Taking the Leadin a Growing Market
ANNUAL REPORT 2012

For the year ended April 30, 2012

Contents
AIN PHARMACIEZ at a Glance

1

History of Growth
Consolidated 11-year Financial Summary
M&A Deals and Government Revisions to Medical Expenses 2
Interview with the President

4

Feature: Taking the Lead in a Growing Market
Operating Environment
Our Competitive Advantages
New Growth Strategy
	  —Medical Mall Dispensing Pharmacies—

9
10
12

Segment Review

16

Corporate Governance

18

Financial Section
Management’s Discussion and Analysisof Financial Condition and Results of Operations
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors

20

Investor Information

54

14

20
24
26
26
27
28
29
53

Forward-looking Statements
This annual report contains forecasts and projections concerning the plans, strategies andperformance of AIN PHARMACIEZ INC. and its subsidiaries and affiliates. These forecasts andprojections constitute forward-looking statements that are not historical facts, but are basedon assumptions and beliefs in accordance with data currently available to management. These
forward-looking statements are subject to a number of risks and uncertainties that include, but
are not limited to, economic conditions, intense competition in the healthcare industry, demand,
foreign exchange rates, tax systems, and laws and regulations. As such, AIN PHARMACIEZ
INC. wishes to caution readers that actual results may differ materially from those projected.

AIN PHARMACIEZ at a Glance

The AIN PHARMACIEZ Group is the leader in the Japanese dispensing pharmacy sector.
The Group operates the No. 1 dispensing pharmacy business in Japan and a unique urban
drug and cosmetic store business targeting style-conscious women in the 20-plus age group.
In the dispensing pharmacy business, the Group is steadily expanding its chain of
specialist dispensing pharmacies* through an active M&A strategy and new store openings.
One of the Group’s strengths is its bargaining power underpinned by the scale of thebusiness. And its profitability is among the highest in the sector.
* Specialist dispensing pharmacies: Pharmacies located near major hospitals to tap into prescription demand

Others¥261 million
0.2%

Dispensing Pharmacy
Business¥127,134 million
89.0%

Drug and Cosmetic StoreBusiness¥15,395 million
10.8%

Fiscal 2012
Consolidated Net Sales¥142,790 million

No.1 Dispensing
Pharmacy in Japan

Unique Urban Drug andCosmetic Stores

Scale of BusinessHigh Profitability—Our Dispensing Pharmacy Store Network—Comparison of net sales and operating margin amongmajor companies operating dispensing pharmacies in Japan

8.0

494 stores nationwide(Fiscal 2012)

Tohoku 71
Hokuriku 14

Operating margin (%)

Hokkaido 73

AIN PHARMACIEZSOGOMEDICAL
6.0

Qol

4.0

NIHON
CHOUZAI

2.0

Kanto/Koshinetsu 249
Kyushu 17

Kinki
44

Tokai
26

0

50,000100,000

150,000

Net sales (¥ million)

Branches
Group companies

AIN PHARMACIEZ INC.
NIHON CHOUZAI Co., Ltd.
SOGO MEDICAL CO., LTD.
Qol Co., Ltd.

Source:Complied by AIN PHARMACIEZ
INC. from the above companies’
financial results for fiscal 2012.

AIN PHARMACIEZ INC. ANNUAL REPORT 20121

History of Growth

The AIN PHARMACIEZ Group has grown and expanded while dealing with the adverse effects from therepeated revisions to medical expenses.
The opening of new stores and M&A have been actively implemented to continue the scale expansion strategy.
(¥ million)
160,000
140,000
120,000
100,000
80,00060,00040,00020,0000Consolidated 11-year Financial Summary

2002/4

2003/4

2004/4

2005/4

24,677
2,674
710
465

35,374
3,268
1,185
603

45,227
3,886
1,766
855

57,091
5,230
2,875
930

1,022
282

1,052
366

1,240
444

1,536
458

6,379
6,379
18,293

7,003
7,003
23,955

8,019
8,019
25,131

9,095
9,095
38,887

8,886,746
564
92
33

11,024,650
907
148
40

11,024,650
905
148
27

11,210,350
1,446
193
44

Per share information (¥)
Net income
Net assets
Cash dividends		

52.43
717.888.0

58.37
633.2210.0

74.72
724.5712.0

79.92
807.6815.0

Stock information (based on the closing price as of April 30) (¥)
Stock price		

1,320

1,080

1,390

2,050

Ratios (%)
Operating margin
Return on sales*4
Return on assets (ROA)*5
Return on equity (ROE)*6
Shareholders’ equity ratio

2.9
1.9
2.6
7.3
34.9

3.4
1.7
2.9
8.6
29.2

3.9
1.9
3.5
10.7
31.9

5.0
1.6
2.9
10.9
23.4

For the year:
Net sales		Selling, general and administrative expenses
Operating income		
Net income		Capital expenditures*2
Depreciation and amortization*2
At the end of the year:
Shareholders’ equity*3
Net assets		
Total assets		
Number of shares outstanding (shares)
Number of employees (persons)
Number of stores : Dispensing pharmacy business
Number of stores : Drug and cosmetic store business

M&A Deals and Government Revisions to
Medical Expenses

Imagawa Yakuhin

AIN TOKAI

Rejoice
AIN MEDICAL SYSTEMS

M&A deals

Rejoice
Pharmacy
Revisions
to medical
expenses

Dispensing fees -1.3%
Drug prices -6.3%

2002/4

2 AIN PHARMACIEZ INC. ANNUAL REPORT 20122003/4

Dispensing fees ±0
Drug prices -4.2%

2004/4

2005/4

(%)
8
7
6
5
4
3
2

2006/4

2007/4

2008/4

2009/4

2010/4

2011/4

1

Net sales (left scale)0

Operating margin (right scale)2012/4(¥ million)

76,303
7,145
3,083
1,215

81,307
7,970
2,888
1,010

106,231
9,203
4,444
1,615

115,387
9,948
5,296
2,127

125,495
10,744
6,492
3,131

129,387
11,981
8,107
3,916

142,790
12,83910,253
4,899

2,087
648

1,620
773

1,914
968

2,891
1,119

2,573
1,286

2,750
1,560

5,870
1,749

10,352
10,352
41,66910,71011,326
49,84912,04012,70757,546

16,071
16,10962,032

21,445
21,49265,89829,45029,49876,94033,69533,74585,90811,304,000
1,684
218
43

11,320,000
1,947
247
43

11,361,000
2,582
356
45

12,831,376
2,741
375
46

14,101,164
2,918
397
49

15,941,004
3,104
448
53

15,940,790
3,326
494
56

104.53912.4318.0

89.34
946.1718.0

142.36
1,059.78
20.0

170.74
1,252.54
30.0

228.081,520.81
40.0

255.67
1,847.46
45.0

307.35
2,113.79
50.0

2,370

1,500

1,490

1,481

2,920

3,115

4,290

4.0
1.6
3.0
12.5
24.8

3.6
1.2
2.2
9.6
21.5

4.2
1.5
3.0
14.2
20.9

4.6
1.8
3.6
15.1
25.9

5.2
2.5
4.9
16.7
32.5

6.3
3.0
5.5
15.4
38.3

7.2
3.4
6.0
15.5
39.2

6 M&As(33 stores)

9 M&As(21 stores)

MEDICAL
HEARTLAND

Asahi Pharmacy
DAICHIKU

Dispensing fees -0.6%
Drug prices -6.7%

2006/4

2007/4

Notes:
1. Amounts of less than one million
yen were rounded down.
2. The amounts of capital
expenditures and depreciation
and amortization prior to the fiscal
year ended April 30, 2007 are on a
non-consolidated basis.
3. Shareholders’ equity =Net assets – Minority interests
4. Return on sales =Net income / Net sales × 100
5. Return on assets =Net income / Total assets(yearly average) × 100
6. Return on equity =Net income / Shareholders’ equity(yearly average) × 100

SUNWOOD

Dispensing fees +0.17%
Drug prices -5.2%

2008/4

2009/4

Dispensing fees +0.52%
Drug prices -5.75%

2010/4

2011/4

Dispensing fees
+0.46%
Drug prices-6.0%

2012/4AIN PHARMACIEZ INC. ANNUAL REPORT 20123

Interview with the President

We reported record net sales and profits in the year underreview. With our strong cash flows, we now have thefoundations in place to move into the next stage of growth.
Medical mall dispensing pharmacies and home healthcare
also look increasingly promising as new sources of earnings to
supplement our existing dispensing pharmacy business anddrug and cosmetic store business. Over the longer term, theentire AIN PHARMACIEZ Group will work together to become avital part of social infrastructure.

July 30, 2012

Kiichi Otani
President and Representative Director

Fiscal 2012 Review

Q. What are your thoughts on the Group’s performance in fiscal 2012?
A. In fiscal 2012, ended April 30, 2012, we posted record net sales and profits,
underlining how our initiatives in a wide range of areas are now bearing fruit.
Net sales rose 10.4% year on year to ¥142,790 million, operating income increased 26.5% to ¥10,253
million, and net income rose 25.1% to ¥4,899 million. All were record figures for the fifth consecutive fiscal
year. Cash flows continue to grow steadily, giving us the base to take the Group to the next stage of growth.
I believe these results show that our initiatives to prepare for drug price and dispensing fee revisions paid
off in many ways. Specifically, we boosted profitability by harnessing our bargaining power, reduced costs in
administrative areas, and increased the efficiency of store operations through greater systemization and otherinitiatives. Growth in our store network through new opening of specialist dispensing pharmacies*1 and M&A
deals also contributed to our strong earnings in fiscal 2012, as did a move into the black in the drug andcosmetic store business on the back of cost reduction efforts.
*1. Specialist dispensing pharmacies: Pharmacies located near major hospitals to tap into prescription demand

Net Sales

Operating Income(¥ million)(¥ million)

150,000

142,790

125,495 129,387
115,387
106,231

100,000(¥ million)

12,000

10,253

10,000

8,107

8,000
6,000

50,000Net Income

6,492
4,444

5,296

4,000

2008/4 2009/4 2010/4 2011/4 2012/4

4 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

0

3,916

4,000

3,131

3,000

2,127
2,000

1,615

1,000

2,000
0

4,899

5,000

2008/4 2009/4 2010/4 2011/4 2012/4

0

2008/4 2009/4 2010/4 2011/4 2012/4

Q. In 2012, you hired the first graduates to come out of the new six-year pharmacy
college courses. How did AIN PHARMACIEZ fare in recruitment?

A. We did not reach our recruitment target this year, but we will work to secure thepeople we need going forward.
In April 2012, roughly 9,000 students graduated from six-year courses at pharmacy colleges. This was thefirst batch of students to complete six-year courses following the switch from the four-year course format.
The AIN PHARMACIEZ Group hired just under 200 pharmacists, which was short of our target.
Recruiting enough pharmacists is vital to achieving our targets for new store openings and deliveringcontinued growth. Competition for graduates is set to become more intense among rival companies andhospitals, but I think we can reach our recruitment goals next year and beyond by promoting our strengths
more effectively, such as our high-quality pharmacist training program.
We had problems reaching our recruitment goals, even as the leading company in the sector, so smaller
and local dispensing pharmacies will probably find it even harder to attract pharmacists going forward. I
think this environment will open the way for potential new M&A targets in the sector.

Strategy

Q. What progress have you made in automating dispensing operations?
A. We are making good progress. New equipment is gradually being introduced with aview to achieving full automation.
Dispensing errors due to human error are the greatest risk that dispensing pharmacies face. Preventing
these errors has been given the highest priority in the AIN PHARMACIEZ Group, putting us at the forefrontof the industry. One way we are tackling the problem is by automating dispensing operations through theintroduction of automated tablet picking machines and other equipment. By creating a fully automated andOngoing Efforts to Automate Dispensing Operations
Drug
dispensing
flow

Prescription
entry

Automatedprescription
entry system
QR codereaderInitial check

Confirmation
using digital
medication
history+

Automatedprescription
recognition
systemDispensing process(Tablets)
Automatedtablet picking
machine(Powdered drugs)
Automatedpowdered drug
dispensing machine

New type of digital
medication history

This symbol denotes non-automated functions

Machineunderdevelopment(Liquid drugs)
Automated liquid
drug dispensing
machineDevelopment
completedFebruary 2011

Final check

Drug
instruction

Confirmation
bypharmacist

Confirmation
based ondigitalmedication
history(Unit-dose packaged
drug check)
New type of digital
medication history

Development
completed
November 2011

Unit-dose
packageddrug checksupport system

Information sent topatient smartphone

AIN PHARMACIEZ INC. ANNUAL REPORT 20125

integrated dispensing system, covering everything from automated prescription entry through to picking,unit-dose packaging and final checks, we are aiming to minimize the risk of errors. Pharmacists also double
and triple check prescribed drugs before they are handed over. This approach ensures safety, cuts costs
and enables pharmacists to improve communication with patients, giving our dispensing pharmacies anadvantage over competitors. Investment in equipment to automate dispensing operations is only effective
once sales reach a certain level. That’s why, from the very beginning, we have aimed to open large-scalespecialist dispensing pharmacies. The key part of our growth strategy is to establish these dispensing
pharmacies near hospitals.

Q. Please tell us about your strategy for the dispensing pharmacy
business from fiscal 2013, including your pharmacy opening targets.

A.

Opening specialist dispensing pharmacies near hospitals willremain central to our growth strategy. We also plan to step up thedevelopment of medical mall dispensing pharmacies *2 to generate a
new source of earnings.
In fiscal 2012, we opened 55 new specialist dispensing pharmacies, including those acquired through M&A
deals. We are targeting a similar level of new pharmacies in fiscal 2013. We are also focusing on opening
pharmacies near medical malls (» See pages 14–15 for more details) located in buildings that connect directly
to stations or in areas near stations. We plan to open 15 of these dispensing pharmacies in fiscal 2013 in areas
such as Minato Mirai (Kanagawa), Kawasaki (Kanagawa), and Higashi Nakano (Tokyo).
We have two main advantages in the development of medical malls. First is location. Working withleading property developers, we can secure prime sites in station buildings and other convenient urban
locations. Second is the quality of medical staff. We have built close relationships with leading medical
institutions and university medical faculties through the development of our dispensing pharmacy networkand endowments for university courses. This puts us in a good position to attract top medical professionals
who want to open their own clinics. Attracting the best doctors also helps to bring in more patients, giving
our medical malls a better chance of success.
Separately, we are also taking part in projects to rebuild or relocate aging medical facilities. The numberof these projects has been rising rapidly in recent years. Our involvement gives us access to sites near the
new or relocated facilities where we can open specialist dispensing pharmacies, allowing us to capture alarge part of the prescription demand generated by the hospital.
*2. Medical mall dispensing pharmacies: Specialist dispensing pharmacies opened near medical malls developed by the AIN
PHARMACIEZ Group

Q. The drug and cosmetic store business has moved into the black.
What are the plans for this business now?

A. We aim to open new stores at rate of around 10 each year while
exploring opportunities in online retailing and other areas.
The move into profit came on the back of efficiency gains, including cost reductions,as well as an increase in the popularity of our stores among consumers due toimprovements to sales areas through store refurbishments and other efforts. With our
drug and cosmetic stores, our aim is to encourage customers to spend time in-store and enjoy the shopping
experience, not just offer them products at low prices. Based on this retailing concept, we plan to regularly
refurbish stores and refresh product lineups while also opening around 10 new stores each year, mainly in
the Tokyo metropolitan area.

6 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

We are also making preparations to start online sales. The first step will be to explore ways of effectively
tapping into our base of 2.7 million ainz & tulpe card holders. Also, given the possibility of further deregulationin the sector, we have started looking at the feasibility of developing a private brand in cooperation with
Seven & i Holdings Co., Ltd.

Q. What are your plans for the home healthcare field?
A. We have decided to make a serious move into this field, which we see as apromising market. Careful preparations are already under way.
We have been involved in a home healthcare project in Yubari, Hokkaido since 2008. Using the knowledge
we have built up through the Yubari model, we now have a clearer vision of how to generate profits in homehealthcare.
Currently, 40% of medical institutions offer home healthcare services, but the equivalent ratio forpharmacies is just 10%. In Japan, 170,000 people receive home-based medical treatment each day andthis figure is projected to rise to 250,000 by 2025. In the latest revisions to drug prices and dispensing
fees, premiums (additional reimbursement points) were introduced for the provision of home healthcare. We
expect the next revisions in two years time to include further initiatives to promote home healthcare. I believe
we can generate a reasonable level of profits in this field, provided we make the right preparations now.
For dispensing pharmacies to offer home healthcare services, they need to work closely with medical
institutions, home nursing care providers and nursing homes so that pharmacists are integrated into the teamof doctors, nurses and care managers providing care to the patients. The pharmacists in the team mustalso have experience in the field. Regions where the population is both aging and declining face particularchallenges, because very few dispensing pharmacies there have the ability to provide home healthcare
services. That’s why, given our unique capabilities and our sense of responsibility as the leading company
in the sector, we have decided to make preparations for a concerted move into the home healthcare field.
Home healthcare also gives us the opportunity to create closer relationships with patients and I believe it will
become an important business for us in the future.

Q. What impact will the April 2012 revisions to drug prices and dispensing fees have on
business performance?

A. The impact overall is likely to be minimal. Through our own efforts, we can not only
absorb the negative impact of these biannual revisions, but also benefit from them.
The revisions to drug prices and dispensing fees were similar to previous revisions and in line with our
expectations. The revisions will naturally have a negative impact on sales, but we expect to absorb thisthrough internal efforts such as improvements to pharmacist skill levels that help us to secure technical fees,
and through efficiency gains driven by automation.
Under the latest revisions, only dispensing pharmacy companies that operate their businesses in line withgovernment policy will be able to benefit, while those that are not able to respond to changes in policy will
be hit hard. One element of the government’s healthcare policy is to promote wider use of generic drugs. In
response, we are using our dedicated generic drug wholesaling subsidiary to flexibly source drugs, dispensing
equipment and consumables at low cost, and training our pharmacists about the importance of increasing theratio of prescriptions for generic drugs. These efforts mean AIN PHARMACIEZ is well placed to benefit fromthe government’s policy on generics.

AIN PHARMACIEZ INC. ANNUAL REPORT 20127

“Our goal is to become a vital partof the social infrastructure.”

Q. What is your outlook for the sector over the next couple of years?
A. I think there is a strong possibility that drug price and dispensing fee revisions in2014 will trigger a wave of restructuring in the sector.
The next revisions to drug prices and dispensing fees are scheduled for 2014, with further revisions likely to
be introduced every two years thereafter for the foreseeable future. With the government putting pressure onsocial welfare spending, I expect dispensing fees, not just drug prices, to be cut further, necessitating majorchanges to dispensing pharmacy earnings model (» See page 10 for more details). However, for some time
now, we have been taking a range of steps to build a powerful sector-leading earnings base, which I believe
will allow us to absorb the negative impact of any future revisions.
In contrast, some weaker small and mid-size dispensing pharmacies may choose to sell their businesses
before the impact hits them. Japan currently has around 50,000 dispensing pharmacies. I think there is astrong possibility that restructuring in the sector will start about one year before the next round of drug priceand dispensing fee revisions. We will need to adopt an aggressive stance in order to play a central role in thiswave of restructuring.

Q. What is the Company’s position on shareholder returns and capital policy?
A. Our goal is to pay stable dividends while continuing to invest in growth.
Our policy on shareholder returns is to pay stable dividends and raise them when possible.
We will also actively invest in growth by using funds to acquire other companies and open new stores. In
the near term, we will ensure these investments do not exceed cash flow generated by the business.

Q. To close, what is your vision for the AIN PHARMACIEZ Group?
A. We are shifting our focus from being the standard in the dispensing pharmacy
sector to becoming a vital part of social infrastructure.
Previously, our goal was to be the standard for the industry as the leading dispensing pharmacy company
in Japan. However, the Great East Japan Earthquake of March 2011 made us realize that dispensing
pharmacies fulfill a much greater role in society. Now our goal is to become a vital part of social infrastructure.
To realize this vision, we will have to create dispensing pharmacies that deliver services to patients rapidly
and reliably. And our mission to be a vital part of social infrastructure will mean expanding our businessand extending our network into regional areas so that our dispensing pharmacies are never far from local
hospitals.

8 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

Feature:

Taking the Leadin a Growing Market
The dispensing pharmacy market is one of Japan’s few growth markets, but it has developed
differently to markets overseas due to the nature of the social environment in Japan.
Against this backdrop, the AIN PHARMACIEZ Group has constantly preempted changes in
the operating environment to become Japan’s leading dispensing pharmacy company basedon sales. Going forward, we plan to continue expanding our network of specialist dispensing
pharmacies near hospitals, which offer high levels of convenience for patients, while steppingup the development of medical mall dispensing pharmacies* as part of our aggressive strategy
to deliver the next phase of growth.
* Medical mall dispensing pharmacies: Specialist dispensing pharmacies opened near medical malls developed by the AIN PHARMACIEZ GroupAIN PHARMACIEZ INC. ANNUAL REPORT 20129

Operating Environment: Market Growth Potential,
Japan is set to become the world’s first super-aging society, with the dispensing pharmacy market projected
to grow further on the back of this trend. Other factors at play in the market include moves by the Japanese
government to revise drug prices, dispensing fees and other medical fees in order to curb increases in national
medical expenses, and a non-hospital dispensing ratio of only around 60%. Going forward, competition is
expected to intensify further, triggering sector restructuring and limiting the number of companies that canremain competitive.

Market growth potential

Super-aging society

Universal healthcare

Expanding healthcare needs

Japan already has the highest ratio ofelderly in the world*, but this ratio isprojected to rise even further. Due to
its relationship with the super-aging society, the dispensing pharmacy sector
is seen as one of Japan’s few growthfields over the medium to long term.
The non-hospital dispensing pharmacy
market is currently worth ¥6 trillion,
but we estimate it will grow to be
worth ¥8 trillion in the longer term.
* Proportion of the population aged 65 and overDistinctive operating environment
Government policy
to curb medical expenses
Drug pricereductions

Revisions todispensing fees

Efforts to promotewider use ofgeneric drugs

Impact on dispensing pharmacy earnings model
Dispensing pharmacy earnings model
Total store sales *1
Sales fromdrugs

Dispensing
fees *2

Purchasing cost of drugs
Drug price margin
Pharmaceuticalmanagement fees
Technical fees(includes preminums forgeneric drug dispensing)Store operation costs+ Store labor costs
SG&A expenses
Gross profit
Operating income

Notes: 1. Dispensing pharmacies receive 0-30% of medical expenses depending on the type		of insurance of customers.
		Dispensing pharmacies then charge the remainder of medical expenses to health		insurance bodies such as national health insurance.
2. Dispensing fees comprise pharmaceutical management fees and technical fees for		pharmacists. These fees are added depending on the services at pharmacies.

10 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

The Japanese government revises
drug prices, dispensing fees andother medical fees once every two
years as part of its strategy to curb
national medical expenses. Earnings
at dispensing pharmacies are basedon drug price margin and dispensing
fees, so earnings are affected bythese revisions (» See the figure on
the left, “Dispensing pharmacy earnings model”).
With the last few revisions, theemphasis has been on reducing drug
prices and promoting wider use ofgeneric drugs by adding premiums forgeneric drug dispensing. Securing
profits by responding appropriately
to this policy trend is key to remaining competitive in the dispensing pharmacy market today.

But Intensifying Competition

Intensifying competition
The dispensing pharmacy market’s
growth prospects are attracting companies from other sectors. At the sametime, the fluctuations in earnings anda lack of qualified pharmacists areleading to a wider gap in performance
among dispensing pharmacy companies, and the sector is expected toexperience a wave of restructuring
as a result. Smaller companies thatlack competiveness are likely to facedifficulties. Restructuring in the sector will probably be led by major
operators of dispensing pharmacy
chains like AIN PHARMACIEZ, whichhave advantages in terms of scale,funding and personnel.

Market entrants
from other industries

Sectorrealignment

Lack of pharmacists
Growing gaps
in performanceand other factors…

Conditions for success

Ability to respond to
government policy
Growth strategy tailoredto distinctive operating
environment

AIN PHARMACIEZ meets these conditions.
We are confident we can play a central rolein the upcoming wave of restructuring,harnessing market growth to establish a dominant position.
» See next pages

Our Competitive Advantages

AIN PHARMACIEZ INC. ANNUAL REPORT 201211

Our Competitive Advantages
The AIN PHARMACIEZ Group has taken a range of steps to counter the earnings impact of government cuts
to national medical expenses and to prepare for increased competition. These initiatives are paying off inmany ways, underpinning our competitiveness.
We have increased earnings through a range of measures, such as expanding our business, boosting
efficiency and leveraging the strengths of our generic drug wholesaling subsidiary. We have also captured a
growing share of the market by opening new pharmacies and M&A deals. The core element of our strategy is
to open specialist dispensing pharmacies near hospitals nationwide. From fiscal 2012, we also began opening
medical mall dispensing pharmacies in earnest.

Ability to respond to government policy

A dedicated generic drug
wholesaling subsidiary:

Pharmacist training
program:As the only dispensing pharmacy
company in the sector with a genericdrug wholesaling subsidiary, we havea decisive advantage over rivals thatallows us to respond to government
policy aimed at encouraging wider
uptake of generic drugs. Using thissubsidiary, we can flexibly procure
generic drugs at low cost.

We are constantly working to improve
the quality of our pharmacists throughone of the sector’s best pharmacist
training programs. Higher-trained
pharmacists allow us to secure technical fees in dispensing operations
and help boost the ratio of repeat
business. Our training program also
allows us to atract newly graduatedpharmacists more effectively, supporting our aggressive growth strategy
based on new pharmacy openings.

Bargaining power

Generic drug
wholesaling
subsidiary

Low-cost procurement

Efficient pharmacy
operation

Efficiency gains:
We are working to improve efficiency
by standardizing processes at pharmacies and by promoting systemization, including efforts to automate
dispensing operations (»See page 5
for more details). This boosts profitability, but also helps to minimizerisks such as dispensing errors.

Leading pharmacist
training programSound financial
structure

Ability to securetechnical fees
Advantages inrecruitment
Open newpharmacies

Improve profitability

12 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

M&A

Expand market shareGrowth strategy tailored to distinctive
operating environment
Our growth stretegy

Large-scalespecialist
dispensing
pharmacies
near hospitals&

Medical malldispensing
pharmacies

We operate large-scale specialist
dispensing pharmacies near hospitals.
This is the central element of ourbusiness strategy. Reasons for thisare twofold: this type of dispensing
pharmacy has proved to be the mostpopular among Japanese patients( » See the mini feature below), andthe format gives us greater scope toincrease earnings and profitability.
Also, from fiscal 2012, we started
the full-scale development of medical
mall dispensing pharmacies.

» See pages 14-15 for more details

Mini feature: Why specialist dispensing pharmacies are so popular in Japan
In Japan, drugstores with dispensing pharmacy functions only account for a small proportion of prescriptions.
Specialist dispensing pharmacies are popular with patients in Japan due to the characteristics of the healthcare
system, and we do not expect this to change over the medium term.
Well stocked
Many prescriptions written in
Japan specify certain drug brands,
which means pharmacies needto stock a wide range of drugs.
Specialist dispensing pharmacies
near hospitals work closely with
their local hospital to ensure theystock the right brands, so patientsusually get the brand of drugs
they need.

Convenient
In Japan, patients have to returnto their hospital to receive repeat
prescriptions. The elderly andpatients with chronic disorders
who tend to visit hospitals more
often, are increasingly using
specialist dispensing pharmacies
near hospitals because of theirconvenience.

Safe and reassuring
OTC drugs are not used much in Japan,
so patient needs are limited. Dispensing
pharmacies need to provide highly specialized services and safety and peace of mind
is paramount. Specialist dispensing pharmacies handle a much greater volume ofprescriptions than drugstores with dispensing
pharmacy functions, which means that pharmacists who work at specialist pharmacies
gain more experience. This in turn leads toan even higher level of specialization at thesedispensing pharmacies.

AIN PHARMACIEZ INC. ANNUAL REPORT 201213

New Growth Strategy —Medical Mall Dispensing
We are stepping up the development of medical mall dispensing pharmacies to generate a new sourceof earnings. Our strategy is to create new medical zones by opening medical malls that incorporate our
specialist dispensing pharmacies. We are involved in the development of the malls from an early stage,
helping with design and working to attract tenants. Using our trusted links with leading medical institutions
and working closely with major property developers and other partners, we are able to develop convenient
medical malls in prime locations that are staffed by highly capable doctors. This helps us to secure a highvolume of prescriptions. We plan to open around 50 medical mall dispensing pharmacies by the end of fiscal
2014, potentially providing a major contribution to net sales and profits.

Formats
Medical mall format

Hybrid format

Working with major property developers, we have started
developing medical malls in optimum locations in major cities
and in or near station buildings. We are also encouraging
medical clinics to locate in or near these malls, which also
incorporate our dispensing pharmacies.

(Combination of dispensing pharmacies near hospitals + medical
mall dispensing pharmacies)
We are developing medical malls near major hospitals toprovide medical services not offered by the hospital. Our
hybrid format dispensing pharmacies will be located next tothe medical mall. We aim to secure optimum sites for thesemalls and pharmacies by participating in projects to rebuild or
relocate hospitals.

Recently Opened Medical Mall Dispensing Pharmacies
Pharmacy nameRegion1

Hirano Kami

Osaka

2

Sapporo Station
North Exit

Sapporo1

Uzumasa Tenjingawa

Kyoto

2

Minato Mirai

Kanagawa

3

Atre Kawasaki

Kanagawa

4

Shibetsu

Hokkaido

5

Nakano Central Park

Tokyo

6

Tomiai

Kumamoto

7

Nagamachi

MiyagiFiscal 2012

Fiscal 2013

Medical institutions served

FormatInternal medicine clinic (opened),
gynecology clinic (opened), one
Medical mallother clinic (planned)
Five clinics from a social medical
Medical mallcorporation (finalized)
Internal medicine clinic (opened),
ENT clinic (opened), one other
Medical mallclinic (negotiations underway)
Internal medicine clinic (opened),
mental health clinic (opened),
Medical malldental clinic (opened)
Navitas Clinic (opened),
Medical malleye clinic (opened)
Shibetsu Municipal General
Hospital and medical building[ENT clinic (opened),
Hybridurology, dermatology,
psychosomatic medicine andother clinics (planned)]
Tokyo Metropolitan Police Hospital
Medical malland multidiscipline clinic (finalized)
Nishi Kumamoto Hospital andHybridpediatrics clinic (planned)
Sendai City Hospital and medical
Hybridbuilding(As of September 2012)

OpenedEstimated*
Estimated*prescriptions annual sales
per day(¥ thousand)July 1, 2011150

316,000

April 2, 2012

250

726,000

April 17, 2012200

300,000

May 1, 2012

200

396,000

May 1, 2012

300

528,000

June 1, 2012

200

396,000

June 1, 2012

300

691,000

June 1, 2012

200

462,000

July 2, 2012480

1,200,000* Assuming medial malls are operating at full capacity

Future plan
We have carefully selected a number of medical malldevelopment projects. Of these, more than 60 medical malldevelopment projects and medical institution relocation and

14 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

rebuilding projects are already underway and we plan to open
15 medical mall dispensing pharmacies in the fiscal 2013.

Pharmacies—

Case Study 1

Medical mall format

Navitas Clinic Kawasaki(Opened May 2012, Kawasaki, Kanagawa Prefecture)
In 2008, we participated in a project to establish a medical mall inside
the JR Tachikawa station building. We helped develop the Navitas Clinicin the mall, provided operational support, and opened one of our own
dispensing pharmacies. This project proved to be such a success thatthe decision was taken to develop a large-scale medical mall in Kawasaki.
This medical mall also incorporates AIN Pharmacy Atre Kawasaki Store,
one of our dispensing pharmacies. The mall has a prime location in Atre
Kawasaki, a shopping center in the Kawasaki station building, so we
expect customer traffic to be strong.
Outline of medical mall(As of September 2012)

Location
Building (Atre Kawasaki)
Dispensing pharmacy area
TenantCase Study 2

AIN Pharmacy Atre Kawasaki Store

8F

Kawasaki City, Kanagawa Prefecture
Eight floors with one underground level
8F
94m2
AIN Pharmacy Atre Kawasaki Store
Navitas Clinic: Internal medicine, pediatrics,
dermatology, travel medicine,anemia treatment, vaccinations (all opened)

Navitas Clinic Kawasaki

Hybrid format

Sendai City Hospital and medical building(Opened July 2012, Sendai, Miyagi Prefecture)
We have developed a medical building near Sendai City Hospital, which
has been relocated. The medical building opened in July 2012. In addition
to targeting prescription demand from Sendai City Hospital, we have also
attracted seven medical clinics to the mall, which has helped to raise thelevel of medical care in the local community.
Outline of medical building
Location
Building
Dispensing pharmacy area
1F

2F
Tenants
3F
4F

Medical building(As of September 2012)
Sendai City, Miyagi Prefecture
Four floors
1F
396m2
AIN Pharmacy Nagamachi Store
Pediatrics clinic (finalized)
Endoscope surgery clinic (finalized),clinical psychiatry clinic (opened),diabetes clinic (finalized),
one other clinic (planned)
Neurological clinic (finalized),
three other clinics (planned)
Licensed childcare center (opened),
one other clinic (planned)

Sendai City
Hospital

Medical building

AIN PHARMACIEZ INC. ANNUAL REPORT 201215

Segment Review

Dispensing Pharmacy Business

Stepping up Development ofMedical Malls to Accelerate Growth

Shoichi Shudo
Senior Managing Director,
General Manager of
Dispensing Pharmacy Division“One of the strengths of our dispensing pharmacies is that our corporate
culture enables a swift response to changes in the environment. Facedwith issues such as Japan’s aging population and the rapid pace ofchange in medical and healthcare administration, we have put in place
an operating structure that harnesses the energy and initiative of ourworkforce so that it can be translated directly into action.”

Fiscal 2012 Review

Medium-term Strategy

In fiscal 2012, we continued to open new pharmacies and

The core element of our growth strategy is to open large-scale

actively pursue M&A opportunities. We also began the full-

specialist dispensing pharmacies near hospitals nationwide.

scale development of medical mall dispensing pharmacies. As

We will continue to aggressively expand our network throughof the end of fiscal 2012, the business operated a total of 494

M&A deals and new pharmacies. We plan to open 66

dispensing pharmacies.

dispensing pharmacies in fiscal 2013.

Net sales rose 11.2% year on year to ¥127,134 million

In fiscal 2012, we started stepping up our growth strategy

on the back of a steady performance by existing dispensing

driven by the opening of medical mall dispensing pharmacies.

pharmacies and solid growth in the number of patients visiting

By actively attracting medical institutions to these medical mallour pharmacies. Segment income increased 20.3% to ¥12,286

projects, we expect to see prescription demand equivalentmillion, reflecting efficiency gains in store operations andto the level at our specialist dispensing pharmacies locatedtechnical fees secured by actively dispensing generic drugs.

near major hospitals. This should translate into a significant
contribution to sales and profits. We plan to open around 50
medical mall dispensing pharmacies by the end of fiscal 2014.
Another of our medium-term goals is to boost theefficiency of dispensing pharmacy operations through initiatives
such as increased automation of dispensing operations. In
generic drugs, which are likely to become more widespread inJapan, we aim to secure technical fees by increasing the ratioof generic drug prescriptions. We will also work to boost profit
margins across the Group by using our dedicated genericdrug wholesaling subsidiary WHOLESALE STARS Co., Ltd. togenerate profits by extending the supply of generic drugs tosmall and mid-size dispensing pharmacies outside the GroupAIN Pharmacy Itabashi Storeand medical institutions. In the home healthcare market, which
is projected to expand, we plan to start full-scale dispensing
services and grow the business into a new source of earnings.

16 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

Drug and Cosmetic Store Business

Aiming to Boost Earnings by Enhancing
Store Appeal and Increasing Efficiency

Rieko Kimei“The ainz & tulpe brand is highly regarded in the industry as a selectstore of drugs and cosmetics. In this business, we leverage the Group’s
expertise in pharmacist training to sell OTC drugs. We aim to continue
supporting the beauty and well-being of people.”

General Manager ofDrug and Cosmetic Store Division

Fiscal 2012 Review

Medium-term Strategy

In fiscal 2012, net sales rose 3.9% year on year to ¥15,395

The drug and cosmetic store business has three different store

million. The business also moved into the black with segment

brands: ainz has an extensive lineup of products from drugs

income of ¥125 million, compared with a loss of ¥207 million

to everyday items; tulpe provides high-quality cosmetics thatin fiscal 2011. New stores contributed to sales, supporting

include foreign brands; and ainz & tulpe has a wide-ranging

growth in profits. Steps were also taken to improve profitability,

lineup that incorporates products from both ainz and tulpe.

such as repositioning employees and reducing costs in areas

With our drug and cosmetic stores, our aim is to encouragesuch as advertising and sales promotion. Changes to sales

customers to spend time in-store and enjoy the shopping

area layouts through store refurbishment and other efforts andexperience, not just offer them products at low prices. In

stronger merchandise lineups also had a positive impact onparticular, ainz & tulpe stores target style-conscious womenthe bottom line.

in the 20-plus age group, and these stores have been wellDuring fiscal 2012, we continued to actively open new ainz

received by the market. Also, our drug and cosmetic stores& tulpe stores in locations with high levels of customer traffic

stand out in the market due to their capabilities in OTC drug

such as station retail areas. As of the end of fiscal 2012, thesales, underpinned by the expertise we have accumulated inbusiness operated a total of 56 drug and cosmetic stores.

the dispensing pharmacy business. Going forward, we plan toopen new stores at a rate of around 10 each year, mainly in theTokyo metropolitan area, while continuing to boost the appealof sales areas and increasing the efficiency of store operations.
We will also work to effectively tap into our base of ainz
& tulpe mobile loyalty card holders and make preparations tomove into online retailing.

ains & tulpe Ario Sapporo StoreAIN PHARMACIEZ INC. ANNUAL REPORT 201217

Corporate Governance(As of July 31, 2012)

AIN PHARMACIEZ assumes responsibility for people’s
health and the well-being of the wider community throughits business activities. We promote a highly efficient andtransparent management system and implement ongoing
initiatives toward enhancement of corporate governance.

BASIC POLICY FOR CORPORATE
GOVERNANCE
Dispensing pharmacies and drug and cosmetic store
chains are the key business areas being developed by AIN
PHARMACIEZ. Both of these businesses are characterized
by a responsibility towards people’s health, and as such, we
recognize the indispensability of continuing with sound andtransparent business activities that prioritize compliance.
We have adopted a corporate auditor system to oversee
not only key management decisions and the businessexecution of directors, but also general corporate management.
In order to ensure the effective mutual management oversightof directors, the Board of Directors convenes more than oncea month, while a management meeting is held for directors
and the standing corporate auditor on a weekly basis.
To minimize potential risks, the Internal Audit Officeensures comprehensive compliance with basic pharmacy
regulations, while the Safety Policy Office conducts analysis
and implements measures to prevent drug dispensing errors.

OVERVIEW OF CORPORATE GOVERNANCE
SYSTEM
The Board of Directors, the major decision-making body of AIN
PHARMACIEZ, is comprised of 12 members. Outside directors
participate in management operations by providing appropriate
advice from multi-faceted perspectives when important
corporate decisions need to be made. At present, there are
four outside directors at AIN PHARMACIEZ, and executives
in charge of internal controls and internal audits are senior
executive officers.
Executives in charge of internal audits and internal control
work closely with the Board of Corporate Auditors from a

directorial standpoint and attend Board of Directors meetings
where they report on internal audits and internal controls.
This helps maintain a system that can secure the confidenceof shareholders and investors in real terms. In addition, AIN
PHARMACIEZ has introduced an executive officer systemseparating roles into management decision-making andoversight, and execution of operations, with the objective ofvitalizing the Board of Directors and improving the functionalityof business execution.
Aside from the above, we hold a weekly management
meeting that is attended by management in positions above
division head in order to monitor day-to-day operations.
Members discuss business execution in each division at themeeting, which also allows for mutual supervision between
business divisions.

Internal Control System
AIN PHARMACIEZ views the effective and reliable functioningof its internal control system as extremely important. With
regard to management oversight, continuous swift decision
making is a prerequisite in order to proactively promotebusiness expansion measures. We hold a management
meeting every week that is attended by directors and standing
corporate auditors, while four outside directors sitting on the
Board of Directors participate in management decisions byoffering appropriate advice from diverse standpoints. Throughthese measures, we are working to ensure that the mutual
management oversight of directors is functioning properly
when key decisions are being made.
Two outside corporate auditors and one standing
corporate auditor comment on relevant matters in a corporate
auditor capacity at meetings of the Board of Corporate
Auditors and Board of Directors, as well as monitor the
execution of duties by directors. We are striving to enhanceinternal control functions through measures that include regularseminars conducted by lawyers, ongoing programs by theCompliance Committee to raise awareness of executives andregular employees and introduction of help desks for breachesof compliance.

General Meeting of Shareholders
Appointment

Appointment

Board ofCorporate Auditors

Board of Directors
Outside Directors
Appointment

Appointment

Audit
Appointment

Representative
Directors

Compliance
Committee

Board ofManaging Directors

Management
Meeting

18 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

Cooperation

Reporting

Reporting
Drug and Cosmetic Store Division

Accounting Auditors
Audit

ReportingBusiness execution

Executive Officers

Appointment

Dispensing Pharmacy Division

Audit
Administration
Department

Internal Audit OfficeManagement System of Group
Companies
T h e A I N P H A R M A C I E Z G ro u p i s c o m p r i s e d o f A I N
PHARMACIEZ INC., its 19 subsidiaries and one affiliate asof April 30, 2012. AIN PHARMACIEZ employs Management
Guidelines for Subsidiaries and Affiliates at each of the Group
companies in order to ensure appropriateness of operations as
a business group. For items requiring important management
decisions (including facts regarding decisions already made) at
subsidiaries, a report is submitted to AIN PHARMACIEZ, theparent company, with action taken once approval has been
granted. Further, a Group management meeting convenes
twice a month in the form of a liaison conference for theGroup companies in order to manage the status of businessexecution at each company.

Internal Audits and Audits by the
Corporate Auditors
In principle, the Internal Audit Office conducts business audits
at least once a year at the head office and stores via a four
person structure. It also audits subsidiaries and verifies thecondition of respective internal audits.
In addition, we are increasing the effectiveness of internal
audits by submitting materials related to internal audits tocorporate auditors and through field audits in collaboration withcorporate auditors. Other measures include timely discussions
and reviews of internal audit methods and their effects, andcoordinating with the accounting auditors on accounting
audits. The status of internal audits is reported at management
meetings, and after coordination with each business division,individual guidance is provided and audits once again
conducted in an effort to enhance compliance.
Audits are conducted by corporate auditors, comprising
two outside corporate auditors and one standing corporate
auditor. In addition to the aforementioned activities, corporate
auditors work to enhance the accuracy of their audits fromlegal and accounting perspectives and in line with theCompany’s articles of incorporation by exchanging ideas withaccounting auditors at the time of each accounting audit.
Corporate auditors accompany the accounting auditors on
audits of subsidiaries to strengthen auditing functions.
Outside corporate auditors formulate audit policies andaudit plans together with the standing corporate auditor, view
important management-related documents, audit financial
documents and reference materials, as well as proposals
submitted at the General Meeting of Shareholders, and verify
the status of business execution by directors. They also offer
advice, suggestions and recommendations to directors andthe Board of Directors through discussions via the Board of
Corporate Auditors.

OUTSIDE DIRECTORS AND OUTSIDECORPORATE AUDITORSThe Board of Directors is comprised of 12 members, including
four outside directors. Two of the Company’s three corporate

auditors are outside corporate auditors. There are no conflictsof interest between the Company and its outside directors andoutside corporate auditors. The outside directors and outside
corporate auditors have been appointed on the basis that they
have the ability to fulfill their roles, possess expert knowledge
about the nature of the Company’s business, and have a highlevel of independence.
Both of the outside corporate auditors have no history ofworking for the Company, its subsidiaries, major shareholders,or its key clients, ensuring they possess a high level of
independence and neutrality. One of these outside corporate
auditors has been designated as the Company’s independent
officer.

REMUNERATION FOR DIRECTORS AND
AUDITORS
The maximum total amount of remuneration for directors
was determined by a resolution at the 33rd Ordinary General
Meeting of Shareholders held on July 30, 2002 to be ¥200
million annually (does not include payments made to directors
for their duties as employees). The actual amount each year isdetermined within this limit by the Board of Directors upon due
consideration of business results and economic conditions.
The maximum total amount of remuneration for corporate
auditors was set at ¥30 million annually at the 22nd Ordinary
General Meeting of Shareholders held on July 30, 1991. The
actual amount each year is determined within this limit via
discussions among the corporate auditors. The amount of
remuneration for directors and corporate auditors for the year
ended April 2012 is as follows.
Item

Directors(excluding outside
directors)
Corporate auditors(excluding outside
corporate auditors)
Outside directors andoutside corporate
auditors

Total
remuneration(¥ million)

Remuneration by type(¥ million)
Basic
Bonus
remuneration

Numberof eligible
individuals

150

123

26

7

7

7

—

1

26

24

2

6

Note: Aside from the above, the portion of employees’ salaries for directors
who concurrently serve as employees amounted to ¥6 million.

STATUS OF ACCOUNTING AUDITS
Three certified public accountants from Ernst & Young
ShinNihon LLC conducted the accounting audits of AIN
PHARMACIEZ based on the Companies Act and Financial
Instruments and Exchange Act. Audit fees for the year endedApril 2012 are as follows.
(¥ thousand)Compensation paid foraudit certification activities

The Company
Consolidated
subsidiaries
Total

Compensation paid for
non-audit activities

35,500–––35,500–AIN PHARMACIEZ INC. ANNUAL REPORT 201219

Financial Section

Management’s Discussion and Analysis of Financial Condition and
Results of Operations

BUSINESS ENVIRONMENT SURROUNDING
THE AIN PHARMACIEZ GROUP
The core business of the AIN PHARMACIEZ Group (the Group)is the dispensing pharmacy business that includes preparing
and dispensing drugs based on prescriptions. Drug prices
and dispensing fees* are stipulated by the Ministry of Health,Labour and Welfare.
As part of its policy to curb national medical expenses, theministry revises drug prices, dispensing fees and other medical
expenses every two years. Earnings at dispensing pharmacies
are the total of dispensing fees* and sales of drugs, so
earnings are affected by these revisions.
Under April 2012 revision, the average drug price was
reduced by 6.0% and additional measures were introduced topromote the uptake of generic drugs. Specifically, dispensing
pharmacies that have a high generic drug dispensing ratio
receive additional reimbursement points (premiums), translating
into higher earnings, while those with a generic drug dispensing
ratio below a predetermined level do not receive these premiums.
The gap in performance is widening between companies
in the industry, which are struggling with changes to theirprofit structures resulting from revisions to medical treatment
fees and other systems. However, the Group regards theserevisions as a perfect opportunity to further raise profitability.
Note: Dispensing fees comprise pharmaceutical management fees andtechnical fees for pharmacists.

BUSINESS Overview FOR THE FISCAL YEARUNDER REVIEW
During the fiscal 2012, ended April 30, 2012, the Japanese
economy showed signs of a moderate pickup owing to asteady recovery from the Great East Japan Earthquake andupward trends in consumer spending, production activity andcapital expenditure. However, there were lingering concerns
about deterioration in the global economy due to the ongoingsovereign debt crisis in Europe and high crude oil prices, and aslowdown in domestic production due to power shortages.
In this economic environment, the Group opened newstores and made effective use of M&A deals to aggressively
expand its dispensing pharmacy and urban drug and cosmetic
store businesses. It also reorganized the operating frameworkof the Group to boost the efficiency of store management
and integrate administrative functions. This reorganization
included absorbing or merging the businesses of sevensubsidiaries across Japan into AIN PHARMACIEZ INC. andcore subsidiaries.

20 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

In the fiscal year under review, consolidated net sales
increased 10.4% to ¥142,790 million, operating income
rose 26.5% to ¥10,253 million, and net income increased
25.1% to ¥4,899 million. All were record figures for the fifth
consecutive fiscal year. The operating margin improved 0.9
percentage point to 7.2%, and the return on sales ratio rose 0.4
percentage point to 3.4%. As of the end of the fiscal year, thenumber of stores in the Group totaled 550, a net increase of
49 stores from the end of the previous fiscal year.

Business Results by Segment
Dispensing Pharmacy Business
The dispensing pharmacy business expanded its operations
through new store openings and M&A deals. Earnings
at existing stores were supported by a steady number ofpatients visiting its dispensing pharmacies and a rise in the
average prescription price due to an increase in longer-termprescriptions. As a result, sales and profits grew year on year.
In addition to continuing its existing strategy of opening
large-scale specialist dispensing pharmacies near hospitals,
the Group also began the full-scale development of medicalmalls, opening a number of these facilities in convenient
locations, such as in or near station buildings.
Although sales in the dispensing pharmacy businessare likely to be affected by the April 2012 revisions to drug
prices and dispensing fees, the Group is confident it canabsorb any negative impact through a range of steps it has
taken in preparation for the revisions. Specifically, the Grouphas been focusing on enhancing the skills of its pharmacists
and actively increasing the generic drug dispensing ratio,
enabling it to secure many of the premiums introduced under
the recent revisions. The Group is also targeting higher drug
price margins by using its dedicated generic drug wholesaling
subsidiary WHOLESALE STARS Co., Ltd., which wasestablished in 2006.
M&A strategy during the fiscal year under review included
acquiring and consolidating a total of nine dispensing
pharmacy companies after carefully assessing the potential for
return on investment. Also, in order to increase the operating
efficiency of the Group, five mid-size and small dispensing
pharmacy subsidiaries were absorbed or merged into AIN
PHARMACIEZ, INC., AIN MEDICAL SYSTEMS INC., Asahi
Pharmacy Co., Ltd. or DAICHIKU Co., Ltd.
In the fiscal year under review, we opened 55 stores,
including those added through the above-noted nine
M&As, and closed nine stores, bringing the total number ofdispensing pharmacies to 494. The dispensing pharmacy
business posted net sales of ¥127,134 million, up 11.2% year

on year, and segment income of ¥12,286 million, an increaseof 20.3% year on year.
Drug and Cosmetic Store Business
The drug and cosmetic store business recorded favorable
sales of some seasonal product lines during the year. In thesummer, demand was strong for cooling products, and in
winter, products that help counter the dry conditions proved
popular. However, the general weakening in consumer
sentiment after the earthquake persisted and the sector as awhole continued to face challenging conditions.
In this environment, the Group continued to open drug
and cosmetic stores operated under the ainz & tulpe brandin station retail areas and other locations with high levels ofcustomer traffic. Also, the store opening process was reviewed
in order to ensure consistent profitability and returns on
investment from store openings.
A number of other steps were taken to improve profitability.
These included focusing on overhauling sales displays andstrengthening merchandising in order to make stores more
appealing to consumers and increase the gross margin. The
Group also upgraded the mobile version of its membershipsystem and reduced the volume of direct mail shots, resulting
in more efficient sales promotion activities at lower cost.
Additionally, in order to make store operation more efficientand reduce store administration costs, AIN PHARMACIEZ
absorbed 11 drugstores in the Tokai region on April 1, 2012.
During the year under review, the Group opened or
relocated a number of ainz & tulpe stores. These included the
Sannomiya Store (Kobe City, Hyogo Prefecture) and the Minato
Mirai Store (Yokohama City, Kanagawa Prefecture), resulting in
a Group total of 56 drug and cosmetic stores at the end of the
fiscal year.
Although sales at existing stores were lower comparedwith the previous fiscal year, sales from new stores contributed
to growth. As a result, the drug and cosmetic store business
reported net sales of ¥15,395 million, up 3.9% year on year,
and segment income was ¥125 million, compared with asegment loss of ¥207 million in the previous fiscal year.
Other Businesses
Net sales in other businesses were ¥261 million, up 23.5%
year on year, and segment loss was ¥143 million, comparedwith a segment loss of ¥78 million a year earlier.

Financial Position
Total assets at the end of the fiscal year under review totaled¥85,908 million, an increase of ¥8,968 million from the end of
the previous fiscal year.
Current assets at the end of fiscal year under review
amounted to ¥40,320 million, up ¥2,287 million from the end of
the previous fiscal year. One reason for this increase was a riseof ¥497 million year on year in cash on hand and in banks to¥15,935 million, partly reflecting expansion in the Group overall

due to store openings and M&A deals. In addition, notes andaccounts receivable increased ¥737 million to ¥10,985 million
due to growth in new dispensing pharmacies and drug andcosmetic stores, while other accounts receivable increased¥720 million to ¥2,757 million.
Fixed assets at the end of the fiscal year under review
totaled ¥45,570 million, up ¥6,698 million from the end of theprevious fiscal year. This was mainly due to an increase in
fixed assets related to investment in new stores and expansion
in the asset base at consolidated subsidiaries that became
part of the Group through M&A deals. Property, plant andequipment increased ¥1,805 million to ¥15,256 million, while
goodwill rose ¥3,797 million to ¥17,664 million.
Current liabilities at the end of the fiscal year under review
amounted to ¥42,945 million, up ¥5,328 million from the endof the previous fiscal year. This mainly reflected increasesof ¥2,817 million in accounts payable and ¥317 million in
accrued income taxes. Long-term liabilities at the end of the
fiscal year under review totaled ¥9,216 million, down ¥607
million from the end of the previous fiscal year. Althoughallowance for retirement benefits increased ¥178 million, there
were decreases of ¥829 million in long-term debt and ¥184
million in bonds. As a result of the above, total liabilities atthe end of the fiscal year under review amounted to ¥52,162
million, up ¥4,721 million from the end of the previous fiscal
year. In interest-bearing debt, short-term debt increased ¥514
million to ¥6,397 million, long-term debt fell ¥829 million to¥6,318 million and the outstanding balance for bonds declined
to zero.
Net assets at the end of the fiscal year under review
amounted to ¥33,745 million, up ¥4,247 million from the endof the previous fiscal year. This mainly reflected an increase inretained earnings of ¥4,199 million due to growth in earnings.
Net unrealized holding losses on securities totaled ¥281 million.
The shareholders’ equity ratio at the end of the fiscal year
under review stood at 39.2%, up 0.9 percentage point fromthe end of the previous fiscal year. ROA rose 0.5 percentage
point to 6.0% and ROE improved 0.1 percentage point to15.5%.

Basic Policies for Profit Distribution
The Company’s basic policy is to pay dividends from retained
earnings each year at the end of the fiscal year. We paid acash dividend of ¥50 per share for the fiscal year under review,
an increase of ¥5 from the end of the previous fiscal year.
In the future, the Company will continue to treat thereturn of profits to shareholders as an important management
issue. We will work to implement our basic policy of providing
returns to investors proportionate to the profits realized andmaintain a stable return on investment. Internal reserves areheld to strengthen the Company’s financial position, prepare
for new store openings and invest in the future developmentof the business. We will make effective use of these funds togenerate profits to be returned to shareholders in the future.

AIN PHARMACIEZ INC. ANNUAL REPORT 201221

In the fiscal year ending April 30, 2013, we plan to increase
annual dividends per share by ¥10. As a result, the total
dividends will rise to ¥60 per share.

Cash Flows
Cash and cash equivalents at the end of the fiscal year underreview totaled ¥15,935 million, up ¥537 million from the endof the previous fiscal year. This mainly reflected operating
cash flow generated in line with business expansion, active
investment in new store openings and M&A using funds
secured through a public offering and private placement of newshares in the previous fiscal year, and a certain level of liquidity
to provide the Group with access to flexible sources of funds.
Cash flows and the main factors affecting each cash flow wereas follows:
Cash Flows from Operating Activities
Net cash provided by operating activities totaled ¥11,679
million, an increase of 53.1% year on year. The main items
that were positive for cash flow were income before income
taxes and minority interests of ¥9,782 million, depreciation andamortization of ¥1,749 million, and amortization of goodwill of¥1,262 million. These increases came on the back of a rise inearnings related to new store openings and M&A.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥9,010 million,
an increase of 132.2% year on year. This was mainly due topayments of ¥2,378 million for purchases of property, plantand equipment related to new openings and refurbishments ofurban drug and cosmetic stores and dispensing pharmacies,and ¥4,122 million for purchase of subsidiaries’ shares
resulting in obtaining controls related to shares acquired in ninecompanies through M&A deals.
Cash Flows from Financing Activities
Net cash used in financing activities totaled ¥2,131 million,
compared with cash of ¥463 million provided in the previous
fiscal year. This was mainly attributable to net short-term debt
procurement of ¥322 million, net long-term debt repayment of¥1,246 million, and ¥184 million in payments for redemption ofbonds. Cash dividends paid totaled ¥717 million.

Business and Other Risks
The following factors may affect the Group’s oprating results,
stock price and financial position. Forward-looking statementsin this annual report are based on information available to theGroup at the end of the fiscal year under review.
1. Laws and Regulations
a. Regulations under the Pharmaceutical Affairs Law andother laws

22 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

We operate dispensing pharmacies under various permits,
licenses, registrations and notifications including those set forth
by the Pharmaceutical Affairs Law, the Health Insurance Law
and the Pharmacists Law, under the supervision of the Ministryof Health, Labour and Welfare, and of prefectural health andwelfare departments. The drug and cosmetic store businessalso involves sales of drugs, which are similarly regulated under
the Pharmaceutical Affairs Law.
b. Easing of drug sales regulations
Under the Law for Partial Revision of the Pharmaceutical Affairs
Law (Law No. 69, June 14, 2006), which includes a review ofthe sales system for over-the-counter (OTC) drugs, OTC drugs
are categorized into three groups by risk. It has thus become
possible to sell the two lower-risk categories of drugs as a“registered seller,” not requiring a pharmacist.
Factors such as the entry into the market of firms fromother industries as a result of a continuing trend in the future toderegulate drug sales may affect the Group’s performance.
2. Details of Business
The Group’s dispensing pharmacy business operates achain of specialist dispensing pharmacies. These dispensing
pharmacies are mainly located near major hospitals (targeting
demand from patients with prescriptions written by those
hospitals) and near medical malls (targeting demand frompatients with prescriptions written by those mixed medical
facilities).
As the dispensing pharmacy business accounted for
89.0% of net sales in the fiscal year under review, we plan tocontinue the multi-store operation mainly based on dispensing
pharmacies. Accordingly, the Group’s operating results may beaffected by the success or failure of the store opening policies
and by trends in competitors’ store openings.
Furthermore, sales of dispensing pharmacies significantly
depend on the medical institutions that write prescriptions.
Therefore, some hard-to-predict factors including the issuanceof non-hospital prescriptions by the medical institutions orsuspension/discontinuation of operations thereof may affect
the Group’s performance.
3. Industry Trends
The revenues in our dispensing pharmacy business come frompharmacy operations involving the dispensing and supplyingof prescription drugs. The drug prices and dispensing fees are
set by the Ministry of Health, Labour and Welfare. As a way
to contain medical expenses, both medical treatment feesand drug prices are being revised in stages. Changes in profit
structure resulting from factors such as revisions in the medical
treatment fee system could continue to affect the Group’s
performance and financial position.
4. Retention of Qualified Staff
Dispensing pharmacies and drugstores (stores for Category 1
Drugs) are required by the Pharmaceutical Affairs Law to havea pharmacist on site; the Pharmacists Law stipulates that thedispensing of drugs must be handled by a pharmacist. The

Group continues to have a policy of expansion by aggressively
opening new stores, but if it becomes difficult to secure
qualified pharmacists, this could affect our store openings andour performance.
5. Risk of Loss of Trust in the Groupa. In the dispensing operations
In our dispensing pharmacy business, pharmacists dispenseand supply prescription drugs that affect the human body.
This business carries the risk that medical accidents might becaused through dispensing errors. The Group recognizes thatany medical accidents could have a severely damaging effecton society’s confidence in the Group, and we place the highest
priority on measures in all aspects to prevent this risk frommaterializing.
b. Protection of personal data
We possess patient data in the dispensing pharmacy business,
including medical histories and prescription information, andwe possess personal data in the drug and cosmetic store
business obtained for the Ainz Point Club Card. The Grouphas completed development of personal information protection
systems and rules for the handling of such information. The
Company acquired the Privacy Mark accreditation in thehealthcare, medical and social service fields.
However, we believe it is possible that any accidental
or illegal leakage of personal data may not only affect our
performance but also lead to a loss of society’s confidence in
the Group.

However, if the Group fails to secure an adequate returnon its M&A investment, or due to interest rate fluctuations
associated with conditions of the financial market, the Group’s
financial position and operating results including interest
expenses may be affected.
8. Consumption Tax Risk
Under Japan’s Consumption Tax Act, dispensing sales in thedispensing pharmacy business related to social insurance
medical examinations are exempt from consumption tax.
However, the business is required to pay consumption tax on
drugs and other products that it procures.
As a result, the consumption tax burden borne by theGroup is booked as consumption tax under cost of sales in thedispensing pharmacy business.
In the past, when consumption tax was introduced inJapan and dispensing fees were revised, the government took
into account the increase in drug prices caused by the higher
rate of consumption tax. However, future revisions to the rateof consumption tax may not be reflected in drug prices, which
could have an impact on the Group’s performance.

6. Risk in Business Strategy
We have promoted the expansion of the business scale
through actively promoting new openings of dispensing
pharmacies and M&A.
Our basic policies regarding M&A strategy require us tocarefully examine target companies and determine the amountto be paid for acquisitions thereof in order to stably secure a
profitability level that exceeds the amortization of goodwill to
be incurred. If matters do not go as planned, however, we may
incur loss on valuation of shares in subsidiaries and impairment
loss on goodwill, which may have an adverse impact on theGroup’s operating results and financial position.
7. Interest Rate Risk
In the Group’s promotion of business expansion based on
actively promoting new store openings and M&A, costs forordinary store openings are covered by its own resources
within the range of operating cash flow, while in some casesof large-scale M&A, costs are partially financed by borrowings
from financial institutions.
To flexibly respond to these capital needs, the Group seeks
to maintain a certain level of liquidity. As of the end of the fiscal
year under review, the balance of cash on hand and in banks
was ¥15,935 million, while the balance of interest-bearing debt
of the Group was ¥12,715 million.
We focus on the possibility of return on investment andseek to reduce interest-bearing debt in implementing M&A.

AIN PHARMACIEZ INC. ANNUAL REPORT 201223

AIN PHARMACIEZ INC.
CONSOLIDATED BALANCE SHEETSAS OF APRIL 30, 2012 AND 2011

Millions of yen
2012
2011

ASSETS
Current assets:
Cash on hand and in banks (Notes 2 and 4)
Notes and accounts receivable (Note 4)
Other accounts receivable
Inventories (Note 3)
Deferred tax assets (Note 11)
Short-term loans
Other current assets
Allowance for doubtful accounts
Total current assets¥

15,935
10,985
2,758
8,253
892
606
918
(27)
40,320¥15,438
10,248
2,037
8,376
929
235
898
(128)
38,033Thousands of
U.S. dollars(Note 1(1))
2012$

197,264
135,987
34,142102,166
11,042
7,502
11,364(334)
499,133

Property, plant and equipment (Note 7):
Buildings and structures
Land
Construction in progress
Other property, plant and equipment
Total property, plant and equipment

7,049
5,622
825
1,761
15,257

6,457
5,421
236
1,338
13,451

87,262
69,596
10,21321,800188,871

Investments and other assets:
Investments in securities (Notes 4 and 5)
Deferred tax assets (Note 11)
Deposits and guarantees
Goodwill
Other intangible fixed assets
Other investments and other assets
Allowance for doubtful accounts
Total investments and other assets
Total assets

2,826
1,123
5,758
17,665
991
2,226
(257)
30,33185,908

2,960
1,233
4,990
13,867
961
1,675
(230)
25,45676,94034,984
13,902
71,280218,680
12,26827,556(3,181)
375,489$ 1,063,481

See accompanying notes.

24 AIN PHARMACIEZ ANNUAL REPORT 2012¥¥

Millions of yen
2012
2011

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable (Note 4)
Short-term debt (Notes 4 and 8)
Accrued income taxes
Deposits received
Allowance for bonuses to employees
Allowance for bonuses to directors
Reserve for reward obligations
Reserve for loss on disaster (Note 9)
Other current liabilities
Total current liabilities

Thousands of
U.S. dollars(Note 1(1))
2012¥Long-term liabilities:
Long-term debt (Notes 4 and 8)
Bonds
Allowance for retirement benefits (Note 10)
Other long-term liabilities
Total long-term liabilities
Net Assets: (Note 12)
Shareholders’ equity
Common stock
Authorized - 44,000,000 shares in 2012 and 2011
Issued - 15,944,106 shares in 2012 and 2011
Capital surplus
Retained earnings
Treasury stock (3,316 shares in 2012 and 3,102 shares in 2011)
Total shareholders’ equity
Accumulated other comprehensive losses:
Unrealized holding losses on securities
Total accumulated other comprehensive losses
Minority interests
Total net assets
Total liabilities and net assets¥

22,525
6,397
2,740
7,714
965
13
302

¥

2,289
42,945
6,318

19,707
5,883
2,422
6,722
948
9
313
11
1,600
37,616$

278,844
79,19033,91995,494
11,946
161
3,739
28,336531,629

7,148
184
1,270
1,223
9,825

17,938
17,950114,100

8,683

8,683

107,489

7,873
17,426(6)
33,977

7,873
13,227(5)
29,77897,462
215,722(74)
420,612

(281)
(281)
51
33,74685,908

(328)
(328)
49
29,49976,940(3,479)(3,479)631
417,752$ 1,063,481

1,449
1,450
9,217

-

¥

78,212--AIN PHARMACIEZ ANNUAL REPORT 201225

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENTS OF INCOMEYEARS ENDED APRIL 30, 2012 AND 2011

Millions of yen
2012
2011
¥ 142,791¥ 129,387
119,698
109,298
23,09320,09012,83911,982
10,2548,108

Net sales (Note 16)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (Note 16)
Other income (expenses):
Interest and dividend income
Commissions received
Real estate rental revenue
Consignment income
Interest expenses
Loss on sales of accounts receivables
Gain on sales of investments in securities
Gain on sales of shares of subsidiaries and affiliates
Loss on sales of investments in securites
Loss on disposal and sales of fixed assets
Impairment losses on investments in securities
Impairment losses on fixed assets
Loss on disaster
Other, net
Income before income taxes and minority interests
Income taxes (Note 11):
Current
DeferredIncome before minority interests
Minority interests
Net income¥

Thousands of
U.S. dollars(Note 1(1))
2012$ 1,767,653
1,481,778
285,875
158,938
126,937

94
59
132
124
(159)
(71)
21
23
(193)
(147)
(52)
(244)
(57)
(472)
9,782

89
52
86
90
(240)
(68)
45
(3)
(134)
(28)
(232)
(60)
(60)
(463)
7,645

1,164
730
1,634
1,535
(1,968)
(879)
260
285
(2,389)(1,820)(644)(3,021)(706)(5,843)
121,094

4,652
229
4,881
4,901
2
4,899

4,039
(313)
3,726
3,919
2
3,917

57,5892,835
60,42360,671
25
60,646¥$AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYEARS ENDED APRIL 30, 2012 AND 2011

Millions of yen
2012
¥
4,901

Millions of yen
2011
¥
3,919

Thousands of
U.S. dollars(Note 1(1))
2012$
60,671

47
47
4,948

(96)
(96)
3,822

582
582
61,253

4,946

3,821

61,2282

2

25

Income before minority interests
Other comprehensive income (losses)
Unrealized holding gains (losses) on securities
Total other comprehensive income (losses)
Total comprehensive income
Comprehensive income attributable toshareholders of the parent
Comprehensive income attributable tominority interests
See accompanying notes.

26 AIN PHARMACIEZ ANNUAL REPORT 2012

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETSYEARS ENDED APRIL 30, 2012 AND 2011

Thousandsof shares
Number ofshares ofcommonstock

Balance at April 30, 2010
Net income
Cash dividends paid
Issuance of new shares
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2011
Net income
Cash dividends paid
Acquisition of treasury stock
Change in scope of consolidation
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2012

14,104
1,840
15,944
15,944

Common
stock

¥

¥

6,308
2,375
2,375
8,683
8,683

Capitalsurplus

¥

¥

5,498
2,375
2,375
7,873
7,873

Retainedearnings

¥

¥

9,874
3,917
(564)
3,353
13,227
4,899
(717)
17
4,199
17,426¥¥

Commonstock

CapitalsurplusRetainedearnings$ 107,489$ 107,489$ 97,462$ 97,462$ 163,741
60,646(8,876)
210
51,981$ 215,722

(4)
(0)
(0)
(5)
(1)
(1)
(6)

¥

¥

$

21,677
3,917
(564)
4,749
(0)
8,102
29,778
4,899
(717)
(1)
17
4,199
33,977

Total
accumulated
othercomprehensive
income (losses)

Unrealized
holding gains(losses) on
securities

¥

(232)
(96)
(96)
(328)
47
47
(281)

¥

¥

¥

(232)
(96)
(96)
(328)
47
47
(281)

Minority
interests

¥

¥

47
2
2
49
2
2
51

Total net
assets¥¥21,492
3,917
(564)
4,749
(0)
(95)
8,007
29,499
4,899
(717)
(1)
17
49
4,247
33,746

Thousands of U.S. dollars (Note 1(1))

Accumulated other comprehensive losses

(62)
(12)
(12)
(74)

$

$

368,631
60,646(8,876)(12)
210
51,981
420,612

Total
accumulated
othercomprehensive
income (losses)

Unrealized
holding gains(losses) on
securities

Total
shareholders’equityTreasurystock$

Accumulated other comprehensive losses

Totalshareholders’equityTreasurystock

Shareholders' equity

Balance at April 30, 2011
Net income
Cash dividends paid
Acquisition of treasury stock
Change in scope of consolidation
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2012

Millions of yen

Shareholders' equity$$(4,060)582
582(3,479)$$(4,060)582
582(3,479)$$Minority
interests

Total net
assets

607
25
25
631

$ 365,177
60,646(8,876)
(12)
210
607
52,575$ 417,752

See accompanying notes.

AIN PHARMACIEZ ANNUAL REPORT 201227

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED APRIL 30, 2012 AND 2011

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Impairment losses on fixed assets
Loss on disaster
Amortization of goodwill
Impairment losses on investments in securities
Gain on sales of shares of subsidiaries and affiliates
Decrease in allowance for doubtful accounts(Decrease) increase in reserve for reward obligations
Increase in allowance for retirement benefits
Increase in allowance for bonuses to employees
Increase (decrease) in allowance for bonuses to directors(Decrease) increase in reserve for loss on disaster
Interest and dividend income
Interest expenses
Loss on investments in partnerships
Gain on donations of property, plant and equipment
Loss (gain) on sales of investments in securities
Loss on disposal and sales of fixed assets
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Decrease in other assets
Increase in other accounts receivable
Increase (decrease) in accounts payable
Increase in other liabilities
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Millions of yen
2012
2011

1,263
52
(23)
(79)
(11)
175
2
3
(11)
(94)
159
19
(28)
172
130
70
405
10
(687)
1,862
1,007
16,17284(159)(4,418)
11,680

7,645
1,561
232
28
974
28

$ 121,094
21,664
3,021

(12)
16
193
34
(12)
11
(89)
240
8
(20)
(42)
133
(86)
(1,131)7(506)(1,169)3,105
11,14690(243)(3,365)
7,627

15,635
644
(285)
(978)
(136)
2,166
25
37
(136)
(1,164)
1,968
235
(347)
2,129
1,609
867
5,014
124
(8,505)23,05012,466200,198
1,040(1,968)(54,692)
144,590

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Purchase of shares in affiliates
Purchase of subsidiaries' shares resulting in obtaining controls
Proceeds from subsidiaries' shares resulting in loss of controls
Payments for loans receivable
Proceeds from collections of loans receivable
Payments for investments in capital
Proceeds from returns of investments in capital
Payments for purchases of intangible fixed assets
Increase in other investments
Net cash used in investing activities(2,378)
166
(478)
575
(8)
(4,122)205(1,061)183(4)
6(1,228)(866)(9,011)(1,237)17(182)
54(1,635)
(875)
699
(3)
3
(317)
(404)
(3,882)(29,438)
2,055(5,917)7,118(99)(51,027)
2,538(13,134)
2,265
(50)
74
(15,202)(10,720)(111,550)

Cash flows from financing activities:
Proceeds from short-term debts
Repayments of short-term debts
Proceeds from long-term debts
Repayments of long-term debts
Payments for redemption of bonds
Repayments of lease obligations
Proceeds from issuance of new shares
Payments for purchase of treasury stock
Cash dividends paid
Dividend payments to minority shareholders
Net cash (used in) provided by financing activities

3,100(2,777)3,400(4,646)
(184)
(305)
(1)
(717)
(2,131)

2,940(4,094)
7,380(9,664)
(33)
(221)
4,720
(0)
(564)
(0)
463

38,376(34,377)
42,090(57,514)(2,278)(3,776)(12)(8,876)(26,380)538
15,398¥ 15,935

4,209
11,188¥ 15,398

6,660
190,616$ 197,264

Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year (Note 2)
See accompanying notes.

28 AIN PHARMACIEZ ANNUAL REPORT 2012

¥

9,782
1,750
244

¥

Thousands of
U.S. dollars(Note 1(1))
2012

AIN PHARMACIEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTSYEARS ENDED APRIL 30, 2012 AND 2011

1. Summary of significant accounting policies(1) Basis of presenting consolidated financial statements
The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Law and its related
accounting regulations, and in conformity with accounting principles generally accepted in Japan("Japanese GAAP"), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of AIN PHARMACIEZ INC. (the “Company”)
prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of
the Ministry of Finance as required by the Financial Instruments and Exchange Law. Some
supplementary information included in the statutory Japanese language consolidated financial
statements, but not required for fair presentation, is not presented in the accompanying consolidated
financial statements.
The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenienceof readers outside Japan, using the prevailing exchange rate at April 30, 2012, which was ¥80.78 to
U.S. $1. The convenience translations should not be construed as representations that the Japanese
yen amounts have been, could have been, or could in the future be, converted into U.S. dollars at thisor any other rate of exchange.
As permitted by the Financial Instruments and Exchange Law of Japan, amounts of less than one
million yen have been omitted. As a result, the totals shown in the accompanying consolidated financial
statements (both in yen and U.S. dollars) do not necessarily agree with the sums of the individual
amounts.
(2) Consolidated statements of cash flows
In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits andshort-term highly liquid investments with maturities not exceeding three months at the time of purchaseare considered to be cash and cash equivalents.
(3) Basis of consolidation and accounting for investments in affiliates
The consolidated financial statements comprise the accounts of the Company and its 18 subsidiaries
as of April 30, 2012 and 2011. All significant intercompany accounts and transactions have been
eliminated in consolidation. All companies are required to consolidate all significant investees which arecontrolled through ownership of majority voting rights or existence of certain conditions.
The investments in affiliates are stated at their underlying equity value. All companies are required toaccount for investments in affiliates (20% to 50% owned and certain others that are 15% to 20%
owned) by the equity method, in principle.
Of consolidated subsidiaries, MEDIWEL Corp. closes its accounts on April 30. The account closing
dates for two consolidated subsidiaries in the dispensing pharmacy business are the end of January
and May, respectively. The account closing dates for two consolidated subsidiaries in the dispensing
pharmacy business are the end of February. The account closing date of other consolidated
subsidiaries is the end of March 31. Financial statements as of these respective closing dates are usedin preparing the consolidated financial statements. However, necessary adjustments are made toimportant transactions that occur between these subsidiaries’ account closing dates and the accountclosing date for the consolidated financial statements.
The consolidated subsidiary closing its accounts of the end of May closed its accounts as of the

AIN PHARMACIEZ ANNUAL REPORT 201229

account closing date of its parent company, AIN MEDIO Inc.
(4) Securities
The Company and its consolidated subsidiaries examine the intent of holding each security and classify
those securities other than equity securities issued by subsidiaries and affiliates: (a) securities held for
trading purposes (hereafter, "trading securities"), (b) debt securities intended to be held to maturity(hereafter, "held-to-maturity debt securities"), (c) other securities that are not classified in any of theabove categories (hereafter, "available-for-sale securities").
Trading securities are carried at fair value and held-to-maturity debt securities are carried at amortizedcost. Marketable securities classified as available-for-sale securities are carried at fair value withchanges in unrealized holding gains or losses, net of the applicable income taxes, included directly in
net assets. Non-marketable securities classified as available-for-sale securities are carried at cost.
Cost of securities sold is determined by the moving average method.
(5) Inventories
Dispensed drugs were stated at lower of cost or market, cost being determined using the gross averagemethod. Merchandise was stated at lower of cost or market, cost being determined using the retailmethod. Supplies were stated at cost determined using the last purchase method.
(6) Depreciation and amortization
Depreciation of property, plant and equipment is computed by the declining-balance method at rates
based on the useful lives, except that the straight-line method is applied to buildings acquired after April
1, 1998. The useful lives of major property, plant and equipment are summarized as follows:
Buildings and structures: 10 to 50 years
The straight-line method is applied over a three-year period for assets with an acquisition price of¥100,000 or more and less than ¥200,000.
Amortization of software used by the Company and its consolidated subsidiaries is computed by thestraight-line method over the useful lives, 5 years. Amortization of long-term prepaid expenses iscomputed by the straight-line method. Amortization of goodwill is computed by the straight-line method
over a period (5 to 20 years).
Leased assets capitalized under finance leases are depreciated over the lease terms of the respective
assets with no residual value. Finance lease transactions that do not transfer ownership thatcommenced prior to April 1, 2008, are accounted for under methods pertaining to standard leasetransactions.
(7) Impairment of fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. When amounts of undiscounted future cash flows of fixed
assets are less than the carrying amounts, the fixed assets are determined to be impaired. Then, anamount by which the carrying amount exceeds the recoverable amount is recognized as an impairment
loss.
The Company and its consolidated subsidiaries identify group of assets by stores as the smallest
identifiable group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows from other assets or groups of assets. With respect to non-performing
assets, real estate is regarded as an independent asset group.
The recoverable amount of the asset group is measured by the respective net selling prices. The land
is assessed based on the appraisal value by an independent real estate appraiser. The fair value of
construction in progress and store facilities is the disposal value from which costs of disposal are
deducted.

30 AIN PHARMACIEZ ANNUAL REPORT 2012

(8) Deferred charges
Amortization of stock issuance cost is computed by the straight-line method over 3 years.
(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide an allowance for doubtful accounts forprobable collection losses by applying the actual rate of bad debt losses experienced in a pastreference period for normal receivables and by individual assessment of collectability for doubtfulreceivables.
(10) Bonuses to employees
Allowance for bonus to employees is provided for payments to employees of the Company and its
consolidated subsidiaries at the amount expected to be paid in respect of the calculation period ended
on the balance sheet date.
(11) Bonuses to directors
Allowance for bonus to directors is provided for payments to directors of the Company and its
consolidated subsidiaries at the amount expected to be paid in respect of the calculation period ended
on the balance sheet date.
(12) Retirement benefits
Retirement benefits covering all employees are provided through two plans: a lump-sum benefit plan
and a tax-qualified pension plan. Upon retirement or termination of employment, employees are
generally entitled to lump-sum or annuity payments based on their current rate of pay, length of service
and cause of termination.
The Company began employing a tax-qualified retirement plan in the 23rd fiscal year (beginning
December 1, 1991) applied to a portion of the retirement benefit (equivalent to 30%).
The liabilities and expenses for retirement benefits are determined based on the amounts actuariallycalculated using certain assumptions. The Company and its consolidated subsidiaries provide anallowance for employees' retirement benefits based on the estimated amounts of the projected benefit
obligation and the fair value of the plan assets. Actuarial gains and losses are recognized in expenses
using the declining-balance method over a period (one year to six years) within the average of theestimated remaining service period, commencing from the year after the year in which they are
incurred.
(13) Reserve for reward obligations
In terms of the estimated redeemable amount of the purchase points given in the parent company’s
Drug and Cosmetic Store Business, the Company sets a reserve based on actual redemptions in thepast.
(14) Reserve for loss on disasterA reserve was set aside as of April 30, 2011, at an estimated amount for expenses considerednecessary to restore assets damaged by the Great East Japan Earthquake.
(15) Income taxes
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 measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.
(16) Amounts per share of common stock

AIN PHARMACIEZ ANNUAL REPORT 201231

Basic net income per share is computed based on the weighted average number of shares of common
stock outstanding during the year.
Diluted net income per share is computed based on the weighted average number of shares ofcommon stock outstanding each year after giving effect to the dilutive potential of common shares to beissued upon conversion of the convertible bonds.
Net assets per share are computed based on the net assets excluding minority interests, and thenumber of common stock outstanding at the year end.
Cash dividends per share represent the actual amount declared as applicable to the respective years.
(17) Derivatives and hedge accounting
The Company and its consolidated subsidiaries state derivative financial instruments at fair value andrecognizes changes in the fair value as gains or losses unless derivative financial instruments are used
for hedging purposes.
If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company
deters recognition of gains or losses resulting from changes in fair value of derivative financial
instruments until the related losses or gains on the hedged items are recognized.
If interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount tobe paid or received under the interest rate swap contract is added to or deducted from the interest on
the assets or liabilities for which the swap contract was executed.
The following summarizes hedging derivative financial instruments used by the Company and items
hedged.
Hedging instruments: Interest rate swap contracts
Hedged items: Interest on long-term debt
The Company uses interest rate swap contracts to hedge interest rate fluctuation risk on hedged items
and identifies hedged items by individual contracts.
The Company does not evaluate hedge effectiveness if the notional amounts, terms and interest
payment dates of the hedging instruments and the hedged items are the same and meet certain
hedging criteria.
(18) Consumption taxes
The Company and its consolidated subsidiaries are accounted for using the tax excluded method.
With regard to consumption taxes and other taxes that are subject to exclusions, expenses arereported in the fiscal year in which they are incurred.
However, consumption taxes and other taxes that are subject to exclusions and that are related to fixed
assets are recorded in “other investments and other assets” within “investments and other assets” andamortized using the straight-line method.
Accrued consumption taxes are indicated in the corresponding “other” sections within current assets
and current liabilities.
(19) Changes of Accounting Procedures and Presentation
The Company and its consolidated subsidiaries have applied “Accounting Standard for Accounting
Changes and Error Corrections” (ASBJ Statement No. 24, issued on December 4, 2009) and“Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance
No. 24, issued on December 4, 2009) for changes in accounting policies and corrections of figures on
and after the beginning of the fiscal year ended April 30, 2012.

32 AIN PHARMACIEZ ANNUAL REPORT 2012

(20) Reclassification and restatement
Certain prior year amounts have been reclassified to conform to the current year presentation.
These reclassifications and restatement had no impact on previously reported results of operations.

2. Cash and cash equivalents(1) Reconciliations of cash on hand and in banks shown in the consolidated balance sheets and cash
and cash equivalents shown in the consolidated statements of cash flows as of and for the years
ended April 30, 2012 and 2011 are as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Cash on hand and in banks¥ 15,935¥ 15,438$ 197,264
Less: Time deposits with maturities
exceeding three months(40)
Cash and cash equivalents¥ 15,935¥ 15,398$ 197,264(2) The following table summarizes assets acquired and liabilities assumed through the acquisition ofshares of the companies relating acquisition cost and net disbursement:(a) Major breakdown of assets and liabilities of companies newly included in the consolidated
financial statements for the years ended April 30, 2012 and 2011 due to the acquisition of shares(i) Acquisition of shares of nine companies in the dispensing pharmacy business for the year
ended April 30, 2012
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.
Thousands ofMillions of yen
U.S. dollars
2012
2012
Current assets¥ 1,704$ 21,094
Fixed assets
803
9,941
Goodwill
4,157
51,461
Current liabilities(1,462)(18,099)
Long-term liabilities(617)(7,638)4,585
56,759Acquisition cost of the companies
Cash and cash equivalents held by(463)(5,732)the companies
Net disbursement due to theacquisition¥ 4,122$ 51,027(ii) Acquisition of shares of six companies in the dispensing pharmacy business for the year
ended April 30, 2011
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.

AIN PHARMACIEZ ANNUAL REPORT 201233

Current assets
Fixed assets
Goodwill
Current liabilities
Long-term liabilities
Acquisition cost of the companies
Cash and cash equivalents held by
the companies
Net disbursement due to theacquisition

Millions of yen
2011¥ 3,8261,226
2,608(2,427)(1,222)4,010(2,375)¥ 1,635

3. Inventories
Inventories at April 30, 2012 and 2011 consisted of the following:

Merchandise
Supplies

Millions of yen
2012
2011
¥ 8,139¥ 8,268
115
107¥ 8,253¥ 8,376

Thousands of
U.S. dollars
2012$ 100,755
1,424$ 102,166

4. Financial instruments(1) Qualitative information on financial instruments(a) Policies for using financial instruments
The Company and its consolidated subsidiaries have expanded business by opening dispensing
pharmacies and drugstores and through M&A activities. Operating cash flows provide the majorityof the funds the Company and its consolidated subsidiaries require to fund its shop openings. The
Company and its consolidated subsidiaries secure additional funding as needed for M&A
activities through bank borrowings and issuance of new shares and invests in highly liquid
financial assets. Derivatives are employed to hedge against the risks described below; theCompany and its consolidated subsidiaries do not engage in speculative transactions.
(b) Details of financial instruments used and the exposures to risk and how they arise
Notes and accounts receivable, which relate to sales receivables, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and theSocial Insurance Medical Care Fee Payment Fund, and therefore do not entail any risk.
Investment securities, which are principally held-to-maturity bonds and equity securities held forthe purpose of maintaining operating relationships with other companies, involve the risk ofmarket price fluctuations.
Lease deposits and guarantee deposits are primarily deposits placed with the owners ofproperties that the Company leases for the operation of dispensing pharmacies and drugstores.
Such deposits involve lessor credit risk.
Notes and accounts payable, which relate to purchases, are payable within three months.
With respect to borrowings, the Company raises funds primarily as working capital or in relation tocapital expenditures. Redemption periods on such debts are typically seven years from the dateof borrowing, at the longest. A portion of these instruments carry floating interest rates and are
therefore subject to interest rate fluctuation risk. Derivative transactions (interest rate swap

34 AIN PHARMACIEZ ANNUAL REPORT 2012transactions) are used to hedge against such risk.
With regard to derivative transactions, interest rate swap transactions are used to hedge the riskof fluctuations in interest rate payments. See Note 1 (17) for the description of derivatives andhedge accounting.
(c) Policies and systems for risk management
Management of credit risk (the risk that a business partner will default on its business transactions)
As the Company’s notes and accounts receivable, which relate to sales, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and the Social
Insurance Medical Care Fee Payment Fund, no particular risk management is employed.
Securities held to maturity are based on the Company’s Marketable Securities Investment
Standards. Such investments are based on careful decisions, following internal screenings ofinvestees and investment amounts. Furthermore, such investments are monitored regularly,
determining the investee’s financial status throughout the investment period to quickly determine
and minimize potential repayment difficulties.
The Company manages default risk on lease deposits and guarantee deposits through the
management of contract periods and regular credit screening.
Management of market risk (the risk of exchange and interest rate fluctuations)
The Company and its consolidated subsidiaries mainly raise funds through long-term debt and use
interest rate swap transactions to hedge the risk of fluctuations in interest rate payments on
borrowings. With regard to investment securities, the Company and its consolidated subsidiaries
regularly check the financial conditions of the issuers of unlisted securities. The Company and its
consolidated subsidiaries review on an ongoing basis the status of their holdings of listed securities,
taking into consideration market conditions and their relationships with the issuing companies.
Management of liquidity risk associated with fund procurement (the risk of being unable to execute
payments when due)
To manage liquidity risk, the Company and its consolidated subsidiaries create cash flow plans
based on annual capital expenditures forecasts. These plans are updated each month, based onrevised operating performance and forecast figures. To ensure the Company’s ability to respondflexibly to sudden demands for funding in relation to M&A activities, the Company maintains acertain level of liquidity, including through issuance of new shares.
(2) Fair values of financial instruments
Carrying values and fair values of the financial instruments on the consolidated balance sheet at April
30, 2012 and 2011 are summarized in the following table:

AIN PHARMACIEZ ANNUAL REPORT 201235

Assets
Carrying value
Cash on hand and in banks
Notes and accounts receivable
Investment in securities
Deposits and guarantees
Total
Fair value
Cash on hand and in banks
Notes and accounts receivable
Investment in securities
Deposits and guarantees
Total
Difference
Cash on hand and in banks
Notes and accounts receivable
Investment in securities
Deposits and guarantees
Total
Liabilities
Carrying value
Accounts payable
Short-term debt including current
portion of long-term debt
Deposits received
Long-term debt
Total
Fair value
Accounts payable
Short-term debt including current
portion of long-term debt
Deposits received
Long-term debt
Total
Difference
Accounts payable
Short-term debt including current
portion of long-term debt
Deposits received
Long-term debt
Total

2011

Thousands of
U.S. dollars
2012¥ 15,935
10,9851,307
5,624
33,851¥ 15,438
10,248
1,965
4,875
32,526$ 197,264
135,987
16,18069,621
419,052

15,935
10,9851,307
5,420
33,647

15,438
10,248
1,965
4,632
32,283

197,264
135,987
16,18067,096
416,526(204)¥ (204)(243)¥ (243)(2,525)$ (2,525)

2012

Millions of yen

Thousands of
U.S. dollars
2012

Millions of yen
2012
2011
¥ 22,525
6,397¥ 19,707
5,883$ 278,844
79,1907,714
6,318
42,955

6,722
7,148
39,46095,494
78,212531,753

22,525
6,406

19,707
5,893

278,844
79,302

7,714
6,333
42,9776,722
7,165
39,48895,49478,398532,025

8

10

99

14
¥ 23

17
¥ 27

173
$ 285

Method of calculating the fair value of financial instruments and matters related to available-for-salesecurities and derivative transactions:
Assets:(a) Cash on hand and in banks and notes and accounts receivable
As these instruments are settled in the short term, their carrying value approximates fair value.
(b) Investment securities
The fair values of equity securities are determined by their prices on stock exchanges. The fairvalues of bonds are determined by the prices indicated by the counterparty financial institutions.
(c) Deposits and guarantees

36 AIN PHARMACIEZ ANNUAL REPORT 2012

The Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period. These amounts are discounted to their current value using
appropriate rates of interest.
Liabilities:(a) Accounts payable, short-term debt and deposits received
As these instruments are settled in the short term, their carrying value approximates fair value. The
fair value of current portion of long-term debt included in short-term debt is determined bydiscounting the total amount of principal and interest by the assumed interest rate on new
borrowings of the same type.
(b) Long-term debt
The fair value of long-term debt included in short-term debt is determined by discounting the total
amount of principal and interest by the assumed interest rate on new borrowings of the same type.
Financial instruments for which fair value is not readily determinable:
The fair values of unlisted equity securities with carrying amounts of ¥ 1,519million ($ 18,804thousand)and ¥994 million as of April 30, 2012 and 2011, respectively, are not readily determinable.
The redemption schedule for monetary claims and securities with maturity dates as of April 30,
2012 are summarized as follows:
Millions of yen

1 year or
less

Cash on hand and in banks
Notes and accounts receivable
Investment securities
Held-to-maturity debt securities
Deposits received
Total

More than
10 years¥ 15,610
10,985

¥ -

¥ -

¥ -

369
¥ 26,965

119
2,627¥ 2,74530
1,682¥ 1,7121,080¥ 1,080

1 year or
less

Cash on hand and in banks
Notes and accounts receivable
Investment securities
Held-to-maturity debt securities
Deposits received
Total

2012
More thanMore than
5 years
1 year but
but less
less than
than 10
5 years
years

Thousands of
U.S. dollars
2012
More thanMore than
5 years
1 year but
but less
less than 5than 10
years
years

More than
10 years$ 193,241
135,987

$ -

$ -

$ -

4,568
$ 333,808

1,473
32,520$ 33,981

371
20,822$ 21,193

13,370$ 13,370

AIN PHARMACIEZ ANNUAL REPORT 201237

Millions of yen

1 year or
less

Cash on hand and in banks
Notes and accounts receivable
Investment securities
Held-to-maturity debt securities
Deposits received
Total

2011
More thanMore than
5 years
1 year but
but less
less than
than 10
5 years
years

More than
10 years¥ 15,438
10,248

¥ -

¥ -

¥ -

450
760
¥ 26,896

1,701¥ 1,701

1,631¥ 1,631899¥ 899

5. Securities(1) The following tables summarize acquisition costs, carrying values and differences of securities withavailable fair values as of April 30, 2012 and 2011:
Other securities:
Securities with carrying values exceeding acquisition costs

Acquisition cost
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total
Carrying value
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total
Difference
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total

38 AIN PHARMACIEZ ANNUAL REPORT 2012

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012

¥ 108
-

¥ 15
-

$ 1,337
-

108

15

1,337

126
-

38
-

1,560
-

126

38

1,560

18
-

22
-

223
-

¥ 18

¥ 22

$ 223

Other securities:
Securities with carrying values not exceeding acquisition costs

Acquisition cost
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total
Carrying value
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total
Difference
Equity securities
Bonds
Limited partnerships
and similar
investments
Other
Total

Thousands of
U.S. dollars
2012

Millions of yen
2012
2011
¥ 914
149

¥ 1,435450$ 11,315
1,845

365
206
1,634

338
277
2,500

4,518
2,550
20,228

500
149

914
450

6,190
1,845

362
169
1,180

329
234
1,928

4,481
2,092
14,608

(414)
-

(521)
-

(5,125)-(3)(37)¥ (453)(8)(43)¥ (573)(37)(458)$ (5,608)

Equity securities included stocks of non-consolidated subsidiaries and affiliates of ¥381 million($4,717 thousand) and ¥322 million at April 30, 2012 and 2011, respectively.
(2) The following table summarizes total sales amounts of other securities sold, and amounts of therelated gains and losses in the years ended April 30, 2012 and 2011:

Total sales ofother securities sold
Related gains
Related losses

Millions of yen
2012
2011
¥ 575
21
193

¥ 54
45
3

Thousands of
U.S. dollars
2012$ 7,1182602,389(3) The following table summarizes impairment loss on other securities in the years ended April 30,
2012 and 2011:
Millions of yen
2012
2011
Other securities with fair value
Other securities without fair value

¥1
51

¥2
26

Thousands of
U.S. dollars
2012
$ 12
631

AIN PHARMACIEZ ANNUAL REPORT 201239

6. Derivative financial instruments and hedging transactions
The Company has applied hedge accounting for interest rate swap contracts to hedge risks of changesof floating interest rates on long-term debt. There were no outstanding derivative transactions for which
hedge accounting has been applied at April 30, 2012. The notional amounts were ¥20 million at April 30,
2011. As discussed in Note 1 (17), if interest rate swap contracts are used as hedges and meet certain
hedging criteria, the net amount to be paid or received under the interest rate swap contract is added toor deducted from the interest on the assets or liabilities for which the swap contract was executed.
Therefore, the fair value of long-term debt includes the fair value of the interest rate swap contracts.
At April 30, 2012 and 2011, there were no outstanding derivative transactions for which hedge
accounting has not been applied.

7. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation,
impairment loss and net balance of leased assets as of April 30, 2012 and 2011, which would havebeen reflected in the consolidated balance sheets if finance lease accounting had been applied to thefinance leases currently accounted for as operating leases as allowed under Japanese GAAP.
Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Acquisition cost
Buildings
¥ 344
¥ 411
$ 4,258
Other fixed assets
362
857
4,481
Intangible fixed assets
120
371
1,486
Total
827
1,639
10,238
Accumulated depreciation
Buildings
287
333
3,553
Other fixed assets
303
706
3,751
Intangible fixed assets
104
306
1,287
Total
694
1,344
8,591
Impairment loss
Buildings
Other fixed assets
2
Intangible fixed assets
Total
2
Net balance
Buildings
58
79
718
Other fixed assets
58
149
718
Intangible fixed assets
17
65
210
Total
¥ 133
¥ 293
$ 1,646
Future minimum lease payments as of April 30, 2012 and 2011 for finance leases currently accounted
for as operating leases are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Due within one year
Due after one year
Total

¥ 74
135
¥ 208

¥ 197
187
¥ 383

$ 916
1,671
$ 2,575

The following table summarizes details of lease expenses, reversal of impairment loss for leased
assets, depreciation, interest expense and impairment loss, if they had been capitalized:

40 AIN PHARMACIEZ ANNUAL REPORT 2012

Thousands of
U.S. dollars
2012

Millions of yen
2012
2011
Lease expense
Reversal of impairment loss forleased assets
Depreciation
Interest expense

¥ 168

¥ 362

$ 2,080

158
5

2
300
43

1,956
62

Equivalent interest is calculated by applying the interest method to allocate for each fiscal year over theterm of the lease the difference between the total lease amount and the equivalent acquisition price ofthe leased asset.
Remaining lease expenses for non-cancellable operating lease transactions are as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Due within one year
Due after one year
Total

¥ 576
3,859
¥ 4,435

¥ 536
3,724
¥ 4,259$ 7,130
47,772$ 54,902

8. Short-term debt and long-term debt
Short-term debt and long-term debt at April 30, 2012 and 2011 consisted of the following:
Millions of yen
2012
2011
Short-term bank loans with aweighted-average interest rate of
1.0%
Subsidiaries’ unsecured bondmaturing in 2015 with a fixed interest
rate of 0.80%-0.92%
Current portion of long-term debt
with a weighted-average interest rateof 0.8%Current portion of lease obligation
with a weighted-average interest rateof 1.6%Long-term debt (2013-2021) with aweighted-average interest rate of
0.8%
Lease obligation (2013-2017) with aweighted-average interest rate of
1.4%
Total

Thousands of
U.S. dollars
2012¥ 2,503¥ 2,135$ 30,985

-

184

-

3,895

3,748

48,217

345

245

4,271

6,318

7,148

78,212676¥ 13,736

548¥ 14,008

8,368$ 170,042

At April 30, 2012 and 2011, the carrying amounts of assets pledged as collateral for accounts payable
are as follows:

AIN PHARMACIEZ ANNUAL REPORT 201241

Assets pledged as collateral:

Investments in securities
Liabilities corresponding tocollateral:

Accounts payable

Thousands of
U.S. dollars
2012

Millions of yen
2012
2011
¥ 6

¥ 6

$ 74

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012

¥ 7

¥ 12

$ 87

The aggregate annual maturities of long-term debt at April 30, 2012 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2013¥ 3,895$ 48,217
2014
2,944
36,4452015
2,086
25,823
2016
994
12,305
2017
236
2,922
The aggregate annual maturities of lease obligations at April 30, 2012 are as follows:Year ending April 30,
2013
2014
2015
2016
2017

Millions of yen
¥ 345
287
196
135
59

Thousands of
U.S. dollars$ 4,271
3,553
2,426
1,671
730

9. Sales, disposal and impairment of fixed assets(1) Gain and loss on sales of fixed assets for the years ended April 30, 2012 and 2011 are as
follows:
Gain on sales of fixed assets:

Buildings and structures
Other property, plant andequipment
Total
Loss on sales of fixed assets:

Buildings and structures
Land
Other property, plant andequipment
Disposal cost
Total

42 AIN PHARMACIEZ ANNUAL REPORT 2012

Thousands of
U.S. dollars
2012

Millions of yen
2012
2011
¥ 16

¥1

$ 198

2
¥ 17

0
¥1

25
$ 210

Millionsof yen2012

Thousands of
U.S. dollars
2012

¥1
9

$ 12
111

12
1
¥ 24

149
12
$ 297

The details of loss on sales of fixed assets for the year ended April 30, 2011 have been omitted as
the amounts are immaterial.

(2) Loss on disposal of fixed assets for the years ended April 30, 2012 and 2011 are as follows:

Millions of yen
2012
2011
Buildings and structures
Other property, plant andequipment
Goodwill
Other intangible fixed assets
Deposits and guarantees
Other investments and otherassets
Disposal cost
Total

Thousands of
U.S. dollars
2012

¥ 29

¥ 33

$ 359

13
26
0
26

4
0
49

161
322
0
322

4
26
¥ 124

2
47
¥ 134

50
322
$ 1,535(3) For the years ended April 30, 2012 and 2011, the Company recognized impairment losses forthe following property groups:

Property group
StoresReal estate
Shops and real estate
Shops scheduled for
opening
Shop to be closed

Description of assets
Store facilities
Land
Store facilities and landStore facilities

Millions of yen
2012
2011

Store facilities

Thousands of
U.S. dollars
2012

¥ 168
50
21

¥ 10
66
156
-

$ 2,080
619
260

5
¥ 244

¥ 232

62
$ 3,021(4) Losses resulting from the Great East Japan Earthquake during the fiscal year ended April 30,
2011, were recorded in “loss on disaster” in the accompanying consolidated statements ofincome. A breakdown of this total is provided below.

Losses on inventories, property, plantand equipment and intangible fixed
assets destroyed in the disaster
Repair, removal and other restoration
expenses
Other
Total

Millions of yen
2011
¥ 28
7
25
¥ 60

Of the ¥60 million for loss on disaster, ¥11 million was an allocation to reserve for loss on disasterfor the year ended April 30, 2011.

AIN PHARMACIEZ ANNUAL REPORT 201243

10. Retirement benefits
Allowance for retirement benefits as of April 30, 2012 and 2011 consist of the following:

Projected benefit obligation
Plan assets at fair value
Unfunded retirement benefit obligation
Unrecognized actuarial gains
Net retirement benefit obligation
Allowance for retirement benefits

Millions of yen
2012
2011
¥ (2,020)¥ (1,623)
251
198(1,768)(1,425)320
155(1,449)(1,270)¥ (1,449)¥ (1,270)

Thousands of
U.S. dollars
2012$ (25,006)
3,107(21,887)
3,961(17,938)$ (17,938)

Retirement benefit expenses for the years ended April 30, 2012 and 2011 comprised the following:Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Service costs
¥ 292
¥ 254
$ 3,615Interest cost on projected benefit obligation
16
13
198
Expected return on plan assets
(1)
(1)
(12)
Amortization of actuarial losses
50
51
619
Retirement benefit expenses
¥ 356
¥ 317
$ 4,407
Actuarial assumptions used in accounting for the Company’s plans as of April 30, 2012 and 2011 areprincipally as follows:

Discount rate
Expected rate of return on plan assets
Amortization period for unrealized
actuarial gain or loss

2012

2011

1.0-2.0%
0.75%
1-6 years

1.0-2.0%
0.75%
1-6 years

11. Income taxes
The aggregate statutory income tax rate used for calculation of deferred income tax assets andliabilities was 40.4%.
(1) The following table summarizes the significant differences between the statutory tax rate and theeffective tax rates for consolidated financial statement purposes for the years ended April 30, 2012
and 2011:
Statutory tax rate
Non-deductible expenses
Per capita inhabitant tax
Amortization of goodwill
Valuation allowance
Reversal of deferred tax assets due
to changes in the corporate income
tax rate
Other
Effective tax rates

44 AIN PHARMACIEZ ANNUAL REPORT 2012

2012
40.4%
0.5
1.5
4.5
-

2011
40.4%
0.4
1.8
4.6
1.5

1.8
1.2
49.9%

0.0
48.7%

(2) Significant components of deferred tax assets and liabilities as of April 30, 2012 and 2011 are as
follows:

Deferred tax assets:
Impairment losses
Excess of allowance for bonuses
Excess of reserve for rewards obligation
Allowance for retirement benefits
Net unrealized holding gains on securities
Other
Sub-total deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Capitalized removal costs
Valuation of land
Total deferred tax liabilities
Net deferred tax assets

Millions of yen
2012
2011

Thousands of
U.S. dollars
2012

¥ 469
357
114
516
153
1,017
2,626
512
2,114

¥ 552
379
127
510
222
837
2,627
465
2,162

$ 5,806
4,419
1,411
6,388
1,894
12,59032,508
6,338
26,170

(100)
(59)
(159)
¥ 1,955¥ 2,162(1,238)(730)(1,968)$ 24,202(3) Adjustment of deferred tax assets and deferred tax liabilities due to changes in the corporate
income tax rate
Following the promulgation of the “Act for Partial Amendment of the Income Tax Act, etc. for the
Purpose of Creating a Taxation System Responding to Changes in Economic and Social Structures”(Act No. 114, 2011) and the “Act on Special Measures for Securing Financial Resources Necessary
to Implement Measures for Reconstruction following the Great East Japan Earthquake” (Act No. 117,2011) on December 2, 2011, the corporate income tax rate will be lowered and a special restoration
surtax will be imposed from fiscal years beginning on or after April 1, 2012.
Accordingly, the statutory tax rate of 40.4% previously used for the calculation of deferred tax assets
and deferred tax liabilities is changed to 37.7% for temporary differences expected to be reversed
from May 1, 2012 to April 30, 2015 and 35.3% for temporary differences expected to be reversed
after April 30, 2015.
As a result of this change, net deferred tax assets and unrealized holding losses on securities
decreased by ¥201 million ($2,488 thousand) and ¥22 million ($272 thousand), respectively, anddeferred income tax increased by ¥179 million ($2,216 thousand) for the year ended April 30, 2012.

12. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital,
which is included in capital surplus.
Under the Japanese Corporate Law (the “Law”), in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in-capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. The legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Law, the legal earnings reserve and additional paid-in capital could be used to eliminate or
reduce a deficit or could be capitalized by resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and

AIN PHARMACIEZ ANNUAL REPORT 201245

retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Law.

13. Commitment
The Company entered into overdraft agreements with 20 and 22 banks as of April 30, 2012 and 2011,
respectively, to finance working capital requirements. The outstanding balances of such overdrafts asof April 30, 2012 and 2011 are as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2011
2012
Total overdraft available¥ 13,365¥ 13,450$ 165,449
Amount utilized
2,305
1,310
28,534
Outstanding balance¥ 11,060¥ 12,140$ 136,915

14. Contingencies
The Company has contingent liabilities for the payment of lease deposits and guarantee deposits toowners of shops that the Company has rented. Such transferred contingent liabilities amounted to¥1,674 million ($20,723 thousand) and ¥1,847 million as of April 30, 2012 and 2011, respectively.

15. Amounts per share
Net assets per share at April 30, 2012 and 2011 and basic and diluted net income per share for theyears then ended are as follows:

Net assets per share
Basic net income per share
Diluted net income per share
Cash dividends per share attributable to the year2012
¥ 2,114
307
50

Yen

2011
¥ 1,847
256
45

U.S. dollars
2012$ 26.17
3.80
0.62

Cash dividends per share represent the cash dividends declared as applicable to the respective years,
including dividends to be paid after the end of the year and not accrued in the accompanying
consolidated financial statements.

16. Segment information(1) Overview of reporting segments
Reporting segments of the Company and its consolidated subsidiaries are composed of thoseindividual business units for which separate financial information is available, from which the boardof directors makes decisions regarding the allocation of management resources and for which
operating performance can be evaluated, allowing the reporting segments to be analyzed
periodically.
The Company and its consolidated subsidiaries divide their operations into two main businesses,
the Dispensing Pharmacy business and the Drug and Cosmetic Store business, and the Other
business. The Dispensing Pharmacy business primarily includes the dispensing pharmacy business,sale of generic drugs, staff dispatching and introduction services and consulting business. The Drugand Cosmetic Store business primarily includes the urban and suburban drug stores and cosmetic
specialty stores. The Other business primarily involves real estate rental business. The Company

46 AIN PHARMACIEZ ANNUAL REPORT 2012

and its consolidated subsidiaries plan and execute strategies for each business.
Consequently, the business operations of the Company and its consolidated subsidiaries areclassified into the three following reporting segments: Dispensing Pharmacy, Drug and Cosmetic
Store and Other.
(2) Methods of calculating sales, income (loss), assets and other items by reporting segment
Methods of accounting for reported business segments are in principle the same as those indicatedin Note 1 “Summary of Significant Accounting Policies.” Income or losses of reporting segments are
based on ordinary income. Income or losses between segments and transfer amounts are based onmarket prices.
(3) Information on sales, income (loss), assets and other items by reporting segment as of and for theyears ended April 30, 2012 and 2011 is summarized as follows:
Millions of yen
2012
Dispensing

Drug and

Other

pharmacy

cosmetic store

Total

Adjustments

Consolidated

Sales
Sales to third parties
Intersegment sales
Total sales¥ 127,134¥ 15,395¥ 261¥ 142,791¥ -¥ 142,791

-

-

19

19

(19)

-

127,134

15,395

280

142,809(19)

142,791

12,287126(144)

12,269(1,721)

10,548¥ 77,142¥ 7,204¥ 2,446¥ 86,792¥ (883)¥ 85,908¥ 1,276

¥ 220

¥ 29

¥ 1,525¥ 28¥ 1,553

1,258

5

-

1,263

-

1,263

177

55

12

244

-

244

3,645

457

139

4,241

2

4,243

Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment loss
Increase of tangible
and intangible
assetsAIN PHARMACIEZ ANNUAL REPORT 201247

Thousands of U.S. dollars
2012
Dispensing

Drug and

Other

Total

Adjustments

Consolidated

pharmacy

cosmetic store$ 1,573,830$ 190,579$ 3,231$ 1,767,653$ -$ 1,767,653

-

-

235

235

(235)

-

1,573,830

190,579

3,466

1,767,876(235)

1,767,653

152,104

1,560(1,783)

151,882(21,305)

130,577$ 954,964$ 89,180$ 30,280$ 1,074,424$ (10,931)$ 1,063,481$ 15,796$ 2,723$ 359$ 18,878$ 347$ 19,225

goodwill

15,57362-

15,635-

15,635

Impairment loss

2,191

681

149

3,021

-

3,021

45,123

5,657

1,721

52,501

25

52,525

Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of

Increase of tangible
and intangible
assets48 AIN PHARMACIEZ ANNUAL REPORT 2012

Millions of yen
2011
Dispensing

Drug and

Other

pharmacy

cosmetic store

Total

Adjustments

Consolidated

Sales
Sales to third parties¥ 114,354¥ 14,821¥ 211¥ 129,387¥ -¥ 129,387

-

31

19

49

(49)

-

114,354

14,852

230

129,437(49)

129,387

10,210

(207)

(79)

9,924

(1,713)

8,210¥ 67,116¥ 6,881¥ 1,162¥ 75,160¥1,781¥ 76,940¥ 1,108

¥ 222

¥ 15

¥ 1,346¥ 28¥ 1,374

goodwill

969

5

-

974

-

974

Impairment loss

76

156

-

232

-

232

1,488

404

132

2,024

55

2,079

Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of

Increase of tangible
and intangible
assets(1) Amortization of goodwill and unamortized balances by reporting segment as of and for the years
ended April 30, 2012 and 2011 are summarized as follows:
Millions of yen
2012
Dispensing

Drug and

Other

pharmacy

cosmetic store

Adjustments

Consolidated

Amortization of goodwill¥ 1,258

¥ 5

¥ -

¥ -

¥ 1,263

Unamortized balances of goodwill

17,655

10--

17,665

Thousands of U.S. dollars
2012
Dispensing

Drug andpharmacy

cosmetic store

Other

Adjustments

Consolidated

Amortization of goodwill$ 15,573

$ 62

$ -

$ -

$ 15,635

Unamortized balances of goodwill

218,557

124--

218,680

AIN PHARMACIEZ ANNUAL REPORT 201249

Millions of yen
2011
Dispensing

Drug and

Other

pharmacy

cosmetic store

Adjustments

Consolidated

Amortization of goodwill

¥ 969

¥ 5

¥ -

¥ -

¥ 974

Unamortized balances of goodwill

13,852

15--

13,867

17. Comprehensive income“Accounting Standard for Presentation of Comprehensive Income” (ASBJ Statement No. 25, issued
June 30, 2010) became effective for consolidated financial statements for the fiscal years ending on orafter March 31, 2011. Accordingly, the Company and its consolidated subsidiaries have applied thisstandard.
Each component of other comprehensive income for the year ended April 30, 2012 was the following:

Unrealized holding losses on securities:
Losses arising during the year
Reclassification adjustments to loss
Amount before income tax effect
Income tax effectTotal Unrealized holding losses on securities
Total other comprehensive income

Millions of yen
2012

Thousands of
U.S. dollars
2012¥ (64)
179
115
68
47
¥ 47

$ (792)
2,216
1,424
842
582
$ 582

18. Business combinations
For the year ended April 30, 2012(1)Business combinations
During the fiscal year ended April 30, 2012, the Company and its consolidated subsidiaries AIN
MEDICAL SYSTEMS Inc., Daichiku Co., Ltd. and AIN MEDIO Inc., acquired for cash
consideration the shares in nine companies in the dispensing pharmacy business, whichbecame consolidated subsidiaries.

Through this business combination, the AIN PHARMACIEZ Group aims to increase its market
share in the dispensing pharmacy business and anticipates greater management economies ofscale. The Group decided to conduct this acquisition after taking into due consideration the
profitability of the acquired companies, their potential return on investment and their ability tosecure stable revenues and profits above and beyond the amortizable goodwill generated
through this acquisition.
(2)Acquisition price and details
Consideration for acquisition
Expenses related directly to acquisition
Cost of acquisition¥4,463 million ($55,249 thousand)¥122 million ($1,510 thousand)¥4,585 million ($56,759 thousand)(3)Amount of goodwill generated, its sources, and its amortization method and term(a) Amount of goodwill generated¥4,157 million ($51,461 thousand)
The cost of acquisition was allocated based on the reasonable information available at April 30,

50 AIN PHARMACIEZ ANNUAL REPORT 2012

2012.The amount of goodwill would change if more information is available.
(b) Sources of goodwill
Goodwill is the excess amount paid for the acquired companies in anticipation that theapplication of the AIN PHARMACIEZ Group’s management resources and economies of scale
will generate this amount.
(c) Goodwill amortization method and term
Straight-line method over 10 years
For the year ended April 30, 2011(1)Business combinations
During the fiscal year ended April 30, 2011, the Company and its consolidated subsidiaries AIN
MEDICAL SYSTEMS Inc. and Asahi Pharmacy Co., Ltd., acquired for cash consideration theshares in six companies in the dispensing pharmacy business, which became consolidated
subsidiaries.
Through this business combination, the AIN PHARMACIEZ Group aims to increase its market
share in the dispensing pharmacy business and anticipates greater management economies ofscale. The Group decided to conduct this acquisition after taking into due consideration the
profitability of the acquired companies, their potential return on investment and their ability tosecure stable revenues and profits above and beyond the amortizable goodwill generated
through this acquisition.

(2)Acquisition price and details
Consideration for acquisition
Expenses related directly to acquisition
Cost of acquisition¥3,974 million¥36 million¥4,010 million(3)Amount of goodwill generated, its sources, and its amortization method and term(a) Amount of goodwill generated¥2,608 million(b) Sources of goodwill
Goodwill is the excess amount paid for the acquired companies in anticipation that theapplication of the AIN PHARMACIEZ Group’s management resources and economies of scale
will generate this amount.
(c) Goodwill amortization method and term
Straight-line method over 10–15 years
19. Subsequent events
Not applicable.

AIN PHARMACIEZ ANNUAL REPORT 201251

20. Quarterly Information(1)Quarterly net sales for the year ended April 30, 2012 are as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2012
Three months ended July 31, 2011
¥ 33,941$ 420,166
Six months ended October 31, 2011
68,833852,104
Nine months ended January 31, 2012
105,389
1,304,642
Twelve months ended April 30, 2012
142,791
1,767,653(2)Quarterly income before income taxes and minority interests for the year ended April 30, 2012is as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2012
Three months ended July 31, 2011
¥ 2,114$ 26,170
Six months ended October 31, 2011
4,531
56,091
Nine months ended January 31, 2012
7,207
89,218
Twelve months ended April 30, 2012
9,782
121,094(3)Quarterly net income for the year ended April 30, 2012 is as follows:
Thousands ofMillions of yen
U.S. dollars
2012
2012
Three months ended July 31, 2011
¥ 1,048$ 12,974
Six months ended October 31, 2011
2,365
29,277
Nine months ended January 31, 2012
3,674
45,482
Twelve months ended April 30, 2012
4,899
60,646(4)Quarterly net income per share for the year ended April 30, 2012 is as follows:
Yen
U.S. dollars
2012
2012
Three months ended July 31, 2011
¥ 65.71$ 0.81
Six months ended October 31, 2011148.34
1.84
Nine months ended January 31, 2012230.48
2.85
Twelve months ended April 30, 2012307.35
3.80(5)Quarterly net income per share for each accounting period of the year ended April 30, 2012 isas follows:
Yen
U.S. dollars
2012
2012
Three months ended July 31, 2011
¥ 65.71$ 0.81Three months ended October 31, 2011
82.62
1.02
Three months ended January 31, 2012
82.14
1.02
Three months ended April 30, 2012
76.88
0.95

52 AIN PHARMACIEZ ANNUAL REPORT 2012

AIN PHARMACIEZ INC. ANNUAL REPORT 201253

Investor Information

Directors andCorporate Auditors

Corporate Data

Stock Information

Corporate NameAIN PHARMACIEZ INC.

Transfer AgentHead Office
5-1-2-1, Higashi-naebo,
Higashi-ku, Sapporo-shi,
Hokkaido 007-8755, Japan

Stock Listings
First Section of the Tokyo Stock
Exchange(Fiscal 2012)(Fiscal 2012)(As of July 28, 2012)

President and Representative
Director
Kiichi Otani
		
Executive Vice Presidents andRepresentative Directors
Tadashi Nagumo
Hiromi Kato		
Senior Managing Directors
Junichi Kawai
Masato Sakurai
Shoichi Shudo
Toshihide Mizushima		Directors
Miya Oishi
Hikaru Minami*1
Tsuyoshi Kobayashi*1
Masao Kiuchi*1
Ko Mori*1
Corporate Auditors
Kouichi Kawamura
Akira Ibayashi*2
Toshiaki Kobayashi*2
Notes: 1. Outside directors
2. Outside corporate auditors

Established
August 1969
Paid-in Capital¥ 8,682 million
Number of Employees
5,125(includiing part-time workers)
Business Lines• Dispensing Pharmacy Business
Management and franchise
operation of dispensing pharmacies
and consulting services for the
opening of dispensing pharmacies• Drug and Cosmetic StoreBusiness
Management of drug and cosmetic
stores and consulting services forthe opening of shopping centers

Mizuho Trust & Banking Co., Ltd.

Securities Code Number
9627
Fiscal Year
May 1 to April 30 of the following year
Ordinary General Meeting of
Shareholders
July
Date of Record
April 30
(The Company will announce otherdates as and when required.)
Number of Shares Outstanding
15,944,106 shares(including treasury stock)
Number of Shareholders
2,165

Major Shareholders		

(As of April 30, 2012)

Shareholders

Number ofshares held
(thousandshares)Shareholding
ratio (%)

Kiichi Otani

1,654

10.37

Retirement Benefit Trust managed by Mizuho Trust & Banking
Co., Ltd. (Marubeni Corporation account);
Trust & Custody Services Bank, Ltd. as a Trustee of Retrust

1,240

7.78

Seven & i Holdings Co., Ltd.

1,240

7.78

The Hokkaido Bank, Ltd.

786

4.93

Japan Trustee Services Bank, Ltd.

611

3.84

JPMorgan Chase Bank 385174 (Standing agent:Mizuho Corporate Bank, Ltd., Settlement Division)

594

3.73

The Master Trust Bank of Japan, Ltd.

514

3.22

J.P. MORGAN CLEARING CORP-SEC(Standing agent: Citibank Japan Ltd.)

494

3.10

State Street Bank and Trust Company (Standing agent:
The Hongkong and Shanghai Banking Corporation,
Custody Division Tokyo Branch)

486

3.05

Yoshiaki Imagawa

442

2.77

Notes: 1. Shares held in the Retirement Benefit Trust managed by Mizuho Trust & Banking Co., Ltd.
(Marubeni Corporation account) are part of Marubeni Corporation’s retirement benefit trust.
2. Shares held by Japan Trustee Services Bank, Ltd. and The Master Trust Bank of Japan, Ltd.
are all related to trust services.

54 AIN PHARMACIEZ INC. ANNUAL REPORT 2012

AIN PHARMACIEZ INC.
5-1-2-1, Higashi-naebo,
Higashi-ku, Sapporo-shi,
Hokkaido 007-8755, Japan

This annual report is printed using vegetable oil ink on FSC ®-certified paper.
Printed in Japan