Towards realization of healthy and prosperous society

Financial Results for the First Half of the Fiscal YearEnding March 31, 2023 (the 14th term)
November 2022

I am Taisuke Murai, President & CEO of VITAL KSK HOLDINGS, INC.
I would like to present to you a summary of the financial results for the first half ofthe fiscal year ending March 31, 2023.

1

▍ Today’s Topics

1. Financial Highlights for the First Half of the Fiscal YearEnding March 31, 2023

2. Full-year Results Forecast for the Fiscal YearEnding March 31, 2023

3. Strengthening Efforts Toward Corporate Value Enhancement

2

Here we have the content of today's presentation.
I will begin with an explanation with respect to financial highlights for the first halfof the fiscal year ending March 31, 2023. I will then move on to the full-year
results forecast for the fiscal year ending March 31, 2023 before explaining how
we are strengthening efforts to enhance our corporate value.

2

1Financial Highlights for the First Half of
the Fiscal Year Ending March 31, 2023

3First of all, I will provide an explanation with respect to financial highlights for the
first half of the fiscal year ending March 31, 2023.

3

▍ Summary of Income for the First Half of the Fiscal Year Ending March 31, 2023
(Million yen, %)Results forecast
Previous year’s results
Ratio tonet sales

AmountNet sales

285,229‒

FY2022 2Q Results

Announced on
October 28, 2022

Revised on
November 8, 2022

AmountAmountAmount289,300

289,300

289,376

Ratio tonet sales

Achievement
rate*

YoY

‒

100.0

101.5

Operating profit

934

0.33

1,500

730

730

0.25

48.7

78.2

Ordinary profit

2,355

0.83

3,200

2,420

2,423

0.84

75.7

102.8

Profit attributableto owners of parent

1,411

0.49

2,000

1,440

1,437

0.50

71.9

101.9

* Achievement rate is rate of achievement of forecast announced on October 28, 2022.
4

Net sales for the period under review were ¥289,376 million, 101.5% of the levela year earlier.
Operating profit amounted to ¥730 million, 78.2% of the level a year earlier. This
reflects the recording of an allowance for doubtful accounts because receivables
held by the Group may become impossible to collect, as announced on
November 8.
Ordinary profit stood at ¥2,423 million, 102.8% of the level a year earlier, due tothe recording of non-operating income of ¥1,800 million, reflecting a greater-thananticipated gain on investments in investment partnerships, in addition toadministrative service fee income from pharmaceutical companies and dividend
income.

As a result, profit attributable to owners of parent was ¥1,437 million, 101.9% of
the level a year earlier.
I will explain the factors behind the increase in net sales and the decrease inoperating profit in more detail later.

4▍ Profit by segment
Prescription drugs

100.3%

Reagents and medical devices 119.8%
OTC drugs

100.4%(Million yen, %)Pharmaceutical Wholesale Business *1
Results

Net sales

273,045

Gross profit

18,343

Selling, general andadministrative
expenseOperating profit

Ratio tonet sales‒

YoY

Pharmacy Business*2
Results

YoY

Veterinary Drug Wholesale
Business*3
Results

YoY

Other Businesses*4
Results

YoY

101.4

9,009

99.6

5,309

103.5

2,011

105.4

6.72

107.2

2,362

97.7

828

104.7

1,894

100.7

17,735

6.50

108.4

2,329

99.7

650

108.0

2,040

103.2

607

0.22

82.2

32

39.6

178

94.1

‒
-146 (-97 in the previous
fiscal year)*1: VITAL KSK HOLDINGS, INC. VITAL-NET, INC., KSK Co., Ltd.
*2: OHNO CO. LTD., Goodneighbor Inc., Kenkodo Pharmacy Co., Ltd.
*3: AGRO-JAPAN, Inc.
*4: Agricultural chemicals wholesale business, nursing care business etc.
*5: The sum total of the SG&A expenses and operating income of each segment may not match the total amounts shown in the previous section as intersegment adjustments of SG&A expenses are omitted.
5

I would now like to explain income by segment.
Starting with the Pharmaceutical Wholesale Business, the NHI drug
prices revisions in April had a negative impact; however, the growthrate of sales of prescription drugs was 100.3% mainly due to focused
efforts on the sale of innovative products eligible for the pricemaintenance premium (PMP) and various vaccines, and the growthrate of reagents and medical devices was 119.8% due to increased
sales of mainly COVID-19-related supplies. As a result, net sales inthis segment came to ¥273,045 million, which is 104.1% of the level ayear earlier. Gross profit amounted to ¥18,343 million, which is107.2% of the level a year earlier. However, SG&A expenses came to¥17,735 million, which is 108.4% of the level a year earlier, due to therecording of an allowance for doubtful accounts mentioned in theprevious section. As a result, operating profit amounted to 607 million
yen, 82.2% of the level a year earlier.
Next, I will discuss the Pharmacy Business. Aiming to realize the family
pharmacies sought by the Japanese government, we endeavored todetermine relevant dispensing fees but were negatively impacted by
the NHI drug price revisions, and net sales in the segment amounted
to ¥9,009 million, which is 99.6% of the level a year earlier, and gross5

profit was ¥2,362 million, which is 97.7% of the level a year earlier.
SG&A expenses were ¥2,329 million, which is 99.7% of the level a year
earlier. As a result, operating profit totaled ¥32 million.
Next, I will explain the results of the Veterinary Drug Wholesale
Business. Net sales amounted to ¥5,309 million, which is 103.5% of
the level a year earlier, due to increased sales of high profit products.
The segment also posted gross profit of ¥828 million yen, which is104.7% of the level a year earlier. However, SG&A expenses were¥650 million yen, 108.0% of the level a year earlier, due to higher
logistics expenses. As a result, operating profit amounted to ¥178
million yen, 94.1% of the level a year earlier.
Turning finally to the Other Businesses segment, sales in the
agricultural chemicals wholesale business were strong; however, otheroperations such as the nursing care business and the sports facility
management business were lackluster due to the COVID-19 pandemic
and, as a result, the segment recorded an operating loss of ¥146
million.

5

▍ Main Initiatives (1) Thorough implementation of price negotiations based on an awareness of transaction costs

0Comparison of selling prices withweighted average (hospitals)

Comparison of selling prices withweighted average (pharmacies)

FY2021 FY2022 2Q

FY2021 FY2022 2Q

5

10

15

20

0

100

200

300

400

6

I would now like to explain the main factors behind the financial results for the firsthalf of the fiscal year ending March 31, 2023.
Firstly, the results reflect thorough implementation of price negotiations focusedon the profit contribution of individual customers (=operating profit per customer).
In our transactions with customers, specifically hospitals with more than 200 beds
and pharmacies, we politely explained the costs of drug manufacturers, including
invoice prices, and the rise in logistics costs and, as a result of our efforts, thegross profit of the Pharmaceutical Wholesale Business improved significantly
year on year.
Going forward, we will continue striving to conduct transactions at reasonable
prices in order to maintain a stable supply of drugs.

6▍ Main Initiatives (2) Promotion of the sale of vaccines◼ Focus on sales of influenza vaccine, cervical cancer vaccine and zoster (shingles) vaccine◼ Leveraged our high clinic coverage ratio to increase combined total sales of all three vaccines to 192% of level a year earlier

Comparison of vaccine sales with levels a year earlier

192%

Influenza vaccine

Cervical cancer vaccine

Zoster (shingles) vaccine

Apr.-Sep. 2021 Results

Apr.-Sep. 2022 Results

Total

7

We also actively focused on sales of vaccines.
As a drug wholesaler with close ties with local communities, we have a high clinic
coverage ratio. Leveraging this strength, we focused on sales of influenza
vaccine, cervical cancer vaccine and zoster (shingles) vaccine, and as a result,combined total sales of the three vaccines grew sharply, increasing to 192% of
the level a year earlier.
This also contributed significantly to improvement in sales and gross profit in thequarter under review.

7▍ Main Initiatives (3) Growth in sales of COVID-19-related products◼ Sales of products such as COVID-19 antigen test kits, simple PCR testing devices and reagents grew to 251% of the levela year earlier.
◼ Sales of COVID-19-related products and supplies to local governments also increased sharply.

Comparison of sales of COVID-19-related products with level a year earlier

251%

Apr.-Sep. 2021

Apr.-Sep. 2022

8

The sales growth of COVID-19-related products was also a factor behind theincreases in net sales and gross profit.
Sales grew significantly, reaching 251% of the level a year earlier, reflecting astrong performance in the COVID-19-related equipment rental business, inaddition to sales of products such as COVID-19 antigen testing kits, simple PCR
testing devices and reagents.
The growth is attributable to an increase in sales not only to medical institutions
who are our existing customers but also to local governments. This is one
example of our success in leveraging our special characteristics as a company
with close ties to local communities operating for many years.

8▍ Main Initiatives (4) Focus on sales of products other than prescription drugs in the Pharmaceutical Wholesale Business
Share of products other than prescription drugs in gross profit of
two companies operating in Pharmaceutical Wholesale Business
18.0%
16.0%
14.0%

12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022 2Q

9Moreover, with sales of prescription drugs growing at a sluggish pace, mainly due
to the impact of repeated NHI drug revisions, we sought to generate gross profit
by focusing on sales of other products such as medical devices, diagnostics andreagents in addition to the COVID-19-related products explained earlier. As aresult, the share of products other than prescription drugs in the gross profit of thetwo companies operating in Pharmaceutical Wholesale Business showed steady
growth.
Moving forward, we will continue working to generate stable profit by actively
expanding products and sales channels with the aim of increasing this share to
more than 20%.

9

▍ Main Initiatives (5) Strengthening outsourcing business -1◼ Expansion of 3PL (3rd Party Logistics) business
Development of a high quality distribution structure that is GDP*1-compliant and partially GMP*2-compliant
Expansion of service area due to increase in logistics services for drug manufacturers based on our reputation for strict
quality management*1 GDP: Good Distribution Practice*2 GMP: Good Manufacturing Practice◼ Outside view of VITAL-NET, INC. Miyagi Logistics Center(Kurokawa District, Miyagi Prefecture）◼ Floor plan of Miyagi Logistics Center 3F

Existing area

Additional
area

10

The outsourcing business, which has been a focus of our efforts for some time, isalso steadily producing results.
One such result is the 3PL business. We have developed a high quality
distribution structure that is compliant with Guidelines on Good Distribution
Practice (GDP) and also partially compliant with Guidelines on Good
Manufacturing practices (GMP).
Logistics services for drug manufacturers are growing based on our reputation forstrict quality management. At VITAL-NET, INC.'s Miyagi Logistics Center, which is
responsible for some logistics functions, we have expanded the area for suchservice to 1.3 times its previous size from the current fiscal year.

10▍ Main Initiatives (5) Strengthening outsourcing business -2◼ Utilization of ICT by our MS to support MR information provision activities
Demand for ICT-based remote sales activities have remained at a high level during the COVID-19 pandemic.
Our MS fulfil the role of linking up doctors and other health professionals with drug manufacturers through the use of tabletsfor virtual accompanied visits, web seminars and so on.

Our MS use ICT to support the provision of information to doctors
by the MR of drug manufacturers

11

I would also like to highlight initiatives to support the information provisionfunction of drug manufacturers' MR.
With no end to the COVID-19 pandemic in sight, demand for ICT-based remotesales activities remains at a high level. As I explained when talking about sales ofvaccines earlier, we are deeply involved in community-based healthcare and,leveraging this strength, our MS actively fulfil the role of linking up drug
manufacturers and doctors and other health professionals. The frequency of
implementation of virtual accompanied visits and web seminars is also steadily
increasing and, with this, fees from drug manufacturers are also rising.

11▍ Factors for Decrease in Operating Profit(Million yen)Six months ended
September 30, 2021

Account item

Main factors forincrease/decrease

22,149

1,195

As explained earlier

809

828

Due to the self-declared bankruptcy
of certain business partners

Other SG&A
expenses

20,609570

Due to higher utilities expenses anddepreciation and amortization

Total

21,418

1,398

730

-234

Gross profit
Provision ofallowance for
doubtful accounts
Selling, general andadministrative
expenses

Increase/decrease
from levela year earlier

Operating profit

12

Next, I would like to explain the decrease in operating profit.
SG&A expenses increased ¥1,398 million from the same period a year earlier due
to the the recording of an allowance for doubtful accounts because receivables
held by the Group may become impossible to collect, as announced on
November 8, 2022.
As a result, operating profit amounted to ¥730 million, which is 78.2% of the levela year earlier.

12▍ Balance Sheet(Million yen)March 31,2022

September 30,
2022

Increase/decrease

Main factors for increase/decrease

198,532
26,971
119,533
31,788
114,501

200,920
27,374
123,569
31,444
115,5112,388
403
4,036 Due to increase in sales (increase in sales of vaccines, etc. in September)
-344
1,010

50,79750,269-528 Due to recording or depreciation and amortization

63,703313,033
190,092
176,685

65,241
316,432
191,230
179,248

1,538 Due to rising market prices of investment securities
3,399
1,138
2,563 Due to increase in sales (increase in sales of vaccines, etc. in September)

1,960

1,960

11,44722,898
212,991
100,041
75,631

10,02021,573
212,803103,628
75,332-1,427 Due to payment of income taxes payable-1,325 Due to contribution to retirement benefit trust
-188
3,587
-299

Accumulated other comprehensive
income23,32927,1703,841 Due to rising market prices of investment securities

Total liabilities and net assets

313,033

316,432

3,399

Current assets
Cash and deposits

Notes and accounts receivable – trade
Inventories
Non-current assets
Property, plant and equipment andintangible assets
Investments and other assets
Total assets
Current liabilities
Notes and accounts payable – trade
Short-term borrowings (including
current portion of long-termborrowings)
Other current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

013

Next, I would like to explain the balance sheet.
Let me start with assets. Notes and accounts receivable - trade increased ¥4,036
million as a result of rising demand for drugs including vaccines and growth insales of COVID-19-related products. Investments and other assets increased¥1,538 million mainly due to the rising market prices of investment securities. As
a result, total assets increased ¥3,399 million.
Moving onto liabilities. Notes and accounts payable - trade climbed ¥2,563 million,
reflecting increased purchases as a result of sales growth. Other current liabilities
fell ¥1,427 million, chiefly owing to the payment of income taxes payable.
Meanwhile non-current liabilities shrank ¥1,325 million, primarily reflecting
contribution to a retirement benefit trust. As a result, total liabilities were down
¥188 million.
Finally, total net assets rose ¥3,587 million. This is mainly because accumulated
other comprehensive income increased ¥3,841 million due to the rising market
prices of investment securities.

13

2

Full-year Earnings Forecasts for the
Fiscal Year Ending March 31, 2023

14

I will now move on the earnings forecasts for the fiscal year ending March 31,
2023.

14

▍ Full-year Earnings Forecasts for the Fiscal Year Ending March 31, 2023
(Million yen, %)Previous year’s
results
AmountNet sales

577,249

Operating profit

2,945

Ordinary profit

Profit attributableto owners of parent

Ratio tonet sales‒

Results forecast
Announced on
May 12, 2022

Revised on
October 28, 2022

AmountAmountRevised earnings forecasts for the fiscal
year ending March 31, 2023
Revised again on November 8, 2022
Amount563,300

567,300

567,300

0.51

2,300

2,300

1,940

5,834

1.01

4,900

5,300

4,770

0.83

4,500

4,700

Ratio tonet sales‒

Increase/decrease*

YoY

0

98.3

0.34

-360

65.9

4,900

0.86

-400

84.0

4,400

0.78

-300

92.2

* Increase/decrease is compared to forecast announced on October 28, 2022.
15

Our full-year earnings forecasts for the fiscal year ending March 31, 2023 reflect
many persisting uncertainties from the third quarter onwards, which include thestabilization of sales of COVID-19-related medical devices, clinical test reagents,
etc. and of demand for the COVID-19 vaccine distribution services as well as
increases in commodity prices and various costs due to surges in raw material
prices amidst progressing global inflation, despite the higher-than-expected sales
in the first six months as stated above.
Furthermore, we decided on the above forecast in light of the recording of anallowance for doubtful accounts because receivables held by the Group may
become impossible to collect, as announced on November 8, 2022.

15

3Strengthening Efforts Toward
Corporate Value Enhancement

16

Next, I would like to explain how we are strengthening efforts to enhance ourcorporate value.

16▍ Basic policy and concrete measures

Basic policy

Concrete measures

1. Enhancement of corporate governancei. Transition to a company with an Audit & Supervisory
Committee
ii. Introduction of a performance-linked compensation systemwith ROE as performance indicator

2. Improvement of capital efficiency

i. Strengthening of shareholder returns
ii. Acceleration of disposal of cross-shareholdingsiii. Specification of ROE target

3. Aggressive investment in growthi. Standby funds for risks essential for BCP
ii. Investment in existing businesses as a social infrastructurecompanyiii. Investment for new earnings sources and future growth

Aiming for further enhancement of corporate value
through steadily execution of these measures
17

In April 2022, we launched our fifth Medium-Term Management Plan (FY2022FY2024). Under the plan, based on its medium-term vision “Business model
innovation looking at next-generation capabilities,” the Company has set out
three practical tasks, namely "1. Pursuit of drug distribution model in keeping withmarket structure changes and market characteristics," "2. Evolution of distribution
and marketing model in step with progress of DX in health care," and "3.
Implementation of group management that meets prime market requirements."
In order to address the third practical task "3. Implementation of groupmanagement that meets prime market requirements," the Company has
continuously been engaged in constructive dialogue with many institutional
investors since April 2022. Consequently, in order to implement more specificactions toward the medium- to long-term enhancement of its corporate value andto actively disclose information, the Company decided to take concrete measures
based on three basic policies: (1) Enhancement of corporate governance, (2)Improvement of capital efficiency, and (3) Aggressive investment in growth.
By steadily implementing these basic policies, we will aim to further enhance ourcorporate value.

17▍ 1. Enhancement of corporate governance(1) Transition to a company with an Audit & Supervisory Committee* Subject to resolution of the 14th Annual General Meeting of Shareholders of the Company to be held in June 2023

◼ Aimed at speeding up management decision-making and further enhancing discussions on management strategies, etc. at meetings of theBoard of Directors◼ Strengthening of the supervisory function of the Board of Directors through an Audit & Supervisory Committee of which the majority ofmembers are Outside Directors
Before the transition

After the transition

General Meeting of Shareholders

General Meeting of Shareholders
Appointment

Dismissal

Appointment

Dismissal

Audit & Supervisory
Board

Board of Directors

Full-time Audit &Supervisory Board Member(without voting rights)

Directors(with voting rights)
Audit

Appointment

Dismissal

Appointment

Dismissal

Board of Directors

Directors and Outside Directors(with voting rights)

Audit & Supervisory
Committee
A majority are Independent
Directors (with voting rights)

Outside Directors(with voting rights)

Outside Audit &Supervisory Board Members(without voting rights)

Supervision
Audit

18

In connection with "1. Enhancement of corporate governance," I would now like toexplain our transition to a company with an Audit & Supervisory Committee.
The Company has been working to enhance corporate governance with the goalof achieving sustained growth and enhancing corporate value over the mediumto long-term. Amidst the rapid change in the business environment surrounding
the Company, the Company decided to transition to a company with an Audit &Supervisory Committee, subject to a resolution at the Annual General Meeting of
Shareholders to be held in June 2023, in order to accelerate management
decision-making, further improve discussions on management strategies, etc. atmeetings of the Board of Directors, and strengthen the supervisory functions of
the Board.

18▍ 1. Enhancement of corporate governance(2) Introduction of a performance-linked compensation system with ROE as the performance indicator* Subject to resolution of the 14th Annual General Meeting of Shareholders of the Company to be held in June 2023

◼ For Directors, Executive Officers, and some employees of the Company and its major operating subsidiaries who satisfy certain conditions◼ Introduction of a restricted stock unit plan for granting stock-based compensation according to the degree of achievement of ROE◼ Giving the Company’s management and employees the same perspective as shareholders toward the sustained enhancement of corporate
value

Restricted stock unit plan (RS: Restricted Stock)

Timing of introduction

From July 2023

Performance indicator

ROE

Eligibility

Directors, Executive Officers, and some employees of the Company and its major operating subsidiaries
who satisfy certain conditions

19

Next, I will discuss our introduction of a performance-linked compensation systemwith ROE as a performance indicator.
The Company plans to introduce a restricted stock unit plan (RS) as a new
performance-based remuneration plan, under which stock compensation is
granted to Directors, Executive Officers, and some employees of the Company
and its major operating subsidiaries who satisfy certain conditions according to
the degree of achievement of return on equity (ROE), on the assumption that theresolution will be approved at the Annual General Meeting of Shareholders to beheld in June 2023.
The Company believes that the introduction of this plan will develop a strong
shared awareness of ROE among Directors, Executive Officers, and employeesof the Company as well as enable them to have the same perspective asshareholders toward the sustained enhancement of corporate value.

19▍ 2. Improvement of capital efficiency(1) Strengthening of shareholder returns◼ Adopted dividend on equity (DOE) as an index for dividends, replacing the previous target of dividend payout ratio of 25% or more, because
DOE is relatively immune to changes in single-year business results.
◼ Future dividend policy: Maintain a DOE of 2% or more

Change in forecast dividend per share for the current fiscal year (ending March 31, 2023)

Before revision

Dividend
per share

An annual dividend of 24 yen (an interim dividendof 12 yen and a year-end dividend of 12 yen)

After revision→

An annual dividend of 39 yen* (an interim dividendof 12 yen and a year-end dividend of 27 yen)

* DOE is over 2% in the following calculation: (39 yen x total shares issued (excluding treasury shares) 51,903,000 shares as of September 30, 2022)
÷ Amount of capital at the end of the fiscal year ended March 31, 2022 (excluding amount paid for new shares) 100,041,897,000 yen = 2.02%

20

I would now like to turn to "2. Improvement of capital efficiency."

Let me start with the change to our dividend policy. The Company has decided toadopt dividend on equity (DOE) as an index for dividends starting in the fiscal
year under review, replacing the previous target of dividend payout ratio of 25%
or more, because DOE is relatively immune to changes in single-year businessresults. The Company also set a target of maintaining a DOE of 2% or more.
Based on this policy, we changed our initial dividend forecasts of an interim
dividend of 12 yen and year-end dividend of 24 yen, making an annual dividendof 24 yen, to an interim dividend of 12 yen and a year-end dividend of 27 yen,making an annual dividend of 39 yen.

20▍ 2. Improvement of capital efficiency(1) Strengthening of shareholder returns◼ A total return ratio of 50% or more
◼ For returning profits to all shareholders with maximum consideration for them, while maintaining its financial soundness.

Year ended March 31,
2020
Results

Year ended March 31,
2021
Results

Year ended March 31,
2022
Results

Year ending March 31,
2023
Forecast

Policy from the year
ending March 31, 2024

Cash dividends
per share

24.0 yen

12.0 yen

26.0 yen(includes special
dividend of 2.0 yen)

39.0 yen

Maintain a DOE of 2%
or morePurchases oftreasury stock

1,400,000 shares(1,498 million yen)‒

2,000,000 shares(1,559 million yen)

1,450,000 shares(998 million yen)

TBD

Total return ratio

61.0%

56.4%

62.0%

68.7%

50.0% or more

21

Next, I will explain our shareholder return policy.

As the shareholders’ equity ratio is not at a particularly high level, currently ataround 30%, the Company will need to continuously maintain its financial
soundness. However, the Company has set the total shareholder return target at
50% or more based on the maximum consideration for shareholders and will
make returns to shareholders accordingly.

21▍ Shareholder Returns Policy for Year Ending March 31, 2023
◼ Changes in net profit

Profit attributable toowners of parent

Year ended March 31, 2021

Year ended March 31, 2022

Year ending March 31, 2023 (forecast)

1,171 million yen

4,770 million yen

4,400 million yen

Year ended March 31, 2021

Year ended March 31, 2022

Year ending March 31, 2023 (forecast)

21.3 yen

87.9 yen

84.4 yen

Year ended March 31, 2021

Year ended March 31, 2022

Year ending March 31, 2023 (forecast)

12 yen26 yen◼ Changes in basic earnings per share

Basic earnings per share◼ Changes in shareholder return policy

39 yenDividend per share

Interim dividend of 12 yen+ year-end dividend of 0 yen

Interim dividend of 12 yen+ year-end dividend of 14 yen(includes special dividend of 2 yen)Interim dividend of 12 yen+ year-end dividend of 27 yen

Payout ratio

56.4%

29.6%

46.0%

Purchase of treasury
shares‒2,000,000 shares(1,559 million yen)

1,450,000 shares(998 million yen)

Total payout ratio

56.4%

62.0%

68.7%
22

I would now like to explain our shareholder return policy for the year ending
March 31, 2023.
As explained earlier, we changed our dividend policy to "Maintain a DOE of 2% ormore" starting from the current fiscal year. Accordingly, we decided to pay a yearend dividend of 27 yen, bringing the annual dividend to 39 yen. As a result, theconsolidated payout ratio will be 46.0%. As the Company acquired 1,450,000
shares of treasury stock in June 2022, total shareholder return that incorporates
the annual dividend will be 68.7%.

22▍ 2. Improvement of capital efficiency(1) Strengthening of shareholder returns◼ Continue to acquire treasury shares until the highest PBR in the industry is achieved.

Changes in PBR of 6 listed pharmaceutical wholesale companies(Times)1.6

1.4
Continue to acquire treasury shares
until the highest PBR in the industry
is achieved.

1.2
1
0.8
0.6

0.4
0.2
0
End of FY2017
The Company

End of FY2018
Company A

End of FY2019
Company B

End of FY2020
Company C

End of FY2021
Company D

End of FY202*
Company E

23Next, I will explain our policy on the purchase of treasury shares.

We have previously conducted purchases of treasury shares as part of a flexible
capital policy and going forward, we will continue to acquire treasury shares until
the highest market-to-book value (PBR) in the pharmaceutical wholesale industry
is achieved. The specific timing and scale of purchases will be determinedfollowing consideration by the Board of Directors.

23▍ 2. Improvement of capital efficiency(2) Acceleration of disposal of cross-shareholdings◼ The Company will sell around 50% of its cross-shareholdings over the next 5 years, and over the next 10 years, the Company will reduce
its cross-shareholdings to less than 10% of its consolidated net assets.
Percent of net assets at the end of
the previous fiscal year: 41.6%
45,0005 years later(Million yen)

40,00035,000

Sell around 50% over the
next 5 years
Reduce to less than 20%
of net assets

30,00025,000After another 5 years

Sell around 49% over the
5 years after that
Reduce to less than 10%of net assets

20,00015,00010,0005,000

0FY2021

FY2022

FY2023

FY2024FY2025

FY2026FY2027

FY2028FY2029FY2030

FY2031

Current
fiscal year
24

Next, I would like to explain the disposal of cross-shareholdings.

At the end of the previous fiscal year, our cross-shareholdings accounted for
41.6% of our net assets. The Company plans to sell approximately 50% of its
cross-shareholdings in the next 5 years, aiming to reduce them to less than 20%
of its net assets. By FY2031, another 5 years after that, all the shares held by theCompany, excluding shares of counterparties in capital and business allianceagreements and shares entrusted with the employee pension trust, will be sold,and the Company will reduce its cross-shareholdings to less than 10% of its
consolidated net assets.

24▍ 2. Improvement of capital efficiency(3) Establishment of ROE target◼ Aiming for an ROE of 5.0% for next fiscal year (FY2023) and a ROE of 8.0% after 10 years (FY2031).

Improve the profitability of existing businesses

Introduction of a performance-linked compensation
system with ROE as performance indicator

Improvement of capital efficiency

Aggressive investment in growth

Fifth Medium-Term Management Plan

Year ended March 31,
2022
Results

ROE

4.7%

Year ending March 31,
2023
Plan

Year ending March 31,
2024
Plan

Year ending March 31,
2025
Plan

・・・・・

Year ending March 31,
2032
Plan

4.5%

5.0%

5.2%

・・・・・

8.0%

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Next, I would like to discuss our ROE target.

The Company aims to achieve an ROE of 5.0% for the next fiscal year (FY2023)
and 8.0% after 10 years (FY2031) by strengthening the profitability of the existing
business through the implementation of the ongoing fifth Medium-Term
Management Plan, shared ROE-linked incentives for the management team andemployees as explained earlier, the improvement of capital efficiency and active
investment for future growth as described next.

25▍ 3. Aggressive investment in growth

Utilize 60 billion yen of net cash effectively during the period of the fifth Medium-Term Management Plan, translating
investment into further enhancement of corporate valueStandby fundfor risks

10 billion yen

Existing business
investment

30 billion yen

Investment ingrowth20 billion yen

Our net cash as of March 31, 2022

Approx. 60 billion yen

26

Let me now explain "3. Aggressive investment in growth."
As of March 31, 2022, we had net cash (cash and deposits + investment
securities – interest-bearing debt) of around 60 billion yen. We plan to utilize thiscash effectively and translate this investment into further enhancement ofcorporate value.
More specifically, we expect to use 10 billion yen as standby funds for risks, 30
billion yen for existing business investment, and 20 billion yen for investment ingrowth.

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▍ 3. Aggressive investment in growth(1) Standby fund for risks (10 billion yen)
◼ Having experienced the East Japan Great Earthquake in March 2011, the Company will set aside approx. 10 billion yen as a standby fund forrisks from a BCP perspective.

(2) Existing business investment (30 billion yen)

KSK’s logistics network

VITAL-NET’s logistics network◼ Preparing for the construction of a new Osaka
Distribution Center◼ Building open core systems◼ Renovating existing facilities and eliminating andconsolidating branches, etc.

3 logistics centers

32 branches

4 logistics centers

53 branches and sales offices
27

Let me start by explaining the 10 billion standby fund for risk. Having experienced
the Great east Japan Earthquake in March 2011, we believe that around 10 billion
yen is necessary from a business continuity planning (BCP) perspective.
Turning next to existing business investment. The Company plans to use
approximately 30 billion yen during the period of the fifth Medium-Term
Management Plan mainly for preparing for the construction of a new Osaka
Logistics Center, building open core systems, renovating existing facilities andeliminating and consolidating branches.
The VITAL KSK Group believes it has a responsibility to deliver
pharmaceuticals—products that relate directly to life and wellbeing—with safety
and peace of mind. As an infrastructure company supporting community-based
healthcare, we are committed to distributing pharmaceuticals without interruption
at all times and to reliably maintaining the capability to deliver what is needed,when needed, in the quantity needed.

27▍ 3. Aggressive investment in growth(3) Investment for new earnings sources and future growth (20 billion yen)
◼ In charge of logistics in Japan for PIVLAZ™ 150 mg, developed as an intravenous infusion by
Idorsia Pharmaceuticals Japan Ltd. and being launched first in Japan.
◼ Expanding investment in various types of outsourcing services, especially 3PL services whereby
we are contracted by other pharmaceutical manufacturers to provide logistics services◼ Actively focusing on new businesses with potential synergies with existing businesses and M&A

28

Moving on to investment for new earnings sources and future growth.

We are now in charge of logistics in Japan for PIVLAZ™ 150 mg, developed as
an intravenous infusion by Idorsia Pharmaceuticals Japan Ltd. and being
launched first in in Japan.
The Company plans to use approximately 20 billion yen mainly for the 3PL
business for other pharmaceutical companies and various other outsourcing
services, as well as for new business investment and M&As in business areas
peripheral to the Company’s mainline pharmaceutical wholesale business.

28▍ 4. Others
Establishment of Sustainability Committee◼ Established Sustainability Committee in October 2022, with the aim of further enhancing corporate value by solving social issues.
◼ Planning to implement initiatives responsibly as a company listed on the Prime Market in areas such as climate change and implementationof human capital management.

E
S

Commitment toenvironmental issues⚫ Climate change countermeasuresnvironment⚫ Reduction of greenhouse gas emissions

Initiatives forsocial issues⚫ Promotion of human capital management

ocial⚫ Respect for the diversity of employees⚫ Improvements to theworkplace environment⚫ Protection of human rights

Corporate governanceinitiatives⚫ Observance of corporate ethics⚫ Ensuring complianceovernance⚫ Enhancement of governance transparency⚫ Appropriate risk management

G

29

Finally, I would like to announce the establishment of a Sustainability Committee.
We newly established a Sustainability Committee in October 2022, to further
promote sustainability management aiming to further enhance corporate value by
solving social issues, including contributing to the development of systems forproviding healthcare in a sustainable manner.
Based on a Sustainability Basic Policy to be formulated in the future, theCommittee will discuss matter such as the implementation of measures toaddress climate change and human capital management, and the enhancementof governance transparency. We are committed to implementing initiatives evenmore responsibly as a company listed on the Prime Market.

29▍ Note on Forward Looking Statements

The Company’s current plans, strategies, earnings forecasts and other forward-looking statements inthese materials are based on information currently available to the Company, and include potential
risks and uncertainties.
Please be aware that there is a possibility that actual business activities and performance will differ
greatly from these outlooks due to changes in the economic situation, market conditions and various
other factors.
For this reason, please do not rely entirely on these forward-looking statements alone when
considering aspects of the Company such as its performance and corporate value.
Furthermore, none of the information contained in these materials is intended to induce you to buy orsell the Company’s stock or recommend investment in the Company’s stock.
Final decisions on investment should be made at your own discretion.

30

Please refer to the note on forward-looking statements shown here.

30▍ Contact for Inquiries

Corporate Communications Department
TEL:

03-3275-3301

Mail:

ir@vitalksk.co.jp

Contacts:

Sato, Nanjo

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Finally, I would like to ask you to direct any inquiries your might have about
today's presentation to our Corporate communications Department.
This brings me to the end of my financial results presentation.

31