage conferred by our origins in Asia, we have set up a sales structure that takes market characteristics into account. By taking advantage of the brand power we have cultivated in the mainstay fields of hematology, hemostasis and urinalysis, we have begun proactive developments in the immunochemistry field, as well. We are promoting sales of the HISCL™-Series, a fully automated immunoassay system characterized by high levels of sensitivity and speed. Going forward, we aim to augment sales by increasing the number of unique measurement parameters.

Reagents

HISCL™-800

Aiming for Further Growth We endeavor to step up our dominance in the in vitro diag-

We are also proactively undertaking efforts on the

nostics domain in the China market by stepping up sales

scientific support front, as we strive to further enhance

and distributor support in the immunochemistry field, as

awareness of the Sysmex brand and bolster our brand

well as the hematology, hemostasis and urinalysis fields.

presence in this market.

Sysmex Report 2016 44

 Business Activities

Overview of Business by Geographic Region

Asia Pacific The Asia Pacific market has a population of around 2.4 billion people. Through scientific awareness activities centered on emerging markets, we are contributing toward increases in the quality of testing. Activities in the Fiscal Year Ended March 31, 2016

Growth Trajectory

Sales Others 9.8%

Hematology 68.7%

Urinalysis 8.1%

(¥ billion)

24

Up 12.3% year on year

20.0 17.8

18

Hemostasis 13.4%

Sales by Business

14.7

The 1994 establishment of a representative office in

support service network. In this manner, we are fortifying

Singapore marked our entry into this market. Taking

our presence in the Asia Pacific market.

advantage of our position as a company headquartered in

In 2014, we relocated and expanded our reagent fac-

Asia, we took the lead over our competitors in establishing

tory in Singapore. With this factory, combined with our

bases broadly across the region. Recent activities include

reagent factory in India, we are making steady strides

opening a branch in Myanmar in 2015, strengthening sup-

toward meeting increased reagent demand in the region.

port services and building an industry-leading sales and

12

6

0

4.0

5.3

5.0

5.8

7.1

7.8

9.0

Market Overview

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Taiwan, South Korea, Mongolia 30.1%

Operating Income (Segment Profit)

Southeast Asia 40.6%

Characteristics: • Includes both advanced and emerging markets, with diverse languages and business customs • In advanced countries, increasingly diverse healthcare needs and growing sophistication

Sales by Area

• In emerging markets, demand for healthcare and testing is rising in tandem with economic growth. • Government-led advances in healthcare infrastructure development in some countries • Population of approximately 2.4 billion

*Revision in intragroup transaction prices

Initiatives

(¥ billion)

2.0

1.8 *

Oceania 11.4%

• By establishing local subsidiaries and through distribu-

South Asia 17.9% 1.5

1.3 * 1.0 *

1.0

0.8 0.5

0.5

0.6

0.3 0

tor activities, building a regionally optimized sales and service structure

1.2 *

0.7 * 0.3 *

Direct Sales 45.1%

Indirect Sales 54.9%

Direct and Indirect Sales

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

 Net sales for the region increased, with higher sales centered on the hematology field in India, Indonesia and South Korea.

• Developing scientific awareness activities in each country Strengthening Scientific Awareness Activities to Raise the Quality of Testing in Emerging Markets In some emerging markets, there is a need to conduct quality assessments to ensure the accuracy of testing results and further increase the quality of testing. Sysmex works with local governments and academic societies to conduct external quality control*, thereby contributing to the standardization of testing results. We also provide academic materials catering to national and regional characteristics, and hold scientific seminars. Efforts such as these are designed to enhance awareness of the importance of testing.

 Operating income increased, reflecting higher sales.  Status in Principal Areas • Sales increased in Southeast Asia, centered on higher sales in the hematology field in Indonesia, Vietnam and the Philippines. • In South Asia, sales were up due to expansion in the hematology and clinical chemistry fields in India and significant increases in Bangladesh. • Sales were up slightly in Oceania, reflecting the acquisition of large-scale projects in Australia, as in the previous year. • Sales were up in South Korea, centering on hematology instruments and reagents.

45 Sysmex Report 2016

• Commencing direct sales in India in the hemostasis and urinalysis fields • Expanding our product portfolio by leveraging our brand strength in the Asia region.

Held a scientific seminar in the Philippines in 2015 (attended by 853 people)

* External quality control: These activities are conducted to check differences in testing results at different medical institutions and perform calibrations. Instruments are adjusted by comparing the measured results obtained at individual medical institutions with the reference values set by standard instruments.

Aiming for Further Growth Going forward, demand in many countries is expected

governments, Sysmex is working to steadily increase its

to increase in line with economic growth. By enhanc-

market share in the hematology field. In the hemostasis,

ing its direct sales structure and stepping up scientific

urinalysis and immunochemistry fields, we are launching

awareness activities in collaboration with various national

new products to expand our product portfolio.

Sysmex Report 2016 46

 Business Activities

Overview of Business by Geographic Region

Japan (including exports to overseas subsidiaries) As a leading company in the IVD domain, we aim to boost overall laboratory sophistication and efficiency, and are working to create new testing parameters.

Activities in the Fiscal Year Ended March 31, 2016

Growth Trajectory

Sales (including intra-area transfers) 160

Up 17.2% year on year

144.0 122.9

120

103.8 64.9 66.8 69.0 66.4

75.7

Intra-Area Transfers (Exports to Group Affiliates, Others)

82.7 88.1

Sales to External Customers (IDEXX and Others)

40

Sales to External Customers (Japan)

0

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Others* 25.4%

Hematology 42.9%

Sales by Business Sales to External Customers (Japan)

Immunochemistry 8.6% Urinalysis 5.6%

48

41.7 *

36

Direct Sales 100.0%

31.1 *

24

20.1 * 7.8 4.6

2.9

6.8 *

8.6 *

R&D and manufacturing. We manufacture high-end instru-

we have also expanded our efforts to encompass the fields

ments in Japan for export to other counties and shipment

of hemostasis, urinalysis, immunochemistry and the life

to customers in a variety of locations around the world.

sciences. Furthermore, we have enhanced our support

Market Overview

Direct and Indirect Sales

11.9 * Sales to External Customers (Japan)

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

• Amid calls to reduce healthcare spending, a growing focus on personalized medicine and preventive medicine

Initiatives

• As a comprehensive IVD supplier, supply products in a

*Revision in intragroup transaction prices

We are also working to create new value as a hub for

products in the 1990s. Centered on the hematology field,

Hemostasis17.5%

(¥ billion)

0

support service.

• Increasingly diverse and sophisticated healthcare needs

Operating Income (Segment Profit)

7.4

over the years by developing Japan’s first automated

Characteristics: • Decline in the birthrate and rapid aging of the population

* “Others” includes clinical laboratory information systems and other items.

12

service structure, including through the SNCS™ network

hematology instrument in 1963 and launching system

(¥ billion)

80

Sysmex has contributed to the development of testing

wide range of fields in addition to hematology, and propose solutions that boost overall laboratory efficiency

• Develop new and unique testing parameters in the immunochemistry field

Stepping up Our Proposal of Solutions Leading to Higher Levels of Overall Laboratory Sophistication and Efficiency By optimizing laboratory workflows, Sysmex makes high-valueadded proposals, such as shortening the amount of time required for testing. As a result, laboratory technologists can provide physicians with more detailed information in combination with test results. In addition, the use of IT to manage laboratory data facilitates complex judgments and verification and allows testing results to be communicated to physicians quickly.

Workflow improvement proposal (sample laboratory)

1USD= ¥120.1, 1EUR= ¥132.6 and 1CNY= ¥18.9 in the fiscal year ended March 31, 2016 (1USD= ¥109.9, 1EUR= ¥138.8 and 1CNY= ¥17.8 in the previous fiscal year)

 Sales and operating income in the Japan geographic region grew, due to higher intra-group sales to Group affiliates (overseas) and a revision in intragroup transaction prices.

Aiming for Further Growth As a hub for the R&D and manufacturing functions,

 In Japan (sales to external customers), reagent sales increased, centered on the immunochemistry field, but instrument sales fell, leading to a slight year-on-year decrease.

Sysmex will work to expand its immunochemistry business in the Japanese market by increasing its number of unique

divisions in Japan will support the Sysmex Group’s global

 Favorable instrument sales to IDEXX pushed up sales.

measurement parameters and promoting its HISCL™

business expansion.

brand of fully automated immunoassay systems.

47 Sysmex Report 2016

Sysmex Report 2016 48

Striving for Sustainable Increases in Corporate Value By putting the “Sysmex Way,” the corporate philosophy for the Sysmex Group, into action, we work to contribute to society and achieve sustainable increases in corporate value.

49 Sysmex Report 2016

Sysmex Report 2016 50

 Striving for Sustainable Increases in Corporate Value

Corporate Governance

By enhancing management soundness and transparency, we aim to maximize the corporate value of the entire Group. Corporate Governance Structure

Management Organization Sysmex recognizes that reinforcing corporate governance

We are also strengthening the Managing Board’s audit

is an important management issue. In accordance with the

and supervisory functions by appointing outside members.

“Sysmex Way,” the corporate philosophy for the Sysmex

The management structure currently comprises 13

Shareholder’s Meeting

Election/Dismissal Managing Board Members of the Managing Board (Excluding members of the Audit and Supervisory Committee)

Group, we have adopted a structure designed to augment

members of the Managing Board (of whom four are

management soundness and transparency, as well as in-

outside members). Three members of the Managing

creasing management speed and efficiency. In June 2016,

Board are also members of the Audit and Supervisory

Sysmex transitioned from the form of a company with a

Committee (of members of the Audit and Supervisory

Board of Corporate Auditors to a company with an Audit

Committee, two are outside members of the Managing

Compensation Committee

and Supervisory Committee. By giving Managing Board

Board). Furthermore, the Company has 19 executive of-

Business Execution

voting rights to members of the Managing Board who are

ficers (of whom seven are also members of the Managing

members of the Audit and Supervisory Committee, we are

Board). In addition, the Company has introduced the

reinforcing the Managing Board’s audit and supervisory

executive officer system to speed up its decision-making on

functions, increasing management transparency and ob-

business execution and respond more swiftly to changes

jectivity, and enhancing the corporate governance system.

in the business environment.

Election/Dismissal

Auditing/ supervision Members of the Managing Board (Members of the Audit and Supervisory Committee)

Election/Dismissal Audit and Supervisory Committee

Cooperation

Nominating Committee Cooperation

Internal Audit Office

Accounting Auditors

Chairman and CEO Risk Management Committee

Global Strategy Committee Steering Committee

Executive Officers

Accounting Auditing

Compliance Committee

Divisions, Subsidiaries and Affiliates

Advances in Corporate Governance (Fiscal years to March 31)

∼2001

Management organization

Adopting Executive offier system

Term of office for members of the Managing Board

One year Note: Two years for member of the Audit and Supervisory Committee

Two years

11

12

11

10

Nine

Eight

Members of the Managing Board (outside) Corporate auditors (outside)

From June 2016 Company with an Audit and Supervisory Committee

Company with a Board of Corporate Auditors

Executive officer system

Number of members of the Managing Board

2017

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Seven

Nine

One

One (out of three standing corporate auditors)

Accounting standards

Philosophy

51 Sysmex Report 2016

Four

Two (out of four standing corporate auditors)

Japanese GAAP

Founding philosophy

13 (one woman)

Activities

Members

Meetings in the fiscal year ended March 31, 2016

Managing Board

Deliberate important matters related to management

Members of the Managing Board

14 (rate of attendance: 99.5%)

Global Strategy Committee

Deliberate on the Group’s management direction and matters of strategic important

Chairman and CEO and senior executive officers

12

Steering Committee

Deliberate important matters related to overall Group operations as an advisory body to facilitate decisionmaking by the Chairman and CEO

Chairman and CEO and executive officers

19

Organization

Audit and Supervisory Committee Of the three members of the Audit and Supervisory

details of Internal Audit Office activities, the Audit and

Committee, two are outside members of the Managing

Supervisory Committee is in place to provide instruction

Board. Members of the Audit and Supervisory Committee

to the Internal Audit Office, as necessary.

attend meetings of the Managing Board, as well as of IFRS (From the first three months of the fiscal year ending March 31, 2017)

“Sysmex Way,” the corporate philosophy for the Sysmex Group

The Audit and Supervisory Committee works closely

the Global Strategy Committee and Steering Committee.

with the accounting auditors on the audit plans report

In this way, members of the Audit and Supervisory

(annual), the audit results reports (annual), and conduct-

Committee monitor the appropriate execution of duties

ing internal control audits related to financial reporting by

by members of the Managing Board. Depending on the

exchanging information and opinions as necessary.

Sysmex Report 2016 52

 Striving for Sustainable Increases in Corporate Value

Corporate Governance

Executive Compensation (Fiscal Year Ended March 31, 2016)

Compliance

Risk Management

Based on our Group philosophy, the “Sysmex Way,” we de-

To control groupwide risk management activities, Sysmex

Sysmex determines executive compensation amounts

Fixed compensation

fine our view of compliance as “conducting business activi-

established a Risk Management Committee, which

and calculation methods by making a clear link between

29%

ties not only in compliance with applicable laws and regula-

is chaired by a risk management officer, the Group’s

operating performance and responsibility for achieve-

tions, but also based on fairness and high ethical standards.”

chief executive in charge of risk management. The Risk

ment. Compensation for members of the Managing Board

In accordance with this definition, we have established a

Management Committee identifies major risks having the

Compensation for Members of the Managing Board in the Fiscal Year Ended March 31, 2016

Global Compliance Code, in which particularly important

potential to significantly impact the Group’s business and

conformance rules and behavioral guidelines for all Group

consistently observes the results of risk response and mon-

executives and employees to abide by, and conducts train-

itoring by individual divisions and affiliated companies.

(Excluding Outside Members)

ing and works to instill this code. The code describes our

divides broadly into fixed and variable portions (including stock options). Fixed compensation is determined on the basis of a member’s position, while variable compensation varies depending on performance. Compensation for corporate auditors comprises only a fixed portion.

prevention of bribery, adherence to international guidelines

world, and we act accordingly. With regard to our qual-

such as the Universal Declaration on Human Rights, as well

ity management system, nearly all Group companies

71%

as research and development. We also set forth a bylaw for

handling development or manufacturing functions have

revising this code once every two years, in principle, to respond

constructed management systems in line with and ob-

to changes in our internal and external environments.

tained certification under the ISO 9001 or ISO 13485*1

Compensation Committee.

Sysmex formulates internal control regulations with

Breakdown of Executive Compensation (Fiscal Year Ended March 31, 2016) Total amount of executive compensation by executive category, total amount by type of compensation and number of executives receiving compensation Total compensation (¥ million)

Executive category

Members of the Managing Board (excluding outside members)

865

Corporate auditors* (excluding outside corporate auditors) Outside executives

36 17

Total compensation by category (¥ million) Basic compensation

251

Stock options

59

36



17

ensure compliance with laws and standards around the

Variable compensation

Compensation amounts are discussed and determined by the Managing Board following deliberation by the



Bonuses

Retirement benefits

554











Number of executives

8

2 3

*The Company was a company with corporate auditors through the fiscal year ended March 31, 2016.

have received ISO 9001 certification and 19 have obtained

with the regulatory authorities at the Ministry of Economy,

ISO 13485 certification. Sysmex also conducts manage-

Trade and Industry. Under the Compliance Committee,

ment reviews and audits of quality activities at its princi-

we have established a Security Export Control Committee.

pal Group companies to confirm that the management

Based on our internal control regulations, this committee

system is operating properly. In addition to quality policy

strives to reinforce our security export control system and

training for all Group employees, we conduct specialized

thoroughly verify the destinations and purposes of our

quality education targeting specific departments and job

export of commodities and technologies.

types. To share quality-related information throughout the

To strengthen the security export control system for

meeting at which quality-related division managers from

systems that link with enterprise resource planning (ERP)

our headquarters, Sysmex Corporation, as well as regional

systems at regional headquarters overseas in an effort to

headquarters and affiliates gather.

Member of the Managing Board

Regarding disclosure, we make it a rule to disclose any sions in light of our own standards, as well as to observe

Compliance Structure Amount of compensation by type (¥ million)

Hisashi Ietsugu

Group and reinforce our systems, once a year we hold a

the Group as a whole, we are introducing management

information that we believe will affect investment deci-

Executives Receiving Total Compensation of ¥100 Million or More Executive category

international standards. Of our 64 Group companies, 31

regard to security export control and registers for approval

ensure management thoroughness and increase efficiency.

Name

Regarding quality, we have constructed a system to

thoughts on ethics in relation to research and development,

Basic compensation

Stock options

Bonuses

Retirement benefits

Total compensation (¥ million)

59

20

172



251

applicable laws and regulations concerning securities Group Compliance Officer Compliance Committee

trading and the Rules on Timely Disclosure of Corporate Information by the Issuer of Listed Security and the Like established by stock exchanges. *1 ISO 13485: Quality management system for the design and manufacture of medical devices

Sysmex Group companies Compliance Officer of Group companies

Divisions

53 Sysmex Report 2016

Sysmex Report 2016 54

 Striving for Sustainable Increases in Corporate Value

Corporate Governance

IR Activities to Enhance Corporate Value

Proactive Disclosure

External Evaluations for IR Activities

At briefings and through shareholder newsletters, we

In addition to financial results briefings and conference

In 2015, Sysmex won the IR Grand Prix Award, sponsored

important facet of corporate management, and discloses

regularly obtain information through questionnaires and

calls, in the supplements to its financial results Sysmex

by the Japan Investor Relations Association, demonstrat-

appropriate information in a timely manner. By commu-

reflect evaluations from our shareholders and the market

proactively discloses voluntary information such as oper-

ing a strong evaluation of its IR activities.

nicating directly with shareholders and investors, we have

into our management.

ating performance by geographic region, type of business

Sysmex recognizes that investor relations activities are an

We aim to continue conducting high-quality IR activi-

also put in place a system to quickly provide third-party

and product category. At our annual technology presenta-

ties going forward. To this end, we will proactively disclose

evaluations and requests as feedback to management.

tions, the people in charge of R&D divisions explain our

information outside the Company and provide feedback

R&D progress, thereby communicating our R&D successes

into the Company, as we endeavor to reflect the results of

and Sysmex’s future potential.

IR activities to management.

At meetings with institutional investors and analysts, we engage proactively on such themes as R&D, shareholder returns and capital policies, as well as our management

Objectives of Sysmex’s IR Activities

In the fiscal year ending March 31, 2017, we are vol-

strategies, business model and medium-term manage-

untarily adopting the International Financial Reporting

ment plans. Although headquartered in Kobe, Sysmex

Standards (IFRS). Our aim is to enhance convenience to Obtain evaluations and requests from capital markets

visits locations including Tokyo, the United States, and European and Asian countries to conduct IR meetings. In the fiscal year ended March 31, 2016, we conducted 365

shareholders and investors by facilitating the international comparison of financial information.

meetings.

IR Grand Prix Award ceremony

Sysmex also provides other opportunities for direct interaction, such as hosting tours of its overseas and domestic facilities. Meanwhile, we strive to introduce information about our business to individual shareholders and investors in an easy-to-understand manner via shareholder newsletters, our website and various video content.

Enhance corporate value through Disseminate dialogue

high-quality information in a timely manner

Reflect promptly in management and IR activities

Major Awards in the Fiscal Year Ended March 31, 2016 (IR Activities) Sponsor

Awards

Japan Investor Relations 20th “IR Grand Prix Award” (only two companies selected out of the 263 participating) Association Securities Analysts Association of Japan

Selected for excellence in disclosure at the 2015 Awards for Excellence in Corporate Disclosure, ranking first in the pharmaceuticals category and in excellence in disclosure to individual investors

Institutional Investor

Ranked in five categories by Institutional Investor 2016 in the Japanese healthcare and pharmaceuticals category, including “Best CEO” and “Best IR Professional”

Investor Relations Policy Principal IR Events Event

1. IR Goals and Basic Policy Activities

Technology presentations

Explanations from people in charge of R&D divisions about R&D progress

Sysmex IR Day (business office tours)

Every other year In 2014, instrument factory tours and explanations about our manufacturing structure and characteristics from the executive in charge

Overseas facility tours

Every other year Tours of hospitals and other facilities actually using our products and explanations by executives at local subsidiaries about the market and Sysmex’s strengths

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

2. Basis of Information Disclosure Sysmex discloses corporate information in accordance with applicable 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, to help shareholders and other investors better understand the Company.

3. Methods of Information Disclosure

Company tours for individual shareholders

Tours of instrument factories and other business offices

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

Company briefings for individual investors

Company briefings at major cities throughout Japan by top management and people in charge of IR

4. IR Quiet Period

IR meetings

Participation in conferences hosted by securities companies, visits to institutional investors in the United States and European and Asian countries, and meetings with investors and analysts in Japan and overseas

55 Sysmex Report 2016

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 deviate significantly from the projections during the quiet period, the Company will release appropriate information.

Sysmex Report 2016 56

 Striving for Sustainable Increases in Corporate Value

Members of the Managing Board

Hisashi Ietsugu

Masayoshi Hayashi

Yukio Nakajima

Susumu Nishiura

Masayo Takahashi

Chairman and CEO

Member of the Managing Board and Senior Executive Officer, Senior Managing Director

Member of the Managing Board and Senior Executive Officer, Senior Managing Director

Member of the Managing Board (Outside) Independent Director

Member of the Managing Board (Outside), Independent Director

Assistant to the President and CEO

Corporate Communication, Corporate Business Administration, Human Resources & General Affairs, Corporate Executive Office

Apr. 1969 Joined TOA Electric Co., Ltd. (current TOA Corporation) Jun. 1998 Member of the Managing Board Oct. 2004 Member of the Managing Board and Senior Executive Officer, Managing Director Jun. 2008 Member of the Managing Board and Senior Executive Officer, Senior Managing Director Jun. 2010 Retired from TOA Corporation Jun. 2013 Joined the Company, Member of the Managing Board (current)

Sep. 1986 Joined the Company, Member of the Managing Board Mar. 1990 Member of the Managing Board and Senior Executive Officer, Managing Director Feb. 1996 Member of the Managing Board and Senior Executive Officer, Managing Director (Representative Director) Apr. 1996 Member of the Managing Board and Senior Executive Officer, Senior Managing Director (Representative Director) Jun. 1996 President and CEO Apr. 2013 Chairman and CEO (current)

Feb. 1972 Joined the Company Jun. 1997 Member of the Managing Board, Executive Vice President of Business Management Apr. 2005 Member of the Managing Board and Executive Officer Apr. 2007 Member of the Managing Board and Senior Executive Officer, Managing Director Apr. 2011 Member of the Managing Board and Senior Executive Officer, Senior Managing Director (current)

Apr. 1973 Joined the Company Jun. 1999 Member of the Managing Board, Executive Vice President of Corporate Business Planning Apr. 2005 Member of the Managing Board and Executive Officer, Vice President of Corporate Business Planning Apr. 2009 Member of the Managing Board and Senior Executive Officer, Managing Director Apr. 2013 Member of the Managing Board and Senior Executive Officer, Senior Managing Director (current)

Oct. 1992 Ph.D. of Medicine and Assistant professor of Ophthalmology, Kyoto University Hospital Oct. 2001 Associate professor, Team Leader of retinal regeneration project, Translational Research Center, Kyoto University Hospital Apr. 2006 Team Leader, Laboratory for Retinal Regeneration Research, RIKEN Center for Developmental Biology, Japan Nov. 2014 Project Leader, Laboratory for Retinal Regeneration Research, RIKEN Center for Developmental Biology, Japan (current) Jun. 2016 Joined the Company, Member of the Managing Board (current)

Koji Tamura

Kazuya Obe

Yukitoshi Kamao

Koichi Onishi

Kazuhito Kajiura

Member of the Managing Board and Senior Executive Officer, Managing Director

Member of the Managing Board and Senior Executive Officer, Managing Director International Business Management

Member of the Managing Board (Member of the Audit and Supervisory Committee)

LS Business Unit

Apr. 1991 Apr. 1996 Oct. 2002 Apr. 2005 Jun. 2009 Apr. 2013

Mar. 1978 Joined the Company Apr. 2013 Executive Officer, Executive Vice President of Business Administration Jun. 2016 Member of the Managing Board (Member of the Audit and Supervisory Committee) (current)

Member of the Managing Board (Outside) (Member of the Audit and Supervisory Committee), Independent Director

Member of the Managing Board (Outside) (Member of the Audit and Supervisory Committee), Independent Director

Jul. 1971 Jun. 2002 Apr. 2004 Apr. 2007 Jun. 2010

Sep. 1972 Joined Tohmatsu Awoki & Co. (current Deloitte Touche Tohmatsu LLC) Jun. 1989 Partner, Tohmatsu Awoki & Sanwa (current Deloitte Touche Tohmatsu LLC) Jan. 2013 Retired from Deloitte Touche Tohmatsu LLC Jun. 2016 Joined the Company, Member of the Managing Board (Member of the Audit and Supervisory Committee) (current)

Sep. 1990 Joined the Company Jun. 2001 Member of the Managing Board, Executive Vice President of International Business Management Apr. 2005 Member of the Managing Board and Executive Officer Apr. 2009 Member of the Managing Board and Senior Executive Officer, Managing Director (current)

Joined the Company President of TOA Medical Electronics (Europe) GmbH (current Sysmex Europe GmbH) Chairman of the Board of Sysmex Corporation of America (current Sysmex America, Inc.) Executive Officer, Executive Vice Chairman & CEO of Sysmex America, Inc. Member of the Managing Board and Executive Officer Member of the Managing Board and Senior Executive Officer, Managing Director (current)

Jun. 2010 Jun. 2013 Jun. 2014 Jun. 2016

Mitsuru Watanabe

Kaoru Asano

Kenji Tachibana

Member of the Managing Board and Senior Executive Officer, Managing Director

Member of the Managing Board and Senior Executive Officer, Managing Director

Member of the Managing Board and Senior Executive Officer, Managing Director

HU Business Unit

R&D Strategic Planning

Apr. 1980 Joined the Company Apr. 2005 Executive Officer, Executive Vice President of R&D Strategic Planning Jun. 2009 Member of the Managing Board and Executive Officer Apr. 2013 Member of the Managing Board and Senior Executive Officer, Managing Director (current)

Aug. 1987 Joined the Company Apr. 2009 Executive Officer, Manager of Central Research Laboratories Apr. 2011 Executive Officer, Executive Vice President of R&D Strategic Planning Apr. 2013 Senior Executive Officer, Manager of Central Research Laboratories Jun. 2014 Member of the Managing Board and Senior Executive Officer Apr. 2015 Member of the Managing Board and Senior Executive Officer, Managing Director (current)

Corporate Business Planning, Business Strategy Development

57 Sysmex Report 2016

Joined Kobe Steel, Ltd. Executive Officer Managing Executive Officer Senior Managing Executive Officer Retired from Senior Managing Executive Officer of Kobe Steel, Ltd. President of Nippon Koshuha Steel Co., Ltd. Executive Corporate Adviser Joined the Company, Corporate Auditor Member of the Managing Board (Member of the Audit and Supervisory Committee) (current)

Mar. 1980 Joined the Company Apr. 2011 Executive Officer, Executive Vice President of IVD Business Development Apr. 2013 Senior Executive Officer, Executive Vice President of Business Strategy Development Jun. 2014 Member of the Managing Board and Senior Executive Officer, Executive Vice President of Business Strategy Development Apr. 2015 Member of the Managing Board and Senior Executive Officer, Managing Director (current)

Sysmex Report 2016 58

 Striving for Sustainable Increases in Corporate Value

Messages from Outside Members of the Managing Board

Susumu Nishiura, Member of the Managing Board (Outside)

Koichi Onishi, Member of the Managing Board (Outside) (Members of the Audit and Supervisory Committee)

Sysmex’s Managing Board and Steering Committee take an active,

Having been involved with the manufacturing sector for many years,

reflective and forward-looking approach to vigorous deliberations

my focus tends toward cost control, quality control, health and safety,

and make decisions accurately. As an outside member, during these

and environmental disaster prevention. In particular, my activities con-

deliberations it is important for me to consider in particular whether

centrate on ensuring that internal control and risk management are

various initiatives for realizing growth (M&A, alliances, etc.) will

sufficient. Specifically, as an outside member of the Managing Board, I

deliver to stakeholders the anticipated levels of investment results

focus continuously on potential risk factors that might be overlooked

and profitability. In addition to operating performance, my remarks

as being matter of course by people from inside the Company.

focus on whether the Company is fulfilling its social responsibility and maintaining compliance. In recent years, Sysmex has rapidly globalized and expanded its scale of business, becoming a global company in which overseas

When auditing, however, I believe “the remedy may be worse than the disease,” so I adopt a balanced approach to ensure that Sysmex will not lose that sense of the vigor that has acted to its advantage to date. Sysmex continues to deliver increases in sales and income based

sales account for a large percentage of the total. To continue

on its high level of competitiveness in its businesses. At the same

enhancing its corporate value going forward, it will be essential for

time, the Company moves enthusiastically into new fields, such as life

the Company to transform its organizational structure and cultivate

science. I see this stance as an important reason the Company has

human resources who can be active on the world stage. As an outside

maintained its growth trajectory.

member of the Managing Board, I intend to concentrate specifically

Companies have a tendency to lose sight of their focuses on cost

on risk management and internal control systems, as well as human

control and quality control once results are realized, so I plan to con-

resource development.

centrate in particular on those areas.

Masayo Takahashi, Member of the Managing Board (Outside)

Kazuhito Kajiura, Member of the Managing Board (Outside) (Member of the Audit and Supervisory Committee)

I agreed to become an outside member of the Managing Board

In agreeing to become an outside member of the Managing Board

because Sysmex’s management direction is in line with my own

and member of the Audit and Supervisory Committee, I aim to use

stance on creating new things the world has never seen before to

the spirit of acting independently according to one’s own beliefs I

promote the advancement of healthcare and realize the well-being of

have cultivated to date in my experience as a certified public accoun-

patients. Sysmex contributes to the advancement of healthcare from

tant. Taking a fair and unbiased stance, I intend to further enhance

a different perspective than companies involved in drug discovery and

the effectiveness of corporate governance as the Company pursues

the development of therapies. With new laws now being drawn up in

business in a way that brings to life the Sysmex Group philosophy,

relation to regenerative medicine, I believe that companies whose

the “Sysmex Way.” Sysmex’s high overseas sales ratio and strong

organizations are designed to play by the conventional rules of

global competitiveness in hematology and other fields are undoubt-

healthcare will have an organizational disadvantage that Sysmex will

edly strengths. At the same time, as part of the Company’s growth

be able to overcome. Given these circumstances, I believe Sysmex’s

process it will need to concentrate on maintaining groupwide compli-

experience, operating performance and forward-looking stance will

ance and ensuring that organizations are in place to communicate

prove to be major advantages. Sysmex has supported healthcare

management information, including risk management, in a timely

around the world by aligning its own profits with benefits to patients.

and accurate manner. As an independent executive who is an out-

I am convinced that Sysmex’s further development along these lines

side member of the Managing Board and a member of the Audit and

will support improvements in healthcare globally. From my perspec-

Supervisory Committee, I plan to apply the knowledge I have gained

tive as an outside member of the Managing Board, I will work to help

over more than 40 years as a certified public accountant and by audit-

ensure fair governance. At the same time, with regard to new technol-

ing and providing direction to global companies. Based on this experi-

ogy introductions and directions in science and healthcare, I will pro-

ence, I will offer advice on raising management efficiency, enhancing

vide information about major trends from the viewpoint of academia

accountability, enlivening deliberations and augmenting the manage-

and healthcare professionals and voice my opinions proactively.

ment function. Through these efforts, I will focus on the legality and appropriateness of management activities.

59 Sysmex Report 2016

Sysmex Report 2016 60

 Striving for Sustainable Increases in Corporate Value

Executive Officers

Reasons for Appointing Outside Members of the Managing Board Susumu Nishiura Susumu Nishiura was appointed to utilize his abundant experience and deep insight in corporate management for management of the Company. Masayo Takahashi Masayo Takahashi was appointed to utilize her abundant experience and deep insight relating to advanced medical research, medical ethics and other fields as a clinician and researcher for management of the Company. Koichi Onishi Koichi Onishi was appointed to utilize his abundant experience and deep insight in corporate management for audit, etc. of the Company. Kazuhito Kajiura

Back row, from left: Juergen Schulze, Hiroshi Nagao, Ikuo Otani, Keiji Fujimoto, Hiroshi Kanda, John Kershaw, Mamoru Kubota Front row, from left: Yukio Hamaguchi, Takashi Goda, Michiaki Ishida, Junzo Yamamoto, Iwane Matsui

Kazuhito Kajiura was appointed to contribute to ensuring the soundness and transparency of the Board of Directors,

Michiaki Ishida

Yukio Hamaguchi

Hiroshi Nagao

enhancing its audit oversight functions, and other matters,

Senior Executive Officer

Executive Officer

Executive Officer

with his professional expertise and experience as a certi-

ICH Business Unit

fied public accountant, and his extensive experience such

President of Sysmex International Reagents Co., Ltd.

Executive Vice President of Corporate Business Administration

Takashi Goda

as leading and auditing global companies.

Senior Executive Officer

Iwane Matsui

John Kershaw

Research & Industry Business Solution Development

Executive Officer

Executive Officer

Business Management (Japan)

President and CEO of Sysmex America, Inc.

Junzo Yamamoto

Keiji Fujimoto

Juergen Schulze

Senior Executive Officer

Executive Officer

Executive Officer

Manufacturing Management Instrument Production SCM

Regulatory Affairs & Quality Assurance Scientific Affairs Customer Support

President and CEO of Sysmex Europe GmbH

Ikuo Otani Executive Officer

Mamoru Kubota Executive Officer Executive Vice President of LS Business Unit Life Science Product Engineering

Executive Vice President of Human Resources & General Affairs

Hiroshi Kanda Executive Officer Executive Vice President of ICH Business Unit Hemostasis Product Engineering

61 Sysmex Report 2016

Sysmex Report 2016 62

 Striving for Sustainable Increases in Corporate Value

Human Resource Development and Cultivation

Sysmex is working to develop diverse human resources and create an attractive and pleasant working environment.

Promoting Diversity As part of its initiatives respecting diversity, Sysmex aims to create a working environment makes the most of indi-

Percentage of Female Managers (Director Level or Above) (%)

vidual employees’ capabilities without regard for nationality, race, gender, or physical disability. To encourage the employment of women, we have

Sysmex Corporation Overall Group

2014.3

2015.3

2016.3

5.3

6.5

8.3

10.6

11.6

14.3

put in place a host of leave systems to support a balance

Human Resource Development Supporting the Generation of New Value

Cultivating Human Resources Globally The Sysmex Group has more than 7,000 employees, with

Sysmex honors human resource diversity, respects the

overseas employees making up more than half of this

individuality of each employee and provides them with a

figure. In line with its global development, in 2015 Sysmex

workplace where they can realize their full potential. We

formulated a global system to facilitate human resource

value the spirit of independence and challenge, provide

development throughout the Group. Under this system,

employees with opportunities for self-fulfillment and

we promote initiatives to enhance the sense of unity

growth, and reward them for their accomplishments.

within the Group, develop next-generation human

We conduct activities that promote the understanding and adoption of the “Sysmex Way,” the corporate philosophy for the Sysmex Group, in individual regions and divi-

resources, strengthen networks within the Group and

daycare center. As a result, the percentage of female employees at Sysmex Corporation has risen from 18.4% in the fiscal year ended March 31, 2006, to 32.4% in the fiscal year ended March 31, 2016. Over that same period, the percentage of female managers (director level or above) rose from 2.4% to 8.3%. (Our target for March 31, 2021, is 15% or higher.) For the Group as a whole, the percentage of female managers was 14.3% in the fiscal year ended March 31, 2016.

foster understanding of different cultures. For example, we have introduced the Global

sions to ensure that the entire Group is working toward

Apprentice Program targeting young employees. The pro-

the same goals and that business activities are performed

gram aims to cultivate future global human resources by

efficiently and with a sense of speed. As one example of

providing employees with the opportunity to experience

our activities, we have introduced the Group CEO Award

working overseas early in their careers.

system to motivate employees. Under this system, awards

between work and child-rearing and opened an in-house

In addition, in 2015 we opened the Global

are presented to individuals and groups that contribute to

Communication Center as a new place to encourage

the realization of the “Sysmex Way,” and this information

human resource development and exchange. This center

is shared throughout the Company.

is designed to enhance individual employees’ skills and

Sysmex Corporation has in place a human resource

foster communications among diverse human resources.

development system to cultivate human resources in a

We believe it is important to share values and foster new

systematic manner through three types of training:

insights in order to create new value and encourage deeper

selective, rank-based and elective. In the fiscal year ended

cultural understanding.

March 31, 2016, expenditure on employee training aver-

Creating a Working Environment That Provides Peace of Mind and Maximizes Skills To create a working environment amenable to diverse human resources, we support work-life balance in regions around the world. Employee satisfaction has risen as a result, and we are highly rated from outside the Company, as evidenced by a number of awards.

• “Great Place to Work” Sysmex Europe (2012, 2014, 2016) Sysmex Brazil (2014)

aged approximately ¥180,000 per employee, up from

• “Companies That Care Honor Roll,” a ranking of companies that

around ¥160,000 in the preceding fiscal year.

contribute to the welfare of employees, their families and the local community

Sysmex Brazil receives award as a “Great Place to Work”

Sysmex America (2009–2016)

• A good company to work for,

“HR Asia Best Companies to Work for in Asia 2015” Sysmex Asia Pacific (2015)

• Nikkei ranking of “Companies that Motivate People” Sysmex Corporation ranked 24th in 2015, up from 30th in 2014. Training at the Global Communication Center

63 Sysmex Report 2016

Interaction of employees from different regions during their work

Sysmex Report 2016 64

 Striving for Sustainable Increases in Corporate Value

Environmental Preservation

We are working to reduce environmental impact based on our environmental policy.

Structure to Increase Efficiency and Lower Environmental Impact

Revising Package Designs to Reduce Material Requirements and Boost Recyclability

As its product categories and sales regions have expand-

We are working to reduce material requirements and

ed, logistics have become more diverse. Sysmex has been

increase recyclability by optimizing the sizes of instrument

revising its logistics processes and structure in response.

packages and introducing packaging designs that are sen-

In 2012, we launched a project to shorten supply chain lead times by reconfiguring the global logistics structure

Promoting Initiatives to Achieve the Targets of the Sysmex Group Environmental Action Plan

Establishing Environmentally Conscious Business Offices and Factories

Based on its environmental policy, Sysmex has formulated

When establishing new business offices and factories, Sysmex

the Sysmex Group Environmental Action Plan (Sysmex

works to minimize environmental impact resulting from their

Eco-Vision 2020) and in the fiscal year ended March 31,

operation by introducing environmentally conscious design,

2016, set mid-term environmental objectives (for the fiscal

facilities and equipment, and operating processes.

years ending March 31, 2016 to 2018). To achieve these

At i-Square, the instrument factory we established

goals, we are working to improve the Group’s environ-

in 2014, we have installed LED lighting and solar power

mental impact on an ongoing basis.

modules to conserve energy and lower CO2 emissions. Solar power supplies around 10% of the electricity used at

Sysmex Group Environmental Action Plan (Sysmex Eco-Vision 2020)

• Promote eco-friendly products and service models Reduce carbon dioxide emissions for logistics by 50% • (per unit of non-consolidated sales, base year: fiscal year

i-Square. Also, at our reagent factory in Germany, which we expanded in the fiscal year ended March 31, 2016, we have installed systems to reduce the amount of energy consumed and lower CO2 emissions. (See the column below for details.)

ended March 31, 2011)



Reduce greenhouse gas emissions at business offices by 50%

Revising our Logistics Processes and

(per unit of consolidated sales, base year: fiscal year ended March 31, 2009)

sitive to the unique needs of export destinations. Specifically, moving forward with the revision of

for overall optimization and introducing process reform.

its package designs, we have introduced steel packag-

Since then, we have gradually revised our logistics struc-

ing for some products to ensure against concerns for

ture and moved forward with packaging reforms.

damage during shipment. We are also reducing storage

In addition to logistics reform, project initiatives are

space by using two-tiered storage and contributing to

intended to reduce environmental impact and serve as an

the recycling of packaging materials at delivery destina-

effective means to achieve the objectives spelled out in

tions. Meanwhile, for shipments in Japan we have begun

Sysmex Eco-Vision 2020.

employing reusable and simplified packaging. To reduce

For example, we have succeeded in shifting the mode

environmental impact, we are deploying this packaging in

of overseas transport of certain refrigerated reagents from

accordance with specific market characteristics. Through

air to ship freight, substantially lowering CO2 emissions.

these efforts, we reduced cardboard waste by 20 tons in

We have also decreased lead time significantly through

the fiscal year ended March 31, 2016.

the local sourcing of some accessories for instruments.

We are also working on improvements to excess pack-

This move has also lowered CO2 emissions by shortening

aging for consumables and parts, and seeking to optimize

transport distances. Enhancing our loading simulations

instrument packaging sizes and simplify packaging.

has enabled us to adjust the timing of product shipments,

Recognizing its growing responsibility to supply prod-

increase our loading ratio in shipping containers and de-

ucts on a global scale, in the future Sysmex plans to con-

crease the number of shipments.

tinue improving its logistics efficiency and minimizing its

As a result of these initiatives, in the fiscal year ended

environmental footprint.

March 31, 2016, we reduced CO2 emitted through logistics (per unit of sales) by 48% compared with March 31, 2011.

a recycle rate of 93% or higher at all • Achieve business offices water usage at reagent factories by 10% • Reduce (per unit of amount of production, base year: fiscal year

Initiatives to Reduce CO2 Emissions from Logistics

ended March 31, 2009) i-Square instrument factory

CO2 Emitted through Logistics (Per unit of sales)

Examples of Initiatives By reinforcing loading simulations, adjusting product shipment timing and raising the shipping container loading ratio.

(t-CO2/billion yen)

Our Expanded, and Environmentally Considerate, Reagent Factory in Germany

800

725.2

In response to growing demand in EMEA, in the fiscal year

650.9

ended March 31, 2016, we expanded our reagent factory in

555.8

600

Germany, increasing capacity by 1.5 times. To reduce the

379.4

400

panels and an ice thermal storage system*. This thermalstorage air conditioning system uses natural energy, taking advantage of seasonal differences.

65 Sysmex Report 2016

49%

71%

Down 48% (Compared with the fiscal year ended March 31, 2011)

200

Reagent factory in Germany

Fiscal year ended March 31, 2015

Improved by 22 percentage points

417.0

factory’s energy use and CO2 emissions, we installed solar

* Ice thermal storage system: With this type of system, ice produced in the ground in winter is used in the summer for cooling. In winter, geothermal water, which is warmer than the ambient air, is used to supply heat.

Fiscal year ended March 31, 2013

534.8

0

03/11

03/12

03/13

03/14

03/15

03/16

Shipping container loading ratio (peak time)

Sysmex Report 2016 66

 Striving for Sustainable Increases in Corporate Value

Contributing to Society

Through our business, we contribute to the establishment of a healthy society and vibrant communities.

prevents billions of people in the developing world from

In these ways, the Company is proactively contributing to

seeking the level of prosperity and longevity now common

society by fighting cancer.

in the industrialized world.” * Flag: A function that determines specific sample irregularities. This is used only as supplemental test data; it is not directly related to diagnosis.

In the fiscal year ended March 31, 2015, employee volunteers at Group companies in the EMEA region launched the cancer-fighting campaign “Sysmex Against Cancer.” The funds raised through this campaign were donated to

Employee Volunteers Conduct Fund-Raising Campaign to Help Fight Cancer become severe and even cause death—a situation that

Creating Testing Technologies to Help Eradicate Serious Infectious Diseases

calls for early differentiation and early diagnosis. Sysmex’s

Cancer is the world’s deadliest disease, and the number of

instruments have had the functionality to flag* in hemato-

deaths from cancer is forecast to continue increasing.

Rapid globalization in recent years has led to an increase

logical tests the abnormal blood cell morphology of cells

in diseases crossing national borders, which has become a

infected with malaria. To provide even higher value, we

the early detection of cancer. We also make donations to

global problem. As part of the international community’s

are now developing technologies to detect and count cells

organizations that work to prevent and conduct research

initiatives in this regard, one of the important themes

infected with malaria. This technology will facilitate hema-

on cancer such as the American Cancer Society and other.

of the United Nation’s Sustainable Development Goals

tological testing that provides information leading to the

(SDGs) for ensuring healthy lives and promoting well-being

simple and quick determination of the presence of malaria

for all is to halt the spread of HIV/AIDS, tuberculosis,

infection, the degree of severity and the type of malarial

malaria and other diseases.

infection (Plasmodium). Furthermore, Sysmex Partec,

Sysmex is working on development of testing tech-

which became a subsidiary in 2013, possesses compact

nologies targeting malaria, dengue fever, HIV and other

and portable instruments that are effective in the treat-

diseases, as well as developing products to contribute to

ment and monitoring of patients with HIV/AIDS, tubercu-

the diagnosis of infectious diseases in emerging markets

losis and malaria, and is developing these products further.

Sysmex manufactures and sells products that assist in

In the initial stages of malaria infection, it is difficult

Fund (GHIT Fund), which states its vision as “one in

cal systems. Without appropriate treatment malaria can

which the crushing burden of infectious disease no longer

31, 2015, a total of 241,733 euros had been donated.

Contributing to Healthcare through the Funding of University Courses Since the fiscal year ended March 31, 2015, Sysmex has contributed funds to the “Assessment of Clinical Testing School of Medicine and promoted joint research on new clinical testing technologies. This course is currently collaborating with Sysmex’s Central Research Laboratories on the development of highly precise yet simple diagnosis technologies for determining the risk of cardiovascular disease by evaluating the function of high-density lipoproteins. We will continue researching laboratory medicine based on scientific evidence, thereby continuing R&D

company to join the Global Health Innovative Technology

to determine the type of malarial infection based on clini-

of cancer prevention and supports research. As of March

(Sysmex)” course offered by the Kobe University Graduate

In 2015, Sysmex became the only diagnostics reagents

and developing countries.

the World Cancer Research Fund, which raises awareness

initiatives aimed at the establishment of new testing technologies and the commercialization of technologies. At the same time, we will continue with our support for local Sysmex Against Cancer contribution presentation ceremony

universities and other community contributions.

Endemic Areas for Malaria Individuals affected: 198 million/year Deaths: 580,000/year

Sysmex’s CSR Activities To further promote CSR initiatives, since 2011 Sysmex has participated in the United Nations Global Compact. We have also established our MidTerm CSR Plan, referring to the 10 principles of the United Nations Global Compact and the ISO 26000 international standards for corporate social responsibility. Sysmex has earned high third-party praise for its efforts as a sustainable

Network Japan WE SUPPORT

company. For example, we were selected by Corporate Knights for inclusion in the 2016 Global 100 (The 100 Most Sustainable Companies in the XN-L Series, which plays a role in detection of malaria infection

World). We were 88th in this ranking, and first in the category of “Health Care Equipment & Supplies.” We have also been selected for inclusion in indexes on socially responsible investment (SRI), such as the Dow Jones

Malaria deaths per 100,000 people (2013)

Sustainability Asia Pacific Index. Please see our website for details on our CSR activities.

100 or more

10–49

Fewer than 1

No malaria transmission

50–99

1–9

Estimated malaria deaths equal zero

Not applicable

http://www.sysmex.co.jp/en/csr/

Source: WHO

67 Sysmex Report 2016

Sysmex Report 2016 68

Financial and Other Information Consolidated Financial and Non-Financial Data (11 Years) Fiscal years ended March 31 (Japanese GAAP)

(Millions of yen)

(Thousands of U.S. dollars)*1

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2016

¥ 87,888

¥ 101,041

¥ 110,724

¥ 111,843

¥ 116,206

¥ 124,694

¥ 134,744

¥ 145,578

¥ 184,538

¥ 221,377

¥ 253,157

$ 2,240,327

10,724

12,715

15,033

15,134

15,740

18,289

19,206

21,805

32,871

44,411

56,962

504,088

Net income attributable to owners of the parent*

7,423

9,008

9,132

8,014

9,765

11,412

12,007

14,166

20,574

26,638

36,233

320,646

Capital expenditure

5,638

4,546

8,244

9,340

4,540

5,840

7,909

8,945

13,366

13,907

13,804

122,159

Depreciation

3,592

3,959

3,924

7,189

7,067

6,871

7,031

7,945

9,961

11,259

12,254

108,442

R&D expenditure

8,184

9,026

9,221

10,771

11,238

12,380

11,904

12,119

13,260

14,692

17,775

157,301

Net cash provided by (used in) operating activities

8,275

10,085

11,635

13,194

21,230

18,135

17,059

25,806

36,564

38,641

39,567

350,150

Net cash provided by (used in) investing activities

(7,859)

(6,630)

(12,883)

(13,545)

(6,603)

(8,916)

(10,372)

(12,524)

(33,940)

(19,544)

(21,623)

(191,354)

Net cash provided by (used in) financing activities

(1,191)

(458)

(1,316)

(10,091)

(3,475)

(3,814)

(3,117)

(2,898)

(7,554)

(8,755)

(77,478)

For the year: Net sales Operating income 2

723

At year-end: Total assets Cash and cash equivalents, end of year Total equity Interest-bearing liabilities

87,447

101,225

109,027

118,522

120,702

130,060

142,285

173,011

210,759

247,984

267,638

2,368,478

9,416

12,715

9,679

9,410

13,813

18,916

21,838

34,307

36,548

50,220

56,482

499,841

62,647

72,396

79,117

79,851

87,136

94,233

102,503

119,154

146,250

169,551

188,095

1,664,558

695

669

1,081

10,344

2,565

1,971

1,026

769

1,960

716

1,348

11,929

(Yen)

(U.S. dollars)

Per share data: ¥ 1,251.8*4

¥ 1,411.0

¥ 1,541.0

¥ 1,548.2

¥ 1,684.9

¥ 910.7*4

¥ 990.5

¥ 1,151.4

¥ 703.8*4

¥ 812.4

¥ 899.5

$ 7.96

Net income (basic) (yen)

145.5*4

179.6

178.9

156.7

190.8

111.2*4

116.9

137.6

99.5*4

128.5

174.4

1.54

Net income (diluted) (yen)

143.8*4

178.0

178.3

156.5

190.5

111.0*4

116.6

137.1

99.2*4

128.0

173.7

1.54

Cash dividends applicable to the year*3 (yen)

6.50*4

9.00

12.00

12.50

14.00

15.00*4

17.00

20.00

27.00*4

38.00

52.00

0.46

Dividend ratio (%)

17.9

20.0

26.8

31.9

29.4

27.0

29.1

29.1

27.1

29.6

29.8

Operating margin (%)

12.2

12.6

13.6

13.5

13.5

14.7

14.3

15.0

17.8

20.1

22.5

Overseas sales ratio (%)

59.7

62.5

67.5

68.0

68.3

69.1

70.5

72.4

78.2

81.7

84.3

Equity ratio (%)

71.6

70.5

72.2

66.8

71.5

71.9

71.6

68.7

69.2

68.0

69.9

12.5

13.4

12.2

10.1

11.8

12.7

12.3

12.8

15.6

17.0

20.4

9.0

9.5

8.7

7.0

8.2

9.1

8.8

9.0

10.7

11.6

14.1

3,334

3,580

3,916

4,148

4,576

4,957

5,521

5,594

6,211

6,742

7,446

Female managers (director level or above) (%)

















10.6

11.6

14.3

Greenhouse gas emissions at business offices per unit of consolidated sales*6 (t-CO2/¥100 million)







10.08

10.86

9.53

8.65

8.63

7.98

7.28

7.26

Equity (yen)

Other data:

Return on equity (ROE) (%) 5

Return on assets (ROA)* (%) Number of employees (Including part-time and other employees)

Notes: *1. U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥113 = US$1, the approximate rate of exchange on March 31, 2016. *2. Figures shown for fiscal years ended on or before March 31, 2015 are “net income.” *3. Dividend (actual) coverted to post-split basis. *4. Two-for-one stock split *5. ROA = Net income attributable to owners of the parent/Total assets (Yearly Average)×100 *6. Main business offices in Japan, instrument factories in Japan, reagent factories in Japan, main overseas locations and overseas reagent factories

69 Sysmex Report 2016

Sysmex Report 2016 70

 Financial and Other Information

Management’s Discussion and Analysis Overview Looking at economic conditions during the fiscal year ended March 31, 2016, in the United States, employment conditions improved, the corporate sector continued to expand gradually, and the country moved to normalize its monetary policy. While the European economy continues to recover, geopolitical risk is mounting. Furthermore, economic deceleration persists in China, despite the country’s fiscal and monetary policies. Economic conditions in the Asia Pacific region were firm, centered on the ASEAN region. Overseas economies generally continued their modest recovery, but the outlook grew uncertain. The Japanese economy continued on its path to recovery thanks to improvements in employment and income conditions and an upturn in capital investment. On the healthcare front, in advanced countries in Europe and the United States, efforts are underway to curtail medical expenses and reform health insurance systems. In the United States, efforts to reduce the number of people without medical insurance are continuing. In China, medical system reform that is underway, including to the medical insurance system, aims to build infrastructures that provide uniform medical services in cities and farming villages throughout the country. Therefore, although some causes for uncertainty remain, the foundations of healthcare-related demand remain solid. The Japanese government is including the medical and healthcare industry in its growth strategies, which is expected to continue invigorating healthcare-related industries going forward.

The Sysmex Group, which has manufactured reagents overseas for some time, completed the expansion of its reagent production factory in Germany. This move boosted capacity to approximately 1.5 times the previous level in response to expected demand increases in the EMEA region. We have also began to expand our reagent factory in the United States to ensure stable reagent supply in the face of expected demand increases in the Americas. Also, Sysmex’s joint venture with Kawasaki Heavy Industries, Ltd. (Kobe), Medicaroid Corporation (Kobe) commenced the full-fledged development of medical robots. To support its product development activities, Medicaroid will leverage the Sysmex Group’s testing and diagnostic technologies, as well as a broad-ranging network in the medical field, as it contributes to the development of the medical industry. Furthermore, in Africa, where healthcare-related markets are slated to expand, we established Sysmex West and Central Africa Ltd., in the Republic of Ghana, thereby strengthening our base of operations in West and Central Africa. By reinforcing our support for distributors and customers, we will continue contributing to the development of healthcare in emerging markets. During the fiscal year the Group recorded consolidated net sales of ¥253,157 million, up 14.4% year on year. Operating income rose 28.3%, to ¥56,962 million; and net income attributable to owners of the parent increased 36.0%, to ¥36,233 million. Total asset turnover increased from 0.97 time to 0.98 time, and return on equity (ROE)

Net Sales

253.157

184,538

180,000 134,744

145,578

SG&A expenses SG&A ratio 94,132

7.9%

2012

2013

2014

71 Sysmex Report 2016

2015

56,962 50

44,411

(¥ million) 40,000 36,233

OVERSEAS

Net sales

84.3%

¥253,157

JAPAN

15.7%

47.4

46.1

40 37.2

24,000

20

32,871

24,000 20,574

19,206

22.5

21,805

14.3

20 17.8

2012

2013

2014

2015

2016

16,000

20.1

14,166 12,007

15.0

12,000

(Years ended March 31)

23.6 23.6%

30

44.3

20,000

0

2016

32,000 26,638

10

¥39,846 million

million

40

60 36,000

25.8% 5.8%

27.0% 0%

(¥ million / %) 60,000

48,000

67,191

60,000

40,000

(Years ended March 31)

100

Operating income Operating margin

80

36.8

0

Net Income Attributable to Owners of the Parent

81,725 81,607

63,886

¥213,311 million

Operating income expanded ¥12,551 million, or 28.3% year on year, to ¥56,962 million, as higher sales more than offset increases in cost of sales and SG&A expenses, and the operating margin improved 2.4 percentage points, to 22.5%. Furthermore, compared with the preceding fiscal year exchange rates had a ¥8,543 positive effect on income. Net income attributable to owners of the parent grew ¥9,595 million, or 36.0%, to ¥36,233 million, owing to a ¥1,038 million gain on revision of retirement benefit plan and a year-on-year decrease in total income taxes of ¥663 million, or 3.5%, to ¥18,427 million.

Operating Income Operating Margin

80,000

120,000

60,000

Income

* Net sales by destination is defined as the sales 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 Group company in a particular location.

Net Sales by Destination Japan Overseas Americas EMEA China Asia Pacific

221,377

Cost of sales rose ¥6,704 million, or 7.0%, to ¥102,063 million. The cost of sales ratio accordingly decreased 2.8 percentage points, to 40.3%. Selling, general and administrative expenses increased ¥12,525 million, or 15.3%, to ¥94,132 million, owing to reinforcement of the sales and after-sales service structures. SG&A expenses as a percentage of net sales rose 0.4 percentage point, from 36.8% to 37.2%.

Looking at net sales by destination, in Japan, sales of reagents increased, centered on the immunochemistry field, but sales of instruments declined, reflecting a tendency by healthcare institutions to curtail capital expenditures. As a result, sales in Japan declined 1.7% year on year, to ¥39,846 million. In overseas markets, we made progress in the strengthening of sales and support structures and the provision of solutions, leading to higher sales of instruments in the field of hematology and hemostasis. Sales of reagents also rose, benefiting from an increase in the installed instrument base. These factors caused the Sysmex Group’s overseas sales to surge 18.0% year on year, to ¥213,311 million. The overseas sales ratio accordingly rose 2.6 percentage points, to 84.3%. Looking at overseas sales by destination, sales in the Americas amounted to ¥59,803 million, up ¥10,251 million, or 20.7% year on year; in EMEA ¥68,216 million, up ¥4,618 million, or 7.3%; in China ¥65,189 million, up ¥15,340 million, or 30.8%; and in Asia-Pacific ¥20,103 million, up ¥2,279 million, or 12.8%.

(¥ million / %) 100,000

240,000

Cost of Sales and SG&A Expenses

Net Sales by Destination*

SG&A Expenses SG&A Ratio

(¥ million) 300,000

Profits and Losses

advanced from 17.0% in the preceding year to 20.4% during the fiscal year under review.

8,000

0 0

2012

2013

2014

(Years ended March 31)

2015

2016

0

0

2012

2013

2014

2015

2016

(Years ended March 31)

Sysmex Report 2016 72

 Financial and Other Information

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

R&D Expenditure To enhance its product portfolio, during the year Sysmex developed new products and pursued R&D centering on clinical testing and the life sciences, fields targeted for future growth. As a result, R&D expenditure amounted expanded ¥3,083 million, or 21.0%, to ¥17,775 million. R&D expenditure as a percentage of net sales increased 0.4 percentage points, from 6.6% to 7.0%.

Liquidity and Sources of Capital Fund Procurement and Liquidity Management The Company raises working capital as necessary through short-term bank loans and other means. Consolidated subsidiaries obtain bank loans as needed to secure working capital, but in October 2003, the Company introduced a cash management system to increase efficiency by unifying financing and capital management at affiliates in Japan. For long-term capital requirements such as capital investment, the Company decides the funding method after taking into account the investment recovery period and risk. During the year, the Company financed capital expenditure and R&D activities primarily from cash provided by operating activities.

Dividend Policy We aim to maintain a proper balance between internal reserves for R&D and capital expenditure, which are designed to sustain steady high growth, and returns to our shareholders as our earning power increases. In terms of returns to shareholders, we intend to provide a stable dividend on a continuous basis and aim for a consolidated payout ratio of 30% under our basic policy of sharing the successes of our operations in line with business performance. As a basic policy, Sysmex pays twice-yearly dividends from retained earnings, an interim dividend and a year-end dividend. The year-end dividend is decided upon approval of the annual shareholders’ meeting, and the interim dividend upon approval by the members of the Managing Board. In accordance with this policy and in light of business performance during the year under review, we announced dividends for the year of ¥52 per share, which includes an interim dividend of ¥24. As a result, the consolidated payout ratio was 29.8%.

R&D Expenditure R&D Expenditure as a Percentage of Net Sales (¥ million / %) 20,000

R&D expenditure R&D expenditure as a percentage of net sales 15 17,775

16,000

Cash Dividends Applicable to the Year Dividend Ratio

75

9

6.6

45

7.0 27 20 17

3

4,000

142,285 8.8

29.1

29.1

24

27.1

29.6

30

2013

2014

(Years ended March 31)

2015

2016

60,000

0

0

160,000

Capital expenditure Depreciation (¥ million) 188,095

100

15,000

15,000 13,366

71.6

68.7 119,154

80

146,250

68.0

69.2

12,254

12,000

11,259

69.9

60

13,907 13,804

12,000

9,961 8,945

9,000

9,000

12

120,000

8

80,000

40

6,000

6,000

4

40,000

20

3,000

3,000

2016 0

0

7,909 7,031

102,503

11.6

9.0

120,000

15

7,945

0 0

2012

2013

2014

2015

2016

(Years ended March 31) Note: Two-for-one stock split conducted on April 1, 2014 and 2011.

73 Sysmex Report 2016

10.7

29.8

12 2012

Capital Expenditure Depreciation

(¥ million / %) 200,000

14.1

173,011

180,000

Capital expenditure (investment in property, plant and equipment, including construction in progress) was down ¥102 million year on year, or 0.7%, to ¥13,804 million. This expenditure went mainly toward the expansion of overseas subsidiaries’ factories for producing IVD reagents in response to growing business in overseas markets, as well as to the enhancement of sales promotion facilities. Depreciation increased ¥995 million, or 8.8%, to ¥12,254 million.

Net cash provided by operating activities was ¥39,567 million (up ¥926 million year on year). As principal factors, income before income taxes provided ¥54,660 million (up ¥8,932 million); depreciation and amortization provided ¥14,186 million (up ¥1,231 million); the increase in notes and accounts receivable used ¥5,477 million (down ¥1,373 million). An increase in inventories used ¥6,821 million (up ¥5,036 million); and income taxes paid used ¥19,578 million (up ¥4,026 million).

169,551

16

38

6

Capital Expenditure and Depreciation

247,984

36

8.3

0

20

240,000

Net cash used in financing activities was ¥8,755 million (up ¥1,201 million). This was mainly due to cash dividends paid of ¥9,549 million (up ¥2,815 million) and a net decrease in short-term bank loans of ¥1,000 million in the preceding fiscal year, which was absent in the fiscal year under review.

Cash Flows from Operating Activities

267,638

60

Cash Flows from Financing Activities

Total equity Equity ratio

(¥ million / %) 300,000

52

Net cash used in investing activities was ¥21,623 million (up ¥2,079 million). Among major factors were purchases of property, plant and equipment, which used ¥13,686 million (up ¥653 million); the purchase of software and other assets, which used ¥6,168 million (up ¥2,712 million); and the purchase of investment securities, which used ¥832 million (down ¥1,518 million).

As of March 31, 2016, cash and cash equivalents amounted to ¥56,482 million, up ¥6,262 million from March 31, 2015. Cash flows from various activities are described in more detail below.

Total assets ROA

Dividend ratio (¥ / %) 60

Cash Flows from Investing Activities

Cash Flows

Total Equity Equity Ratio

210,759

8.8 7.2

Total Assets ROA*

Cash dividends applicable to the year (Dividend convert to post-split base)

48

11,904 12,119

8,000

As of March 31, 2016, total assets amounted to ¥267,638 million, up ¥19,654 million from a year earlier. The primary reasons were increases of ¥6,262 million in cash and cash equivalents, ¥2,637 million in trade accounts receivable, ¥3,123 million in investments in lease, ¥5,735 million in inventories, ¥4,548 million in buildings and structures and ¥2,120 million in software.

12

14,692 13,260

12,000

Assets, Liabilities and Equity

Total liabilities as of March 31, 2016, were ¥79,543 million, up ¥1,110 million from a year earlier. Principal factors included a rise of ¥3,646 million in trade accounts payable, although income taxes payable fell ¥2,821 million. Total equity came to ¥188,095 million at March 31, 2016, up ¥18,544 million from a year earlier. The main reason for the increase was a ¥25,858 million rise in retained earnings, whereas the foreign currency translation adjustment decreased ¥6,999 million. The equity ratio as of March 31, 2016, was 69.9%, up 1.9 percentage points from the 68.0% recorded as of March 31, 2015.

2012

2013

2014

2015

(March 31)

2012

2013

(March 31)

2014

2015

2016

0

0

2012

2013

2014

2015

2016

0

(March 31)

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

Sysmex Report 2016 74

 Financial and Other Information

Consolidated Balance Sheet Sysmex Corporation and Subsidiaries

Thousands of U.S. Dollars (Note 1)

Millions of Yen March 31, 2016

2016

2015

2016

ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 11) Short-term investments (Note 3)

¥ 56,482

¥ 50,220

$ 499,841

362

294

3,204

2,618

2,802

23,168

52,706

50,069

466,425

225

171

1,991

Receivables (Note 11): Trade notes Trade accounts Associated companies Other Allowance for doubtful accounts Investments in lease (Notes 10 and 11)

635

351

5,619

(589)

(576)

(5,212)

8,536

5,413

75,540

35,623

29,888

315,248

Deferred tax assets (Note 9)

7,912

8,988

70,018

Prepaid expenses and other current assets

8,155

6,529

72,167

172,665

154,149

1,528,009

Inventories (Note 4)

Total current assets

PROPERTY, PLANT AND EQUIPMENT: Land

11,311

11,260

100,097

Buildings and structures

42,556

38,008

376,602

Machinery and equipment

10,773

10,524

95,336

Furniture and fixtures

51,359

47,446

454,505

1,396

2,629

12,354

Lease assets Construction in progress

2,051

4,137

18,150

119,446

114,004

1,057,044

(58,211)

(54,942)

(515,141)

61,235

59,062

541,903

Investment securities (Notes 3 and 11) Investments in associated companies

4,706 2,048

5,243 1,932

41,646 18,124

Goodwill

9,086

12,114

80,407

Software

9,233

7,113

81,708

Total Accumulated depreciation Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:

Asset for retirement benefits (Note 6)

583

961

5,159

Deferred tax assets (Note 9)

329

267

2,912

Other assets Total investments and other assets TOTAL

7,753

7,143

68,610

33,738

34,773

298,566

¥ 267,638

¥ 247,984

$ 2,368,478

Thousands of U.S. Dollars (Note 1)

Millions of Yen

2016 LIABILITIES AND EQUITY CURRENT LIABILITIES: Current portion of long-term debt (Note 5) Current portion of long-term lease obligations (Note 11) Payables (Note 11): Trade notes Trade accounts Associated companies Construction and other Income taxes payable (Note 11) Accrued expenses Deferred tax liabilities (Note 9) Other current liabilities Total current liabilities LONG-TERM LIABILITIES: Long-term debt (Note 5) Long-term lease obligations (Note 11) Liability for retirement benefits (Note 6) Deferred tax liabilities (Note 9) Other long-term liabilities Total long-term liabilities

¥

2015

2016

51

9 1,327

1,745 17,986 138 6,242 6,818 13,930 316 18,570 65,896

1,470 14,340 166 6,122 9,639 14,832 102 18,448 65,170

15,442 159,168 1,221 55,239 60,336 123,274 2,797 164,337 583,150

1 733 566 8,779 3,568 13,647

199 563 8,994 3,507 13,263

9 6,487 5,009 77,690 31,575 120,770

11,017 15,958 1,097 155,563

10,483 15,424 1,024 129,705

97,496 141,222 9,707 1,376,664

1 150

$ ¥

COMMITMENTS AND CONTINGENT LIABILITIES (Notes 10 and 12) EQUITY (Notes 7, 8, 14 and 16): Common stock, authorized, 598,688,000 shares; issued, 208,332,432 shares in 2016 and 207,894,432 shares in 2015 Capital surplus Stock acquisition rights Retained earnings Treasury stock - at cost: 444,048 shares in 2016 and 443,380 shares in 2015 Accumulated other comprehensive income: Unrealized gain on available-for-sale securities Deferred gain on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Total Non-controlling interests Total equity TOTAL

(286) 1,170 3 3,429 144 188,095 0 188,095 ¥ 267,638

(281) 1,367 1 10,428 1,400 169,551 169,551 ¥ 247,984

(2,531) 10,354 27 30,345 1,274 1,664,558 0 1,664,558 $ 2,368,478

See notes to consolidated financial statements.

75 Sysmex Report 2016

Sysmex Report 2016 76

 Financial and Other Information

Consolidated Statement of Income

Consolidated Statement of Changes in Equity

Sysmex Corporation and Subsidiaries

Sysmex Corporation and Subsidiaries Millions of Yen Accumulated Other Comprehensive Income

Thousands of U.S. Dollars (Note 1)

Millions of Yen Year Ended March 31, 2016

NET SALES COST OF SALES Gross profit SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Operating income OTHER INCOME (EXPENSES): Interest and dividend income Interest expense Foreign exchange gain (loss)–net Gain on revision of retirement benefit plan (Note 6) Other–net Other income (expenses)–net INCOME BEFORE INCOME TAXES INCOME TAXES (Note 9): Current Deferred Total income taxes NET INCOME NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT

2016 ¥ 253,157 102,063 151,094 94,132 56,962

2015 ¥ 221,377 95,359 126,018 81,607 44,411

368 (46) (2,743) 1,038 (919) (2,302) 54,660

309 (44) 932 120 1,317 45,728

3,257 (407) (24,274) 9,186 (8,133) (20,371) 483,717

16,514 1,913 18,427 36,233

17,119 1,971 19,090 26,638

146,142 16,929 163,071 320,646

(0)

(0)

¥ 36,233

¥ 26,638 Yen

PER SHARE OF COMMON STOCK (Notes 2.w and 14): Basic net income Diluted net income Cash dividends applicable to the year

2016 $ 2,240,327 903,212 1,337,115 833,027 504,088

¥ 174.42 173.71 52.00

(0) $ 320,646 U.S. Dollars

¥ 128.49 128.02 38.00

$ 1.54 1.54 0.46

Year Ended March 31, 2016

BALANCE, APRIL 1, 2014 (as previously reported) Cumulative effect of accounting change (Note 2.l) BALANCE, APRIL 1, 2014 (as restated) Net income attributable to owners of the parent Cash dividends, ¥32.50 per share Purchase of treasury stock Exercise of warrants Increase due to decrease in associated companies accounted for by the equity method Net change in the year BALANCE, MARCH 31, 2015 Net income attributable to owners of the parent Cash dividends, ¥46.00 per share Purchase of treasury stock Exercise of warrants Decrease due to change of fiscal year-end of subsidiaries Net change in the year BALANCE, MARCH 31, 2016

Number of Shares of Common Stock Common Outstanding Stock

Capital Surplus

207,113,076 ¥ 10,243 ¥ 15,184

Stock Acquisition Rights

Retained Earnings

¥ 493 ¥ 109,977

207,113,076

¥ 1,134

¥ 8,653

10,243

15,184

493

109,782

(270)

1,134

¥ 0 ¥ 146,250

(195)

(195)

8,653

836

(6,734) (2,824) 340,800

(11) 240

240

19 207,451,052

10,483

15,424

531 1,024

129,705

(281)

233 1,367

¥1 1

1,775 10,428

564 1,400

36,233

207,888,384 ¥ 11,017 ¥ 15,958

¥ (286)

(197) ¥ 1,170

(6,999) 2 ¥ 3 ¥ 3,429

146,055

26,638

26,638

(6,734) (11) 480

(6,734) (11) 480

19 3,104 169,551

(0)

19 3,104 169,551

(9,549) (5) 1,068

(9,549) (5) 1,068

(826) (1,256) (8,377) ¥ 144 ¥ 188,095

(826) 0 (8,377) ¥ 0 ¥ 188,095

534

(826) 73 ¥ 1,097 ¥ 155,563

0

36,233

(5) 534

146,055

36,233

(9,549) (668) 438,000

Total

Noncontrolling Interests Total Equity

¥ 836 ¥ 146,250

26,638

Thousands of U.S. Dollars (Note 1) Accumulated Other Comprehensive Income

Consolidated Statement of Comprehensive Income

Common Stock

Sysmex Corporation and Subsidiaries

Thousands of U.S. Dollars (Note 1)

Millions of Yen Year Ended March 31, 2016

¥ (270)

(195)

See notes to consolidated financial statements.

NET INCOME OTHER COMPREHENSIVE INCOME (LOSS) (Note 13): Unrealized gain (loss) on available-for-sale securities Deferred gain on derivatives under hedge accounting Foreign currency translation adjustments Defined retirement benefit plans Total other comprehensive income (loss) COMPREHENSIVE INCOME TOTAL COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO: Owners of the parent Non-controlling interests

Treasury Stock

Deferred Unrealized Gain on Defined Gain on Derivatives Foreign Currency Retirement under AvailableTranslation Benefit Hedge for-Sale Plans Securities Accounting Adjustments

2016 ¥ 36,233

2015 ¥ 26,638

2016 $ 320,646

(197) 2 (6,999) (1,256) (8,450) ¥ 27,783

233 1 1,775 564 2,573 ¥ 29,211

(1,743) 18 (61,938) (11,115) (74,778) $ 245,868

¥ 27,783 (0)

¥ 29,211 (0)

$ 245,868 (0)

BALANCE, MARCH 31, 2015 Net income attributable to owners of the parent Cash dividends, $0.41 per share Purchase of treasury stock Exercise of warrants Decrease due to change of fiscal year-end of subsidiaries Net change in the year BALANCE, MARCH 31, 2016

Capital Surplus

$ 92,770 $ 136,496

Stock Acquisition Rights

Retained Earnings

$ 9,062 $ 1,147,832

Treasury Stock

Unrealized Defined Gain on Deferred Gain Foreign Available- on Derivatives Currency Retirement for-Sale under Hedge Translation Benefit Securities Accounting Adjustments Plans

$ (2,487) $ 12,097

320,646 (84,504) (44) 4,726

4,726

$ 97,496 $ 141,222

(7,310) 645 (1,743) $ 9,707 $ 1,376,664 $ (2,531) $ 10,354

Total

Noncontrolling Interests Total Equity

$ 9 $ 92,283 $ 12,389 $ 1,500,451

$ 1,500,451

320,646 (84,504) (44) 9,452

320,646 (84,504) (44) 9,452

(7,310) 18 (61,938) (11,115) (74,133) $ 27 $ 30,345 $ 01,274 $ 1,664,558

(7,310) $0 (74,133) $ 0 $ 1,664,558

See notes to consolidated financial statements.

See notes to consolidated financial statements.

77 Sysmex Report 2016

Sysmex Report 2016 78

 Financial and Other Information

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

Sysmex Corporation and Subsidiaries

Sysmex Corporation and Subsidiaries Year Ended March 31, 2016

Thousands of U.S. Dollars (Note 1)

Millions of Yen Year Ended March 31, 2016

OPERATING ACTIVITIES: Income before income taxes Adjustments for: Income taxes - paid Depreciation and amortization Gain on revision of retirement benefit plan Loss on disposal of property, plant and equipment Changes in assets and liabilities: Increase in notes and accounts receivable Increase in inventories Increase in asset for retirement benefits Increase in notes and accounts payable Decrease in liability for retirement benefits Other–net Net cash provided by operating activities INVESTING ACTIVITIES: Purchases of property, plant and equipment Purchases of software and other assets Purchases of investment securities Purchases of investments in subsidiaries with changes in consolidation scope Acquisitions, net of cash acquired Other–net Net cash used in investing activities FINANCING ACTIVITIES: Decrease in short-term bank loans - net Repayments of long-term debt Payments of lease obligations Exercise of warrants Dividends paid Other–net Net cash used in financing activities FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR DECREASE IN CASH AND CASH EQUIVALENTS DUE TO CHANGE OF FISCAL YEAR-END OF SUBSIDIARIES CASH AND CASH EQUIVALENTS, END OF YEAR See notes to consolidated financial statements.

79 Sysmex Report 2016

2016

2015

2016

¥ 54,660

¥ 45,728

$ 483,717

(19,578) 14,186 (1,038) 365

(15,552) 12,955

(5,477) (6,821) (374) 4,145 (48) (453) 39,567

(6,850) (1,785) 2,517 (640) 2,125 38,641

(48,469) (60,363) (3,310) 36,681 (425) (4,008) 350,150

(13,686) (6,168) (832)

(13,033) (3,456) (2,350)

(121,115) (54,584) (7,363)

143

(403)

(173,257) 125,540 (9,186) 3,230

(3,566)

(534) (21,623)

(342) (363) (19,544)

(4,726) (191,354)

(1) (50) 850 (9,549) (5) (8,755)

(1,000) (148) (57) 396 (6,734) (11) (7,554)

(9) (442) 7,522 (84,504) (45) (77,478)

(2,321) 6,868 50,220

2,129 13,672 36,548

(20,540) 60,778 444,425

¥ 50,220

(5,362) $ 499,841

(606) ¥ 56,482

1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2015 consolidated financial statements to conform to the classifications used in 2016. The consolidated financial statements are stated in Japanese yen, the currency of the country in which Sysmex Corporation (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥113 to $1, the approximate rate of exchange at March 31, 2016. 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 ACCOUNTING POLICIES a. Consolidation—The consolidated financial statements as of March 31, 2016, include the accounts of the Company and its 60 (59 in 2015) subsidiaries (collectively the “Group”). Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method. Investments in three (three in 2015) associated companies are accounted for by the equity 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 or 20 years. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is also eliminated. For the year ended March 31, 2016, Sysmex Partec GmbH and four other companies changed their fiscal year-end from December 31 to March 31. The Company included the subsidiaries’ operating results for the 12-month period from April 1, 2015 to March 31, 2016 in the consolidated statement of income and included their operating results for the 3-month period from January 1, 2015 to March 31, 2015 in the consolidated statement of changes in equity by directly charging retained earnings as a decrease due to change of fiscal year-end of subsidiaries.

b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements—In May 2006, the Accounting Standards Board of Japan (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” which was subsequently revised in February 2010 and March 2015 to reflect revisions of the relevant Japanese GAAP or accounting standards in other jurisdictions. PITF No. 18 prescribes that the accounting policies and procedures applied to a parent company and its

subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements. However, financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America (Financial Accounting Standards Board Accounting Standards Codification - “FASB ASC”) tentatively may be used for the consolidation process, except for the following items that should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of research and development (R&D); and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—In March 2008, the ASBJ issued ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments” which was subsequently revised in line with the revisions to PITF No. 18 above. The standard requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s financial statements are used in applying the equity method unless it is impracticable to determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or generally accepted accounting principles in the United States of America tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of R&D; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.

d. Business Combination—In October 2003, the Business Accounting Council issued a Statement of Opinion, “Accounting for Business Combinations,” and in December 2005, 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.” In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, “Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting standard are as follows: (1) The revised standard requires accounting for business combinations only by the purchase method. As a result, the pooling-of-interests method of accounting is no longer allowed. (2) The previous accounting standard required R&D costs to be charged to income as incurred. Under the revised standard, in-process R&D costs acquired in the business combination are capitalized as an intangible asset. (3) The previous accounting standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets acquired and all of the liabilities assumed have been identified after a review of the

Sysmex Report 2016 80

 Financial and Other Information

procedures used in the purchase price allocation. The revised standard was applicable to business combinations undertaken on or after April 1, 2010. In September 2013, the ASBJ issued revised ASBJ Statement No. 21, “Accounting Standard for Business Combinations,” revised ASBJ Guidance No. 10, “Guidance on Accounting Standards for Business Combinations and Business Divestitures,” and revised ASBJ Statement No. 22, “Accounting Standard for Consolidated Financial Statements.” Major accounting changes are as follows: (a) Transactions with non-controlling interest—A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of non-controlling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Under the previous accounting standard, any difference between the fair value of the consideration received or paid and the amount by which the non-controlling interest is adjusted is accounted for as an adjustment of goodwill or as profit or loss in the consolidated statement of income. Under the revised accounting standard, such difference is accounted for as capital surplus as long as the parent retains control over its subsidiary. (b) Presentation of the consolidated balance sheet—In the consolidated balance sheet, “minority interest” under the previous accounting standard is changed to “non-controlling interest” under the revised accounting standard. (c) Presentation of the consolidated statement of income—In the consolidated statement of income, “income before minority interest” under the previous accounting standard is changed to “net income” under the revised accounting standard, and “net income” under the previous accounting standard is changed to “net income attributable to owners of the parent” under the revised accounting standard. (d) Provisional accounting treatments for a business combination—If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. Under the previous accounting standard guidance, the impact of adjustments to provisional amounts recorded in a business combination on profit or loss is recognized as profit or loss in the year in which the measurement is completed. Under the revised accounting standard guidance, during the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. (e) Acquisition-related costs—Acquisition-related costs are costs, such as advisory fees or professional fees, which an acquirer incurs to effect a business combination. Under the previous accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs of the investment. Under the revised accounting standard, acquisition-related costs shall be accounted for as expenses in the periods in which the costs are incurred. The above accounting standards and guidance for (a) transactions with non-controlling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related costs are effective for the beginning of annual periods beginning on or after April 1, 2015. Earlier application is permitted from the beginning of annual periods beginning on or after April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income. In the case of earlier application, all accounting standards and guidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, should be applied simultaneously.

81 Sysmex Report 2016

Either retrospective or prospective application of the revised accounting standards and guidance for (a) transactions with non-controlling interest and (e) acquisition-related costs is permitted. In retrospective application of the revised standards and guidance, the accumulated effects of retrospective adjustments for all (a) transactions with non-controlling interest and (e) acquisition-related costs which occurred in the past shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for the year of the first-time application. In prospective application, the new standards and guidance shall be applied prospectively from the beginning of the year of the first-time application. The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income shall be applied to all periods presented in financial statements containing the first-time application of the revised standards and guidance. The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, 2015. Earlier application is permitted for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, 2014. The Company applied the revised accounting standards and guidance for (a) transactions with non-controlling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related costs above, effective April 1, 2015, and (d) provisional accounting treatments for a business combination above for a business combination which occurred on or after April 1, 2015. The revised accounting standards and guidance for (a) transactions with non-controlling interest and (e) acquisition-related costs were applied prospectively. With respect to (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, the applicable line items in the 2015 consolidated financial statements have been accordingly reclassified and presented in line with those in 2016. There was no impact from these accounting changes.

e. 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. Cash equivalents include time deposits, commercial paper and bond funds, all of which mature or become due within three months of the date of acquisition. f. Marketable and Investment Securities—Marketable and investment securities are classified and accounted for, depending on management’s intent, as follows: (1) held-to-maturity debt securities, for which there is a positive intent and ability to hold to maturity, are reported at amortized cost; and (2) available-for-sale securities, which are not classified as either of the aforementioned securities, are reported at fair value, with unrealized gains and losses, 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 to income. g. Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential losses in the receivables outstanding.

h. Inventories—Inventories are stated at the lower cost determined by the average cost method or net selling value for the Company and its domestic subsidiaries, and at the lower of cost, determined by the moving-average method, or market for foreign subsidiaries.

i. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation is computed by the straight-line method over the estimated useful lives of the assets. The range of useful lives is from 31 to 50 years for buildings and structures, from 5 to 11 years for machinery and equipment, and from 2 to 15 years for furniture and fixtures. Lease assets are depreciated by the straight-line method over the respective lease periods.

j. Long-lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by 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 the asset or the net selling price at disposition.

k. 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 during the current year to the estimated total sales over the estimated salable years or the amount to be amortized using the straightline 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. l. Retirement and Pension Plans—The Company has defined benefit pension plans for employees’ retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. Actuarial gains and losses are amortized on a straight-line basis over five years within the average remaining service period. Past service costs are amortized on a straight-line basis over five years within the average remaining service period. Certain of its subsidiaries have unfunded lump-sum payment plans for employees’ retirement benefits and accounted for the liability for retirement benefits based on the required amount in accordance with the retirement allowance regulations. In May 2012, the ASBJ issued ASBJ Statement No. 26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on Accounting Standard for Retirement Benefits,” which replaced the accounting standard for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed by partial amendments from time to time through 2009. (a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). (b) The revised accounting standard does not change how to recognize actuarial gains and losses and past service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining service period of the employees. However, actuarial gains and losses and past service costs that arose in the current period and have not yet been recognized in profit or loss are included in other comprehensive income, and actuarial gains and losses and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period are treated as reclassification adjustments (see Note 13). (c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods, the discount rate, and expected future salary increases.

This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, all with earlier application being permitted from the beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required. The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014, and for (c) above, effective April 1, 2014. With respect to (c) above, the Company changed the method of attributing the expected benefit to periods from a point basis to a benefit formula basis, the method of determining the discount rate from using the period which approximates the expected average remaining service period to using a single weighted average discount rate reflecting the estimated timing and amount of benefit payment, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. As a result, retained earnings as of April 1, 2014, decreased by ¥195 million. Unfunded retirement benefits for the Company’s directors are provided at the estimated amount which would be required if such individuals retired at the balance sheet date. However, the Company abolished its unfunded retirement benefit plan on June 24, 2005. No additional provisions have been recorded for retirement benefits to be paid to the Company’s directors since then. The liability for directors’ retirement benefits is the amount provided in proportion to the term that present directors had been in place before June 24, 2005. (Additional Information) The Company transferred a part of the defined benefit pension plans to the defined contribution pension plans on April 1, 2015. The Company accounted the transfer in accordance with “Guidance on Accounting for Transfers between Retirement Benefit Plans” (ASBJ Application Guidance No. 1 issued on January 31, 2002) to account for the transfer. As a result of this change, ¥1,038 million ($9,186 thousand) of other income was recorded for the year ended March 31, 2016.

m. Asset Retirement Obligations—In March 2008, the ASBJ issued ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

n. Stock Options—ASBJ Statement No. 8, “Accounting Standard for Stock Options” and related guidance are applicable to stock options granted on and after May 1, 2006.

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 Financial and Other Information

This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period as consideration for receiving 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 options are presented as stock acquisition rights as a separate component of equity until exercised.

o. Research and Development—R&D costs are charged to income as incurred. Such costs were ¥17,775 million ($157,301 thousand) and ¥14,692 million for the years ended March 31, 2016 and 2015, respectively. p. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the previous accounting standard for lease transactions. (1) Finance Leases as Lessee Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s financial statements. The revised accounting standard requires that all finance lease transactions be capitalized by recognizing lease assets and lease obligations in the balance sheet. In addition, the revised accounting standard permits leases that existed at the transition date and do not transfer ownership of the leased property to the lessee to continue to be accounted for as operating lease transactions. (2) Finance Leases as Lessor Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased property to the lessee were treated as sales. However, other finance leases were permitted to be accounted for as operating lease transactions if certain “as if sold” information was disclosed in the notes to the lessor’s financial statements. The revised accounting standard requires that all finance leases that are deemed to transfer ownership of the leased property to the lessee are recognized as lease receivables, and all finance leases that are not deemed to transfer ownership of the leased property to the lessee are recognized as investments in lease.

q. Bonuses to Directors—Bonuses to directors are accrued at the end of the year to which such bonuses are attributable.

r. Construction Contracts—In December 2007, the ASBJ issued ASBJ Statement No. 15, “Accounting Standard for Construction Contracts” and ASBJ Guidance No. 18, “Guidance on Accounting Standard for Construction Contracts.” Under this accounting standard, construction revenue and construction costs should be recognized by the percentage-of-completion method if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, the outcome of a construction contract is deemed to be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts.

s. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statement 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 income tax rates to the temporary differences.

83 Sysmex Report 2016

t. Foreign Currency Transactions—All short-term and long-term monetary 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 and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged by forward exchange contracts.

u. Foreign Currency Financial Statements—The balance sheet accounts of the 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 are shown as “Foreign currency translation adjustments” under accumulated other comprehensive income in a separate component of equity. Revenue and expense accounts of foreign subsidiaries are translated into yen at the average exchange rate. v. Derivatives and Hedging Activities—The Group uses foreign exchange forward contracts and interest rate swaps to manage its 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: (1) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income; and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions. Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements is recognized and included in interest expense or income.

w. Per Share Information—Basic net income per share is computed by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for stock splits. Diluted net income per share reflects the potential dilution that could occur if warrants were exercised. Diluted net income per share of common stock assumes full exercise of outstanding warrants. Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the respective fiscal years, including dividends to be paid after the end of the year, retroactively adjusted for stock splits. x. Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement No. 24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24, “Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments under this standard and guidance are as follows: (1) Changes in Accounting Policies When a new accounting policy is applied following revision of an accounting standard, the new policy is applied retrospectively unless the revised accounting standard includes specific transitional provisions, in which case the entity shall comply with the specific transitional provisions. (2) Changes in Presentation When the presentation of financial statements is changed, priorperiod financial statements are reclassified in accordance with the new presentation. (3) Changes in Accounting Estimates A change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.

(4) Corrections of Prior-Period Errors When an error in prior-period financial statements is discovered, those statements are restated.

y. New Accounting Pronouncements Tax Effect Accounting—On March 28, 2016, the ASBJ issued ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” which included certain revisions of the previous accounting and auditing guidance issued by the Japanese Institute of Certified Public Accountants. While the new guidance continues to follow the basic framework of the previous guidance, it provides new guidance for the application of judgment in assessing the recoverability of deferred tax assets. The previous guidance provided a basic framework which included certain specific restrictions on recognizing deferred tax assets depending on the company’s classification in respect of its profitability, taxable profit and temporary differences, etc. The new guidance does not change such basic framework but, in limited cases, allows companies to recognize deferred tax assets even for a deductible temporary difference for which it was specifically prohibited to recognize a deferred tax asset under the previous guidance, if the company can justify, with reasonable grounds, that it is probable that the deductible temporary difference will be utilized against future taxable profit in some future period. The new guidance is effective for the beginning of annual periods beginning on or after April 1, 2016. Earlier application is permitted for annual periods ending on or after March 31, 2016. The new guidance shall not be applied retrospectively and any adjustments from the application of the new guidance at the beginning of the reporting period shall be reflected within retained earnings or accumulated other comprehensive income at the beginning of the reporting period. The Company expects to apply the new guidance on recoverability of deferred tax assets effective April 1, 2016, and is in the process of measuring the effects of applying the new guidance in future applicable periods.

3. SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES Short-term investments and investment securities as of March 31, 2016 and 2015, consisted of the following: Thousands of Millions of Yen U.S. Dollars 2016 2015 2016 Current: Time deposits other than cash equivalents ¥ 63 ¥ 53 $ 558 Mutual funds 299 241 2,646 Total ¥ 362 ¥ 294 $ 3,204 Non-current: Marketable equity securities ¥ 3,264 ¥ 3,595 $ 28,885 Non-marketable securities 1,442 1,648 12,761 Total ¥ 4,706 ¥ 5,243 $ 41,646 The costs and aggregate fair values of investment securities as of March 31, 2016 and 2015, were as follows: Millions of Yen 2016 Unrealized Unrealized Cost Fair Value Gains Losses Available-for-sale Equity securities ¥ 1,569 ¥1,696 ¥ (1) ¥ 3,264

Cost Available-for-sale Equity securities

¥ 1,569

Millions of Yen 2015 Unrealized Unrealized Fair Value Gains Losses ¥ 2,026

¥ 3,595

Thousands of U.S. Dollars 2016 Unrealized Unrealized Cost Fair Value Gains Losses Available-for-sale Equity securities

$ 13,885

$ 15,009

$ (9) $ 28,885

The information for available-for-sale securities which were sold during the year ended March 31, 2015, was as follows: Millions of Yen 2015 Realized Realized Proceeds Gains Losses Available-for-sale Equity securities ¥1 ¥0

The impairment losses on available-for-sale securities for the year ended March 31, 2016, were ¥400 million ($3,540 thousand).

4. INVENTORIES Inventories as of March 31, 2016 and 2015, consisted of the following: Thousands of Millions of Yen U.S. Dollars 2016 2015 2016 Finished products ¥ 27,057 ¥ 22,737 $ 239,442 and merchandise Work in process 2,984 2,870 26,408 Raw materials 5,042 3,801 44,619 Supplies 4,779 540 480 Total ¥ 35,623 ¥ 29,888 $ 315,248

5. LONG-TERM DEBT Long-term debt as of March 31, 2016, consisted of the following: Millions Thousands of of Yen U.S. Dollars Loans from banks, due through 2017, with interest of 8.87% for 2016: Collateralized Total Less current portion Long-term debt, less current portion

¥2

$ 18

2

18

(1)

(9)

¥1

$ 9

Annual maturities of long-term debt as of March 31, 2016, were as follows: Millions Thousands of Year Ending March 31 of Yen U.S. Dollars 2016 ¥1 $ 9 2017

1

9

Total

¥2

$ 18

Sysmex Report 2016 84

 Financial and Other Information

The carrying amounts of assets pledged as collateral for the above collateralized long-term debt at March 31, 2016, were as follows: Millions of Thousands of U.S. Dollars Yen Land Buildings and structures - net of accumulated depreciation Machinery and equipment - net of accumulated depreciation Total

¥ 23

$ 203

207

1,832

13

115

¥ 243

$ 2,150

6. RETIREMENT AND PENSION PLANS The Company and certain of its 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 are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age or by death. The Company has cash balance pension plans as defined benefit pension plans. Certain of its subsidiaries adopt a simple method to calculate retirement benefit obligation as for lump-sum payment plans. The Company and certain of its subsidiaries have defined contribution plans. In April 1, 2015, the Company implemented revisions to its pension plan and transferred a portion of defined benefit pension plans to defined contribution plans.

(1) The changes in defined benefit obligation for the years ended March 31, 2016 and 2015, were as follows: Millions of Yen 2016

2015

Balance at beginning of year ¥ 13,060 ¥ 11,980 (as previously reported) Cumulative effect of 303 accounting change Balance at beginning of year 13,060 12,283 (as restated) Current service cost Interest cost Actuarial (gains) losses Benefits paid Prior service cost Decrease due to transfer to defined contribution pension plans Others Balance at end of year

Thousands of U.S. Dollars 2016 $ 115,575

115,575

725

939

6,416

83

148

735

452

458

4,000

(620)

(554)

(5,487)

112

991

(4,049)

(35,832)

(83)

(214)

(734)

¥ 9,680 ¥ 13,060

$ 85,664

(2) The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:

2015

Thousands of U.S. Dollars 2016

Balance at beginning of year ¥ 13,560 ¥ 11,362

$ 120,000

Millions of Yen 2016 Expected return on plan assets Actuarial (gains) losses Contributions from the employer Benefits paid Decrease due to transfer to defined contribution pension plans Balance at end of year

85 Sysmex Report 2016

303

341

2,681

(550)

1,577

(4,867)

500

752

4,425

(566)

(472)

(5,009)

(3) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets Millions of Yen 2016 Funded defined benefit obligation Total

¥ 9,799 ¥ 13,560

(30,513) $ 86,717

$ 81,558

(9,799)

(13,560)

(86,717)

(583)

(961)

(5,159)

461

4,106

¥ (119) ¥

(500)

$ (1,053)

(10)

$ (566)

272

2,080

2,407

¥ 208

¥ 2,070

$ 1,841

2016 Unrecognized prior service cost Unrecognized actuarial (gains) losses Total

464

2015

Thousands of U.S. Dollars 2016

Millions of Yen

¥ (64)

¥

(7) Plan assets a. Components of plan assets Plan assets as of March 31, 2016 and 2015, consisted of the following: 2016 2015

2016

2015

Thousands of U.S. Dollars 2016

¥ 464

¥ 461

$ 4,106

(583)

(961)

(5,159)

Millions of Yen

Liability for retirement benefits Asset for retirement benefits

Domestic debt investments

29%

29%

Domestic equity investments

28

30

Foreign debt investments

10

11

Foreign equity investments

25

25

Others Total

Net liability (asset) arising from defined benefit obligation

¥ (119)

¥ (500)

8

5

100%

100%

$ (1,053)

b. Method of determining the expected rate of return on plan assets (4) The components of net periodic benefit costs for the years ended March 31, 2016 and 2015, were as follows:

2016

2015

Thousands of U.S. Dollars 2016

Service cost

¥ 725

¥ 939

$ 6,416

Interest cost

83

148

734

(303)

(341)

(2,681)

(331)

(353)

(2,929)

20

6

177

Net periodic benefit costs

¥ 194

¥ 399

$ 1,717

Profit due to transition to defined contribution pension plans*

¥ (1,038)

Millions of Yen

Expected return on plan assets Recognized actuarial (gains) losses Amortization of prior service cost

$ (9,186)

* The amount was recorded in the other income of the consolidated statement of income for the year ended March 31, 2016.

(5) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2016 and 2015 Millions of Yen 2016 Prior service cost Actuarial (gains) losses Total

(3,448)

Thousands of U.S. Dollars 2016

¥ 9,216 ¥ 12,599

Plan assets Unfunded defined benefit obligation Net liability (asset) arising from defined benefit obligation

2015

(6) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2016 and 2015

¥

(54)

2015 ¥

6

Thousands of U.S. Dollars 2016 $

The expected rate of return on plan assets is determined considering the long-term rates of return which are expected currently and in the future from the various components of the plan assets.

(8) Assumptions used for the years ended March 31, 2016 and 2015, are set forth as follows: 2016

2015

Discount rate

0.6%

1.0%

Expected rate of return on plan assets

3.0%

3.0%

766

(16,000)

¥ (1,862)

¥ 772

$ (16,478)

Plan assets Sum of actuarial liabilities of pension plan and minimum actuarial reserve Net balance

Required contributions to the defined contribution pension plan of the Company and certain of its subsidiaries were ¥1,467 million ($12,982 thousand) and ¥638 million as of March 31, 2016 and 2015, respectively. In addition, the Company and certain of its subsidiaries participate in contributory multi-employer pension plans covering substantially all of their employees. The Company and certain of its subsidiaries cannot reasonably calculate the amount of plan assets corresponding to the contributions to multi-employer plan. Therefore, it is accounted for using the same method as a defined contribution plan. The contributions to such multi-employer plan, which are accounted for using the same method as a defined contribution plan, were ¥606 million ($5,363 thousand) and ¥572 million as of March 31, 2016 and 2015, respectively.

Year Ended March 31, 2016 The funded status of the multi-employer plan calculated as of March 31, 2015, was as follows: Millions of Yen

Plan assets Sum of actuarial liabilities of pension plan and minimum actuarial reserve Net balance

The Pension Osaka Fund of Japan Pharmaceutical Electronics Welfare Information Pension Fund Technology Association Industry ¥ 261,939 ¥ 334,668 284,215

381,438

¥ (22,276)

¥ (46,770)

The Pension Osaka Fund of Japan Pharmaceutical Electronics Welfare Information Pension Fund Technology Association Industry $ 2,318,044 $ 2,961,664 2,515,177

3,375,558

$ (197,133)

$ (413,894)

The net balance above is mainly caused by past service cost of ¥79,804 million ($706,230 thousand) and general reserve of ¥10,758 million ($95,204 thousand). Past service cost under the plan is amortized on a straight-line basis over 20 years for The Pension Fund of Japan Electronics Information Technology Industry or over 16 years for Osaka Pharmaceutical Welfare Pension Fund Association, and the special contributions of ¥8 million ($71 thousand), which are utilized for such amortization, were expensed in the consolidated statement of income of the Group. The contribution ratio of the Group in the multi-employer plan calculated as of March 31, 2015, was as follows: The Pension Osaka Fund of Japan Pharmaceutical Electronics Welfare Information Pension Fund Technology Association Industry The contribution ratio of the Group in 5.59% 0.15% the multi-employer plan The ratios above do not represent the actual actuarial liability ratio of the Group.

Year Ended March 31, 2015 The funded status of the multi-employer plan calculated as of March 31, 2014, was as follows:

(9) Defined contribution pension plan

(478)

(1,808)

Thousands of U.S. Dollars

Millions of Yen

Plan assets Sum of actuarial liabilities of pension plan and minimum actuarial reserve Net balance

The Pension Osaka Fund of Japan Pharmaceutical Electronics Welfare Information Pension Fund Technology Association Industry ¥ 231,951 ¥ 292,417 262,247

366,867

¥ (30,296)

¥ (74,450)

The net balance above is mainly caused by past service cost of ¥82,118 million and a deficiency brought forward of ¥23,869 million. Past service cost under the plan is amortized on a straight-line basis over 20 years for The Pension Fund of Japan Electronics Information Technology Industry or over 17 years for Osaka Pharmaceutical Welfare Pension Fund Association, and the special contributions of ¥7 million, which are utilized for such amortization, were expensed in the consolidated statement of income of the Group.

Sysmex Report 2016 86

 Financial and Other Information

The contribution ratio of the Group in the multi-employer plan calculated as of March 31, 2014, was as follows: The Pension Osaka Fund of Japan Pharmaceutical Electronics Welfare Information Pension Fund Technology Association Industry The contribution ratio of the Group in 5.29% 0.16% the multi-employer plan

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, 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 Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts within equity under certain conditions upon resolution of the shareholders.

The ratios above do not represent the actual actuarial liability ratio of the Group. The Company also has recorded a liability for an unfunded retirement benefit plan covering all of its directors in the amount of ¥102 million ($903 thousand) and ¥102 million as of March 31, 2016 and 2015, respectively.

7. EQUITY Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

(a) Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. Additionally, for companies that meet certain criteria including (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed as one year rather than the normal two year term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-inkind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation. However, the Company cannot do so because it does not meet all the above criteria. The Companies Act permits companies to distribute dividends-inkind (noncash assets) to shareholders subject to a certain limitation and additional requirements.

(c) Treasury stock and treasury stock acquisition rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.

The stock option activity is as follows:

March 31, 2014 - Outstanding Exercised

2007 Stock Option

9 directors 152 employees 18 directors of subsidiaries 42 employees of subsidiaries 6 directors 203 employees 34 directors of subsidiaries 43 employees of subsidiaries

2013 Stock Option

1,460,000

Date of Grant July 30, 2007

September 13, 2013

Exercise Price

Exercise Period

¥ 1,163 ($ 10.29)

From July 30, 2009 to July 29, 2015

¥ 3,110 From September 13, 2015 to ($ 27.52) September 12, 2021

1,452,000 (14,000) 1,438,000 677,600 (340,800)

Canceled March 31, 2015 - Outstanding

336,800

For the year ended March 31, 2016 Non-vested March 31, 2015 - Outstanding Granted Canceled Vested

1,438,000 (4,000) (1,434,000)

March 31, 2016 - Outstanding Vested March 31, 2015 - Outstanding

336,800

Vested

1,434,000

Exercised

(263,200)

Canceled

(73,600)

March 31, 2016 - Outstanding

Fair value price at grant date Number of Options Granted (Shares) 2,932,800

(Shares)

Vested

Average stock price at exercise

Persons Granted

(Shares) Non-vested March 31, 2014 - Outstanding Granted Canceled Vested March 31, 2015 - Outstanding Vested

8. STOCK OPTIONS Stock Option

2013 Stock Option

For the year ended March 31, 2015

Exercise price

The stock options outstanding as of March 31, 2016, are as follows:

9. INCOME TAXES 2007 Stock Option

(174,800) (4,200) 1,255,000

¥ 1,163 ($ 10.29) ¥ 7,094 ($ 62.78) ¥ 98,325 ($ 870.13)

¥ 3,110 ($ 27.52) ¥ 7,073 ($ 62.59) ¥ 174,900 ($ 1,547.79)

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 Risk free interest rate: 1.403%

The Assumptions Used to Measure Fair Value of 2013 Stock Option Estimate method: Black-Scholes option pricing model Volatility of stock price: 34.51% Estimated remaining outstanding period: five years Estimated dividend: ¥ 36 per share Risk free interest rate: 0.250%

87 Sysmex Report 2016

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 33.0% and 35.6% for the years ended March 31, 2016 and 2015, respectively. Foreign subsidiaries are subject to income taxes of the countries in which they operate. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2016 and 2015, are as follows: Thousands of Millions of Yen U.S. Dollars 2016 2015 2016 Deferred tax assets (current): Unrealized intercompany ¥ 3,735 ¥ 4,887 $ 33,053 profits Inventories 513 555 4,540 Accrued bonuses 1,304 1,196 11,540 Accrued enterprise tax 527 575 4,664 Other 1,846 1,864 16,336 Total 7,925 9,077 70,133 Deferred tax assets (non-current): Depreciation 191 147 1,690 Unrealized intercompany 725 944 6,416 profits Liability for retirement 113 117 1,000 benefits Software 927 930 8,204 Investment securities 280 299 2,478 Tax loss carryforwards 961 381 8,504 Other 585 565 5,177 Less valuation allowance (952) (593) (8,425) Total 2,830 2,790 25,044 Deferred tax liabilities (current): Unearned revenue

217

1,921

Other 112 191 Total 329 191 Deferred tax liabilities (non-current): Net unrealized gain on available-for-sale securities 518 653 Revaluation of land for consolidation 344 400 Revaluation of intangible assets for consolidation 905 1,151 Asset for retirement benefits 179 313 Investment loss for subsidiaries capital reduction by corporation tax law 324 342 Undistributed earnings of 8,079 7,558 foreign subsidiaries Other 931 1,100 Total 11,280 11,517 Net deferred tax assets ¥ (854) ¥ 159 (liabilities)

991 2,912

4,584 3,044 8,009 1,584

2,867 71,496 8,238 99,822 $ (7,557)

Sysmex Report 2016 88

 Financial and Other Information

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements of income for the year ended March 31, 2015, is as follows: Normal effective statutory tax rate 35.6% Expenses not deductible for income tax purposes 0.9 Per capita levy 0.1 Foreign tax credit (0.3) R&D tax credit (1.7) Amortization of goodwill 1.1 Effect of tax rate reduction 0.5 Tax effect on undistributed earnings of foreign subsidiaries 6.8 Different tax rates applied to foreign subsidiaries (3.1) Change in valuation allowance 0.9 Other - net 1.0 Actual effective tax rate 41.8% Since the actual effective tax rate at March 31, 2016, differed from the normal effective statutory tax rate by less than 5%, disclosure of details is omitted. Tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2015, to approximately 33.0% and for the fiscal year beginning on or after April 1, 2016, to approximately 32.2%. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, by ¥69 million and increase accumulated other comprehensive income for unrealized gain on available-for-sale securities by ¥68 million, deferred gain on derivatives under hedge accounting by ¥0 million, defined retirement benefit plan by ¥67 million in the consolidated balance sheet as of March 31, 2015, and to increase income taxes-deferred in the consolidated statement of income for the year then ended by ¥204 million. New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2016, to approximately 30.8% and for the fiscal year beginning on or after April 1, 2018, to approximately 30.6%. The effect of these changes was to decrease deferred tax assets, net of deferred tax liabilities, by ¥192 million ($1,699 thousand) and increase accumulated other comprehensive income for unrealized gain on available-for-sale securities by ¥28 million ($248 thousand), deferred gain on derivatives under hedge accounting by ¥0 million ($0 thousand), defined retirement benefit plan by ¥3 million ($27 thousand) in the consolidated balance sheet as of March 31, 2016, and to increase income taxes-deferred in the consolidated statement of income for the year then ended by ¥223 million ($1,973 thousand).

10. LEASES (Lessee) The Group leases certain furniture, fixtures and other assets. The minimum rental commitments under noncancelable operating leases are as follows: Millions of Thousands of Yen U.S. Dollars Due within one year Due after one year Total

2016

2016

¥ 2,474

$ 21,894

11,763

104,097

¥ 14,237

$ 125,991

(Lessor) The net investments in lease are summarized as follows: Millions of Yen

Gross lease receivables Estimated residual values Unearned interest income Investments in lease

89 Sysmex Report 2016

Thousands of U.S. Dollars

2016

2015

2016

¥ 8,167

¥ 4,812

$ 72,274

1,032

1,020

9,133

(663)

(419)

(5,867)

¥ 8,536

¥ 5,413

$ 75,540

Maturities of investment in lease for finance leases that are not deemed to transfer ownership of the leased property to the lessee are as follows: Millions of Thousands of Year Ending March 31 Yen U.S. Dollars 2017 ¥ 2,172 $ 19,221 2018 1,924 17,027 2019 1,663 14,717 2020 1,201 10,628 2021 715 6,327 2022 and thereafter 492 4,354 Total ¥ 8,167 $ 72,274 Future rental income under noncancelable operating leases (including imputed interest income): Millions of Thousands of Yen U.S. Dollars Due within one year Due after one year Total

2016

2016

¥ 1,234

$ 10,920

2,648

23,434

¥ 3,882

$ 34,354

11. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES (1) Group Policy for Financial Instruments The Group invests cash surpluses in low-risk financial assets, mainly short-term deposits and uses financial instruments, mainly short-term bank loans, for funding. Derivatives are used, not for speculative purposes, but to manage exposure to financial risks as described in (2) below. (2) Nature and Extent of Risks Arising from Financial Instruments Receivables, such as trade notes, trade accounts and investments in lease, are exposed to customer credit risk. Although receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign currencies, is hedged by using forward foreign currency contracts. Marketable and investment securities, mainly listing shares, are exposed to the risk of market price fluctuations. Payment terms of payables, such as trade notes and trade accounts, are mostly less than six months. Maturities of finance lease obligations, which are mainly used for the funding of equipment investments, are less than seven years after the balance sheet date. Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to market risks from changes in foreign currency exchange rates of receivables. Please see Note 12, “DERIVATIVES” for more details about instruments, hedged items and the policy for hedge accounting and assessment procedures for hedge effectiveness. (3) Risk Management for Financial Instruments

Credit risk management Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment term and balances of major customers by each business administration department to identify the default risk of customers at an early stage. The credit risk regarding subsidiaries is also managed in the same manner. With respect to financial investments, the Group manages its exposure to credit risk by prohibiting its funding to high credit rated bonds in accordance with its internal guidelines. Credit risk from derivatives is minimized because the Group deals only with large financial institutions.

Market risk management (foreign exchange risk) Foreign currency trade receivables are exposed to market risk resulting from fluctuations in foreign currency exchange rates. Such foreign currency exchange risk, which is recognized with respect to each currency and each month, is managed by using forward foreign currency contracts. Forward foreign currency contracts are used when foreign currency trade receivables are certainly expected from forecasted transactions according to conditions in foreign currency exchange fluctuations. Marketable and investment securities are managed by monitoring market values and financial position of issuers on a regular basis. Derivative transactions have been approved by a predefined decision maker based on the internal guidelines, which prescribe the authority and the limit, and managed by regularly confirming the balance of each day by the finance department.

Liquidity risk management Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on their maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets in view of business income, expenditure, and equipment investment spending plan along with adequate financial planning by the corporate treasury department. Subsidiaries also report their financial plans to the Group. The finance department manages the liquidity risk by obtaining information of cash flows of the whole Group. (4) Fair Values of Financial Instruments Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, other rational valuation techniques are used instead. The techniques include some changing factors and the fair values may be changed by adopting different assumptions. In addition, the contract amounts of derivatives in Note 12, “DERIVATIVES,” do not directly indicate the market risk of derivatives. (a) Fair value of financial instruments The carrying amounts, fair values and unrealized gain/loss as of March 31, 2016 and 2015, are as follows. Note that financial instruments whose fair value cannot be reliably determined are not included (see (b)). Millions of Yen Carrying Unrealized Fair Value March 31, 2016 Amount Gain/Loss Cash and cash equivalents ¥ 56,482 ¥ 56,482 Receivables: Trade notes 2,618 Trade accounts 52,706 Associated companies 225 Allowance for doubtful (589) accounts (*1) Receivables - net 54,960 54,961 ¥ 1 Investments in lease 8,536 8,459 (77) Investment securities Available-for-sale securities 3,264 3,264 Total ¥ 123,242 ¥ 123,166 ¥ (76) Payables: Trade notes ¥ 1,745 ¥ 1,745 Trade accounts 17,986 17,986 Associated companies 138 138 Lease obligations 883 867 ¥ (16) Income taxes payable 6,818 6,818 Total ¥ 27,570 ¥ 27,554 ¥ (16) Derivatives (*2) ¥ 251 ¥ 251

March 31, 2015 Cash and cash equivalents Receivables: Trade notes Trade accounts Associated companies Allowance for doubtful accounts (*1) Receivables - net Investments in lease Investment securities Available-for-sale securities Total Payables: Trade notes Trade accounts Associated companies Lease obligations Income taxes payable Total Derivatives (*2)

March 31, 2016 Cash and cash equivalents Receivables: Trade notes Trade accounts Associated companies Allowance for doubtful accounts (*1) Receivables - net Investments in lease Investment securities Available-for-sale securities Total Payables: Trade notes Trade accounts Associated companies Lease obligations Income taxes payable Total Derivatives (*2)

Millions of Yen Carrying Unrealized Fair Value Amount Gain/Loss ¥ 50,220 ¥ 50,220 2,802 50,069 171 (576) 52,466 5,413

52,464 5,365

3,595

3,595

¥ (2) (48)

¥ 111,694 ¥ 111,644

¥ (50)

¥ 1,470 ¥ 1,470 14,340 14,340 166 166 250 265 9,639 9,639 ¥ 25,865 ¥ 25,880 ¥ (51) ¥ (51)

¥ 15 ¥ 15

Thousands of U.S. Dollars Carrying Unrealized Fair Value Amount Gain/Loss $ 499,841 $ 499,841 23,168 466,425 1,991 (5,212) 486,372 75,540

486,381 74,858

28,885

28,885

$ 1,090,638 $ 1,089,965 $ 15,442 159,168 1,221 7,814 60,336 $ 243,981 $ 2,221

$ 15,442 159,168 1,221 7,673 60,336 $ 243,840 $ 2,221

$9 (682)

$ (673)

$ (141) $(141)

Notes: *1. Allowance for doubtful accounts associated with trade accounts receivable is deducted. *2. Derivative assets and liabilities are on a net basis.

Assets Cash and Cash Equivalents The carrying values are adopted for cash and cash equivalents as they approximate fair value because of their short maturities. Receivables The carrying values are adopted for short-term receivables as they approximate fair value. The fair values of long-term receivables, such as installment receivables, are measured at the present values discounted by risk-free rates and the future cash flows including credit risks.

Sysmex Report 2016 90

 Financial and Other Information

Investments in Lease The fair values of investments in lease are measured at the present values discounted by the interest rate after consideration of the remaining terms and credit risks. Investment Securities The fair values of equity securities are determined by securities exchange prices. Please see Note 3, “SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES,” for securities categorized by purposes.

Liabilities Payables and Income Taxes Payable The carrying values are adopted for payables and income taxes payable as they approximate fair value because of their short maturities. Lease Obligations The fair values of lease obligations are measured at the present values of total principal discounted by the interest rate which would be used if a new lease transaction occurred.

Derivatives Fair value information for derivatives is included in Note 12, “DERIVATIVES.” (b) Carrying amount of financial instruments whose fair value cannot be reliably determined Thousands of Millions of Yen U.S. Dollars Investments in equity instruments that do not have a quoted market price in an active market

2016

2015

2016

¥ 3,490

¥ 3,580

$ 30,885

The above financial instruments are not included in investment securities because they do not have market values and it is difficult to estimate the future cash flows. (5) Maturity Analysis for Financial Assets Millions of Yen Due after Due after Due in One Year Five Years Due after One Year March 31, 2016 through through Ten Years or Less Five Years Ten Years Cash and cash equivalents ¥ 56,482 Receivables: Trade notes 2,618 Trade accounts 52,435 ¥ 271 Associated companies 225 Investments in lease 2,459 5,635 ¥ 442 Total ¥ 442 ¥ 114,219 ¥ 5,906

Millions of Yen Due after Due after Due in One Year Five Years Due after One Year March 31, 2015 through through Ten Years or Less Five Years Ten Years Cash and cash equivalents ¥ 50,220 Receivables: Trade notes 2,802 Trade accounts 49,105 ¥ 964 Associated companies 171 Investments in lease 1,798 3,522 ¥ 93 Total ¥ 93 ¥ 104,096 ¥ 4,486

91 Sysmex Report 2016

Thousands of U.S. Dollars Due after Due after Due in One Year Five Years Due after One Year March 31, 2016 through through Ten Years or Less Five Years Ten Years Cash and cash equivalents $ 499,841 Receivables: Trade notes 23,168 Trade accounts 464,027 $ 2,398 Associated companies 1,991 Investments in lease 21,761 49,867 $ 3,912 Total $ 3,912 $ 1,010,788 $ 52,265

Derivative Transactions to Which Hedge Accounting is Applied

March 31, 2016 Foreign currency forward contractsSelling U.S. dollars

March 31, 2015

12. DERIVATIVES The Group enters into foreign currency forward contracts and foreign currency option contracts to hedge foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies. All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within the Group’s business. Accordingly, market risk in these derivatives is basically 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 to major 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 the authorization and credit limit amount.

Derivative Transactions to Which Hedge Accounting is Not Applied

March 31, 2016 Foreign currency forward contracts: Selling U.S. dollars Selling Euros

March 31, 2015 Foreign currency forward contractsSelling U.S. dollars

March 31, 2016 Foreign currency forward contracts: Selling U.S. dollars Selling Euros

Millions of Yen Contract Contract Amount Unrealized Fair Value Amount Due after Gain/Loss One Year

¥ 7,730 192

¥ 247 0

¥ 247 0

Millions of Yen Contract Contract Amount Unrealized Fair Value Amount Due after Gain/Loss One Year

¥ 5,111

¥ (52)

Foreign currency forward contractsSelling U.S. dollars

March 31, 2016 Foreign currency forward contractsSelling U.S. dollars

Millions of Yen Contract Hedged Contract Amount Item Amount Due after One Year

Receivables

¥ 1,521

Millions of Yen Contract Hedged Contract Amount Item Amount Due after One Year

Receivables

¥ 721

13. OTHER COMPREHENSIVE INCOME (LOSS)

Fair Value

¥4

Fair Value

¥1

Thousands of U.S. Dollars Contract Fair Hedged Contract Amount Item Amount Due after Value One Year

Receivables $ 13,460

$ 35

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution. The contract amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

The components of other comprehensive income (loss) for the years ended March 31, 2016 and 2015, were as follows: Thousands of Millions of Yen U.S. Dollars Unrealized gain (loss) on available-for-sale securities: Gains (losses) arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Deferred gain on derivatives under hedge accounting: Gains (losses) arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Foreign currency translation adjustments: Adjustments arising during the year Total Defined retirement benefit plans: Adjustments arising during the year Reclassification adjustments to profit or loss Amount before income tax effect Income tax effect Total Total other comprehensive income (loss)

2016

2015

2016

¥ (331)

¥ 255

$ (2,929)

(0) (331)

255

(2,929)

134 ¥ (197)

(22) ¥ 233

1,186 $ (1,743)

¥

¥

¥

61

(67)

$540

(59)

68

(522)

2

1

18

(0) 2

¥

(0) 1

$

(0) 18

¥ (6,999)

¥ 1,775

$ (61,938)

¥ (6,999)

¥ 1,775

$ (61,938)

¥ (1,063)

¥ 1,119

$ (9,407)

(799)

(347)

(7,071)

(1,862)

772

(16,478)

606 ¥ (1,256)

(208) ¥ 564

5,363 $ (11,115)

¥ (8,450)

¥ 2,573

$ (74,778)

¥ (52)

Thousands of U.S. Dollars Contract Contract Amount Unrealized Fair Value Amount Due after Gain/Loss One Year

$ 68,407 1,699

$ 2,186 0

$ 2,186 0

Sysmex Report 2016 92

 Financial and Other Information

14. NET INCOME PER SHARE

17. SEGMENT INFORMATION

Reconciliation of the differences between basic and diluted net income per share (“EPS”) for the years ended March 31, 2016 and 2015, is as follows: Millions Thousands U.S. Yen of Yen of Shares Dollars Net Income Attributable Weightedto Owners Average EPS of the Shares Parent For the year ended March 31, 2016: Basic EPS Net income attributable $ 1.54 to common shareholders ¥ 36,233 207,735 ¥ 174.42 Effect of dilutive securities Stock options 856 Diluted EPS Net income for ¥ 36,233 208,591 ¥ 173.71 $ 1.54 computation

Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. 1. Description of reportable segments The Group’s reportable segments are those for which separate financial information is available and regular evaluation by the Company’s management is being performed in order to decide how resources are allocated among the Group. The Group mainly produces and sells diagnostic instruments and reagents. The Company plans comprehensive strategies within Japan and conducts business activities there, and the four regional headquarters located in America, EMEA, China and Asia-Pacific plan comprehensive strategies for each region and conduct business activities in those regions. Therefore, the Group consists of the geographical segments based on production and sales structures, which are “Japan,” “Americas,” “EMEA,” “China” and “Asia-Pacific.”

For the year ended March 31, 2015: Basic EPS Net income attributable to common shareholders ¥ 26,638 207,311 ¥ 128.49 Effect of dilutive securities Stock options 765 Diluted EPS Net income for ¥ 26,638 208,076 ¥ 128.02 computation

15. RELATED PARTY DISCLOSURES Transactions of the Company with related parties for the years ended March 31, 2016 and 2015, were as follows: Thousands of Millions of Yen U.S. Dollars 2016 Officers of the Company Exercise of stock options Significant officers of the Company’s subsidiaries Exercise of stock options

2015

2016

¥ 217

¥ 23

$ 1,920

31

12

274

2. Methods of measurement for the amounts of sales, profit (loss), assets and other items for each reportable segment The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of Significant Accounting Policies,” and the profits of the reportable segments are their operating incomes. Intersegment sales or transfers are determined based on market prices or costs of goods manufactured.

3. Information about sales, profit (loss), assets and other items is as follows:

Japan Sales: Sales to external customers Intersegment sales or transfers Total Segment profit Segment assets Other: Depreciation Amortization of goodwill Investment of associates accounted for using the equity method Increase in property, plant and equipment and intangible assets

¥ 43,008 101,012 ¥ 144,020 ¥ 41,789 152,344

¥ 56,481 867 ¥ 57,348 ¥ 2,083 35,667

5,571

2,293

281

9,794

Amortization of goodwill Investment of associates accounted for using the equity method Increase in property, plant and equipment and intangible assets

Americas

Amortization of goodwill Investment of associates accounted for using the equity method Increase in property, plant and equipment and intangible assets

¥ 253,157 103,919 ¥ 357,076 ¥ 54,007 313,940

¥ (103,919) ¥ (103,919) ¥ 2,955 (46,302)

¥ 253,157 ¥ 56,962 267,638

3,964

275

1,310

13,413

(1,159)

12,254

576

1,932

1,932

2,048

2,048

5,561

668

1,428

Millions of Yen 2015 Reportable Segment EMEA China Asia-Pacific

21,186

Total

¥ 253,157

(1,215)

19,971

Reconciliations Consolidated

¥ 47,014 300 ¥ 47,314 ¥ 2,402 34,522

¥ 63,257 1,173 ¥ 64,430 ¥ 5,199 69,094

¥ 49,840 7 ¥ 49,847 ¥ 6,802 35,611

¥ 17,866 158 ¥ 18,024 ¥ 1,227 18,386

¥ 221,377 81,175 ¥ 302,552 ¥ 46,793 288,501

¥ (81,175) ¥ (81,175) ¥ (2,382) (40,517)

¥ 221,377 ¥ 44,411 247,984

4,926

2,192

3,817

269

1,177

12,381

(1,122)

11,259

574

1,696

1,696

1,932

1,932

280

842

1,932

8,901

1,702

5,803

233

1,900

Americas

Thousands of U.S. Dollars 2016 Reportable Segment EMEA China Asia-Pacific

$ 380,602 893,911 $ 1,274,513 $ 369,814 1,348,177

$ 499,831 7,673 $ 507,504 $ 18,434 315,637

$ 605,787 17,071 $ 622,858 $ 24,469 615,088

$ 576,496 53 $ 576,549 $ 49,230 331,089

49,301

20,292

35,080

2,433

Japan Sales: Sales to external customers Intersegment sales or transfers Total Segment profit Segment assets Other: Depreciation

¥ 20,070 105 ¥ 20,175 ¥ 1,807 19,011

¥ 43,400 79,537 ¥ 122,937 ¥ 31,163 130,888

16. SUBSEQUENT EVENTS Appropriations of Retained Earnings The following appropriation of retained earnings at March 31, 2016, was approved at the shareholders’ meeting of the Company held on June 24, 2016: Millions of Thousands of Yen U.S. Dollars Year-end cash dividends, ¥28 ($0.25) ¥ 5,821 $ 51,513 per share

Reconciliations Consolidated

¥ 65,144 6 ¥ 65,150 ¥ 5,563 37,413

1,075

3,735

Total

¥ 68,454 1,929 ¥ 70,383 ¥ 2,765 69,505

2,048

Japan Sales: Sales to external customers Intersegment sales or transfers Total Segment profit Segment assets Other: Depreciation

Americas

Millions of Yen 2016 Reportable Segment EMEA China Asia-Pacific

2,488

9,513

33,053

49,212

5,912

Total

$ 177,611 $ 2,240,327 929 919,637 $ 178,540 $ 3,159,964 $ 15,991 $ 477,938 168,239 2,778,230

(1,176)

17,363

Reconciliations Consolidated

$ 2,240,327 $ (919,637) $ (919,637) $ 2,240,327 $ 26,150 $ 504,088 (409,752) 2,368,478

11,593

118,699

5,097

17,098

17,098

18,124

18,124

18,124

86,673

18,539

¥ 221,377

12,637

187,487

(10,257)

(10,752)

108,442

176,735

Note: Reconciliations principally consist of intersegment transfers and unallocated corporate assets at ¥4,194 million ($37,115 thousand) and ¥4,729 million for 2016 and 2015, respectively. The unallocated corporate assets are primarily composed of funds such as marketable equity securities.

93 Sysmex Report 2016

Sysmex Report 2016 94

 Financial and Other Information

4. Information about products and services

Instruments Sales to external customers

¥ 85,873

Instruments Sales to external customers

¥ 71,461

5. Information about geographical areas (1) Sales Millions of Yen 2016 Japan America China Other ¥ 39,846 ¥ 50,592 ¥ 65,189 ¥ 97,530

Japan $ 352,619

Others ¥ 27,423

Millions of Yen 2015 Maintenance Reagents Services ¥ 105,378 ¥ 21,804

Others ¥ 22,734

Total ¥ 253,157

Total ¥ 221,377

Thousands of U.S. Dollars 2016 Maintenance Instruments Reagents Others Total Services $ 759,938 $ 1,020,319 $ 217,389 $ 242,681 $ 2,240,327

Sales to external customers

Japan ¥ 40,554

Independent Auditor’s Report

Millions of Yen 2016 Maintenance Reagents Services ¥ 115,296 ¥ 24,565

Millions of Yen 2015 America China Other ¥ 45,855 ¥ 49,849 ¥ 85,119

(2) Property, plant and equipment Millions of Yen 2016 Japan Other Total ¥ 38,555 ¥ 22,680 ¥ 61,235

Total ¥ 253,157

Millions of Yen 2015 Japan Other ¥ 37,550 ¥ 21,512

Total ¥ 221,377

Total ¥ 59,062

Thousands of U.S. Dollars 2016 Japan Other Total $ 341,195 $ 200,708 $ 541,903

Thousands of U.S. Dollars 2016 America China Other Total $ 447,717 $ 576,894 $ 863,097 $ 2,240,327

Note: Sales are classified by country or region based on the location of customers.

6. Information about major customers There are no customers who account for more than 10% of the consolidated sales. 7. Information on the balance of goodwill of reportable segments Millions of Yen 2016 Japan

Americas

Goodwill at March 31, 2016

EMEA

China

Asia-Pacific

¥ 7,995

Eliminations/ Corporate

¥ 1,091

Total ¥ 9,086

Millions of Yen 2015 Japan Goodwill at March 31, 2015

Americas

¥ 281

EMEA

China

Asia-Pacific

¥ 10,029

Eliminations/ Corporate

¥ 1,804

Total ¥ 12,114

Thousands of U.S. Dollars 2016 Japan Goodwill at March 31, 2016

95 Sysmex Report 2016

Americas

EMEA $ 70,752

China

Asia-Pacific $ 9,655

Eliminations/ Corporate

Total $ 80,407

Sysmex Report 2016 96

 Financial and Other Information

Stock Information (As of March 31, 2016)

Stock Price Range

Corporate Overview (As of March 31, 2016)

Principal Shareholders (Top 10)

Sysmex Corporation

(Calculated as the closing price on March 31, 2006 = 100)

600

Number of Percentage of shares held shareholding (Thousands) (%)

Shareholders

Sysmex (Figures adjusted for stock split) Tokyo Price Index close (TOPIX)

Japan Trustee Services Bank, Ltd. JPMorgan Chase Bank 380055 The Kobe Yamabuki Foundation Nakatani Foundation for Advancement of Measuring Technologies in Biomedical Engineering Nakatani Kosan, Ltd. The Master Trust Bank of Japan, Ltd. Kazuko Ietsugu Taeko Wada Kenji Itani Ryoshin Co.

500

400

300

200

100

23,105 12,371 12,000

11.1 5.9 5.8

11,830

5.7

10,297 8,080 6,124 6,124 5,000 4,800

4.9 3.9 2.9 2.9 2.4 2.3

03/06 03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Cash Dividends per Share and Dividend Ratio (Consolidated) 60

Composition of Shareholders

(%)

Individuals and others 19.51%

Financial institutions 20.44%

45

Financial instrument firms 0.56%

30

Other Japanese companies 19.98% Foreign investors 39.51%

15

75

38

50

27 9

12

12.5

20.0 26.8 0

100

52

Cash dividends per share (Figures adjusted for stock split) Dividend payout ratio

31.9

14 29.4

20

17

15 27.0

29.1

29.8 29.1

27.1

29.6

25 0

03/07 03/08 03/09 03/10 03/11 03/12 03/13 03/14 03/15 03/16

Note: Two-for-one stock split conducted on April 2011 and 2014.

Dividend Policy Distribution of Shares by Number of Shares Held Less than 1,000 shares 1.33% Number of shares: 2,766,815 (11,700 shareholders)

More than 1,000 shares 1.71% Number of shares: 3,568,322 (1,842 shareholders)

Sysmex aims to maintain a proper balance between aggressive investment, which is designed to sustain steady high growth,

Head Office

1-5-1, Wakinohama-Kaigandori, Chuo-ku, Kobe 651-0073, Japan

Inquiries

IR & Corporate Communication Department TEL: +81-78-265-0500

Website

Please see our website for more detailed and the most recent information. Website http://www.sysmex.co.jp/en/ IR information http://www.sysmex.co.jp/en/ir/ Sustainability information http://www.sysmex.co.jp/en/csr/

Number of Employees

7,446 (consolidated basis)

Fiscal Year

April 1—March 31

Shareholders’ Meeting

In June

Number of Shares Authorized

598,688,000 shares

Number of Shares Issued

208,332,432 shares

Paid-in Capital

¥11,016 million

Stock Listings

Tokyo Stock Exchange, First Section

Ticker Code

6869

Transfer Agent

Mitsubishi UFJ Trust and Banking Corporation

Independent Auditor

Deloitte Touche Tohmatsu LLC

Rating

A+ (Rating and Investment Information, Inc. (R&I))

Major Indexes

DSI (Daiwa Stock Indices) Dow Jones Sustainability Asia Pacific Index Ethibel Pioneer & Excellence FTSE4Good Index JPX-Nikkei Index 400 MSCI Standard Index MSCI Global Sustainability Indexes Russell/Nomura Japan Equity Indexes S&P Japan 500

and returns to our shareholders as our earning power increases. In terms of returns to shareholders, we intend to provide a sta-

More than 5,000 shares 1.13%

ble dividend on a continuous basis and aim for a consolidated

Number of shares: 2,352,053 (331 shareholders)

payout ratio of 30% under our basic policy of sharing the suc-

More than 10,000 shares 5.71%

February 20, 1968

(including part-time employees and others)

0

(Yen)

Established

cesses of our operations in line with business performance.

Number of shares: 11,895,035 (409 shareholders)

More than 500,000 shares 78.64% Number of shares: 163,837,385 (78 shareholders)

97 Sysmex Report 2016

More than 100,000 shares 11.48% Number of shares: 23,912,822 (112 shareholders)

Sysmex Report 2016 98