Sharpening Our Edge for Sustained Growthaz199097.vo.msecnd.net/4694/ir/...work and thereby improved business profitability. as a result, the business turned a profit for the year,

BML, INC.

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2009

ANNuAL RepoRt 2009Year ended March 31, 2009

Sharpening Our Edge for Sustained Growth

Profile

Financial Highlights

Letter to Investors

Corporate Governance

Special Feature


Review of Operations

10 Testing Business

12 Medical Informatics Business

R&D

Environmental & Corporate Social Activities

Board of Directors

Financial Section

Corporate Data

01

02

06

08

10

14

15

16

17

45

Contents

Since its establishment, BML, INC. has provided rapid and highly accurate contract clinical testing services in a broad range of fields, from routine to highly specialized tests, based on the

fundamental principle of “contributing to the creation of a healthy society through medical care.” BML continues to rise to the challenge of constantly improving quality and productivity in the medical treatment field and elsewhere. We also apply our currently amassed technologies

to provide high-quality services in related fields such as food hygiene testing and environmental-related testing, where demand has been increasing in recent years.

ForwArd-LooKing STATeMenTSThis annual report contains forward-looking statements about BML’s future plans, strategies and results that are not historical facts. rather, they are assumptions and beliefs formed by management, based on currently available information. Such statements contain risks and uncertainties, which include, but are not limited to, economic trends, competition in the medical industry, market supply and demand, foreign exchange rates, and tax and other systems. readers should therefore be aware that actual results could differ materi-ally from BML’s forecasts.

3,500

1,500

2,500

2,000

3,000

1,000

500

0

3,075

2,374

2,0861,972

1,718

7.77%

6.30%5.76%5.69%

5.19%

05/03 06/03 07/03 08/03 09/03

45,000

30,000

15,000

0

40,83538,344

36,97535,514

33,755

05/03 06/03 07/03 08/03 09/03

6,000

4,000

2,000

0 05/03 06/03 07/03 08/03 09/03

5,593

4,841

3,022

5,018

4,294 7.24%6.65%

4.21%

7.10%

6.34%

Financial HighlightsBML, INC. and Consolidated Subsidiaries

Years ended March 31

Millions of yenThousands of

U.S. dollars (Note)

2009 2008 2007 2006 2005 2009

For the year:

Sales ¥77,199 ¥72,833 ¥71,834 ¥70,712 ¥67,705 $785,898

Operating income 5,593 4,841 3,022 5,018 4,294 56,936

Net income 3,075 2,374 2,086 1,972 1,718 31,306

Capital expenditures 6,255 2,915 3,804 3,398 3,374 63,678

Depreciation and amortization 4,093 3,092 4,187 4,184 4,349 41,668

At year-end:

Total assets ¥62,810 ¥59,962 ¥58,219 ¥57,414 ¥58,676 $639,413

Shareholders’ equity 40,835 38,344 36,975 35,514 33,755 415,121

Amounts per share (yen and dollars):

Net income ¥144.89 ¥111.16 ¥ 96.90 ¥ 88.68 ¥ 76.59 $1.48

Cash dividends 30.00 25.00 20.00 20.00 20.00 0.31

Financial indicators:

Operating income to net sales (%) 7.24 6.65 4.21 7.10 6.34

ROE (%) 7.77 6.30 5.76 5.69 5.19

Number of employees 2,979 2,896 2,687 2,463 2,362

Note: The U.S. dollar amounts are translated from yen, for convenience only, at the rate of US$1.00=¥98.23, the approximate closing rate on the Tokyo foreign exchange market at March 31, 2009.

ShaREhOLDERS’ EqUITY

(Millions of yen)

Operating Income Operating Income to Net Sales

Net Income ROE

NET INCOME & ROE

(Millions of yen)

OpERaTINg INCOME & OpERaTINg INCOME TO NET SaLES

(Millions of yen)

BML, INC. 01 aNNUaL REpORT 09

Review of Business Performance in Fiscal 2008In the clinical testing business, we worked to maintain and/or adjust contract fee rates in contract renewals

following the revision of the medical fee structure. In addition, we developed our marketing program with a

focus on the clinic market. These efforts saw sales increase 5.8% from the previous year, while profit also rose

due to increased revenue and the quantity effect, despite the fact that business integration costs and other

expenses from M&a and alliance activity increased.

In the other testing business, BML Food Science Solutions, Inc., which is engaged in the food hygiene busi-

ness, performed well amid increasing public concern over food safety. The business saw significant year on year

increases in income, partly due to proactive efforts to reduce costs.

In the medical informatics business, although we continued to market and promote our electronic patient

chart system Medical Station® (MS) through expositions and pR activities, new installations of MS declined

from the previous year. however. we pushed through with the restructuring of our business operations frame-

work and thereby improved business profitability. as a result, the business turned a profit for the year, in con-

trast to the loss posted the previous fiscal year.

In other businesses, allegro, Inc., which operates the SMO*/CRO* businesses, saw a significant drop in profit

due to a decline in orders and an increase in personnel expenses.

In the medical industry, major reforms to the healthcare system are taking place to cope with the aging of Japanese society and the increase in healthcare costs for the elderly.

For the contract clinical testing industry, fiscal 2008, the year under review, was a year in which medical service fees were revised (they are revised every other year).

This revision saw insurance points for specimen testing lowered by an average of 1%; however this was a much smaller reduction than in past years.

Amid this environment, BML Group increased sales and earnings in its clinical testing business. This was achieved by working to sustain or set more appropriate consignment fees,

in the renewal of contracts following the revision of clinical fees, and by carrying out sales activities focused on the clinic market.

Letter to Investors

BML, INC. 02 aNNUaL REpORT 09 BML, INC. 03 aNNUaL REpORT 09

as a result, consolidated sales for fiscal 2008 were ¥77,199 million, an increase of 6.0% from the previous

period, consolidated operating income was ¥5,593 million, an increase of 15.5%, while net income increased by

29.5% to ¥3,075 million.

Our business results for the past three years are shown in the chart below.

BUSINESS RESULTS (Millions of yen)

2007/03 2008/03 2009/03 2009 growth

Sales ¥71,834 ¥72,833 ¥77,199 6.0%

Testing 67,018 69,077 73,310 6.1%

Medical Informatics 3,372 3,231 3,418 5.8%

Other businesses 1,443 523 471 –9.9%

Operating income 3,022 4,841 5,593 15.5%

Net income ¥ 2,086 ¥ 2,374 ¥ 3,075 29.5%

* Site Management Organization (SMO): an independent organization that contracts with a specific medical institution to support clinical trials specific to that institution.

* Clinical Research Organization (CRO): an independent organization that carries out or supports, wholly or in part, various operations related to clinical trials conducted by pharmaceutical companies in the development of drugs.

Yutaka AraiPresident


Management Strategyas part of our long-term vision, we have made it a goal to quickly achieve consolidated sales of ¥100 million,

and are also aiming to achieve an ordinary income ratio of 10%.

amid ongoing measures by the government to curb medical costs, the contract clinical testing busi-

ness is seeing a contraction in market size and the competition among service providers is intensifying,

leading to continued industr y consolidation. against this backdrop, the BML group has formulated busi-

ness strategies which will allow all business divisions and other groups to share targets in order to

achieve continued growth. going forward, the BML group will work as one to carry out these strategies

and raise its level of competitiveness.

Issues to be Addressed and Related StrategiesSTRENgThENINg ThE BUSINESS STRUCTURE

We will work to maintain and/or adjust contract fee rates as a part of building a strong business structure and

earnings base. We will bolster earnings management in the contract testing business by both integrating testing

labs into bases, and realigning them. at BML general Laboratory, our main laboratory, we are pushing through

with the building of next-generation laboratory systems, and going forward we will proceed with additional

automation in the specimen intake division and for bacteria testing. This will fur ther enhance productivity and

improve user services, all with the goal of boosting the competitiveness of the clinical testing business.

RapID DEvELOpMENT OF pERIphERaL BUSINESSES

We will continue to accelerate the growth of the peripheral businesses of medical informatics and food

hygiene by aggressively developing them to be our second and third earnings pillars. In the marketing division,

we have integrated the organizations in charge of both businesses, and going forward we aim to expand the

business base through the integrated activity of both sides.

In the food hygiene business, the market is expected to grow and we will fur ther enhance our business

platform to capture new users.


Strengthening Group ManagementWe will work to bolster group management through a number of efforts. In addition to expanding synergies

and improving the efficiency of group management by enhancing collaboration and operations with group

companies, we will expand the group through M&a activity as well as alliances with regional testing centers. In

conjunction with this group expansion, we will realign our laboratory network and integrate operations

including sales and specimen collection and delivery.

Increasing Shareholder ValueThe BML group believes that returning profits to shareholders is one of management’s most important tasks.

going forward, we will continue to strive to maintain a stable operating base and increase return on equity.

Our basic policy regarding dividends is to continue to maintain a stable dividend, while working to raise the

dividend level in accordance with consolidated operating results.

For fiscal 2008, following our basic policy of continuing to maintain a stable dividend, we raised the dividend

by a total of 5 yen per share from the previous year, to 30 yen per share (includes the interim dividend of

¥12.5 yen per share). With respect to retained earnings, we plan to effectively use funds for capital investment

aimed at making our testing platform stronger and more efficient, as well as on strategic investments eyeing

future growth.

We remain dedicated to enhancing shareholder value by establishing BML as a medical informatics com-

pany and by achieving stable earnings growth. In this challenging business environment, we hope we can

continue to meet your expectations by working steadily toward our goals.

July 2009

Yutaka arai

president


Basic PositionBML sees corporate governance as important to:

1) Realizing management compliance

2) Maintaining competitiveness through speedy decision-making and policy execution

3) Ensuring rigorous risk management

Through its investor relations (IR) activities, BML is also committed to proactive disclosure and to increas-

ing management transparency.

Status of Corporate Governance FrameworkBML has also adopted the corporate auditor system, comprised of three statutory auditors, including two outside

auditors. as of the date of this report, the Board of Directors consists of 11 members, all of whom are internal

appointments (eight of whom also serve as executive officers). The Board of Directors’ regular meeting is held once a

month in principle, and meetings are also held on an ad hoc basis as necessary. Corporate auditors attend each

meeting of the Board of Directors, at which important business policies are decided and reported on, to monitor

decision-making and the status of business execution by the Board.

BML adopted an executive officer system in June 2004 with the aim of enhancing its competitiveness by strength-

ening the functions (decision-making and oversight) of the Board of Directors and promoting faster decision-making

and more flexible business policy execution. To create a business structure that enables rapid and accurate execution

of business, executive officers are responsible for carrying out the operational activities of the Company within the

scope of their authority. Directors, in addition to attending meetings of the Executive Committee, oversee the execu-

tion of business policy through status reports provided by executive officers. Directors also convene meetings of the

Board of Directors to decide and report on important business policies.

BML’s compensation system for directors and executive officers is designed to be reflective of the Company’s business

performance and to ensure management is shareholder-oriented. In line with this objective, BML has abolished its retirement

allowance system for directors and corporate auditors, and adopted a stock option program. Through these changes to the

Company’s corporate governance system, the management, including the Board of Directors, is striving to improve the

strategic power and flexibility of BML’s management organization and decision making systems, and to construct an effective

corporate governance framework.

Internal AuditingThe Company has established an Office of auditors (with a staff of two) under the direct supervision of the presi-

dent as the department responsible for conducting internal inspections of all divisions, including affiliated companies.

The Office of auditors performs audits of the effectiveness of the internal control system, and of business execution.

The Office of auditors also carries out internal audits in conjunction with the quality assurance Division targeting its

special field of the testing division, and provides guidance pertaining to compliance with all relevant laws and ordi-

nances, internal control systems, risk management, product quality, and environmental-related issues.

In addition to attending meetings of the Executive Committee, the Board of Directors, and other important meet-

ings, these auditors review documents relating to important corporate decisions. They also conduct rigorous audits of

operations of the Company’s headquarters and major business offices as well as of its financial assets. The Office of

auditors also cooperates with the Company’s corporate auditors in various ways, including the provision of audit

results to the Board of Corporate auditors, the execution of joint audits, and the exchange of relevant information.

Corporate Governance


Risk Management SystemThe BML group has a risk management system in place to cope with risks that surround the group. The risk man-

agement system aims to ensure sustained business operations and, when a risk event occurs, maintain organizational

functions, reduce management resource losses and quickly restore such resources, and prevent the recurrence of the

risk event.

1) To prepare for natural disasters, we have reinforced our operations by strengthening our physical assets, duplicating

our systems and establishing regional laboratories. Meanwhile, we have a crisis management manual that stipulates

the measures to be taken in response to emergencies.

2) as a measure to enhance our information security, since December 2001 we have had ISMS certification, and have

continually worked to strengthen our management systems. In February 2006, we received the privacy mark indi-

cating our compliance with the personal Information protection act, and we regularly upgrade and review our

systems.

3) With respect to compliance and other legal risks, in May 2003 we established a Compliance Committee which

includes outside lawyers. In addition to holding internal training sessions, we provide periodic internal bulletins to

foster and spread management awareness. at the same time, we established an internal whistleblower system (the

Compliance post) to handle potential risks.

4) To prepare for environmental risks, quality risks and other important operational risks, we have obtained certifications such

as ISO 14001 and ISO 9001, and systematically work to prevent risks and make improvements and bolster risk manage-

ment. Furthermore, the Risk Management Division has built a comprehensive risk management structure covering the

entire BML group. With this, the group will step up its efforts to identify, analyze and prevent risks, and will make

responses to emergencies more effective.

Corporate Officer CompensationDuring fiscal 2008, compensation to the Company’s directors and corporate auditors was as follows:

Total annual Director Compensation: 329 million yen

Total annual Corporate auditor Compensation: 18 million yen (outside auditors: 6 million yen)

The above figures include compensation through the stock option system.

INTERNaL aUDIT FUNCTIONS

BML’S CORpORaTE gOvERNaNCE FRaMEWORk

general Meeting of Shareholders

accounting auditorBoard of Corporate auditors

Compliance Committee

Executive Committee

Board of Directors

president

Legal Counsel

ExECUTIvE FUNCTIONS

affiliatesBusiness Depts. /Divisions

Office of auditors

quality assurance Division

Risk Management Division(Legal Division)


Special Feature

BML’s core testing business covers over 4,000 types of tests, ranging from routine tests such as biochemical tests and hematological tests, to more specialized tests such as bacteria tests, cellular immunity tests and DNA tests. The clinical testing business receives specimens for testing from over 200,000 people each day. In order to

respond to such enormous demand, BML built the industry’s first automated testing systems, Frontier and Symphony, in the mid-1990s, thereby making fully automatic, unmanned testing a reality. However, aging of the original equipment, an increase in our M&A activity and other developments have meant that over the last few years we have been overhauling the existing systems in order to build new next-generation laboratory systems. Following the October 2006 completion of New Symphony Chemistry, a new automated line for

biochemical testing, in April 2007 we brought online New Symphony Hematology, a system for automating hematological testing, which raised the test processing capability to about twice the previous level.

Furthermore, in August 2008, New Frontier, a high-speed line for front-end test processing of serum samples, was completed. With this, we have now established a single integrated system that extends from automated

front-end processing spanning specimen sorting to dispensing, to the subsequent testing process. This has enabled us to improve and further boost the efficiency of our testing service capabilities.

The Continuing Evolution of BML’s Symphonization



• Dispensing for Automated Analysis

• Dispensing for Manual Analysis

• Dispensing for Referral Tests

• Automated Conveyor System

1 Specimen Sorting2 Specimen Supplying3 automatic Centrifuge4 Cap Remover5 automatic Specimen

Dispenser6 Biochemical Test Device7 Serological Test Device

8 Special Test Device9 Urine/general Test

Device10 hematological Test

Device11 Cap Tightener12 Specimen Container

• Accuracy Control Between Testing Devices

• Optimum Application of Automated Re-test

• Multiple and Simultaneous Test Execution Using Serial and parallel Coupling of Devices

Receiving Laboratory

• Test Request Information

• Line Supervision

• Test Request Input (Optical Character Reader)

• Laboratory Test Control • Laboratory Test Control

• Test Report Documentation• Test Result Input/Reference

• User System• Ordering System• External Center

System

aUTOMaTION LINE SEqUENCE OF ThE FRONTIER aND SYMphONY LINE SYSTEM

Frontier Line (Preparation Procedures)

• Conveyor System

Manual Laboratory Test

New FrontierWith the introduction of New Frontier, specimens collected for testing (blood and other body fluids,

etc.) can be automatically screened to quickly determine whether the specimen volume is sufficient to

conduct testing. This has enabled us to extract in advance those specimens which are clearly insuf-

ficient in terms of volume, resulting in a front-end processing system that ensures efficient testing.

Moreover, we have developed a system for checking by monitoring the remaining specimen volume.

This has enabled us to offer better service by being able to respond quickly if additional testing of the

same specimen is requested.

New SymphonyNew Symphony is comprised of New Symphony Chemistry and New Symphony hematology.

NEW SYMphONY ChEMISTRY

Specimens automatically dispensed from New Frontier are sent to New Symphony Chemistry where biochemical

analysis takes place. Biochemical analysis involves routine testing, such as analysis of liver and kidney function. With the

new system, the 10 automated transfer robots transport the specimens to the biochemical testing system, where

biochemical analysis takes place. These automated transfer robots can move without a track, and use a laser called

“laser radar” to automatically detect and avoid obstacles. There is also a control system that allows multiple

robots to respond to transfer requests from analysis devices and optimally dispatches them without collisions

or jams. The testing system is now able to automatically analyze 4,800 specimens per hour.

NEW SYMphONY hEMaTOLOgY

New Symphony hematology is a device that conducts hematological tests to measure the

number of red blood cells, white blood cells and platelets in the blood. It also systematizes

morphological testing which checks for abnormal cells specific to each medical condition. Like

New Symphony Chemistry, which was completed earlier, New Symphony hematology was

introduced in order to enable more efficient testing, and processing capacity was increased by

twice. as a result, an average of 30,000 specimens are now tested each day. For tests which

are on the increase, in addition to possessing the capacity to handle several tens of thousands

more specimens a day, we have also secured space to add additional equipment.

Clinical Laboratory Test Information System

Automated Specimen Conveyor Line System

On-line System

Symphony Line (Testing Procedures)

6

11 12

7

8

9

10

1 2 3 4 5


Business OverviewThe testing business has an operational reach covering all clinical

testing fields, from biochemical tests, hematological tests and other

routine tests, to more specialized tests, such as DNa tests. The

testing business also operates clinical testing labs within hospitals

on a contract basis. Moreover, the testing business includes the

environmental-related testing and food hygiene units.

In core clinical testing operations, the testing business has real-

ized top-level processing capabilities in terms of both quality and

volume at the BML general Laboratory. On the marketing side, our

clinical testing operations provide services throughout Japan through

cooperation with local testing centers and regional laboratories.

BML’s outsourcing business conducts in-house clinical testing on

a contract basis. These contracts come in two forms: Facility Man-

agement Service (FMS), under which BML leases automated analy-

sis equipment to medical institutions, including testing devices and

systems, leaving the hospital to conduct actual clinical testing; and

System package Laboratory (SpL) contracts, where BML conducts

in-house testing using its own equipment and systems.

The food hygiene business targets mainly clients in the restaurant

industry and major retail stores, providing testing and consulting on a

consignment basis. The environmental-related testing business con-

ducts tests, including tests for residual pesticides, on a contract basis.

PerformanceIn the clinical testing business, we carried out sales activities focused

on the clinic market, while striving to maintain and optimize con-

tract rates at the time of renewals alongside revision to medical

service fees. Combined with profit-focused proposal-based market-

ing using FMS and branch laboratories targeting large institutions

(the leasing of testing equipment and systems as well as operational

support and the contracting of operating hospital testing labs), the

benefits of M&as and alliances with regional testing centers carried

out during the previous fiscal year helped to drive steady growth in

testing volume during fiscal 2008, and contract rates were relatively

stable. Consequently, net sales in the testing business increased

5.8% from the previous fiscal year.

In terms of earnings, despite the increase in operational integra-

tion costs and other costs associated with M&a activity and alliances,

the Company saw an increase in profits due to higher testing sales

and volume. In regard to the next-generation laboratory systems

under construction at the BML general Laboratory, the new system

Testing Business

Review of Operations

BML general Laboratory New Symphony hematology (brought online in March 2008)


(New Frontier) for front-end test processing (automated dispensing)

was completed in august and became fully operational. With this

step, the core part of the next-generation laboratory systems has

been completed, thereby enhancing our consignment clinical testing

framework and further raising efficiency. The next-generation labora-

tory systems begin with specimen intake and the front-end testing

process, and then proceed to New Symphony Chemistry (brought

online in October 2006) and New Symphony hematology (brought

online in March 2007), both of which are automated lines for bio-

chemical testing and hematological testing, respectively.

In the other testing business, as the public has become increas-

ingly aware of the importance of food safety, BML Food Science

Solutions, Inc., which is engaged in the food hygiene business,

posted steady growth in orders and helped also by cost-cutting

efforts, posted significant year-on-year increases in profit.

as a result of these and other factors, the testing business reported

a 6.1% year-on-year increase in net sales, to ¥73,310 million.

OutlookFor the medical industry, fiscal 2009 will see no reduction in

national health insurance (NhI) points for clinical testing. Based on

this, testing volume is expected to increase by 3.8% while contract

testing fees are expected to decline by 1.7%. In this context, the

clinical testing business will continue to focus on expanding its

market share in the clinic market as well as enhancing education

and training, and strengthening sales support, such as support for

creating various sales tools.

In regard to measures to improve earnings, we will increase our

earnings power by integrating and closing regional laboratories and

by streamlining and optimizing collection and delivery operations.

Regarding next-generation laboratory systems, the launch of New

Frontier has increased processing capacity by approximately 1.5 times.

going forward, we will further utilize this system’s capabilities by

expanding next-day notification for non-rare items and regional cov-

erage. We will improve the quality of services for users through our

system for providing information on the amount of test specimens

remaining, which went into operation in april 2009. Elsewhere, we will

inspect the testing process from many different angles and build a

low-cost structure by pushing through with automation and increasing

efficiency, which will lead to enhanced business competitiveness.

In the food hygiene business, we expect a sharp downturn in the

business environment because of the increasing cost-cutting aware-

ness among client companies, mainly due to impact of the economic

recession triggered by the financial crisis that began in the U.S.

80,000

0

40,000

20,000

60,000

64,17566,626 67,018 69,077

73,310

05/03 06/03 07/03 08/03 09/03 05/03 06/03 07/03 08/03 09/03

4,000

0

2,000

1,000

3,000 2,732

3,289 3,335 3,2293,061

3,5193,246

2,519

3,388

2,499

SpL Sales FMS Sales

TESTINg BUSINESS NET SaLES

(Millions of yen)

SpL aND FML SaLES

(Millions of yen)


Business OverviewThe medical informatics business mainly sells Medical Station®, an

internally developed electronic patient chart system. This system

offers integrated patient chart and medical billing functions, and

borrows extensively from technologies and expertise cultivated in

our clinical testing business. Medical Station® also boasts enhanced

testing-related functions, including the ability to easily prepare test

request forms on a special screen and the ability to make graphs

from the data of test results.

Medical Station® comes in two versions: the mainstay Medical

Station® Clinic (MS-C) for medical clinics, and a low-cost version

called Medical Station® Small Business Server (MS-S). various

Medical Station® functions can be selected as options, enabling us

to respond flexibly to the needs of users.

Medical Station® pamphlet advertisement of Medical Station®

In addition to direct sales, we have been focusing on sales

through agencies and maintenance and suppor t systems, which

have produced recent gains in efficiency in our maintenance and

suppor t framework. In terms of functions, Medical Station® fea-

tures an electronic patient char t system combined with a medical

billing computer, making it easy to use, and enhanced testing-

related functions. In addition, Medical Station® is interoperable

with many different kinds of software. Medical Station® has cap-

tured the leading share in the electronic patient char t market in

Japan, reflecting the product’s competitive advantages as well as

our seminar-based sales promotion activities and enhanced main-

tenance suppor t framework.

Medical Informatics Business


PerformanceIn fiscal 2008, regarding sales promotion activities for Medical Sta-

tion®, we continued to host medical IT seminars and advertise on

Tv and in trade journals. There were new installations of Medical

Station® at 254 institutions (49 fewer than the previous fiscal year)

during fiscal 2008, primarily at medical institutions which opened

for business during the year. We replaced hardware centered on

servers at 445 user institutions where hardware was approaching

the end of manufacturer warranty during fiscal 2008.

Meanwhile, profitability improved due to our efforts to restructure

the business operations framework. Consequently, the medical informat-

ics business returned to profitability after posting a loss in fiscal 2007.

as a result of the above and other factors, net sales in the

medical informatics business increased 5.8% year on year to

¥3,418 million.

OutlookIn terms of the outlook for this business, in april 2009, we inte-

grated the sales divisions for Medical Station® and the clinical

testing business in order to generate greater synergies between

the two fields. going forward, we aim to raise operating efficiency

and expand business through concer ted activities by both divi-

sions. In response to increasingly intense competition, we will add

new functions and otherwise make Medical Station® even more

attractive as a product. We will also appropriately handle the

replacement of existing users’ hardware.

Total annual

4,000

0

2,000

1,000

3,000

2,114

2,548

3,3723,231

3,418

05/03 06/03 07/03 08/03 09/03 05/03 06/03 07/03 08/03 09/03

3,000

0

2,000

1,000

254303383317218

1,216

1,533

1,916

2,219

2,473

MEDICaL INFORMaTICS BUSINESS NET SaLES

(Millions of yen)

MEDICaL STaTION®: aNNUaL aND TOTaL INSTaLLaTIONS

(Sets)


The Advanced Technology & Development Division develops groundbreaking clinical testing methods and testing reagents in response to medical advances and social needs. The division supplies these technologies and reagents

to locations where clinical testing is conducted, playing its part in advancing medical science.Consolidated subsidiary Merits, Inc., conducts R&D related to medical informatics, and pursues R&D into the use

of networks in testing information and the use of automated systems in testing processes in response to the growing sophistication of medical information. The Company’s R&D expenses totaled ¥588 million in fiscal 2008.

clinical research needs for a unique testing method that can mea-

sure drug resistance effectively with a high degree of sensitivity.

In the diabetes area, we worked with asahi kasei pharma

Corporation to jointly develop a test for myoinositol in the urine as

a new diabetes marker (NhI points listed on January 1, 2008), and

we began receiving test orders from October 2008. There are high

hopes for myoinositol in the urine to function as an indicator of

post-eating hyperglycemia. In addition, lipoprotein-associated

phospholipase a2, which we developed as a new indicator for

coronary artery disease and metabolic syndrome, was added as a

clinical trial test item, and we have seen an increase in orders

received. Meanwhile, in the allergies field, we established a new

allergen testing method (BaT) using basophil activation as an

indicator and in February 2009 we began contract testing for food

allergies at certain institutions. going forward, we plan to expand

the scope of application of drug allergens and enhance BaT testing.

Meanwhile, concerning our joint industry-academia project

with The New Energy and Industrial Technology Development

Organization (NEDO), we completed the third year of a five-

year plan for developing new karyotyping technology on sched-

ule. We were successful in automating the three processes

needed to produce high-density genomic DNa arrays: DNa

extraction, inexhaustible resource, and amplification. We are

currently studying ways to put this into practical use for congeni-

tal abnormality syndrome analysis testing and for useful testing of

cancer diagnosis and prognosis predictions.

Key Accomplishments in Fiscal 2008In the genome testing field, in June 2008, the UgT1a1 gene

polymorphism test using the Invader assay method was

approved as an in vitro diagnostic drug, a first in Japan for

drug-responsive SNps. In November 2008, the NhI point listing

of 2,000 was announced for this test. With a near 10-year track

record as a contractor for Invader testing, we announced that

upon the official launch of sales of the diagnostic kit (Sekisui

Medical Co., Ltd.) in late March 2009 we would be quickly

switching from research testing to NhI testing.

One more area that is significantly expanding as a genome

test that will contribute to personalized healthcare is several

gene mutation analyses related to the effect of molecular-

targeted drugs on malignant tumors. The EgFR gene mutation

analysis to determine the efficacy of the lung cancer drug Iressa

is already being conducted on more than 25,000 specimens

annually in Japan by BML and other major testing centers.

In November 2008, we began taking orders in a timely

manner using the direct sequence method to perform k-ras

gene mutation analysis to determine the efficacy of the colon

cancer drug Erbitax, which received approval in September 2008.

Elsewhere, BML has independently developed a BCR/aBL

mutation analysis using the Invader assay method. With the

approval in January 2009 of both Sprycel and Tasigna as new,

second-generation drugs (following gleevec) for Chronic Myelog-

enous Leukemia (CML), this analysis is meeting new CML-related

aDvaNCED TEChNOLOgY & DEvELOpMENT DIvISION ORgaNIzaTION

R&D

advanced Technology & Development Division

Development planning Office

advanced Medicine Department

Reagent Department

advanced Medicine, Section 1


Reagent Manufacturing Section

Development & quality Control Section



Recently, social demands for corporate compliance and preservation of the environment have been increasing

yearly, bringing about an era in which fulfilling its corporate social responsibility is a company’s social mission.

BML conducts its business activities with concern for the environment, and given the social aspect of

corporations, the Company is pursuing even greater environmental awareness in its activities, with the aim of

being a company that is trusted by society.

BML’s Relationship With Societyas a company engaged in the medical field, BML considers its

mission the swift provision of test results and testing information

that engenders patient trust and wins customer satisfaction. as

such, we have constructed a quality management system, including

the establishment of strict standards for all phases of manage-

ment, from the receipt of test consignments to results notification.

Outside of clinical testing, BML conducts an array of environmen-

tal tests, including food hygiene tests, water quality tests, and

residual pesticide tests, as part of its commitment to providing a

test consignment system that meets the needs of society.

Moreover, BML is developing measures to improve work-

places, with the aim of enabling employees to work in healthy

environments. as part of its social contribution activities, BML

has since fiscal 2002 conducted a clean campaign (Gomi Zero

activities) and has invited students from nearby junior high

schools to participate in learning-through-experience programs,

thereby deepening BML’s ties with the community.

Environmental InitiativesBased on our BML group Environmental policy, we take into

consideration the impacts that our business activities have on

the environment, and the entire group is engaged in various

activities to lessen its environmental footprint.

The Company also works to prevent global warming.

primarily due to our efforts to renew air-conditioning and

refrigerating equipment, CO2 emissions in fiscal 2008 were

14,698 tons, 2.1% lower than the previous fiscal year. going

forward, we will introduce energy saving models when we

replace or update equipment and also continue our individual

day-to-day efforts to prevent global warming.

The BML group generates various types of waste, including

radioactive waste and specially controlled industrial waste

(infectious waste). going beyond simply disposing of this waste

in compliance with all relevant laws and regulations, BML has

established even stricter internal rules for its disposal.

Gomi Zero activities Junior high school students participating in a learning-through-experience program

Environmental & Corporate Social Activities


Board of Directors

Director and Senior Advisor

kENJI kONDO

President

YUTaka aRaI

Director

kazUTa FUkUDa

Director

TOShIYUkI kOREYaSU

Director

TakaShI OTSUka

Director

kENSUkE kONDO

Director

SaDahIRO NakaMURa

Director

MINORU TaNaka

Director

hIROShI TaNaBE

Director

TSUTOMU INENaga

Director

NOBUkI aRaI

Kenji KondoDirector and Senior Advisor

Yutaka AraiPresident

Toshiyuki KoreyasuDirector

Minoru TanakaDirector

Takashi OtsukaDirector

Kazuta FukudaDirector

Kensuke KondoDirector

Standing Auditor

MaSahaRU NIShIMURa

Auditors

TOShIO YaMaMURaTOShIO SaITO

Hiroshi TanabeDirector

Tsutomu InenagaDirector

Nobuki AraiDirector

Sadahiro NakamuraDirector

(as of March 31, 2009)

BML, INC. 16 aNNUaL REpORT 09

Management’s Discussion and Analysis

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Auditors

18

22

24

25

26

27

44

Financial Section

BML, INC. 17 ANNuAL RepoRt 09

Management’s Discussion and Analysis

Scope of Consolidationthe BML Group consists of the parent, BML, INC., 20 consolidated

subsidiaries, and five affiliates.

on September 5, 2008, consolidated subsidiary BML Life Science

Holdings, Inc., (BML, Inc. shareholder ratio: 65%) acquired all the out-

standing shares of Q&C, Inc. adding it to the scope of consolidation.

In April 2008 the Company acquired 20% of the outstanding shares

of Chuo Biseibutsu Kensasho, Inc.

Operating EnvironmentIn the medical industry, large scale medical system reform has been

conducted against the backdrop of an aging population and an increase

in medical costs for the elderly. A range of reforms included establish-

ment of a new healthcare system for people over the age of 75 and

reorganization of care beds. As par t of the reform, specific health

checkups and specific health guidance for lifestyle disease prevention

star ted in April, 2008. In the contract clinical testing business, fiscal

2008 was a year for revision of medical service fees under the national

health insurance (NHI) system (carried out every two years). NHI

points for laboratory testing were reduced by an average of approxi-

mately 1%, but this was well below the reduction in previous years.

Also, the addition to specimen management related to in-house test-

ing, which was tightened in the previous revision, was reviewed again

and par tially eased.

In this environment, we worked in the testing business to maintain

and adjust unit contract fee rates following renewal of contracts accom-

panying the revision of medical service fees. We also stepped up mar-

keting activities with a focus on the clinic market. In addition, we

implemented proposal-based marketing targeting large facilities with

profitability-focused FMS (Facility Management Services—lease of

testing devices and systems to medical institutions and operating assis-

tance) and Branch Laboratory methods (contracts to operate on-site

testing facilities). With the additional benefit of M&A and alliances in our

regional testing centers conducted in the previous fiscal year, the

volume of testing increased steadily, and contract rates also remained

relatively stable. As a result, sales for the testing business increased by

5.8% from the previous period. profit also rose due to increased rev-

enue and the quantity effect, despite the fact that business integration

costs and other expenses from M&A and alliance activity increased.

Regarding next-generation laboratory systems under construction at the

BML General Laboratory (Kawagoe, Saitama prefecture), New Frontier, a

new automatic dispensing system for front-end testing processes, was com-

pleted and commenced full operation in August 2008. this completed the

core section of the next-generation laboratory system, connecting New

Symphony Chemistry, which started operation in october 2006 and New

Symphony Hematology, which started operation in March, 2007. these are

automated lines for processes from specimen intake to front-end testing

processes, and on to biochemical and hematological tests. these systems

have served to enhance and further streamline the contract testing system.

In other testing businesses, BML Food Science Solutions, Inc., which

operates the food hygiene business, saw brisk orders on the back of

increased public concern over food safety, which combined with prog-

ress in cost-cutting to return a significant increase in profits.

In the medical informatics business, despite ongoing promotion for

our electronic patient chart system Medical Station® (MS), including

continuous medical It seminars and advertisements on tV and in

specialized magazines, the number of new installations of MS declined

by 49 facilities from the previous year to 254 facilities, mainly newly

opened clinics. Also, we replaced hardware, mainly servers, for existing

users at 445 facilities whose maintenance service contracts were due

to expire. on the other hand, profitability improved due to realignment

of the business operation structure, and the business turned a profit for

the year, compared to a loss in the previous fiscal year.

In other business, Allegro, Inc., which operates SMo* and CRo*

businesses, saw a significant drop in profit due to a decline in orders

and an increase in personnel expenses.

As a result, consolidated sales increased by 6.0% to ¥77,199 million and

operating income increased by 15.5% to ¥5,593 million. By segment, sales

were up ¥4,233 million in the testing business, up ¥187 million in the

medical informatics business, and down ¥52 million in other businesses.

* Site Management organization (SMo): An independent organization that contracts with a specific medical institution to support clinical trials specific to that institution.

* Clinical Research organization (CRo): An independent organization that carries out or supports, wholly or in part, various operations related to clinical trials conducted by pharmaceutical companies in the development of drugs.

Operating Expenses and IncomeCost of sales for the period under review increased by ¥2,256 million,

or 4.9% year on year, to ¥48,743 million. the cost of sales ratio declined

0.7 points to 63.1%. Consequently the gross profit margin increased 0.7

points year on year to 36.9%.

Selling, general and administrative expenses increased by ¥1,358 million,

or 6.3% year on year, to ¥22,863 million. the main factors affecting this

were increases in personnel expenses and increases in depreciation.

As a result of the above, operating income for the period under

review increased ¥752 million, or 15.5% year on year, to ¥5,593 million.

BML, INC. 18 ANNuAL RepoRt 09 BML, INC. 19 ANNuAL RepoRt 09

Other Income (Expenses), Taxes and Net Incomeother income for the period under review increased ¥226 million year

on year to ¥70 million. this increase was mainly due to an increase in

dividends received, and a decrease in loss on disposal of property.

As a result of the above, income before income taxes and minority

interests increased ¥978 million, or 20.9% year on year, to ¥5,651 million.

Income taxes increased ¥214 million, or 9.6% year on year, to

¥2,434 million.

Consequently, net income increased ¥701 million, or 29.5% year on

year, to ¥3,075 million, net income per share increased ¥33.7 from the

previous period to ¥144.9, and cash dividends per share were ¥30.

Segment Informationthe core testing business segment accounts for more than 90% of total

sales, operating income, and assets. BML therefore does not carry out

separate accounting procedures for individual businesses.

Sales by segment are as shown below.

SALeS By SeGMeNt (Millions of yen)

Sales

09/03 08/03

testing 73,310 69,077

Medical Informatics 3,418 3,231

other 471 523

Corporate and elimination — —

total 77,199 72,833

Sales for each category of the testing business are as shown below.

SALeS By MAjoR teSt type (Millions of yen)

09/03 08/03

Share (%) Share (%)

Biochemical 31,358 42.8 29,948 43.4

Hematological 6,238 8.5 5,709 8.3

Immunological 15,966 21.8 14,977 21.7

Microbiological 4,223 5.8 3,951 5.7

pathological 5,154 7.0 4,820 6.9

other 10,371 14.1 9,672 14.0

total 73,310 100.0 69,077 100.0

Financial PositionCurrent assets fell ¥161 million, or 0.5% year on year, to ¥29,145 mil-

lion. the main factor in this decline was a decrease of ¥460 million in

cash and cash equivalents.

property, plant and equipment, net increased ¥2,516 million, or

10.6% year on year, to ¥26,343 million.

Intangible assets declined ¥177 million, or 4.8%, to ¥3,541 million.

the main factor behind the decline was amortization of goodwill.

Investments and other assets increased by ¥670 million, or 21.5%

year on year, to ¥3,781 million.

As a result of the above, total assets rose ¥2,848 million, or 4.7%

year on year, to ¥62,810 million.

Current liabilities declined by ¥707 million, or 4.1% year on year, to

¥16,662 million, the main factor being a drop in short-term bank loans

of ¥39 million and a fall in accrued expenses.

80,000

40,000

60,000

20,000

0

72,83371,83470,71267,705

05/03 06/03 07/03 08/03 09/03

77,19977,199

SALeS

(Millions of yen)

6,000

4,000

2,000

0

4,841

3,022

5,018

4,294

05/03 06/03 07/03 08/03 09/03

5,593

opeRAtING INCoMe

(Millions of yen)


Long-term liabilities increased ¥915 million, or 24.4% year on year,

to ¥4,666 million. this was mainly due to incurring lease obligations of

¥650 million.

equity, which is calculated by adding valuation gains and losses and

translation adjustments to shareholders’ equity, increased ¥2,491 million,

or 6.5% year on year, to ¥40,835 million, reflecting mainly an increase in

retained earnings associated with higher net income. the equity ratio

improved 1.1 percentage points to 65.0%. Minority interests rose ¥135

million year on year to ¥607 million. the main factor in this was the

increase in holdings of Q&C, Inc. As a result of the above, net assets for

the fiscal year under review increased by ¥2,640 million, or 6.8% year

on year, to ¥41,482 million.

Cash FlowsCash generated from operating activities increased by ¥1,321 million year

on year to ¥7,718 million. this mainly reflected an increase in income

before income taxes and minority interests of ¥978 million and an

increase in depreciation and amortization of ¥1,001 million on one hand,

and an increase in income taxes paid of ¥729 million on the other.

Investing activities used net cash of ¥6,876 million, an increase of

¥4,628 million. this was due to an increase of ¥3,335 million in pur-

chase of property, plant and equipment.

Financing activities used cash of ¥1,302 million, a decrease of ¥636

million from the previous fiscal year. this reflected a decrease of ¥488

million in net decrease in short-term bank loans, and the absence of a

purchase of treasury stock that was recorded in the previous fiscal year.

As a result of the above, cash and cash equivalents for the fiscal year

under review declined ¥460 million year on year to ¥11,326 million.

Fund Requirements and Financial Policythe Group’s main requirements for operating funds are for the pur-

chase of reagents and pods used to conduct testing, and operating

expenditures and personnel costs related to manufacturing activities

and general management activities.

the Group aims to fund current operating requirements from operating

cash flow. Regarding the procurement of funds through borrowing, short-

term loans due within one year are generally used to procure operating

funds. If there is a shortage of funds available to purchase production facilities

and other items, in principle, funds are procured with long-term borrowing.

the BML Group uses the cash generated by its sound financial

position and operating activities to repay loans after making allowance

for funds for capital expenditure. In this way, the Group works to

reduce the balance of its loans.

Capital Investment and R&D CostsIn the fiscal year under review, the amount of capital investment rose

¥3,355 million, or 142.3% year on year, to ¥5,712 million. the main compo-

nents of this were buildings used for sales offices and testing equipment such

as automated analysis equipment. R&D expenses decreased ¥91 million, or

13.4%, to ¥588 million. these expenses corresponded to 0.8% of sales.

Business Risksthe following are the main risk factors that could affect the BML

Group’s operating performance, share price and financial position.

Statements concerning the future reflect the judgment of the Group

(the Company and its affiliates) at the time of submission of the yuho

financial report.

4,000

2,000

3,000

1,000

0

2,374

2,0861,972

1,718

05/03 06/03 07/03 08/03 09/03

3,075

Net INCoMe

(Millions of yen)

15,000

10,000

5,000

0

12,97712,174

13,01013,379

05/03 06/03 07/03 08/03 09/03

13,524

NuMBeR oF CLIeNtS


(1) RISK ReLAtING to GoVeRNMeNt ReGuLAtIoN oF

tHe INDuStRy

our core clinical testing business is regulated by the government with

respect to opening, equipment and management organization of

clinical laboratories under the Act on Clinical Laboratory technicians,

etc. If this law were to change or if the restrictions of the law were to

be tightened, it could lead to restriction of the Group’s activities and/

or an increase in costs.

(2) RISK ReLAtING to pRICe FALLS Due to ReVISIoN oF

NHI poINtS

In the clinical testing business, NHI (National Health Insurance) points

form the basis for medical fees and are set for most testing items. NHI

points are revised every two years in accordance with the Health

Insurance Act by the Ministry of Health, Labour and Welfare. Should the

medical fee system change and the margins of medical institutions be

reduced in order to control national medical expenses, the impact to

contract testing fees could have an adverse impact on the business

performance and financial position of the BML Group.

(3) RISKS ReLAtING to QuALIty CoNtRoL

Accuracy control is very important to the Group’s core clinical testing

business. We therefore operate a survey program as a certified organi-

zation of the College of American pathologists (CAp) and introduce

strict accuracy control measures. We have also acquired ISo 9001 and

ISo 15189 certifications and set up a rigorous accuracy control system.

However, testing quality may be compromised by unforeseen situations

resulting in the unavailability of correct amounts and storage conditions,

or other conditions. In the case that such an event resulted in claims for

damages, this could have an adverse impact on the business perfor-

mance and financial position of the BML Group.

(4) RISKS ReLAtING to BuSINeSS StRAteGy

the BML Group is focused on the potential of the introduction of It to

healthcare through electronic patient chart systems as a new business,

and is investing in development and sales of electronic patient charts to

establish this business. However, the market is still immature and as

medical institutions see worsening performance with healthcare

administrators tightening regulations and introducing measures to

control healthcare costs, sentiment for introducing the electronic

patient char t systems could be expected to remain weak. If as a result

of such a development the Group’s strategy fails to achieve the

expected return on investment, it could have an adverse impact on

the BML Group’s business performance and financial position.

(5) RISKS ReLAtING to INFoRMAtIoN SeCuRIty

the BML Group holds a large quantity of patients’ personal data and

testing data. As a medical informatics company, we have a duty to

ensure the security of the data and to provide highly reliable informa-

tion. We therefore acquired ISMS certification for our information

security system. However, in the event of an unexpected occurrence

such as a leak of personal data due to the recent rise in volume and

severity of crimes relating to corporate information security, the result-

ing loss of credibility and social backlash against violation of patients’

privacy could have an adverse impact on the business performance and

financial position of the BML Group.

9.0

6.0

3.0

0

7.77

6.306.305.765.765.695.69

5.19

05/03 06/03 07/03 08/03 09/03

Roe

(%)

1,000

600

400

800

200

0

679638

727

918

05/03 06/03 07/03 08/03 09/03

588588

R&D expeNSeS

(Millions of yen)


Consolidated Balance SheetsBML, INC. and Consolidated Subsidiaries

March 31, 2009 and 2008

Millions of yen

thousands of u.S. dollars (Note 4)

Assets 2009 2008 2009

Current assets:

Cash and cash equivalents ¥ 11,326 ¥ 11,786 $ 115,300

Short-term investments 874 866 8,790

Receivables, trade:

Notes and accounts 13,956 13,868 142,074

unconsolidated subsidiaries and affiliates 13 2 132

Inventories (Note 5) 1,535 1,501 15,621

Deferred income taxes (Note 15) 924 887 9,401

other current assets 583 468 6,050

Allowance for doubtful accounts (66) (72) (671)

total current assets 29,145 29,306 296,697

Property, plant and equipment:

Land (Note 8) 10,728 10,490 109,213

Buildings and structures (Note 8) 23,873 22,604 243,030

Machinery and equipment 24,792 22,762 252,384

Construction in progress 53 361 544

Leased assets (Note 9) 849 – 8,641

60,295 56,217 613,812

Accumulated depreciation (33,952) (32,390) (345,632)

property, plant and equipment, net 26,343 23,827 268,180

Intangible assets:

Software 2,625 2,472 26,724

Goodwill – 836 –

other intangible assets 916 410 9,323

total intangible assets 3,541 3,718 36,047

Investments and other assets:

Investments in securities (Notes 6 and 7) 930 552 9,466

Investments in unconsolidated subsidiaries and affiliates 413 222 4,207

Deferred income taxes (Note 15) 1,601 1,483 16,297

other 908 1,134 9,245

Allowance for doubtful accounts (71) (280) (726)

total investments and other assets 3,781 3,111 38,489

Total assets ¥ 62,810 ¥ 59,962 $ 639,413


Millions of yen


Liabilities and net assets 2009 2008 2009

Current liabilities:

payables, trade:

Notes and accounts ¥ 8,497 ¥ 8,136 $ 86,500

unconsolidated subsidiaries and affiliates 47 5 475

Short-term bank loans (Note 8) 951 990 9,686

Current portion of long-term debt (Note 8) 0 633 0

Accrued expenses 4,926 5,983 50,150

Accrued income taxes 1,549 1,336 15,767

other current liabilities 692 286 7,042

total current liabilities 16,662 17,369 169,620

Long-term liabilities:

Lease obligations (Notes 8 and 9) 650 – 6,621

Accrued retirement benefits and allowances (Note 10) 3,256 2,991 33,145

other long-term liabilities 760 760 7,731

total long-term liabilities 4,666 3,751 47,497

Net assets:

Shareholders’ equity:

Common stock:

Authorized—59,400,000 shares

Issued and outstanding—22,007,363 shares in 2009 and 2008 6,046 6,046 61,545

Capital surplus 6,647 6,647 67,668

Retained earnings 29,353 26,862 298,825

treasury stock, at cost—783,464 shares in 2009 and 783,322 shares in 2008 (1,269) (1,269) (12,917)

total shareholders’ equity 40,777 38,286 415,121

Valuation and translation adjustments:

unrealized gain on securities 58 58 588

total valuation and translation adjustments 58 58 588

Stock options 40 26 407

Minority interests 607 472 6,180

total net assets 41,482 38,842 422,296

Total liabilities and net assets ¥62,810 ¥59,962 $639,413

See notes to consolidated financial statements.


Consolidated Statements of IncomeBML, INC. and Consolidated Subsidiaries

years ended March 31, 2009, 2008 and 2007

Millions of yen


2009 2008 2007 2009

Sales ¥77,199 ¥72,833 ¥71,834 $785,898

Cost of sales 48,743 46,487 46,397 496,207

Gross profit 28,456 26,346 25,437 289,691

Selling, general and administrative expenses (Note 13) 22,863 21,505 22,415 232,755

operating income 5,593 4,841 3,022 56,936

Other income (expenses):

Interest income 16 16 9 159

Interest expense (28) (28) (48) (287)

other income (expenses), net (Note 14) 70 (156) 919 717

Income before income taxes and minority interests 5,651 4,673 3,902 57,525

Income taxes: (Note 15)

Current 2,592 2,185 1,740 26,391

Deferred (158) 35 68 (1,616)

2,434 2,220 1,808 24,775

Income before minority interests 3,217 2,453 2,094 32,750

Minority interests 142 79 8 1,444

Net income ¥ 3,075 ¥ 2,374 ¥ 2,086 $ 31,306

yenu.S. dollars (Note 4)

Amounts per share:

Basic net income ¥144.89 ¥111.16 ¥96.90 $1.48

Diluted net income 144.64 111.01 96.81 1.47

Cash dividends 30.00 25.00 20.00 0.31



Consolidated Statements of Changes in Net AssetsBML, INC. and Consolidated Subsidiaries


thousands Millions of yen

Number of shares issued

and outstanding

Common stock

Capital surplus

Retained earnings

treasury stock, at cost

total shareholders’

equity

unrealized gain on

securitiesStock

optionsMinority interests

total net assets

Balance at March 31, 2006 22,007 ¥6,046 ¥ 6,647 ¥ 23,357 ¥ (755) ¥ 35,295 ¥219 ¥ – ¥ 8 ¥ 35,522

Cash dividends – – – (484) – (484) – – – (484)

Bonuses to directors and statutory auditors – – – (64) – (64) – – – (64)

Increase in treasury stock – – – – (0) (0) – – – (0)

Net income – – – 2,086 – 2,086 – – – 2,086

other changes – – – – – – (77) 14 385 322

Balance at March 31, 2007 22,007 6,046 6,647 24,895 (755) 36,833 142 14 393 37,382

Cash dividends – – – (428) – (428) – – – (428)

Increase due to addition of consolidated subsidiaries – – – 21 – 21 – – – 21

Net income – – – 2,374 – 2,374 – – – 2,374

Increase in treasury stock – – – – (514) (514) – – – (514)

other changes – – – – – – (84) 12 79 7

Balance at March 31, 2008 22,007 6,046 6,647 26,862 (1,269) 38,286 58 26 472 38,842

Cash dividends – – – (584) – (584) – – – (584)

Net income – – – 3,075 – 3,075 – – – 3,075

Increase in treasury stock – – 0 – (0) (0) – – – (0)

Disposal of treasury stock – – – – 0 0 – – – 0

other changes – – – – – – (0) 14 135 149

Balance at March 31, 2009 22,007 ¥6,046 ¥6,647 ¥29,353 ¥(1,269) ¥40,777 ¥ 58 ¥40 ¥607 ¥41,482


Common stock

Capital surplus

Retained earnings

treasury stock, at cost

total shareholders’

equity

unrealized gain on

securitiesStock

optionsMinority interests

total net assets

Balance at March 31, 2008 $ 61,545 $ 67,668 $ 273,460 $ (12,914) $ 389,759 $ 595 $ 262 $ 4,804 $ 395,420

Cash dividends – – (5,941) – (5,941) – – – (5,941)

Net income – – 31,306 – 31,306 – – – 31,306

Increase in treasury stock – 0 – (3) (3) – – – (3)

Disposal of treasury stock – – – 0 0 – – – 0

other changes – – – – – (7) 145 1,376 1,514

Balance at March 31, 2009 $61,545 $67,668 $298,825 $(12,917) $415,121 $588 $407 $6,180 $422,296



Consolidated Statements of Cash FlowsBML, INC. and Consolidated Subsidiaries


Millions of yen


2009 2008 2007 2009Cash flows from operating activities:Income before income taxes and minority interests ¥ 5,651 ¥ 4,673 ¥ 3,902 $ 57,525Adjustments to reconcile income before income taxes and minority interests to net cash provided by operating activities: Depreciation and amortization 4,093 3,092 4,187 41,668 Increase (decrease) in provision for employees’ retirement benefits 247 28 (2) 2,518 Interest expense 28 28 48 287 Loss on disposal of property, plant and equipment 85 249 187 865 Loss on impairment of fixed assets 64 – – 653 Gain on sales of investments in securities – (45) – – Gain on sales of stock of subsidiaries – – (274) – Gain on sale of a business – – (674) – Changes in assets and liabilities: Accounts receivable, trade (69) 218 64 (706) Inventories (29) 23 (212) (298) Accounts payable, trade 383 (94) 40 3,902 Bonuses paid to directors and statutory auditors – – (64) – other (587) (241) 259 (5,975) Subtotal 9,866 7,931 7,461 100,439Interest paid (28) (29) (52) (288)tax refunds received – – – –Income taxes paid (2,388) (1,659) (2,295) (24,307)other 268 154 207 2,722 Net cash provided by operating activities 7,718 6,397 5,321 78,566Cash flows from investing activities:Increase in time deposits (885) (960) (1,063) (9,007)proceeds from withdrawal of time deposits 877 1,115 1,794 8,925purchases of property, plant and equipment (5,155) (1,820) (3,225) (52,483)purchases of intangible assets (1,100) (1,095) (579) (11,195)proceeds from sale of a business – – 939 –purchases of investments in securities (408) (97) (51) (4,154)purchases of stock in affiliates (192) – – (1,951)proceeds from sale of a subsidiary’s stock – – 546 –proceeds from sales of subsidiaries’ stock resulting in changes in scope of consolidation – 27 – –Acquisition of shares of initially consolidated subsidiaries (47) – (27) (479)proceeds from withdrawals of advances 29 182 170 300Increase in specified trust fund – – (1,000) –proceeds from withdrawal of specified trust fund – – 1,000 –other 5 400 195 47 Net cash used in investing activities (6,876) (2,248) (1,301) (69,997)Cash flows from financing activities:Net decrease in short-term bank loans (46) (534) (583) (470)Repayment of long-term loans (625) (461) (531) (6,364)Dividends paid (584) (428) (484) (5,942)purchases of treasury stock – (514) – –other (47) (1) 47 (476) Net cash used in financing activities (1,302) (1,938) (1,551) (13,252)Net decrease (increase) in cash and cash equivalents (460) 2,211 2,469 (4,683)Cash and cash equivalents at beginning of year 11,786 9,496 7,002 119,983Increase in cash and cash equivalents resulting from initial consolidation of subsidiaries – 79 – –Increase in cash and cash equivalents resulting from merger of unconsolidated subsidiaries – – 25 –Cash and cash equivalents at end of year ¥11,326 ¥11,786 ¥ 9,496 $115,300



1. Basis of Preparationthe accompanying consolidated financial statements of BML, INC. (the “Company”) and consolidated subsidiaries (collectively,

the “Group”) are prepared on the basis of accounting principles generally accepted in japan, which are different in certain

respects as to the application and disclosure requirements of International Financial Reporting Standards, and have been

compiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and

exchange Law of japan.

In preparing the accompanying consolidated financial statements, certain reclassifications have been made to the consolidated

financial statements issued domestically for readers outside japan. Furthermore, the notes to the accompanying consolidated

financial statements include certain information which is not required under accounting principles generally accepted in japan but

is presented herein as additional information.

2. Summary of Significant Accounting Policies(1) pRINCIpLeS oF CoNSoLIDAtIoN

the accompanying consolidated financial statements include the accounts of the Company and its 20 subsidiaries as of March 31,

2009 (19 as of March 31, 2008). All significant intercompany accounts and transactions have been eliminated in consolidation.

Investments in unconsolidated subsidiaries, not significant in amount, are carried at cost.

(2) CASH AND CASH eQuIVALeNtS

Cash and cash equivalents include all highly liquid debt instruments with a maturity of three months or less when purchased which can

easily be converted to cash and are subject to little risk of change in value.

(3) MARKetABLe SeCuRItIeS AND INVeStMeNtS IN SeCuRItIeS

the Company classifies its securities into three categories: trading, held-to-maturity or other securities. trading securities are car-

ried at fair value and held-to-maturity securities are carried at amortized cost. Marketable securities classified as other securities

are carried at fair value with any changes in unrealized holding gain or loss, net of the applicable income taxes, included directly in

net assets. Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determined by the

moving average method.

(4) ALLoWANCe FoR DouBtFuL ACCouNtS

the allowance for doubtful accounts is provided at an amount sufficient to cover possible losses on the collection of receivables.

the amount of the allowance is determined primarily based on the historical experience of bad debts plus an estimate of the

collectibility of individual receivables based on the financial position of the debtors.

(5) INVeNtoRIeS

Inventories are stated principally at the lower of cost or market, cost being determined principally by the average method. (See Note 3)

(6) pRopeRty, pLANt AND eQuIpMeNt, AND DepReCIAtIoN (exCLuDING LeASeD ASSetS)

property, plant and equipment are stated at cost. Depreciation is computed principally by the declining-balance method at rates

based on the estimated useful lives of the respective assets, which vary according to general classification, type of construction and

use. Maintenance and repairs, including minor renewals and improvements, are charged to income as incurred. (See Note 3)

effective from the fiscal year beginning April 1, 2007, the Company and its domestic consolidated subsidiaries depreciates the

residual value of fixed assets acquired on or before March 31, 2007, to nominal value over five years based on the straight-line

method. this change had the effect of lowering both operating income and income before income taxes and minority interests by

¥130 million (uS$1,301 thousand) for the year ended March 31, 2008 from the corresponding amounts which would have been

recorded under the previous method.

Notes to Consolidated Financial StatementsBML, INC. and Consolidated Subsidiaries

March 31, 2009


(7) SoFtWARe AND AMoRtIzAtIoN (exCLuDING LeASeD ASSetS)

Software is carried at cost less accumulated amortization calculated by the straight-line method over a useful life of 5 years as

determined by the Company.

(8) GooDWILL

the excess of the purchase price over net assets acquired is presented as goodwill and amortized by the straight-line method

over a period of 5 years.

(9) LeASeD ASSetS

the straight-line method is applied with the useful life of the asset being the lease term and the residual value being zero.

the accounting treatment for finance lease transactions, other than those involving a transfer of title, for which the starting

date of the lease was March 31, 2008 or earlier is accounted for in a manner similar to the accounting treatment for operating

lease transactions. (See Note 3)

(10) RetIReMeNt BeNeFItS AND ALLoWANCeS

Accrued retirement benefits for employees at the balance sheet date are provided principally at an amount calculated based on

the retirement benefit obligation and the fair value of the pension plan assets as of the balance sheet date, as adjusted for unrec-

ognized actuarial gain or loss and unrecognized prior service cost. the retirement benefit obligation is attributed to each period by

the straight-line method over the estimated average years of service of the eligible employees.

Certain consolidated subsidiaries provide for retirement allowances to directors and statutory auditors based on their inter-

nal rules. these are recorded at an estimate of the amount which would be required to be paid if all directors and statutory

auditors retired at the balance sheet date.

(11) SHAReHoLDeRS’ eQuIty

the Corporation Law of japan provides that an amount equal to 10% of the amount to be disbursed as distributions of capital

surplus (other than the capital reserve) and retained earnings (other than the legal reserve) be transferred to the capital reserve

and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of the capital stock

account. Such distributions can be made at any time by resolution of the shareholders, or by the Board of Directors if certain

conditions are met.

(12) INCoMe tAxeS

Deferred income taxes are provided for income tax expense by the asset and liability method. Deferred tax assets and liabilities

are determined based on the differences between financial reporting and the tax bases of the assets and liabilities and are mea-

sured using the enacted tax rates and laws which will be in effect when the differences are expected to reverse.

(13) Net INCoMe peR SHARe

the computation of basic net income per share is based on the weighted-average number of shares of common stock outstand-

ing during the respective years. Diluted net income per share is computed to reflect the effect of potentially dilutive securities.

3. Accounting Changes(1) ACCouNtING StANDARD FoR MeASuReMeNt oF INVeNtoRIeS

effective the fiscal year ended March 31, 2009, the Company and its consolidated subsidiaries have applied the “Accounting Stan-

dard for Measurement of Inventories” (Accounting Standard Board of japan (ASBj) Statement No. 9, issued on july 5, 2006). the

effect of this change on profit and loss for the year ended March 31, 2009 was not material.


(2) ACCouNtING StANDARD FoR LeASe tRANSACtIoNS

effective for the fiscal year ended March 31, 2009, the Company and its consolidated subsidiaries have applied the “Accounting

Standard for Lease transaction” (ASBj Statement No. 13, revised on March 30, 2007) and “Guidance on Accounting Standards for

Lease transactions” (ASBj Guidance No. 16, revised on March 30, 2007) for the lease transactions, entered into a contract on and

after April 1, 2008, other than the lease transactions which deem to transfer ownership of the leased assets to the lessee. the

effect of this change on profit and loss for the year ended March 31, 2009 was not material. these lease transactions are

accounted for as finance leases, while they were accounted for in the same manner as operating leases before adoption. on the

other hand, the lease transactions entered into a contract on and before March 31, 2008, are still accounted for in the same

manner as operating leases.

(3) CHANGe IN DepReCIAtIoN MetHoD oF SIGNIFICANt pRopeRty, pLANt AND eQuIpMeNt

effective from the fiscal year beginning April 1, 2007, the Company changed the depreciation method for fixed assets acquired on

or after April 1, 2007. this change was made in accordance with the revised Corporation tax Law of japan (partial Revision of

Income tax Law, Law No. 6, March 30, 2007, and Cabinet order No. 83 of March 30, 2007 for the partial revision of the Corpora-

tion tax Law enforcement Guidance). this change had the effect of lowering both operating income and income before income

taxes and minority interests by ¥82 million (uS$833 thousand) for the year ended March 31, 2008 from the corresponding

amounts which would have been recorded under the previous method.

(4) BoNuSeS to DIReCtoRS

effective the year ended March 31, 2007, the Company and its consolidated subsidiaries have adopted “Accounting Standard for

Directors’ Bonuses” (ASBj Statement No. 4, issued on November 29, 2005).

As a result of the adoption of this accounting standard, income before income taxes and minority interests decreased by ¥58

million ($594 thousand) for the year ended March 31, 2007 from the amount which would have been recorded under the

method applied in the previous year.

(5) SHARe-BASeD pAyMeNtS

effective the year ended March 31, 2007, the Company and its consolidated subsidiaries have adopted “Accounting Standard for

Share-based payments” (ASBj Statement No. 8, issued on December 27, 2005) and revised “Guidance on Accounting Standard for

Share-based payments” (ASBj Guidance No. 11, issued on May 31, 2006).

As a result of the adoption of this accounting standard, income before income taxes and minority interests decreased by ¥14

million ($146 thousand) for the year ended March 31, 2007 from the amount which would have been recorded under the

method applied in the previous year.

(6) BuSINeSS CoMBINAtIoNS AND BuSINeSS DIVeStItuReS

effective the year ended March 31, 2007, the Company has adopted “Accounting Standard for Business Combinations” (issued on

october 31, 2003 by the Business Accounting Council of japan), and “Accounting Standard for Business Divestitures” and revised

“Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBj State-

ment No. 7, issued on December 27, 2005 and ASBj Guidance No. 10, issued on December 22, 2006, respectively).

As a result of the adoption of these accounting standards, although there was no impact on income before income taxes and

minority interests, operating income decreased by ¥1,120 million ($11,399 thousand) for the year ended March 31, 2007 from

the amount which would have been recorded under the method applied in the previous year.


4. U.S. Dollar Amountsthe Company maintains its accounting records in yen. the u.S. dollar amounts included in the accompanying consolidated financial

statements and notes thereto represent the arithmetic results of translating yen into u.S. dollars at ¥98.23 = u.S.$1.00, the rate of

exchange prevailing on March 31, 2009. the inclusion of such dollar amounts is solely for the convenience of the reader and is not

intended to imply that assets and liabilities which originated in yen have been or could readily be converted, realized or settled in

dollars at that or any other rate.

5. InventoriesInventories at March 31, 2009 and 2008 consisted of the following:

Millions of yenthousands of u.S. dollars

2009 2008 2009

Finished products ¥ 155 ¥ 220 $ 1,573

Work in process 395 220 4,019

Raw materials and supplies 985 1,061 10,029

¥1,535 ¥1,501 $15,621

6. Investments in Unconsolidated Subsidiaries and AffiliatesInvestments in unconsolidated subsidiaries and affiliates at March 31, 2009 and 2008 consisted of the following:


2009 2008 2009

Investments ¥413 ¥222 $4,207

¥413 ¥222 $4,207

7. Marketable Securities and Investments in SecuritiesInformation regarding marketable securities classified as other securities at March 31, 2009 and 2008 was as follows:

Millions of yen

2009Acquisition

costCarrying

valueunrealized gain (loss)

Securities whose carrying value exceeds their acquisition cost:

equity securities ¥513 ¥615 ¥102

Bonds – – –

other – – –

Subtotal 513 615 102

Securities whose acquisition cost exceeds their carrying value:

equity securities 32 24 (8)

Bonds – – –

other – – –

Subtotal 32 24 (8)

total ¥545 ¥639 ¥ 94


Millions of yen

2008Acquisition

costCarrying



equity securities ¥190 ¥287 ¥97

Bonds – – –

other – – –

Subtotal 190 287 97



Bonds – – –

other – – –

Subtotal 29 22 (7)

total ¥219 ¥309 ¥90

thousands of u.S. dollars

2009Acquisition

costCarrying



equity securities $5,224 $6,263 $1,039

Bonds – – –

other – – –

Subtotal 5,224 6,263 1,039



Bonds – – –

other – – –

Subtotal 323 245 (78)

total $5,547 $6,508 $ 961

Securities recorded at cost at March 31, 2009 and 2008 are summarized as follows:


2009 2008 2009

Non-marketable equity securities ¥291 ¥244 $2,958

8. Short-Term Borrowings and Long-Term DebtShort-term borrowings (excluding lease obligations) represent overdraft facilities at average interest rates of 1.5% and 1.4% at

March 31, 2009 and 2008, respectively.

the current portion of lease obligations represents overdraft facilities at an average interest rate of 2.0% at March 31, 2009.


Long-term debt at March 31, 2009 and 2008 consisted of the following:


2009 2008 2009

Loans from banks, due 2008 to 2010 ¥ – ¥ 633 $ –

Lease obligations, due 2009 to 2014 815 – 8,301

Current portion of long-term debt – (633) –

Current portion of lease obligations (165) – (1,680)

¥ 650 ¥ – $ 6,621

At March 31, 2009 and 2008, debt with collateral consisted of the following:


2009 2008 2009

Short-term bank loans ¥850 ¥850 $8,653

Current portion of long-term debt – 5 –

¥850 ¥855 $8,653

Assets pledged as collateral for short-term bank loans, the current portion of long-term debt, and long-term debt at March

31, 2009 and 2008 were as follows:


2009 2008 2009

Land ¥2,885 ¥2,885 $29,365

Buildings and structures 5,290 5,276 53,855

¥8,175 ¥8,161 $83,220

the maturities of lease obligations are summarized as follows:

years ending March 31,Millions of

yenthousands of u.S. dollars

2010 ¥165 $1,680

2011 164 1,673

2012 168 1,708

2013 and thereafter 318 3,240

¥815 $8,301

9. LeasesAt March 31, 2009 and 2008, property held under finance leases which were not capitalized as assets are summarized as follows:

Millions of yen thousands of u.S. dollars

2009Acquisition

costAccumulated depreciation

Net book value

Acquisition cost

Accumulated depreciation

Net book value

Machinery and equipment ¥7,111 ¥3,769 ¥3,342 $72,388 $38,365 $34,023

Software 143 89 54 1,460 906 554

¥7,254 ¥3,858 ¥3,396 $73,848 $39,271 $34,577


Millions of yen

2008Acquisition

costAccumulated depreciation

Net book value

Machinery and equipment ¥8,674 ¥3,781 ¥4,893

Software 218 125 93

¥8,892 ¥3,906 ¥4,986

Future lease payments subsequent to March 31, 2009 and 2008 under finance leases outstanding were as follows:


year ending March 31, 2009 2008 2009

2010 ¥1,331 ¥ – $13,551

2011 and thereafter 2,146 – 21,845

2009 – 1,612 –

2010 and thereafter – 3,384 –

¥3,477 ¥4,996 $35,396

Lease expenses paid, depreciation charges and interest expense under finance leases for the years ended March 31, 2009,

2008 and 2007 were as follows:


2009 2008 2007 2009

Lease expenses paid ¥1,699 ¥1,721 ¥1,475 $17,294

Depreciation charges 1,567 1,636 1,407 15,949

Interest expense 89 105 74 910

10. Retirement Benefits and Allowancesthe Company and its consolidated subsidiaries participate in the Welfare pension Fund accompanying consolidated plan, tax-

qualified pension plans and lump-sum payment plans which are qualified as defined benefit plans.

the table below sets forth the plans’ funded status and the amounts recognized in the consolidated balance sheets at March

31, 2009 and 2008:


2009 2008 2009

projected benefit obligation ¥(6,756) ¥(6,321) $(68,777)

plan assets at fair value 3,059 3,483 31,139

projected benefit obligation in excess of plan assets (3,697) (2,838) (37,638)

unrecognized net actuarial loss 1,075 564 10,950

unrecognized prior service cost (496) (596) (5,052)

prepaid pension cost (5) – (57)

Accrued retirement benefits ¥(3,123) ¥(2,870) $(31,797)


Retirement benefit expenses related to the plans, including amortization of the unfunded projected benefit obligation for the

years ended March 31, 2009, 2008 and 2007 were as follows:


2009 2008 2007 2009

Current service cost ¥671 ¥555 ¥520 $ 6,829

Interest cost 94 87 81 956

expected return on plan assets – – – –

Amortization of prior service cost (99) (99) (99) (1,010)

Amortization of net actuarial loss 167 65 13 1,706

Retirement benefit expenses ¥833 ¥608 ¥515 $ 8,481

the Group’s assumptions for the years ended March 31, 2009 and 2008, which were used in determining the retirement

benefit expenses and accrued employees’ retirement benefits presented above, were as follows:

2009 2008

Allocation of retirement benefit expenses Flat allocation Flat allocation

Discount rate 1.7% 1.7%

expected rate of return on plan assets 0.0% 0.0%

Allocation of prior service cost Straight-line method over 10 years Straight-line method over 10 years

Allocation of net actuarial loss Straight-line method over 10 years Straight-line method over 10 years

Retirement allowances payable to directors and statutory auditors at March 31, 2009 and 2008 were as follows:


2009 2008 2009

¥(133) ¥(121) $(1,348)

11. Net Assets(1) SHARe SuBSCRIptIoN RIGHtS

For the year ended March 31, 2009

Number of shares issuedMillions of

yenthousands of u.S. dollars

Company Descriptiontype of

shares issued

Number of shares at March 31,

2008 Increase Decrease


2009

Balance at March 31,

2009


2009

parent Company (2006) Share subscription rights as stock options

Common Stock – – – – ¥14 $146

(2007) Share subscription rights as stock options

Common Stock – – – – ¥12 $116


Common Stock – – – – ¥14 $145

total – – – – ¥40 $407



Number of shares issuedMillions of

yen

Company Descriptiontype of

shares issued


2007 Increase Decrease


2008


2008

parent Company (2007) Share subscription rights as stock options

Common Stock – – – – ¥12


Common Stock – – – – ¥14

total – – – – ¥26

(2) DIVIDeNDS


1) Dividends paid

Millions of yen

thousands of u.S. dollars yen u.S. dollars

Resolutiontype of shares

total dividends

total dividends

Dividends per share

Dividends per share

Cut-off date

effective date

Annual general meeting of the Shareholders on june 27, 2008

Common Stock ¥318 $3,241 ¥15.0 $0.15

March 31, 2008

june 30, 2008

Meeting of board of directors on November 13, 2008

Common Stock ¥265 $2,701 ¥12.5 $0.13

September 30, 2008

December 8, 2008

2) Dividends with the cut-off date in the year ended March 31, 2009 and the effective date in the year ending March 31, 2010

Millions of yen

thousands of u.S. dollars yen u.S. dollars


total dividends

total dividends

Source of dividends

Dividends per share

Dividends per share

Cut-off date

effective date


Common Stock ¥371 $3,781

Retained earnings ¥17.5 $0.18

March 31, 2009

june 29, 2009


1) Dividends paid

Millions of yen yen


total dividends

Dividends per share

Cut-off date

effective date


Common Stock ¥215 ¥10.0

March 31, 2007

june 30, 2007

Meeting of board of directors on November 15, 2007

Common Stock ¥213 ¥10.0

September 30, 2007

December 10, 2007


2) Dividends with the cut-off date in the year ended March 31, 2008 and the effective date in the year ending March 31, 2009

Millions of yen yen


total dividends

Source of dividends

Dividends per share

Cut-off date

effective date


Common Stock ¥318

Retained earnings ¥15

March 31, 2008

june 30, 2008

(3) StoCK optIoNS

1) Description of stock options


Stock option plans 2005 2006 2007 2008 2009

Individuals covered by the plan

Directors of the Company 11 11 11 11 11

total 11 11 11 11 11

type and number of shares to be issued upon the exercise of the share subscription rights

Common stock 9,900 9,400 6,500 7,200 9,700

Granted date october 1, 2004

November 1, 2005

December 4, 2006

october 12, 2007

October 17, 2008

exercise period From october 2, 2004 to june 29, 2024

From November 2, 2005 to june 29, 2025

From December 5, 2006 to june 29, 2026

From october 13, 2007 to june 28, 2027

From October 18, 2008 to June 27, 2028

For the year ended March 31, 2008Stock option plans 2005 2006 2007 2008

Individuals covered by the plan

Directors of the Company 11 11 11 11

total 11 11 11 11

type and number of shares to be issued upon the exercise of the share subscription rights

Common stock 9,900 9,400 6,500 7,200

Granted date october 1, 2004

November 1, 2005

December 4, 2006

october 12, 2007

exercise period From october 2, 2004 to june 29, 2024

From November 2, 2005 to june 29, 2025

From December 5, 2006 to june 29, 2026

From october 13, 2007 to june 28, 2027


2) Change in the size of stock options


Movements of stock options 2005 2006 2007 2008 2009

Share subscription rights which are not yet vested

outstanding as of March 31, 2008 9,900 9,400 6,500 7,200 –

Granted – – – – 9,700

Forfeited – – – – –

Vested – – – – –

outstanding as of March 31, 2009 9,900 9,400 6,500 7,200 9,700

exercise price (yen) ¥ 100 ¥ 100 ¥ 100 ¥ 100 ¥ 100

exercise price (u.S. dollars) $1.02 $1.02 $ 1.02 $ 1.02 $ 1.02

Weighted average exercise price (yen) ¥ – ¥ – ¥ – ¥ – ¥ –

Weighted average exercise price (u.S. dollars) $ – $ – $ – $ – $ –

Weighted average fair value per stock at the granted date (yen) ¥ – ¥ – ¥2,201 ¥1,583 ¥1,470

Weighted average fair value per stock at the granted date (u.S. dollars) $ – $ – $ 22.41 $ 16.12 $ 14.96

For the year ended March 31, 2008Movements of stock options 2005 2006 2007 2008

Share subscription rights which are not yet vested

outstanding as of March 31, 2007 9,900 9,400 6,500 7,200

Granted – – – –

Forfeited – – – –

Vested – – – –

outstanding as of March 31, 2008 9,900 9,400 6,500 7,200

exercise price (yen) ¥100 ¥100 ¥ 100 ¥ 100

Weighted average exercise price (yen) ¥ – ¥ – ¥ – ¥ –

Weighted average fair value per stock at the granted date (yen) ¥ – ¥ – ¥2,201 ¥1,583

Stock option expense included in “Selling, general and administrative expenses” for the years ended March 31, 2009 and 2008

amounted to ¥14 million ($145 thousand) and ¥11 million, respectively. the fair value of options granted is estimated by using the

Black and Scholes model with the following weighted assumptions.

For the years ended March 31, 2009 March 31, 2008 March 31, 2007

expected volatility 42.678% 43.039% 44.074%

expected holding period 9.8 years 9.9 years 9.8 years

expected dividend 25 yen 20 yen 20 yen

Risk-free rate 1.552% 1.700% 1.627%

Because it is difficult to reasonably estimate the number of options that will expire in the future, the number of vested options

is calculated based on historical data for the options that have not yet been vested, and the number of options that have actually

forfeited for the options that have already been vested.


12. Contingent LiabilitiesContingent liabilities at March 31, 2009 and 2008 consisted of the following:


2009 2008 2009

Guarantees for customers’ lease obligations ¥3 ¥5 $26

13. Selling, general and Administrative ExpensesMajor items of selling, general and administrative expenses are as follows:


2009 2008 2007 2009

Salaries and provision for bonuses ¥8,295 ¥7,972 ¥7,657 $84,449

Retirement benefit expenses ¥ 297 ¥ 244 ¥ 180 $ 3,032

provision for directors’ retirement benefits ¥ 21 ¥ 23 ¥ 26 $ 217

provision for allowance for doubtful accounts ¥ – ¥ – ¥ 101 $ –

Supplies expenses ¥2,626 ¥2,616 ¥2,508 $ 26,739

Research and development expenses ¥ 588 ¥ 679 ¥ 637 $ 5,987

14. Other Income (Expenses)—Other Income (Expenses), Netother income (expenses)—other income (expenses), net for the years ended March 31, 2009, 2008 and 2007 consisted of

the following:


2009 2008 2007 2009

Rental revenue from real estate ¥ 51 ¥ 49 ¥ 55 $ 521

Rental cost of real estate (25) (22) (15) (250)

Subsidies paid for cost of medical checkups – 32 29 –

Gain on sales of investments in securities – 45 – –

Gain on sales of stock of subsidiaries – – 274 –

Gain on sales of a business – – 674 –

Loss on disposal of property, plant and equipment (85) (249) (187) (865)

Write-down of investments in securities (24) (12) – (247)

Loss on impairment of fixed assets (64) – – (653)

patent royalties 57 29 19 584

Loss on disposal of inventories – (11) – –

Gain on sales of property, plant and equipment 6 8 57 60

provision for allowance for doubtful accounts – (54) – –

Reversal for allowance for doubtful accounts 9 16 – 96

Subsidy income 37 – – 377

Rent expenses on facilities (36) (5) – (363)

Compensation paid (22) (71) (18) (222)

other, net 166 89 31 1,679

¥ 70 ¥(156) ¥ 919 $ 717


15. Income Taxesthe significant components of deferred tax assets and liabilities at March 31, 2009 and 2008 were as follows:


2009 2008 2009

Deferred tax assets:

Accrued bonuses ¥ 654 ¥ 632 $ 6,652

Accrued retirement benefits 1,600 1,473 16,284

Allowance for doubtful accounts 28 82 289

Accrued enterprise taxes 131 120 1,329

unrealized gain 131 129 1,336

Write-downs of investments in securities 89 172 906

Loss on revaluation of golf club memberships 83 79 849

tax loss carryforwards 74 89 758

other 271 213 2,759

Gross deferred tax assets 3,061 2,989 31,162

Valuation allowance (320) (411) (3,261)

total deferred tax assets 2,741 2,578 27,901

Deferred tax liabilities:

Reserves under Special taxation Measures Law (171) (171) (1,740)

unrealized gain on securities (38) (30) (391)

others (7) (8) (73)

total deferred tax liabilities (216) (209) (2,204)

Net deferred tax assets ¥2,525 ¥2,369 $25,697

A reconciliation of the differences between the statutory tax rate and the Group’s effective tax rates for the years ended

March 31, 2009, 2008 and 2007 were as follows:

2009 2008 2007

Statutory tax rate 40.4% 40.4% 40.4%

expenses not deductible for tax purposes 0.6 0.8 1.6

Non-taxable dividend income (0.2) (0.1) (0.1)

tax on undistributed profits and inhabitants’ per capita taxes 3.5 3.1 3.3

Amortization of goodwill 1.1 1.1 1.4

Valuation allowance (1.7) 2.6 (0.3)

tax reduction (0.5) (1.2) (1.0)

other, net (0.1) 0.8 1.0

effective tax rates 43.1% 47.5% 46.3%

16. Segment Informationthe Group is primarily engaged in the business of clinical testing. As domestic sales, operating income and total assets of the

clinical testing segment constituted more than 90% of the consolidated totals for the years ended March 31, 2009, 2008 and 2007,

disclosure of business segment and geographical areas information has been omitted.

the Company had no consolidated subsidiaries or branches in foreign countries during the years ended March 31, 2009,

2008 and 2007.


17. Related Party TransactionsKenji Kondo is the Senior Advisor of the Company and its principal shareholder. At March 31, 2009, Kenji Kondo directly held

10.4% and indirectly held 22.4% of the total number of outstanding shares of the Company’s common stock.

Kenji Kondo is concurrently both the Senior Advisor of the Company and the Chairman of the Arima Kondou Memorial

Medical Fund. the receivables due from the Arima Kondou Memorial Medical Fund at March 31, 2009 and 2008 were as follows:


2009 2008 2009

Notes and accounts receivable—trade ¥10 ¥8 $101

Significant transactions with the Arima Kondou Memorial Medical Fund for the years ended March 31, 2009, 2008 and 2007

were as follows:


2009 2008 2007 2009

Net sales ¥46 ¥33 ¥38 $468

Revenue from rental of machinery and equipment 9 9 9 97

(Notes) (1) the transaction amounts do not include the consumption taxes and the year end balance amounts include them. (2) transaction prices, etc. are negotiated and decided in consideration of market prices. (3) Revenue from rental of machinery and equipment is decided in consideration of rental revenue for market.

18. Supplementary Cash Flow Informationthe following is a summary of the assets and liabilities of the subsidiaries which were initially included in consolidation upon acqui-

sition of their stock during the years ended March 31, 2009, 2008 and 2007.

the relationship of assets and liabilities, acquisition costs, and net cash flows for Q&C, Inc (which was initially consolidated during

the year ended March 31, 2009), Biken, Inc., Labotech, Inc. (which was initially consolidated during the year ended March 31, 2008) and

Morioka Medical Laboratories, Inc. (which was initially consolidated during the year ended March 31, 2007) are summarized as follows:


2009 2008 2007 2009

Current assets ¥ 51 ¥ 153 ¥ 305 $ 515

Non-current assets 26 16 124 266

Goodwill 35 157 29 355

Current liabilities (49) (219) (147) (495)

Non-current liabilities – (73) (114) –

Minority interests – (0) (57) –

Acquisition costs 63 34 140 641

the Group’s interest in subsidiaries prior to their inclusion in the scope of consolidation – (1) – –

Cash and cash equivalents (16) (60) (113) (162)

Net cash expenditure for acquisition ¥ 47 ¥ (27) ¥ 27 $ 479


the following is a summary of the assets and liabilities of a dispensing pharmacy business which was sold during the year

ended March 31, 2007:

Millions of yen

2007

Current assets ¥ 3

Non-current assets 262

Decrease in assets resulting from sale of a business 265

Gain on sale of a business 674

proceeds from sale of a business ¥939

Significant noncash transaction

For the fiscal year ended March 31, 2009, the amounts of assets and liabilities related to finance leases was ¥855 million

($8,710 thousand).

19. Business combinationsFor the year ended March 31, 2009

[Q&C, INC.]

(1) Name and business of acquired company, reasons

for business combination, date of business combination,

legal form of business, name of company after business

combination, and ratio of voting rights acquired

a. Name and business of acquired company

Name of acquired company: Q&C, Inc.

Business: Food hygiene service

b. Reasons for business combination

to promote efficiency and strengthen the

business base

c. Date of business combination

September 5, 2009

d. Legal form of business combination

Acquisition of Q&C, Inc.’s stock

e. Name of company after business combination

Q&C, Inc.

f. Ratio of voting rights acquired

65% (indirect)

(2) period of the operating results of the acquired com-

pany included in the consolidated financial statements

october 1, 2008 to March 31, 2009

(3) Acquisition cost of the acquired company

the acquisition cost of the acquired company

was ¥63 million ($641 thousand). the stock was

acquired with cash.

(4) Amount of goodwill, reason for recognition, amorti-

zation method and useful life

a. Amount of goodwill

¥34 million ($355 thousand)

b. Reason for the recognition

Goodwill resulted from expectations of future earning

capabilities through future development of operations.

c. Amortization method and useful life

Amortization on a straight-line basis over 5 years

(5) overall breakdown of assets received and liabilities

assumed on date of business combination

Current assets ¥50 million ($516 thousand)

Fixed assets ¥26 million ($266 thousand)

Current liabilities ¥48 million ($495 thousand)

(6) estimated effect the acquired company would have

had on the statements of income for the year ended

March 31, 2009 if the business combination had been

completed on April 1, 2008

Sales ¥140 million ($1,434 thousand)

ordinary income ¥6 million ($68 thousand)

Method of calculating estimated amount and

important precondition

Sales and ordinary income stated above describe

the calculation of the estimated amounts from the

beginning of the fiscal year to September 30, 2008.

the figures are unaudited.



[BIoMeDICAL SCIeNCe LABoRAtoRy, INC.]

(1) Name and business of combined company, legal

form of business combination, name of company

after business combination, and outline and purpose

of the transaction

a. Name and combined company

Combined company: tokyo Koshueisei Laboratories, Inc.

Dissolved company: Biomedical Science Laboratory, Inc.

b. Business of combined company

testing business

c. Legal form of business combination

Merger by absorption, with tokyo Koshueisei

Laboratories, Inc.

d. outline of the transaction and purpose of acquisition

purpose

to attempt workforce optimization in the group

Amalgamation date

April 1, 2007

outline

Merger by absorption, with tokyo Koshueisei

Laboratories, Inc.

e. Summary of account treatment

the transaction was accounted for as a business

combination among entities under common control.

there are no effects of this recording on the profit

and loss of the fiscal year ended March 31, 2008.

[BIKeN, INC.]

(1) Name and business of acquired company,

reasons for business combination, date of business

combination, legal form of business combination,

name of company after business combination, and

ratio of voting rights acquired


Name of acquired company: Biken, Inc.

Business: trustee of the Clinical Laboratory


to promote efficiency and strengthen the

business base


August 23, 2007


Acquisition of Biken, Inc.’s stock


Biken, Inc.


100%

(2) period of the operating results of the acquired

company included in the consolidated financial

statements

october 1, 2007 to March 31, 2008



was ¥14 million. the stock was acquired with cash.

(4) Amount of goodwill, reason for recognition,

amortization method and useful life


¥138 million



capabilities through future development of operations.



(5) overall breakdown of assets received and liabili-

ties assumed on date of business combination.

Current assets ¥57 million

Fixed assets ¥3 million

Current liabilities ¥115 million

Fixed liabilities ¥69 million

(6) estimated effect the acquired company would

have had on the statements of income for the year

ended March 31, 2008 if the business combination

had been completed on April 1, 2007

Sales ¥175 million

ordinary income ¥(15) million



Sales and ordinary income stated above describes


beginning of the fiscal year to September 30, 2007.


[LABoteCH, INC.]

(1) Name and business of acquired company,

reasons for business combination, date of business

combination, legal form of business combination,

name of company after business combination, and

ratio of voting rights acquired


Name of acquired company: Labotech, Inc.

Business: trustee of the Clinical Laboratory



to strengthen relationships and build an efficient

business management system


February 1, 2008


Acquisition of Labotech, Inc.’s stock


Labotech, Inc.


51.0% (Ratio of voting rights have been

obtained:10.0%)

(2) period of the operating results of the acquired

company included in the consolidated financial

statements

Because the date of acquisition as the date and

operating results are not included.



was ¥18 million. the stock was acquired with cash.

(4) Amount of goodwill, reason for recognition,

amortization method and useful life


¥19 million



capabilities through future development of operation.



(5) overall breakdown of assets received and liabili-

ties assumed on date of business combination

Current assets ¥95 million

Fixed assets ¥13 million

Current liabilities ¥104 million

Fixed liabilities ¥4 million

(6) estimated effect the acquired company would

have had on the statements of income for the year

ended March 31, 2008 if the business combination

had been completed on April 1, 2007

Sales ¥398 million

ordinary income ¥10 million



Sales and ordinary income stated above describe


beginning of the fiscal year to March 31, 2008.



Report of Independent Auditors

BML, INC. 44 ANNuAL RepoRt 09

Corporate Data

dATe Founded: July 1955

HeAdquArTerS: 5-21-3, Sendagaya, Shibuya-ku, Tokyo 151-0051, Japan

CAPiTAL: ¥6,045,586,000 (Approx. u.S.$51 million)

CoMMon SToCK: issued: 22,007,363 shares number of shareholders: 3,880

The minimum trading unit for the company’s shares was changed from 1,000 shares to 100 shares on August 1, 2000. BML listed on the First Section of the Tokyo Stock exchange in April 2001.

nuMBer oF eMPLoYeeS: 2,979 (full-time employees only)

PrinCiPAL SHAreHoLderS: BML Planning, inc. 16.31% Kenji Kondo 10.08% Kensuke Kondo 6.71% estate Kogyo Limited Company 6.32% Japan Trustee Services Bank, Ltd. (Trust Account) 4.72% otsuka Pharmaceutical Co., Ltd. 4.54% Japan Trustee Services Bank, Ltd. (Trust Account 4g) 3.03% Mellon Bank Treaty Client omnibus 2.77% Motoyoshi Arai 2.74% Takeo Kumazawa 2.13%

BML SuBSidiArieS: Kyodo igaku Laboratories, inc. Merits, inc. PCL Japan, inc. Tokyo Koshueisei Laboratories, inc. ehime Medical Laboratories, inc. Japan Clinical Service, inc. daiichi Clinical Laboratories, inc. Matsudo Medical Laboratories, inc. Labotec, inc. (Chiba) nikken igaku, inc. daiichi Clinical Medicine Laboratories, inc. Morioka Medical Laboratories, inc. BML Life Science Holdings, inc. oPL, inc. Merits Support Systems, inc. Biken, lnc. Labotec, inc. (nagasaki) Allegro, inc. BML Food Science Solutions, inc. q&C, inc. (As of March 31, 2009)

BML, inC. 45 AnnuAL rePorT 09

BM

L, IN

C.

AN

Nu

AL

Re

po

Rt

2009

BML, INC.Head office

5-21-3, Sendagaya, Shibuya-ku, Tokyo 151-0051, JapanTel: 81-3-3350-0111 Fax: 81-3-3350-1180

BML General Laboratory1361-1, Matoba, Kawagoe-shi, Saitama 350-1101, Japan

Tel: 81-49-232-3131 Fax: 81-49-232-3132

Home Page Address: http://www.bml.co.jp/

Printed in Japan on recycled paper.

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