SYSMEX CORPORATION Annual Report 1999

SYSMEX CORPORATION was orig-

inally established in 1968 as TOA MEDICAL ELECTRONICS CO., LTD.

Since then it has steadily evolved into a manufacturer involved in the

development, production and sales of integrated in vitro diagnostic (IVD)

systems, including equipment, software and reagents. It has built an

excellent reputation in Japan and around the world for its unique devel-

opment capabilities in the fields of hematology, coagulation, immuno-

chemistry and urinalysis.

Today SYSMEX products are sold in over 110 countries. To meet the

varied needs of markets with differing health care systems, SYSMEX

CORPORATION has established a global network of 15 sales, production

and research operations in ten countries around the globe.

To mark its 30th anniversary, the Company adopted the “SYSMEX”

brand name, already well known throughout the world, as its new corpo-

rate name in October of 1998. SYSMEX is determined to make this mile-

stone the start of a new phase in its growth and development as a leading

company in the IVD market, as well as in new areas such as industrial

applications for laboratory testing.

CONTENTS

This logo symbolizes our determination, and

reflects our business approach of always looking

to the future and anticipating future needs.

P r o f i l e

CONSOLIDATED FINANCIAL HIGHLIGHTS.............................................. 1

SYSMEX AT A GLANCE............................................................................ 2

INTERVIEW WITH PRESIDENT HISASHI IETSUGU............................ 4

FUNDAMENTAL EMPHASIS ON ADVANCED TECHNOLOGIES ....... 12

PRODUCTION AND DISTRIBUTION SYSTEMS ................................ 15

GLOBAL MARKETING ACTIVITIES .................................................. 16

MAJOR PRODUCTS.......................................................................... 17

TOPICS ............................................................................................. 18

FINANCIAL REVIEW.......................................................................... 20

CONSOLIDATED FINANCIAL STATEMENTS.................................... 22

CONSOLIDATED SUBSIDIARIES AND AFFILIATES ......................... 32

BOARD OF DIRECTORS AND CORPORATE AUDITORS .................. 33

CORPORATE DATA .......................................................................... 33

1

Thousands ofMillions of Yen U.S. Dollars

For the years ended March 31, 1999 1998 1997 1999

For the year:

Net sales ¥38,337 ¥35,576 ¥33,992 $316,835

Operating income 3,400 3,178 3,817 28,099

Net income 913 1,555 1,642 7,545

At year-end:

Total assets ¥42,513 ¥43,172 ¥42,568 $351,347

Total shareholders’ equity 31,680 31,283 30,227 261,818

Per share data:

Net income ¥43.71 ¥74.38 ¥78.54 $0.36

Cash dividends applicable to the year 22.00 20.00 20.00 0.18

Net Sales(¥ million)

1996 1997 1998 1999 1996 1997 1998 1999 1996 1997 1998 1999 1996 1997 1998 19990

10,000

20,000

30,000

40,000

0

500

1,000

1,500

2,000

0

10,000

20,000

30,000

40,000

50,000

0

10,000

20,000

30,000

40,000

Net Income(¥ million)

Total Assets(¥ million)

Total Shareholders’Equity(¥ million)

CONSOLIDATED FINANCIAL HIGHLIGHTS

Yen U.S. Dollars

Note: U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥121=U.S.$1,

the approximate rate of exchange, on March 31, 1999.

2

Asia-Pacific

0.9%Europe

17.2%

The Americas

19.0%

Japan

62.9%

Total Net Sales

¥38,337 million

Consolidated Net Sales byGeographic Area in 1999

The consolidated net sales during the year endedMarch 1999 increased by 7.8% over the previous term,reaching ¥38,337 million. As viewed by geographicarea, the net sales at home by SYSMEX CORPORA-TION and its consolidated subsidiaries and affiliatesgrew by 4.0% over the previous period, to ¥24,106 mil-lion. Meanwhile, the Americas, with 8.1% growth,Europe, with 19.3% growth, and the Asia-Pacific, with186.2% growth brought in ¥7,291 million, ¥6,608 mil-lion, and ¥332 million, respectively.

SYSMEX AT A GLANCE

Outline of Diagnostics

Examine concentration of coagulation factors (pro-duced mainly in humans) in plasma for diagnosis ofhemostasis function or liver function

Examine number, type and abnormality of blood cellsof peripheral blood for diagnosis of anemia,leukemia, etc.

Examine concentration of proteins (which rise withthe onset of cancer, infectious diseases, etc.) inserum

Examine chemical materials or particles in urine fordiagnosis of kidney function, infectious diseases,etc.

Hematology

Hemostasis(Coagulation)

Immunochemistry

Bio-chemistry

Urinalysis

Blood Gas

Microbiology

Pathology

Image Scanning, Electrocardiography, Respiratory Function Test, Ultrasonography, etc.

In VitroDiagnostics

In VivoDiagnostics

Examine concentration of oxygen or carbon dioxidein arterial blood for diagnosis of acid-base balancefunction or respiratory function

Clinical Laboratory Test

SYSMEX’s Business Fields

3

Overview of Activities The main field of activity for SYSMEX is

clinical diagnostics testing, developing

and manufacturing diagnostic systems to

test blood and urine specimens. It has

built a global network to manufacture

and market its instruments, reagents and

software, to carry out research and devel-

opment activities, and provide after-sales

service to distributors and users of its

products.

SYSMEX has developed an especially

strong position in the hematology mar-

ket segment, which is critical to clinical

testing around the world. Introducing

the first automated blood cell analyzer

in Japan in 1963, it has developed a wide

range of advanced technologies and test-

ing systems, resulting in a market share

of 65% and placing it in the leading posi-

tion in this segment in Japan. Globally,

the Company ranks second, with a mar-

ket share of approximately 20–25%, and

it is using its unique expertise in this

field as the basis for expansion into

other areas of clinical analysis, includ-

ing coagulation, immunochemistry and

urinalysis, and for the development of

newer generations of its instruments

and reagents.

Today, knowledge developed in these

fields is helping SYSMEX to meet the

growing needs of a world that has become

increasingly dependent on advanced med-

ical technology. The know-how gained in

its first 30 years is also providing the

Company with a stepping stone for diversi-

fication beyond the medical field and into

industrial applications.

Characteristics of theSpecimen Testing Business The main users of SYSMEX products are

hospitals and commercial laboratories.

Test results must be extremely precise

and re-producible. To achieve the neces-

sary standards, SYSMEX reagents, con-

trols and analyzers are backed by an ongo-

ing commitment to research and develop-

ment. To ensure that SYSMEX systems

function properly, the Company recom-

mends and supports the use of only SYS-

MEX brand reagents on its instrument sys-

tems.

Market Growth Potential While there is some variation between

advanced and developing countries, the

overall market for clinical IVD testing is

growing. In advanced countries, there is

an expanding need for improvements in

the efficiency of testing, including the

use of automation, computerization and

systemization, and users are likely to

invest in these aspects in the future. In

developing countries, economic growth is

being paralleled by rapid improvements

in medical infrastructure, and the IVD

market is therefore expected to remain

on a steep growth curve. In 1998, the

worldwide market for in vitro diagnostic

testing systems, the main field of activity

for SYSMEX, reached an estimated $19

billion, and steady growth is forecast for

the next several years.

1960 1965 1970 1975 1980 1985 1990 1995 2000

Product Fields and Development History

● Japanese Market Only

Hematology

Reagents

Urinalysis

Informatics

Coagulation

Immunochemistry

Systemization

Particle Analysis● FPIA-1000 ● FPIA-2100

● CDA-500● FPIA-2000

● DPS-440 ● DPS-1000 ● DPS-2000 ● LAFIA-I● PC-DPS ● LAFIA● DPS-500 ● UDPS-100

● DPS-600 ● UDPS-200● SIS ● SIS

● CA-100 ● CA-5000 ● CA-1500● CA-4000 ● CA-6000 ● CA-50

● CA-7000● CA-1000 ● CA-500 Series

● PAMIA-10 ● PAMIA-30● PAMIA-100 ● PAMIA-50

● PAMIA-20

● HS SYSTEM ● SE-Alpha● HST-Series

● SF-Alpha● US-Alpha ● US-AlphaII

● XE-Alpha

● NE-Alpha

● TU-100 ● UA-1000 ● UF-100● UA-2000

● UF-50

● Cell Check ● RHEMOX ● CELLENT ● STMATOLYSER ● STMATOLYSER-3WP ● STMATLYSER-WH● WEIHEM-7 ● QUICKLYSER ● SULEFOLYSER

● CELLKIT-7 ● CELLPACK ● STMATOLYSER-IM● CELLSHEATH

● CC-1001 ● PL-100 ● CC-800 ● SE-9000 ● XE-2100● R-1000● CC-1002 ● E Series ● NE-8000 ● SF-3000

● CC-107 ● CC-108 ● CC-180,170,150,130 ● K-1000 ● KX-21● F-800,500,300 ● F820/520

In fiscal 1998, we changed our corporate name to SYSMEX

CORPORATION and improved our business structure by

enhancing the operations of our overseas subsidiaries, creating

alliances with companies throughout the world in various high-

tech business fields and by diversifying our overall business

operations. These movements are an important aspect of our

strategy for steady growth in the coming millennium.

INTERVIEW WITH PRESIDENT HISASHI IETSUGU

Hisashi IetsuguPresident and CEO

4

5

How do you view the results for the fiscal year ended March 1999?

Ietsugu: At the non-consolidated level, our sales increased by 5.6% and our net income

by 1.2%. Consolidated sales were 7.8% higher, but net income declined by 41.3%.

A regional breakdown of consolidated sales reveals that sales in Japan rose by

4%, despite economic stagnation and curbs on medical expenditure. This reflected

the steady progression of sales taking place in the coagulation market here.

Sales in Europe showed a healthy 19% increase. The growth trend was especial-

ly strong in the United Kingdom and Spain, and we also expanded our sales channels

in the Eastern European and African markets. The steady sales in the blood cell

counting product line contributed particularly to this growth.

We continued to develop our network in the Asia-Pacific region. Sales showed

growth due to our strategy of introducing key products in this area, despite the

effects of the Asian currency crisis, a tightening of monetary policy in China, and

other factors.

I would like to describe trends in the United States in a little more depth, since

developments in this region had a negative impact on profits. Our North American dis-

tributor withdrew from this segment of the diagnostics business, therefore we started

to sell independently through a subsidiary, SYSMEX CORPORATION OF AMERICA

(SCA) in 1994. As projected, SCA was operating in the black by fiscal 1997, and the

venture was generally successful. However, the U.S. market was affected by reductions

in medical expenditures as part of health care reforms. The growth of managed care

programs was especially significant, resulting in consolidation of manufacturers to

gain significant advantages through their ability to coordinate marketing promotions

and product deliveries to hospital groups or GPOs (Group Purchasing Organizations).

SCA was unable to cover this vast market through its own sales network, and

the fact that it was specializing mainly in sales of our automated robotic systems

instrumentation to Integrated Delivery Networks limited our ability to expand our

activities through our own efforts. For some time, we had been in negotiations with

the Roche Group, which was eager to use our exclusive hematology technology to

expand its activities in that field. When we concluded a comprehensive global agree-

ment with Roche, we decided to take the opportunity to restore our market share by

using Roche’s extensive sales and service network to expand our sales of hematology

products in the United States.

In February 1999, we had already begun to sell our hematology products

through Roche’s network in North America. I expect our share in this field to grow.

However, this move resulted in transitional costs, with the result that we showed a

loss at the operating profit level. This affected our overall consolidated results, lead-

ing to a decline in net income. I would like to state categorically, however, that our

negative performance in the United States is a temporary phenomenon.

What are your predictions for medium to long-term trends in themarket environment?

Ietsugu: Health care is a broad concept that encompasses therapy, diagnosis and all

health maintenance activities. A major factor behind the rising demand for health

care in the advanced economies in recent years has been the dual trends toward

smaller families and an aging population. This pattern is linked not only to traditional

health care and the extension of life, but also to such issues as lifestyle changes, and

is likely to become increasingly important in the future. There is also pressure to keep

“Global Niche” is ourbasic strategic phrase for the

future. In some specific

businesses, particularly in the field

of hematology, we are a world

leader, having established a firm

foothold in global markets.

6

health care costs as low as possible. The business environment for the health care

industry is likely to become especially difficult in Japan due to curbs on health expen-

ditures, and other factors. In the so-called developing countries, economic growth will

inevitably lead to improvements in the health care infrastructure, which means that

there is considerable potential for market growth.

How will SYSMEX develop its business in the future?

Ietsugu: The main focus of our hematology business at present is diagnostics, and

this will continue to be our core area in the medium-term perspective. We already

have a large share of the Japanese domestic market, and there seems to be little

scope for significant market growth. However, we are predicting sales growth, thanks

to the launch of the XE-2100 Automated Hematology Analyzer and the enhancement

of our product range with products accessed from AVL and Roche. We will also work

to increase our profit through improved operating efficiency.

In North America, we will use Roche’s extensive sales and service network to

expand our share of the hematology market. We anticipate substantial profit growth

in the year ending March 2000. The fact that our performance will no longer be

affected by the transition costs incurred in the year just ended will have a major posi-

tive impact. And while revenues will be reduced due to the shift from direct selling to

distribution through Roche, we will be able to achieve dramatic reductions in

expenses, including inventory costs and wages. We therefore anticipate substantial

profit growth in the fiscal year ending March 2000.

In Europe we will work aggressively to expand sales in areas where we have

already strengthened our presence through the establishment of our own sales, mar-

keting, software development and production facilities. New areas of activity, such as

scientific instruments and information technology (IT), are also expected to con-

tribute to its sales. Another goal is the expansion of the sales area to include Eastern

Europe, Africa and the Middle East.

We see the Asia-Pacific region as a promising market. The Southeast Asian

economies are recovering from the effects of the recent currency crisis, and we expect

economic growth to be accompanied by improvements in the health care infrastruc-

ture to meet the needs of the region’s large population. Another positive factor for us

is the establishment of sales and service bases in the region. We are determined to

become the leading supplier of diagnostics in the Asia-Pacific region.

In Central and South America, we will focus on the establishment of

reagent production operations and the further development of our sales and ser-

vice network.

As the total number of systems installed throughout the world increases, we

can expect growth in sales of the reagents used in those systems. This will provide a

stable revenue flow. In the market for hemostasis instruments, we will continue to

work with Dade Behring Inc., the leading manufacturer of hemostasis reagents. By

combining the strength of Dade Behring’s products with our expertise in the area of

coagulation instrument systems, we will strive to maintain our position as the leading

supplier in this area. We will expand our product portfolio and expand our promotion

activities globally by strengthening our marketing and sales in regions where SYS-

MEX or Dade Behring are particularly strong.

As far as our other areas of activity are concerned, we plan to target increased

sales of point-of-care (POC) products, which allow urgent tests to be carried out in

ICUs, operating theaters or at the bedside, rather than in central clinical laborato-

7

Obtaining product and technology

synergy effects from forming alliances

with leading companies both at home

and abroad, SYSMEX is actively

engaged in expanding its business

fields and areas of operation.

XE-2100:SYSMEX’s next generation Hematology analyzer hasthe fastest processing speed in the world. The mostdistinctive advantage is its networking function,which connects Laboratory Information Systems,Hospital Information Systems, remote QC (*) andremote maintenance (*).*under development

TLA:Gaining widespread attention among professionals,TLA (Total Laboratory Automation) promotes efficientlaboratory operation by integrating data processingtechnology among diagnostic testing equipment.Contributing to reductions in medical costs, TLA commands the biggest share of the world market forthis technology.

SYSMEX’s “Global Alliances” are

based on an equal partnerships, enabling us and leading com-

panies around the world to benefit from each other’s expertise,

accelerate business development and diversify risks.

Global Network of SYSMEX

•SYSMEX EUROPE GMBH•SYSMEX DEUTSCHLAND GMBH

•JINAN SYSMEX MEDICAL ELECTRONICS CO., LTD.

•SYSMEX CORPORATION OF AMERICA•SYSMEX INFOSYSTEMS AMERICA, INC.

8

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●��� ●���●���

●���●���

●���●���

●���●���

●���

●�����●���●���

Overseas Business Subsidiaries,Factories and Research Centers

Overseas Branches and Representative Offices

Countries to which SYSMEX Exports

JINAN SYSMEX MEDICAL ELECTRONICS CO., LTD.SYSMEX REAGENTS AMERICA, INC.SYSMEX CORPORATION OF AMERICASYSMEX INFOSYSTEMS AMERICA, INC.SYSMEX DO BRASIL INDUSTRIA E COMERCIO LTDA

•SYSMEX CORPORATION

•MEDICA CO., LTD.

•TOA MEDICAL CO., LTD.

•SYSMEX LOGISTICS CO., LTD.

•RA SYSTEMS CORP.

OVERSEAS

DOMESTIC

SYSMEX UK LIMITEDSYSMEX BELGIUM S.A.SYSMEX MOLIS S.A.SYSMEX EUROPE GMBHSYSMEX DEUTSCHLAND GMBHSYSMEX TRANSASIA BIO-MEDICALS PVT. LTD.SYSMEX (THAILAND) CO., LTD.MED-ONE CO., LTD.SYSMEX (MALAYSIA) SDN BHDSYSMEX SINGAPORE PTE LTD

9

ries. In addition to products that we have developed by ourselves, we intend to aug-

ment our line-up in Japan with POC-related products manufactured by AVL and the

Roche Group. We believe that there is potential for significant synergies with our

own products.

The global trend toward the use of information technology has also spread to

health care systems. There is growing demand for the networking of multiple facilities

and integrated management of various types of test data, and other clinical informa-

tion. We intend to take an active role in the IT field, especially the development of soft-

ware related to our core businesses. We will strengthen our tripolar global software

development organization, which is based primarily on software development sub-

sidiaries in Belgium, the United States and our operations in Japan.

Through our involvement in clinical testing, we have developed unique particle

measurement and image-processing technology. We will endeavor to develop applica-

tions for this technology in new markets for particle analysis, for instance industrial

products such as toners and ceramics. Specifically, we aim to move into the scientific

instrument measurement field with a range of particle measurement systems con-

sisting of our own FPIA series and products manufactured by the British company

Malvern Instruments, a global leader in this market.

Another area into which we plan to expand is personal health. In addition to

health management products, such as the ASTRIM, which is a non-invasive peripheral

vessel monitoring system and can be used to measure hemoglobin, we will also enter

the health management software market. As the first step of our mid-term strategy,

we aim to achieve sales and income growth in the year ending March 2000.

Links with overseas companies appear to play a major role in yourfuture plans. What is your strategy on business alliances?

Ietsugu: Our basic approach is to use our unique technology as the basis for equal

relationships with a select number of the world’s leading companies. We intend to

build alliances with partner companies where such relationships allow us to expand

our activities and markets by combining our respective strengths. Even when our

partner is one of the biggest companies in the world, our policy is to form equal part-

nerships that allow us to pursue our own activities independently. We do not intend

to accept equity participation by any corporate group.

The American company, Dade Behring Inc., is the world’s top manufacturer of

hemostasis reagents. F. Hoffmann La Roche Ltd. of Switzerland is the world’s leading

company in the health care market, while Malvern Instruments Ltd. in the U.K. is a

top manufacturer of particle measurement systems. AVL Medical Instruments AG,

also of Switzerland, is a world leader in blood gas analyzer technology. By forming

partnerships with companies such as these, we aim to expand sales in each market

and to strengthen our technology development capabilities by sharing our expertise

in our respective areas of competence.

How would you define the strengths of SYSMEX CORPORATION?

Ietsugu: Our greatest strength is the advanced, specialized knowledge that we have

accumulated in the field of diagnostics. Specifically, we have acquired sophisticated

technology in all of the areas required for the development of instruments, reagents,

software and systems. Another strength is our ability to integrate these capabilities,

which encompass product breadth, research and development, sales, maintenance

10

and scientific services. This ability is the driving force that has enabled us to become

number two in the world in the field of hematology. Hematology testing is the most

fundamental and clinically necessary of all diagnostics tests.

Also important is the global scope of our activities. By actively expanding into

other countries, we have established a structure that enables us to supply products

suitable for each local market, while spreading our risks.

Please tell us about the Central Research Laboratories you are cur-rently building.

Ietsugu: The purpose of the Central Research Laboratories is to enhance our core

technologies, to create new core technologies for the future, and to provide a

research environment in which we can develop our human resources and create orig-

inal new technologies. Our policy is to make these laboratories available to university

researchers and other outside users. We see the provision of this open research envi-

ronment as part of our contribution to society. Specifically, we will undertake disease

research into blood cell abnormalities and carry out analyses and research relating

to industrial particles. At the same time, we will provide particle and cellular analy-

ses on a contract basis. In addition, we will intensify the Company’s R&D efforts in

the fields of biotechnology and information technology at the new laboratories,

which are scheduled to open in April 2000.

Finally, could you give a message to your shareholders, customersand investors?

Ietsugu: I should first like to express our sincere appreciation for their continuing

support. We are determined to live up to this confidence by maintaining steady

progress based on our awareness of the importance of our activities to the health

care business and to the quality of life for human beings. Our basic policy is to main-

tain steady performance levels so that we can provide our shareholders with reliable

dividends. We are also aware that our share price reflects our reputation in the mar-

ket and our corporate value, and we will endeavor to manage our activities in ways

that enhance revenue and profit. We are determined to keep SYSMEX on a growth

track, while adapting flexibly to changing trends and environments.

The global business environment, including the health care industry, is becom-

ing increasingly competitive. We are keenly aware that the struggle to survive will be

all the more fierce because of the future promise of this industry, the industry’s

social responsibilities and importance in relation to the future of humankind. Our

activities are also guided by our profound awareness of our responsibilities to our

shareholders and those with whom we do business. In conclusion, I would like to

reiterate our gratitude for the support of our shareholders and customers and to

express our determination to work even harder to fulfill their expectations.

July 1999

Hisashi Ietsugu

President and CEO

SYSMEX’s Technologyand Business Fields

The Central Research Laboratories scheduled to open in April 2000

SYSMEX’s measurement technology achieves precise,high-quality performance for all products, such as thisadvanced laser measurement system

SYSMEX develops its own compo-nents, including IC cards, for all ofits equipment

11

12

A History of Research andDevelopment Activities SYSMEX has maintained a strong commit-

ment to the development of in vitro clini-

cal laboratory testing technology since

1963, when it developed Japan’s first prac-

tical automated blood cell counters. Its

unique technological capabilities have

enabled it to expand the scope of its activi-

ties to include not only blood cell counters

and other hematological systems, but also

coagulation (hemostasis) analysis systems,

immunochemistry testing technology, and

urinalysis systems. Today, it develops and

produces a wide range of clinical instru-

mentation and reagents, as well as infor-

mation systems for processing test data. It

is also helping to improve the efficiency of

the medical environment by linking these

various analysis systems with sophisticated

software technology to achieve total labo-

ratory automation (TLA). In addition, SYS-

MEX has perfected a range of integrated

hematological analysis systems, including

the HS Transportation (HST) series. These

achievements are reflected in SYSMEX’s

status as the world’s leading company in

this field of modular automated hematol-

ogy in terms market share.

Research and DevelopmentOrganization The backbone of SYSMEX CORPORATION’s

advanced technology development capabili-

ties is a development organization that

integrates the efforts of technical experts

in fields ranging from chemistry and biolo-

gy to electrical and mechanical engineer-

ing, software engineering, optics and phar-

macology. The achievements of people

working in these various fields are brought

together to create new products, propri-

etary to the Company.

SYSMEX CORPORATION’s main

research and development base is the

Techno Center. In addition to carefully

coordinated R&D in various fields, the

staff at this facility is also involved in the

development of the Company’s informa-

tion network and the provision of techni-

cal support services.

A new facility, the Central Research

Laboratories, is currently under construc-

tion. When they open in April of 2000, these

laboratories will provide an enhanced

research environment for the creation of

innovative technologies and the training of

FUNDAMENTAL EMPHASIS ONADVANCED TECHNOLOGIES

13

First successful practical application in Japan of an automated blood cell counter (CC-1001)

Launch of the CA-4000, the first fully automated blood coagulation analyzer in the world

Launch of the immunochemistry analyzer PAMIA-10, using a unique particle counting technology

Launch of the R-1000, the first automated reticulocyte analyzer in the world using flow cytometry

Launch of a fully automated hematology system, the HS, integrating everything from blood cell counting,the WBC differential, and reticulocyte counting to the preparation of slides for microscopic testing

Launch of the discrete automated hematology analyzer SE-9000, featuring a highly sensitive immature cellchannel, in addition to counting blood cells and the WBC differential

Launch of the UF-100, the first fully automated urine cell analyzer in the world

Launch of the XE-2100, the next generation hematology analyzer. The fastest in the world and featuring acomprehensive networking function

Launch of the ASTRIM for non-medical fields in Japan. The first product analyzing peripheral blood vesselsusing non-invasive technology

Range of innovative products continues to win high acclaim

HST-330 (XE):The HST series performs the entire process of measuring andmanipulating samples from blood cell count testing, blood celldiagnosis, and blood film preparation and staining withoutrequiring any operator intervention.

ASTRIM, a non-invasive bloodvessel monitor, is expected tobecome increasingly important,especially in the sports industry.

*Japanese Market Only

1963

1986

1987

1988

1990

1993

1995

1999

14

skilled personnel. These enhancements to

SYSMEX’s research and development orga-

nization will further strengthen its ability

to contribute to the development of new

technologies and high valued-added prod-

ucts to meet today’s needs.

Diversification Medical expenditures everywhere are

coming under increasing restraint in

anticipation of the expanding demands of

an aging society, and health is becoming

the focus of growing public interest. These

and other trends are reflected in continu-

ing change in the medical environment.

SYSMEX is adapting to this change by

expanding the scope of its activities.

One new area of involvement is point-

of-care (POC) testing. Developed in

response to the growing emphasis on man-

aged care, this approach brings testing

and clinical processes closer to the

patient. Traditionally, specimen testing

was carried out in central laboratories

based in major hospitals. Today, however,

there is a growing need for equipment and

reagents that allow accurate and rapid

testing to be conducted in intensive care

units, at the bedside, and in clinics and

smaller hospitals. SYSMEX is enhancing

its range of products in this area, which

already includes the KX-21 Automated

Hematology Analyzer, the UF-50 Fully

Automated Urine Analyzer, the CA series

of Automated Coagulation Analyzers, and

blood gas and electrolyte analyzers manu-

factured by AVL. The Company also plans

to sell a number of POC products manu-

factured by Roche Diagnostics.

Another important area of involvement is

information technology (IT), including the

integration and centralized management of

the vast amounts of data produced through

clinical lab testing and the development of

remote support capabilities for its instru-

ment systems. SYSMEX uses software exper-

tise developed through its diagnostics busi-

ness to introduce systems that allow the

effective use of test data through the cen-

tralized management of all test results. The

United States and Europe lead the world in

this field, and SYSMEX has strengthened its

software development capabilities by creat-

ing a tripolar structure linking its Asian

operations, which are coordinated from

Japan, with two overseas software develop-

ment subsidiaries, SYSMEX MOLIS S.A. in

Belgium, and SYSMEX INFOSYSTEMS

AMERICA, INC. in the United States. This

global organization supports the develop-

ment of products that reflect local medical

environments in each region.

A third area of activity is scientific

measurement and analysis. SYSMEX

CORPORATION’s advanced particle mea-

surement technology has enabled it to

build an excellent record of achievement

in this field, including the development of

particulate image processing technology.

This technology is already used to analyze

such products as copier toners and battery

materials, and there is potential for new

applications in such areas as cosmetics

and pharmaceuticals. Under an alliance

with Malvern Instruments, SYSMEX is cur-

rently working to enhance and expand the

range of measurement items. It is already

the leading manufacturer in Japan.

SYSMEX CORPORATION’s fourth field

of activity is personal health, including

day-to-day health management and prod-

ucts aimed at the prevention of illness.

The revolutionary ASTRIM, a non-invasive

peripheral vessel monitoring system,

allows hemoglobin measurement tests to

be carried out without taking blood sam-

ples. There is considerable potential for

sports-related uses, and SYSMEX is also

studying the possibility of medical applica-

tions. Another activity in this field is the

development and sales of health-related

software.

SYSMEX’s Techno Center, an integrated technology development facility

Main Production Facilities SYSMEX products are employed primarilyin the fields of medicine and health care.They are manufactured using the mostadvanced production facilities and highlysophisticated quality control systems.

The Kakogawa Factory, which is locat-ed in Kakogawa City, Hyogo Prefecture,plays an important role as the main pro-duction site for almost all of SYSMEX’selectronic medical devices. Its advancedproduction facilities meet the good manu-facturing practice (GMP) standards formedical equipment. They also satisfy FDAstandards. The factory’s integrated pro-duction system for clinical testing equip-ment includes sophisticated and compre-hensive quality control systems based oncomputerized production managementand process control.

Another key product category for SYS-MEX is reagents for use on SYSMEX-brandinstruments. A wide range of reagents ismanufactured at the Ono Factory in OnoCity, Hyogo Prefecture. Completed in1991, the factory meets the stringent GMPstandards for pharmaceutical production.SYSMEX has also established productionbases in the United States, China, India,Germany and Brazil to ensure reliable pro-duction and supply in locations close toareas of consumption.

Quality ControlSYSMEX has worked consistently toenhance its quality control systems. Itsfacilities, including the Kakogawa and Onofactories, have achieved quality controlcertification under international stan-dards, such as ISO9001 and ISO13485, aswell as the European EN46001 standardand the Japanese quality assurance stan-dard JISZ9901. Quality control systems atoverseas plants are also being subject tothe same high standards and facilities inthe United States, Germany and Chinahave already achieved certification underthe ISO9000 series.

Environmental ManagementSystems SYSMEX has established a large projectteam to coordinate preparations for the

achievement of certification under theinternational environmental managementstandard (ISO14001) for environmentalmanagement systems at its domestic pro-duction plants. It also plans to gain certifi-cation for overseas operations.

Distribution and InformationSystems to SupportProduction and Sales To ensure that its expanding range ofproducts can be shipped and supplied effi-ciently and reliably, SYSMEX built theSYSMEX LOGISTICS CO., LTD. next to theOno Factory. The new company becameoperational in April, 1998. By centralizingdistribution operations, SYSMEX hasestablished a highly reliable distributionsystem for its products, while reducingdistribution costs and improving its deliv-ery and service systems.

SYSMEX has also integrated basicoperations under the R/3 ERP system*.This system supports integrated manage-ment, encompassing not only distributionoperations such as inventory control,orders and shipment, but also production,sales, and accounting and financial data.Further efficiency gains are beingachieved by means of information sharingthrough a corporate-wide LAN.

*R/3 is a Trademark of SAP AG.

15

PRODUCTION AND DISTRIBUTION SYSTEMS

The Kakogawa Factory manufacturesvarious testing instruments understringent quality control

SYSMEX LOGISTICS CO., LTD.began operation in 1998The Ono Factory

produces a widerange of reagents

Products and Services to MeetMarket Needs SYSMEX CORPORATION takes great pride

in the leadership of its technology and the

performance of its products, and enjoys an

excellent reputation in both domestic and

overseas markets. It serves the Japanese

market through a nationwide network of

18 branches and sales offices. The

Company regards the provision of after-

sales service and technical assistance to

users as a priority activity, and it main-

tains systems that support a prompt

response to customer inquiries or repair

requirements. These systems have been

further enhanced by the establishment of

the Technical Support Center in August

1998. The Center works with local branch-

es and sales offices to provide the highest

level of support to customers.

SYSMEX products are exported to over

110 countries. Sales and marketing offices

have been established in the United States,

the United Kingdom, Germany, China,

Singapore, Malaysia, Thailand and Brazil to

provide enhanced support to overseas cus-

tomers and to facilitate marketing activi-

ties that match local needs. Each of these

sales offices has its own extensive network

of agencies to provide in-depth support in

each country and region.

The year under review brought signifi-

cant progress toward the expansion of

activities in the Asian market. There were

a number of moves toward the integration

of production, sales and information in the

region. For example, SYSMEX SINGAPORE

PTE LTD, which was established in

February of 1998, commenced full-scale

operations as a regional coordination cen-

ter for Southeast Asia, while in India, SYS-

MEX TRANSASIA BIO-MEDICALS

PVT.LTD. was established to produce and

sell equipment and reagents. Its factory

initiated full-scale production operations,

and the Chinese sales and service sub-

sidiary, JINAN SYSMEX MEDICAL

ELECTRONICS CO., LTD., established a

branch company in Beijing. These overseas

operations enable SYSMEX to develop and

manufacture products that reflect the

needs of local medical systems and envi-

ronments in various countries and regions.

Global Support for Science SYSMEX actively supports research activi-

ties relating to medical science. Since 1978,

it has hosted the SYSMEX Hematology

Seminars in Japan. These seminars provide

opportunities for medical researchers from

Japan and overseas to present the latest

research results and share other important

information. In the year under review, the

Company hosted a similar seminar in China

to encourage scientific research in that

country. The SYSMEX Journal, which pub-

lishes data and research papers relating to

clinical testing, is used and respected by

researchers throughout the world. In addi-

tion, the Technical Support Center provides

advice in response to inquiries on various

scientific topics.

16

The SYSMEX Journal

The Technical Support Center plays an impor-tant role in customer support operations

The SYSMEX HematologySeminar in China

GLOBAL MARKETING ACTIVITIES

17

MAJOR PRODUCTS

HST-330 (XE): Total Hematology Automation System

SE series + RAM-1:Multi-task automated hematology analyzer/auto-mated reticulocyte counter unit

KX-21:Automated hematology analyzer

XE-Alpha:Integrated hematology system

CA-500 Series:Fully automated blood coagula-tion analyzer

UF-100:Fully automated urine cellanalyzer

PAMIA-50:Immunochemistry analyzer*For the Japanese market only

Reagents:Reagents are as important asmedical instruments

CA-1500: Fully automated blood coagulation analyzer

SIS: SIS (Sysmex Information System) integratesand manages all data available from clinicaltests in hematology, coagulation to generalanalysis fields. Linked to multi-discipline ana-lytical instruments, SIS is able to support testworkflow from receipt of samples to datareview, and report in a flexible manner.

LAFIA:LAFIA is a filing system for blood images andpatient information, providing functions such asdata reference, search, and editing. Throughweb connectivity, data review and/or editing,independent of time and/or place, are madepossible. Also, by simultaneously comparingimages to a reference image library, cell diagno-sis is supported.

XE-2100:As a strategic system, the 21st-century orientedhematology analyzer, the XE-2100—featuringthe fastest processing speed in the world—con-tributes to improved efficiency in the laboratory,such as saving turnaround time. The most distin-guishing benefit is that it is integrated into aninformation network, enabling intra- and inter-hospital data-sharing and support activities viaremote access. (under development)

PRINCIPAL PRODUCTS

NEW PRODUCTS

FPIA-2100: Flow particulate image analyzer*For the Japanese market only

UF-50:Fully automated urine cell analyzer

R-500:Automated reticulocyte analyzer

CA-50:Automated blood coagulationanalyzer

CA-7000:CA-7000 is a fully automated blood coagulationanalyzer capable of handling approximately 500tests per hour and reading reagent ID. CA-7000,through reflex testing capability, carries out theentire process of re-testing without the aid of laboratory staff.

Server

18

TOPICS

30th Anniversary Marked by New Corporate Identity and Move to NewCorporate Headquarters

In October 1998, the Company adopted the name “SYSMEX CORPORATION.” At

the same time, it relocated its corporate headquarters to the International Health

Development Center Building in a new city center built in eastern Kobe. The new

headquarters is located in a district where development has been based on the

concept of “life.” The development project symbolizes Kobe’s recovery after the

Great Hanshin-Awaji Earthquake of 1995. It is the ideal location for SYSMEX,

which is about to enter a new phase of growth and success in the 21st century as

a company trusted by people throughout the world.

New Business Operations in Asia—A Priority Market for the New Millennium

Asian countries are steadily improving their medical care environments. SYSMEX sees Asia as a priori-

ty market for the future and is aggressively expanding its network in the region. SYSMEX SINGAPORE

PTE LTD commenced business operations on April 1, 1998, and in July, a new equipment and reagent

manufacturing joint venture was established in India. Also in July, a new branch was opened in Beijing

to strengthen sales and service in China. The Company also continued to contribute to the advance-

ment of medical science in Asia. For example, it launched Chinese-language versions of its equipment

and hosted a hematology seminar in China.

Alliance with Malvern Instruments Signals Start of GlobalExpansion in the Scientific Measurement Field

In June of 1998, SYSMEX signed an agency agreement with the U.K.-based compa-

ny, Malvern Instruments Ltd. The aim of the new alliance is to expand sales of

particle analyzers, which play a central role in the scientific measurement field.

European sales of SYSMEX products started in July, and in October, the Company

began to sell Malvern products in Japan. As a result of this alliance, SYSMEX now

has the most extensive range of particle analyzers in the Japanese market.

MASTERSIZER (Malvern)

Head Office

19

Global Alliance with Roche

On May 14, 1998, SYSMEX formed a global alliance with the Roche Group of Switzerland, one of the

world’s leading manufacturers of health care products. In February of 1999, the Company restructured

its operations in North America under the terms of the

alliance to reach and expand markets through Roche’s

extensive sales and service network in that vast region.

Future plans by the alliance partners call for the continued

increase in the scope of activities in the North American

hematology market.

Alliance with AVL Medical Instruments

In February 1999, SYSMEX formed a business partnership with the Swiss compa-

ny AVL Medical Instruments AG, the leading manufacturer of blood gas analyzers.

The agreement gives SYSMEX exclusive rights to sell and service blood gas and

electrolyte analyzers manufactured by AVL in Japan. Full-scale sales opera-

tions commenced in April 1999. AVL enjoys an

excellent reputation in the area of point-of-care

(POC) equipment and SYSMEX is committed to

the strategic development of this market.

Y2K Compliance

As a company involved in the manufacture and sale of medical equipment, SYSMEX regards the Y2K

problem as an extremely important issue. It supplies a wide range of equipment to overseas users and

is carefully monitoring developments in the countries concerned. A large project team has been

active in this area since April 1998.

OPTI (AVL)

OMNI (AVL)

The signing ceremony between SYSMEXand AVL, which took place in February 1999

A global alliance with Roche bring strongpotential for various field

20

Sales and IncomeIn fiscal year 1998 (April 1, 1998 through March 31, 1999), the con-

solidated sales of SYSMEX CORPORATION and its subsidiaries

amounted to ¥38,337 million, an increase of 7.8% over the previous

year’s level.

During the period under review, priority was given to productivity

improvements in domestic sales and service and to additional sup-

port of overseas sales. In Japan, sales of hematology equipment

remained sluggish due to curbs on medical expenditure and

increased competition. However, SYSMEX expanded its product line-

up with the introduction of new products, and this was reflected in

strong sales growth of 4% to ¥24,106 million. In overseas markets,

sales in all areas showed an increase. Sales in the U.S. were ¥7,291

million, and in Europe, revenues totaled ¥6,608 million, while the

Asia-Pacific region total came to ¥332 million.

The cost of sales increased by 3.9% to ¥15,273 million, but the cost

of sales as a ratio to revenues was 1.5 percentage points lower, at

39.8%.

Selling and administrative expenses increased by 11.1% to

¥19,664 million. The increase reflects a rise in labor costs resulting

from new hires to enlarge the work force, higher operating costs due

to active expansion of the business, and an increase in amortization.

In addition, non-recurring costs associated with the formation of

new alliances increased during the term and, as a result, the

Company’s U.S. subsidiary reported a deficit in net income.

Operating income for the year ending March 1999, amounted to

¥3,400 million, an increase of 7.0%. The operating income ratio was

the same as last year, at 8.9%.

Net income totaled ¥913 million, a decline of 41.2%. Net income

per share amounted to ¥43.71 and the ratio of net income to share-

holders’ equity reached 2.9%. The dividend payout was ¥460 million,

and the dividend per share increased to ¥22.00 through a 30th

anniversary special dividend payment of ¥2.

Regional Segments Regional sales and operating profit are analyzed below.

Japan Despite the effects of the serious economic situation and curbs on

medical expenditure, sales in Japan increased by 4.0% to ¥24,106

million, reflecting strong sales of hemostasis analyzers imported

under an alliance with Dade Behring Inc. Performance also benefit-

ed from reductions in production costs and business expenses as a

result of productivity improvements. Operating income increased

15.6% compared to the previous year’s level, at ¥3,510 million.

FINANCIAL REVIEW

40,000

1997 1998 19990

10,000

15,000

25,000

20,000

5,000

1997 1998 1999 1997 1998 1999 1997 1998 1999

Net SalesNet Income

30,000

20,000

10,000

0

4,000

3,000

2,000

1,000

0

8,000

6,000

4,000

2,000

0

8,000

6,000

4,000

2,000

0

Net Sales and NetIncome(¥ million)

Sales by GeographicArea/Japan(¥ million)

Sales by GeographicArea/The Americas(¥ million)

Sales by GeographicArea/Europe(¥ million)

21

The Americas The strong performance of the U.S. economy helped to boost regional

sales by 8.1% to ¥7,291 million. However, a ¥727 million operating

loss resulted from non-recurring costs associated with the formation

of the alliance with Roche Diagnostics.

Europe In Europe, performance remained steady amid changes in the eco-

nomic environment as a result of currency union. Demand was

strong, especially in the area of blood cell counters, and sales rose

by 19.3% to ¥6,608 million. Operating income was 33.6 % higher, at

¥314 million.

Asia-Pacific The Asia-Pacific economies recovered only slowly from their econom-

ic crisis. Despite this situation, select SYSMEX products sold well in

Asian markets, and sales reached ¥332 million, up by 186.2% over the

previous year’s level. However, as a result of start-up costs for new

companies established in China and India, the operating income

declined by 27.1%, to ¥35 million.

Financial PositionTotal assets as of March 31, 1999 amounted to ¥42,513 million, a 1.5%

decline from the position at the end of the previous fiscal year. The

main reason for the decline was a reduction in investment securities.

Total liabilities decreased by 5.7% to ¥10,759 million. The capital

account increased by 1.3% to ¥31,680 million as of March 31, 1999.

Shareholders’ equity ratio rose by 2.0% to 74.5%. Shareholders’ equity

per share increased from ¥1,496.12 to ¥1,515.11.

Cash FlowCash flow from business activities amounted to ¥838 million, a

decline of ¥1,662 million when compared with the previous year’s

result. The reduction reflects a decrease in net income and

increased accounts payable due to the expansion of business opera-

tions. Depreciation increased by 2.1%, to ¥2,367 million.

Cash used for investment activities amounted to only ¥94 million,

compared with ¥384 million in the previous fiscal year. This decline

reflects a settlement of investment for distribution facilities of SYS-

MEX LOGISTICS CO., LTD. and was settled at the FY1997 level.

Cash used in financial activities was substantially lower, at ¥113

million, down from ¥1,708 million in the previous fiscal year. The

reduction was attributable to reduced repayments of long-term bor-

rowings.

After adjustment for exchange rate fluctuations, the balance as of

March 31, 1999 was ¥1,550 million, an increase of ¥248 million, or 19.0%.

Total Assets

1997 1998 19990

200

250

350

300

150

100

50

1997 1998 1999 1997 1998 1999 1997 1998 1999

Shareholders’ Equity

0

2,000

3,000

5,000

4,000

1,000

0

3,000

2,000

1,000

0

1,000

1,500

2,500

2,000

500

Sales by GeographicArea/Asia-Pacific(¥ million)

Total Assets andShareholders’Equity(¥ million)

Capital Expenditure(¥ million)

Depreciation andAmortization(¥ million)

22

Thousands ofMillions of Yen U.S. Dollars (Note 3)

March 31, 1999 and 1998 1999 1998 1999

ASSETS

Current Assets:

Cash and cash equivalents ......................................................................................... ¥ 1,550 ¥ 1,302 $ 12,810

Marketable securities (Note 5) .................................................................................. 2,654 4,752 21,934

Notes and accounts receivable:Trade notes ............................................................................................................ 4,476 4,632 36,992

Trade accounts ...................................................................................................... 9,063 8,276 74,901

Affiliates ................................................................................................................ 173 59 1,430

Allowance for doubtful notes and accounts.......................................................... (78) (108) (645)

Inventories (Note 4) .................................................................................................. 7,601 7,499 62,818

Prepaid expenses and other current assets ................................................................. 970 1,105 8,016

Total current assets ..................................................................................... 26,409 27,517 218,256

Property, Plant and Equipment:

Land............................................................................................................................ 3,493 3,470 28,868

Buildings and structures ............................................................................................. 8,098 7,086 66,926

Machinery and equipment ......................................................................................... 12,898 12,400 106,595

Construction in progress ............................................................................................ 20 773 165

Total .............................................................................................................. 24,509 23,729 202,554

Accumulated depreciation ......................................................................................... (13,315) (12,554) (110,042)

Net property, plant and equipment ............................................................ 11,194 11,175 92,512

Investments and Other Assets:

Investments in and advances to unconsolidated subsidiary and affiliates (Note 5) .............................................................................................. 288 267 2,380

Investment securities (Note 5) .................................................................................. 1,506 1,744 12,446

Other assets ................................................................................................................ 3,087 2,469 25,513

Total investments and other assets ............................................................ 4,881 4,480 40,339

Translation Adjustments .............................................................................................. 29 240

Total ............................................................................................................. ¥42,513 ¥43,172 $351,347

See notes to consolidated financial statements.

Consolidated Balance SheetsSYSMEX CORPORATION and Consolidated Subsidiaries

CONSOLIDATED FINANCIAL STATEMENTS

23

Thousands ofMillions of Yen U.S. Dollars (Note 3)

1999 1998 1999

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities:

Short-term bank loans (Note 6) ................................................................................ ¥ 611 ¥ 638 $ 5,050

Current portion of long-term debt (Note 6).............................................................. 438 156 3,620

Notes and accounts payable:Trade notes ............................................................................................................ 342 3,020 2,826

Trade accounts ...................................................................................................... 3,423 1,682 28,289

Unconsolidated subsidiary and affiliates ............................................................... 271 609 2,240

Construction and other ......................................................................................... 209 965 1,727

Income taxes payable ................................................................................................. 1,137 828 9,397

Accrued expenses and other current liabilities.......................................................... 3,328 2,603 27,504

Total current liabilities ............................................................................... 9,759 10,501 80,653

Long-Term Liabilities:

Long-term debt (Note 6) ........................................................................................... 281 189 2,322

Liability for retirement benefits (Note 7) .................................................................. 184 194 1,521

Other long-term liabilities ......................................................................................... 535 522 4,421

Total long-term liabilities ........................................................................... 1,000 905 8,264

Translation Adjustments .............................................................................................. 435Minority Interests ......................................................................................................... 74 48 612

Commitments and Contingent Liabilities (Notes 11 and 13)

Shareholders’ Equity (Notes 8 and 14):Common stock, ¥50 par value - authorized, 74,836,000 shares; issued and outstanding:20,909,200 shares in 1999 and 1998........................................................................ 3,385 3,385 27,975

Additional paid-in capital.......................................................................................... 5,561 5,561 45,959

Retained earnings....................................................................................................... 22,734 22,337 187,884

Total shareholders’ equity .......................................................................... 31,680 31,283 261,818

Total ............................................................................................................. ¥42,513 ¥43,172 $351,347

24

Thousands ofMillions of Yen U.S. Dollars (Note 3)

Years Ended March 31, 1999 and 1998 1999 1998 1999

Net Sales (Note 15) ....................................................................................................... ¥38,337 ¥35,576 $316,835

Cost and Expenses (Note 15):Cost of sales ................................................................................................................ 15,273 14,705 126,223

Selling, general and administrative............................................................................ 19,664 17,693 162,513

Total cost and expenses ................................................................................ 34,937 32,398 288,736

Operating Income (Note 15) ......................................................................................... 3,400 3,178 28,099

Other Income (Expenses):

Interest and dividend income .................................................................................... 114 185 942

Interest expense.......................................................................................................... (49) (38) (405)

Exchange gain (loss) .................................................................................................. (121) 51 (1,000)

Write-down of marketable equity securities ............................................................. (234) (151) (1,934)

Other — net............................................................................................................... (104) 58 (859)

Other income (expenses) — net .................................................................. (394) 105 (3,256)

Income before Income Taxes and Minority Interests ................................................ 3,006 3,283 24,843

Income Taxes (Note 9).................................................................................................. 2,071 1,708 17,116

Net Income before Minority Interests ........................................................................ 935 1,575 7,727

Minority Interests ......................................................................................................... 22 20 182

Net Income .................................................................................................................... ¥ 913 ¥ 1,555 $ 7,545

Yen U.S. Dollars

Amounts per Common Share (Note 10):Net income ................................................................................................................ ¥ 43.71 ¥ 74.38 $ 0.36

Cash dividends applicable to the year ....................................................................... 22.00 20.00 0.18

See notes to consolidated financial statements.

Consolidated Statements of IncomeSYSMEX CORPORATION and Consolidated Subsidiaries

25

Number of Millions of Yen

Common Shares AdditionalIssued and Common Paid-in Retained

Years Ended March 31, 1999 and 1998 Outstanding Stock Capital Earnings

Balance, April 1, 1997 ............................................................................... 20,909,200 ¥3,385 ¥5,561 ¥21,281Net income............................................................................................... 1,555Cash dividends, ¥20.00 per share............................................................. (418)Bonuses to directors and corporate auditors ............................................ (81)

Balance, March 31, 1998 ........................................................................... 20,909,200 3,385 5,561 22,337Net income............................................................................................... 913Cash dividends, ¥22.00 per share............................................................. (460)Bonuses to directors and corporate auditors ............................................ (56)

Balance, March 31, 1999 ........................................................................... 20,909,200 ¥3,385 ¥5,561 ¥22,734

Thousands of U.S. Dollars (Note 3)

AdditionalCommon Paid-in Retained

Stock Capital Earnings

Balance, March 31, 1998 ................................................................................................... $27,975 $45,959 $184,602Net income....................................................................................................................... 7,545Cash dividends, $0.18 per share....................................................................................... (3,802)Bonuses to directors and corporate auditors .................................................................... (461)

Balance, March 31, 1999 ................................................................................................... $27,975 $45,959 $187,884

See notes to consolidated financial statements.

Consolidated Statements of Shareholders' EquitySYSMEX CORPORATION and Consolidated Subsidiaries

26

Thousands ofMillions of Yen U.S. Dollars (Note 3)

Years Ended March 31, 1999 and 1998 1999 1998 1999

Operating Activities:Net income ................................................................................................................ ¥ 913 ¥1,555 $ 7,545Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization.............................................................................. 2,367 2,318 19,562Write-down of marketable equity securities ......................................................... 234 151 1,934Loss on sales and disposal of property, plant and equipment................................ 94 49 777Changes in assets and liabilities:

Notes and accounts receivable ......................................................................... (745) (876) (6,157)Inventories ........................................................................................................ (102) (842) (843)Prepaid expenses, other current assets and other assets ................................... (1,040) (837) (8,595)Notes and accounts payable ............................................................................. (1,894) 846 (15,653)Income taxes payable........................................................................................ 309 (363) 2,554Liability for retirement benefits, net of provision ............................................ (10) (71) (83)Accrued expenses, other current liabilities and other long-term liabilities ........................................................................ 738 367 6,099

Other — net .......................................................................................................... (26) 203 (214)Net cash provided by operating activities ............................................................. 838 2,500 6,926

Investing Activities:Capital expenditures .................................................................................................. (2,140) (2,890) (17,686)Increase in investments in and advances to affiliates ................................................ (36) (212) (298)Payments for purchases of investment securities ....................................................... (21) (200) (173)Proceeds from sales of property, plant and equipment .............................................. 5 491 41Proceeds from sales of investment securities.............................................................. 100Net change in marketable securities .......................................................................... 2,098 2,327 17,339

Net cash used in investing activities ..................................................................... (94) (384) (777)

Financing Activities:Repayments of long-term debt ................................................................................... (406) (1,499) (3,355)Cash dividends paid .................................................................................................. (460) (418) (3,802)Proceeds from issuance of long-term debt.................................................................. 780 100 6,446Net change in short-term bank loans ........................................................................ (27) 109 (223)

Net cash used in financing activities .................................................................... (113) (1,708) (934)

Effect of Exchange Rate Changes ................................................................................ (383) (67) (3,165)Net Increase in Cash and Cash Equivalents ............................................................... 248 341 2,050Cash and Cash Equivalents, Beginning of Year .......................................................... 1,302 961 10,760Cash and Cash Equivalents, End of Year .................................................................... ¥1,550 ¥1,302 $12,810Additional Cash Flow Information:

Interest paid................................................................................................................ ¥ 41 ¥ 41 $ 339Income taxes paid....................................................................................................... 1,776 1,886 14,678

See notes to consolidated financial statements.

Consolidated Statements of Cash FlowsSYSMEX CORPORATION and Consolidated Subsidiaries

27

1. Basis of presenting consolidated financial statementsEffective October 1, 1998, the Company changed its corporate namefrom TOA MEDICAL ELECTRONICS CO., LTD. to SYSMEXCORPORATION (the “Company”).

The accompanying consolidated financial statements have been pre-pared from the consolidated financial statements of the Company whichare issued for domestic reporting purposes in accordance with the provi-sions set forth in the Japanese Securities and Exchange Law and its relat-ed accounting regulations and in conformity with accounting principlesand practices generally accepted in Japan, which are different in certainrespects as to application and disclosure requirements of InternationalAccounting Standards. The consolidated financial statements are notintended to present the financial position, results of operations and cashflows in accordance with accounting principles and practices generallyaccepted in countries and jurisdictions other than Japan.

In preparing the consolidated financial statements, certain reclassifi-cations and rearrangements have been made to the consolidated finan-cial statements issued domestically in order to present them in a formwhich is more familiar to readers outside Japan. The consolidated state-ments of cash flows are not required as a part of the basic financial state-ments in Japan but are presented herein as additional information. Theaccompanying notes include certain information which is not requiredunder generally accepted accounting principles and practices in Japanbut is presented herein as additional information.

2. Summary of significant accounting policiesa. Principles of consolidationThe consolidated financial statements include the accounts of theCompany and its consolidated subsidiaries (15 in 1999, 12 in 1998;together the “Companies”).

Investments in an unconsolidated subsidiary and affiliate company(the Company owned 20% to 50%) in 1999 and investments in 2 affili-ate companies in 1998 are accounted for by the equity method.

The excess of the cost of the Company’s investments in subsidiariesand affiliates over its equity in the net assets at the respective dates ofacquisition, is amortized over a period of five years.

All significant intercompany balances and transactions have beeneliminated in consolidation. All material unrealized profit included inassets resulting from transactions within the Companies and with affili-ates has been eliminated.b. Cash and cash equivalentsIn reporting cash flows, the Companies consider cash and time depositswith maturities of one year or less to be cash and cash equivalents.Such time deposits may be withdrawn on demand without diminutionof principal.c. InventoriesInventories are stated at cost determined by the average method for theCompany and its domestic subsidiaries, and at the lower of cost, deter-mined by the first-in, first-out method, or market for foreign subsidiaries.d. Marketable and investment securitiesListed securities included in marketable and investment securities arestated at the lower of cost or market, cost being determined by the mov-ing-average method. Other securities are stated at cost determined by the moving-average method.

Until fiscal 1998, reductions in the carrying values of marketablesecurities attributable to a decline in market values were not reversed ifthere was a subsequent rise in market values. However, beginning fiscal

1999, the Company has changed its policy to recognize such reversal ifthere is a subsequent recovery in market values, taking into considerationthe amendment to the Japanese corporate income tax law effective in1998. This change in valuation method did not affect the accompanyingconsolidated financial statements.e. Property, plant and equipmentProperty, plant and equipment are stated at cost. Depreciation of prop-erty, plant and equipment is computed substantially by the declining-balance method except that buildings of the Company and its domes-tic subsidiaries is computed by the straight-line method, at rates basedon the estimated useful lives of the assets, while the straight-linemethod is principally applied to the property, plant and equipment offoreign subsidiaries.

Effective April 1, 1998, the Company and its domestic subsidiariesadopted the straight-line method for depreciation of buildings, which,previously, had been depreciated by the declining-balance method. Thischange was made to provide a more accurate allocation of the cost of thebuildings. The effect of change was to decrease depreciation by ¥142 mil-lion ($1,174 thousand) and to increase income before income taxes by¥127 million ($1,050 thousand) for the year ended March 31, 1999.

The range of useful lives is principally from 31 to 50 years (35 to 65years in 1998) for buildings and structures, and from 7 to 12 years formachinery and equipment.f. Retirement benefit planThe Company has a non-contributory pension plan which covers most ofits employees. The policy for the plan is to fund and charge to operationsnormal costs as accrued on the basis of an accepted actuarial method plusprior service costs. The prior service costs are amortized over approxi-mately 5 years.

Unfunded retirement benefits for the Company’s directors and corpo-rate auditors are provided at the estimated amount which would berequired if such individuals retired at the balance sheet date.g. Foreign currency transactions and financial statementsShort-term receivables and payables denominated in foreign currenciesare translated into Japanese yen at the current exchange rates at the bal-ance sheet date. Long-term receivables and payables denominated in for-eign currencies are translated into Japanese yen at historical exchangerates. Assets and liabilities which are covered by forward exchange con-tracts are translated using the exchange rates set forth in the applicableforward exchange contracts. Related exchange gains or losses are recog-nized in the fiscal period in which they occur.

The financial statements of overseas subsidiaries are translated intoJapanese yen at the current exchange rates at the balance sheet dateexcept shareholders’ equity, which is translated at historical rates.Differences arising from such translation are shown as “Translationadjustments” in the accompanying consolidated balance sheets.h. LeasesAll leases of the Company and its domestic subsidiaries are accounted foras operating leases. Under Japanese accounting standards for leases,finance leases that are deemed to transfer ownership of the leased proper-ty to the lessee are to be capitalized, while other finance leases are per-mitted to be accounted for as operating lease transactions if certain “as ifcapitalized” information is disclosed in the notes to the lessee’s financialstatements. These standards are being applied on a step by step basisbeginning with fiscal years starting on or after April 1, 1996, with fullimplementation for fiscal years staring on or after April 1, 1998.

Finance leases of certain overseas subsidiaries are accounted for ascapital leases.

Notes to Consolidated Financial StatementsSYSMEX CORPORATION and Consolidated Subsidiaries

28

i. Research and developmentResearch and development costs are charged to income as incurred. Suchcosts were ¥2,813 million ($23,248 thousand) and ¥2,992 million for theyears ended March 31, 1999 and 1998, respectively.j. Income taxesThe Company and its domestic subsidiaries provide for income taxes atthe amounts currently payable for each year. The tax effect of temporarydifferences between tax and financial reporting purposes is not recorded.Certain overseas subsidiaries provide for deferred income taxes relating totemporary differences in accordance with accounting principles generallyaccepted in the relevant country. k. Cash dividendsCash dividends charged to retained earnings are those actually paid dur-ing the year, which represent the year-end dividends for the precedingfiscal year and interim dividends for the current fiscal year.l. ReclassificationCertain prior year amounts have been reclassified to conform to the fiscal1999 presentation. These changes had no impact on previously reportedresults of operations or shareholders’ equity.

3. Translations into United States dollarsThe consolidated financial statements are stated in Japanese yen. TheUnited States dollar amounts included herein are presented solely forconvenience and have been translated from the yen amounts at the rateof ¥121=$1, the approximate exchange rate at March 31, 1999. Thetranslations should not be construed as representations that the yenamounts could be converted into United States dollars at that or anyother rate.

4. InventoriesInventories at March 31, 1999 and 1998 consisted of the following:

Thousands ofMillions of Yen U.S. Dollars

1999 1998 1999Finished products ........................... ¥4,853 ¥5,532 $40,107Work in process ............................. 1,084 992 8,959Raw materials................................. 773 774 6,388Supplies .......................................... 264 137 2,182Merchandise................................... 627 64 5,182

Total .................................... ¥7,601 ¥7,499 $62,818

5. Marketable securities and investmentsMarketable securities principally consists of money management fundsand Japanese treasury bond funds which are unaffected by changes inmarket prices.

The aggregate carrying and market values of marketable equity anddebt securities included in investment securities at March 31, 1999 and1998 were as follows:

Thousands ofMillions of Yen U.S. Dollars

1999 1998 1999Carrying Market Carrying Market Carrying Market

Value Value Value Value Value Value

Investment securities ......... ¥1,505 ¥1,455 ¥1,678 ¥1,733 $12,438 $12,025

The difference between the above carrying value amounts and theamounts shown in the accompanying balance sheets principally consistsof non-marketable securities for which there is no readily-available mar-ket from which to obtain or calculate the market value thereof.

Investments in and advances to unconsolidated subsidiary and affili-ates at March 31, 1999 and 1998 consisted of the following:

Thousands ofMillions of Yen U.S. Dollars

1999 1998 1999Investments at cost ........................ ¥208 ¥207 $1,719Equity in deficit.............................. (13) (3) (107)Advances........................................ 93 63 768

Total ......................................... ¥288 ¥267 $2,380

6. Short-term bank loans and long-term debtShort-term bank loans were principally represented by bank overdrafts.Weighted average per annum interest rates of short-term bank loans atMarch 31, 1999 and 1998 were 4.3% and 4.6%, respectively.Long-term debt at March 31, 1999 and 1998 consisted of the following:

Thousands ofMillions of Yen U.S. Dollars

1999 1998 1999Unsecured loans from banks and other financial institutions, due through 2001, with interest ranging from 1.250% to 2.725% for 1999 (from 1.925% to 2.275% for 1998)........................................... ¥719 ¥345 $5,942

Less current portion ........................... 438 156 3,620Long-term debt, less current portion................................. ¥281 ¥189 $2,322

At March 31, 1999, annual maturities of long-term debt were as fol-lows:

Thousands ofMillions of Yen U.S. Dollars

Year Ending March 31:2000 .............................................. ¥438 $3,6202001 .............................................. 246 2,0332002 .............................................. 35 289

Total ........................................ ¥719 $5,942

7. Retirement benefit plansMost of the Company’s employees are covered by a non-contributorypension plan.

The assets of the plan as of the most recent available date (August 1,1998) were ¥1,608 million ($13,289 thousand).

29

The balance of the Company’s liability for retirement benefits at thedate of transition from its prior unfunded retirement benefit plan to thecurrent funded non-contributory pension plan had been reversed toincome over seven years. The reversed amounts were ¥10 million ($83thousand) and ¥17 million for the years ended March 31, 1999 and 1998,respectively.

The Company also has recorded a liability for an unfunded retire-ment benefit plan covering all of its directors and corporate auditors inthe amount of ¥184 million ($1,521 thousand) and ¥194 million as ofMarch 31, 1999 and 1998, respectively. Payment of retirement benefitsto directors and corporate auditors is subject to approval at the share-holders’ meeting.

Total charges to income for retirement and pension plans were ¥186million ($1,537 thousand) and ¥201 million for the years ended March31, 1999 and 1998, respectively.

8. Shareholders' equityThe Japanese Commercial Code (the “Code”) requires at least 50% ofthe issue price of new shares, with a minimum of the par value thereof, tobe designated as common stock as determined by resolution of the Boardof Directors. Proceeds in excess of amounts designated as common stockare credited to additional paid-in capital.

The Code also requires the Company to appropriate from retainedearnings to a legal reserve an amount at least equal to 10% of all cashpayments made as appropriations of retained earnings until the reserveequals 25% of common stock. This reserve is not available for dividendsbut may be used to reduce a deficit by resolution of the shareholders.Such legal reserve included in retained earnings was ¥259 million($2,140 thousand) at March 31, 1999.

The Company may transfer portions of additional paid-in capital andlegal reserve to stated capital by resolution of the Board of Directors. TheCompany may also transfer portions of unappropriated retained earnings,available for dividends, to stated capital by resolution of the shareholders.Under the Code, the Company may issue new common shares to existingshareholders, without consideration, as a stock split pursuant to resolutionof the Board of Directors. The Company may make such a stock split tothe extent that the aggregate par value of the shares outstanding after thestock split does not exceed stated capital. However, the amount calculat-ed by dividing the total amount of shareholders’ equity by the number ofoutstanding shares after the stock split shall not be less than ¥50.

9. Income taxesThe Company and its domestic subsidiaries are subject to Japanesenational and local income taxes. Foreign subsidiaries are subject toincome taxes of the countries in which they operate. The actual effectivetax rates in the accompanying consolidated statements of income differfrom the normal statutory tax rate of 47.7% for 1999 and 51.3% for 1998,due to a number of factors, mainly non-deductible expenses and losses ofconsolidated subsidiaries.

10. Amounts per common shareThe computation of net income per common share is based on theweighted average number of shares outstanding of 20,909,200 for theyears ended March 31, 1999 and 1998.

Diluted net income per share is not disclosed because the Companydoes not have any instruments with dilutive effects.

Cash dividends applicable to the year per common share are present-ed on an accrual basis and include dividends to be paid after the end ofthe year.

11. Commitments - leasesTotal lease payments under finance leases that do not transfer ownershipof the leased property to the lessee were ¥590 million ($4,876 thousand)and ¥368 million for the years ended March 31, 1999 and 1998, respec-tively.

Pro forma information of leased property under finance leases that donot transfer ownership of the leased property to the lessee on an “as ifcapitalized” basis for the years ended March 31, 1999 and 1998, was asfollows:

Machinery and Equipment:Thousands of

For the Year Ended March 31, 1999 Millions of Yen U.S. Dollars

Acquisition cost ................................. ¥2,570 $21,240Accumulated depreciation................. 1,100 9,091

Net leased property....................... ¥1,470 $12,149

Obligations under finance leases (including imputed interestexpense):

Thousands ofMillions of Yen U.S. Dollars

For the Year Ending March 31: 1999 1998 1999Due within one year....................... ¥ 520 ¥ 406 $ 4,298Due after one year .......................... 950 771 7,851

Total .................................... ¥1,470 ¥1,177 $12,149

Depreciation expense, which is not reflected in the accompanyingstatement of income, computed by the straight-line method was ¥590million ($4,876 thousand) for the year ended March 31, 1999.

12. DerivativesThe Company enters into interest rate swap agreements as a means ofmanaging interest rate exposure. The Company does not hold or issuederivatives for speculative purposes.Interest rate swaps are subject to market risk, which is the exposure creat-ed by potential fluctuations in market conditions. The counterparties tothe Company’s derivatives are limited to major international financialinstitutions; the Company does not anticipate any losses arising fromcredit risk. Derivative transactions entered into by the Company havebeen made in accordance with internal policies which regulate theauthorization of such transactions.

As of March 31, 1999, the Company has an interest rate swap con-tract (fixed rate payment, floating rate receipt) with a notional amountof ¥100 million. As of March 31, 1998, the Company had no outstandinginterest rate swap contracts.

Forward exchange contract amounts which are assigned to associatedassets or liabilities and reflected in the balance sheet at year end are notsubject to presentation under Japanese accounting standards.

30

13. Contingent liabilitiesAt March 31, 1999, contingent liabilities for notes discounted withrecourse, in the ordinary course of business, totaled ¥12 million ($99thousand).

14. Subsequent eventsThe following plan for appropriations of retained earnings for the yearended March 31, 1999 was approved at the Shareholders’ GeneralMeeting of the Company held on June 29, 1999:

Millions Thousands ofof Yen U.S. Dollars

Cash dividends, ¥12 ($0.10) per share .............. ¥251 $2,074Bonuses to directors and corporate auditors ...... 68 562

15. Segment informationa. Operations in different industriesThe Companies’ main operations are to manufacture and sell laboratory testing instruments and reagents used by clinical laboratories around the world.Under Japanese accounting regulations, the Companies are not required to disclose industry segment information because their main industry segmentrepresented more than 90% of their operations.b. Foreign operationsInformation about operations by geographic area for the years ended March 31, 1999 and 1998 are summarized below.

Millions of Yen

Eliminations/ Consoli-For the Year Ended March 31, 1999 Japan Americas Europe Asia Pacific Total Corporate dated

Net sales to outside customers.......................... ¥24,106 ¥7,291 ¥6,608 ¥332 ¥38,337 ¥38,337Interarea transfer .............................................. 6,086 20 218 6 6,330 ¥(6,330)

Total net sales ............................................. 30,192 7,311 6,826 338 44,667 (6,330) 38,337Operating expenses........................................... 26,682 8,038 6,512 303 41,535 (6,598) 34,937

Operating income (loss).............................. ¥ 3,510 ¥ (727) ¥ 314 ¥ 35 ¥ 3,132 ¥( 268 ¥ 3,400

Assets ................................................................ ¥34,903 ¥4,753 ¥3,159 ¥431 ¥43,246 ¥ (733) ¥42,513

Thousands of U.S. Dollars

Eliminations/ Consoli-For the Year Ended March 31, 1999 Japan Americas Europe Asia Pacific Total Corporate dated

Net sales to outside customers.......................... $199,223 $60,257 $54,612 $2,743 $316,835 $316,835Interarea transfer .............................................. 50,298 165 1,802 50 52,315 $(52,315)

Total net sales ............................................. 249,521 60,422 56,414 2,793 369,150 (52,315) 316,835Operating expenses........................................... 220,512 66,430 53,818 2,504 343,264 (54,528) 288,736

Operating income (loss).............................. $ 29,009 $(6,008) $ 2,596 $ 289 $ 25,886 $( 2,213 $ 28,099

Assets ................................................................ $288,454 $39,281 $26,107 $3,562 $357,404 $ (6,057) $351,347

Millions of Yen

Eliminations/ Consoli-For the Year Ended March 31, 1998 Japan Americas Europe Asia Pacific Total Corporate dated

Net sales to outside customers.......................... ¥23,178 ¥6,744 ¥5,538 ¥116 ¥35,576 ¥35,576Interarea transfer .............................................. 5,425 3 280 8 5,716 ¥(5,716)

Total net sales ............................................. 28,603 6,747 5,818 124 41,292 (5,716) 35,576Operating expenses........................................... 25,567 6,843 5,583 76 38,069 (5,671) 32,398

Operating income (loss).............................. ¥ 3,036 ¥ (96) ¥ 235 ¥ 48 ¥ 3,223 ¥ (45) ¥ 3,178

Assets ................................................................ ¥31,439 ¥5,278 ¥2,750 ¥178 ¥39,645 ¥(3,527 ¥43,172

c. Net sales to foreign customersNet sales to foreign customers for the years ended March 31, 1999 and 1998 consisted of the following:

Thousands ofMillions of Yen U.S. Dollars

For the Year Ended March 31, 1999 1998 1999By Geographic Area

Americas ........................................................................................................................................... ¥ 7,456 ¥ 6,763 $ 61,620Europe............................................................................................................................................... 11,663 9,831 96,388Asia Pacific ....................................................................................................................................... 2,514 2,655 20,777

Total ............................................................................................................................................ ¥21,633 ¥19,249 $178,785

31

To the Board of Directors and Shareholders of SYSMEX CORPORATION:

We have examined the consolidated balance sheets of SYSMEX CORPORATION and consolidated sub-sidiaries as of March 31, 1999 and 1998, and the related consolidated statements of income, shareholders’equity, and cash flows for the years then ended, all expressed in Japanese yen. Our examinations weremade in accordance with auditing standards, procedures and practices generally accepted and applied inJapan and, accordingly, included such tests of the accounting records and such other auditing procedures aswe considered necessary in the circumstances.

In our opinion, the consolidated financial statements referred to above present fairly the financial positionof SYSMEX CORPORATION and consolidated subsidiaries as of March 31, 1999 and 1998, and theresults of their operations and their cash flows for the years then ended, in conformity with accountingprinciples and practices generally accepted in Japan consistently applied during the years except for thechange, with which we concur, in the accounting for depreciation of buildings of the Company and itsdomestic subsidiaries, as discussed in Note 2.e.

Our examinations also comprehended the translation of Japanese yen amounts into United States dollaramounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 3to the consolidated financial statements. Such United States dollar amounts are presented solely for theconvenience of readers outside Japan.

June 29, 1999

Tohmatsu & Co.Osaka Kokusai Building Telephone (06) 6261-13813-13, Azuchimachi 2-chome Facsimile (06) 6261-1238Chuo-ku, Osaka 541-0052, Japan

Independent Auditors' Report

32

CONSOLIDATED SUBSIDIARIES AND AFFILIATES

DOMESTIC

MEDICA CO., LTD.

323-3 Miyaoki, Yumesaki-cho,Shikama-gun, Hyogo 671-2121, JapanTelephone: 07933-5-2080Facsimile: 07933-5-2080

TOA MEDICAL CO., LTD.

1-5-1, Wakinohama-kaigandori,Chuo-ku, Kobe, Hyogo 651-0073, JapanTelephone: 078-230-0618Facsimile: 078-230-0619

SYSMEX LOGISTICS CO., LTD.

17 Takumidai, Ono, Hyogo 675-1322,JapanTelephone: 0794-64-2326Facsimile: 0794-64-2310

RA SYSTEMS CORP.*

1850-3 Hirookanomura, Shiojiri,Nagano 399-0702, JapanTelephone: 0263-54-2251Facsimile: 0263-54-2254

OVERSEAS

SYSMEX CORPORATION OF

AMERICA

Gilmer Road, 6699 RFD, Long Grove, Illinois 60047-9596, U.S.A.Telephone: (+1) 847-726-3500Facsimile: (+1) 847-726-3505

SYSMEX REAGENTS AMERICA, INC.

10716 Reagan Street, Los Alamitos,CA 90720, U.S.A.Telephone: (+1) 562-799-4001Facsimile: (+1) 562-799-9702

SYSMEX INFOSYSTEMS

AMERICA, INC.

Gilmer Road, 6699 RFD, Long Grove, Illinois 60047-9596, U.S.A.Telephone: (+1) 847-726-3500Facsimile: (+1) 847-726-3568

SYSMEX DO BRASIL INDUSTRIA E

COMERCIO LTDA

Rua Rrofessor Algacyr Munyoz Mader,No. 3775 Bloco C, CEP 81310-020,na Cidade de Curitiba, Estado do Parana,Brasil

SYSMEX EUROPE GMBH

Bornbarch 1, 22848 Norderstedt, GermanyTelephone: (+49) 40-527260Facsimile: (+49) 40-52726100

SYSMEX DEUTSCHLAND GMBH

Bornbarch 1, 22848 Norderstedt, GermanyTelephone: (+49) 40-5341020Facsimile: (+49) 40-5232302

SYSMEX UK LIMITED

Sunrise Parkway, Linford Wood(East),Milton Keynes, Buckinghamshire, MK146QF, U.K.Telephone: (+44) 1-908-669555Facsimile: (+44) 1-908-669409

SYSMEX BELGIUM S.A.

Rue Pres Champs 25B 4671 Barchon, BelgiumTelephone: (+32) 4-387-9393Facsimile: (+32) 4-387-9394

SYSMEX MOLIS S.A.**

Rue Pres Champs 25B 4671 Barchon, BelgiumTelephone: (+32) 4-387-9393Facsimile: (+32) 4-387-9394

JINAN SYSMEX MEDICAL

ELECTRONICS CO., LTD.

Middle Section Airport Road, Yaoqiang Town, Licheng District, Jinan City, Shandong Province, China; PC.250100Telephone: (+86) 531-873-4440Facsimile: (+86) 531-873-4442

SYSMEX SINGAPORE PTE LTD

10, Shenton Way, #15-01, MAS Building,SingaporeTelephone: (+65) 221-3629Facsimile: (+65) 221-3687

SYSMEX TRANSASIA BIO-MED-

ICALS PVT.LTD.

Transasia House Plot No.8 Chandivali Studio Road Mumbai 400 072, IndiaTelephone: (+91) 22-857-2020Facsimile: (+91) 22-857-5530

SYSMEX (MALAYSIA) SDN BHD

Lot 928, Block A, Kelana Centre Point,Jln SS 7/19 Kelana Jaya, 47301 Petaling Jaya,Selangor, MalaysiaTelephone: (+60) 3-7041799Facsimile: (+60) 3-7047821

SYSMEX (THAILAND) CO., LTD.***

1555 Soi Latphrao, 94 Latphrao RoadWangthonglang, Bangkok 10310,ThailandTelephone: (+66) 2-5593333Facsimile: (+66) 2-5398481

MED-ONE CO., LTD.***

1555 Soi Latphrao, 94 Latphrao RoadWangthonglang, Bangkok 10310,ThailandTelephone: (+66) 2-5593333Facsimile: (+66) 2-5398481

* Company under the application of theequity method

** Company under the application of theequity method as of March 31, 1999, andchange to consolidated company afterthe 1999 term.

*** Start of operations after the 1999 term

(As of August 31, 1999)

33

CORPORATE DATA OFFICES

Established:

February 20, 1968

Paid-In Capital:

¥3,384,900,000

Authorized Shares:

74,836,000

Issued And Outstanding Shares:

20,909,200

Number Of Shareholders:

2,519

Stock Listings:

Tokyo (2nd Section) and Osaka(2nd Section)

Number Of Employees:

973 (Non-Consolidated)1,757 (Consolidated)

Transfer Agent For Common Stock:

The Mitsubishi Trust and Banking Corporation1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-0005, Japan

(As of March 31, 1999)

Head Office

1-5-1, Wakinohama-kaigandori,Chuo-ku, Kobe, Hyogo 651-0073, JapanTelephone: 078-265-0500Facsimile: 078-265-0524

Techno Center

4-4-4, Takatsukadai, Nishi-ku,Kobe, Hyogo 651-2271, JapanTelephone: 078-991-1911

Kakogawa Factory

314-2 Kitano, Noguchi-cho,Kakogawa, Hyogo 675-0011, JapanTelephone: 0794-24-1171

Ono Factory

17 Takumidai, Ono, Hyogo 675-1322, JapanTelephone: 0794-62-7001

Sendai Office

1-23-4, North Fancy Building, Izumi-Chuo,Izumi-ku, Sendai 981-3133, JapanTelephone: 022-375-7751

Tokyo Office

1-24-1, Hongo, Bunkyo-ku,Tokyo 113-0033, JapanTelephone: 03-3814-5046

Nagoya Office

3-85-1, Yashirodai, Meito-ku, Nagoya 465-0092, JapanTelephone: 052-775-8101

Osaka Office

1-23-43, Esaka-cho, Suita, Osaka 564-0063, JapanTelephone: 06-6337-8300

Fukuoka Office

4-9-24, Hakataeki-minami, Hakata-ku,Fukuoka 812-0016, JapanTelephone: 092-411-4314

Domestic Sales Offices

Sapporo, Morioka, Omiya, Chiba,Yokohama, Niigata, Kanazawa,Shizuoka, Kyoto, Kobe, Hiroshima,Takamatsu, Kagoshima

Shanghai Representative Office

15F-A, Shanghai Jiushi Fuxing Building,918, Middle Huaihai Road, Shanghai,China; PC.200020Telephone: (+86) 21-64156769

(As of August 31, 1999)

BOARD OF DIRECTORS AND CORPORATE AUDITORS

Mitsuo Waka Tokuhiro Okada

Hisashi IetsuguKenichi Yukimoto

President and CEO

Hisashi Ietsugu

Senior Managing Director

Kenichi Yukimoto

Managing Directors

Tokuhiro OkadaMitsuo Waka

Directors

Kunio NakajimaEiichi HekiTadashi NakataniMasayoshi HayashiShigenori OhigashiHiroshi YamamotoYukio Nakajima

Standing Corporate Auditors

Yoshikatsu AmanoSumitaka Uemasu

Corporate Auditor

Yoshiro Ishida

(As of August 31, 1999)

SYSMEX CORPORATION1-5-1, Wakinohama-Kaigandori, Chuo-ku,Kobe, Hyogo 651-0073, JapanURL: http://www.sysmex.co.jp

Printed in Japan