Building the Foundations for Growth
ANNUAL REPORT 2015
For the year ended April 30, 2015

AIN PHARMACIEZ at a Glance

Message from the President

Changes in our operating environment

ProfileThe AIN PHARMACIEZ Group operates Japan’s leading
dispensing pharmacy business and a unique drug andcosmetic store business focused on urban markets. We
are working to expand these businesses while responding
flexibly to changes in the operating environment.
In the dispensing pharmacy sector, one of Japan’s few
growth markets, we have channeled business resources into
dispensing pharmacies located near hospitals, helping AIN
PHARMACIEZ become the leading dispensing pharmacy
company in Japan. Leveraging this position, we aim toplay a key role in society by supporting Japan’s healthcare
system, while also increasing corporate value over the
medium and long term. In the drug and cosmetic store
business, we are rolling out new retail formats and taking
other steps to prepare for the next stage of growth.

present major opportunities.

Net Sales by Segment

We are building on our strengths to establish

Other Businesses¥1,037 million
0.5%

a dominant lead in the market.

Drug and Cosmetic
Store Business¥17,803 million
9.5%
Fiscal 2015
Consolidated
Net Sales¥187,904 million

Dispensing Pharmacy
Business¥169,063 million
90.0%

History of Growth
Net sales(¥ million)

Dispensing pharmacy business

Drug and cosmetic store business

Other Businesses

Market capitalization(¥ million)
1,600

200,000

1,400
150,000

1,200
1,000

100,000

800
600

50,000

400
200

0

M&A
deals
Revisions
to medical
expenses

2002/4

2003/4

2004/4

Imagawa Yakuhin

AIN TOKAI

-1.3%
-6.3%

2005/4

2006/4

2007/4

2008/4

2009/4

2010/4

MEDICAL
Rejoice
Asahi Pharmacy
HEARTLANDAIN MEDICAL SYSTEMSDAICHIKUSUNWOOD
Rejoice
Pharmacy

±0
-4.2%

-0.6%
-6.7%

+0.17%-5.2%

2011/4

2012/42013/4

2014/4

2015/4

6 M&As(33 stores)

9 M&As(21 stores)

11 M&As(28 stores)

13 M&As(22 stores)

14 M&As(63 stores)
Medio
Pharmacy(52 stores)+0.52%-5.75%+0.46%-6.0%

0

Kiichi Otani
President and Representative Director+0.22%-2.65%
Dispensing fees

Fiscal 2015 Review

Drug prices

In fiscal 2015, ended April 30, 2015, the Group’s results were solid, with profits exceeding ourforecasts despite weaker-than-expected sales.

Contents

The dispensing fee revisions in April 2014 were designed to encourage dispensing

Message from the President

1

Financial and Non-Financial Highlights

6

Growth Strategy: Building the Foundations for Growth 8
Operating Environment
8Management Challenges and Business Strategies
10
Our Strategies: Scale
12
Our Strategies: Quality
14
Our Strategies: Flexibility
16
Corporate Governance

18

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

20

Investor Information

54

20
24
26
26
27
28
29
53

pharmacies to play a greater role in local healthcare provision, presenting major challenges
for the sector. This means we have to enhance the skills of our pharmacists and step up
our capabilities to create “dispensing pharmacies at the heart of local communities Note 1.”
Fortunately, we have anticipated these changes for some time and reinforced the Group’s
capabilities accordingly. The measures we have implemented are now starting to have an impact
and are also feeding through to earnings, with sales and profits both rising year on year.
In fiscal 2015, net sales rose 10.4% year on year to ¥187,904 million, operating income
increased 13.2% to ¥11,452 million and net income rose 17.8% to ¥6,197 million. Operating
income and net income were both new records for the Group.
Improvements to our frontline capabilities are one reason for these solid results. Since 2012,

Forward-looking Statements
This annual report contains forecasts and projections concerning the plans, strategies and performance of AIN PHARMACIEZ INC. and its subsidiaries andaffiliates. These forecasts and projections constitute forward-looking statements that are not historical facts, but are based on assumptions and beliefs inaccordance 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.

we have been implementing a pharmacy-led project that encourages frontline employees
to provide more efficient and high-quality services. This has improved our ability to responddynamically to developments in the operating environment, feeding directly into stronger
earnings.

Note 1:This type of dispensing
pharmacy aims to support
local healthcare provision inareas such as the managementof left over prescription
medicines, patient healthmanagement, prevention of
double medication, homebased healthcare and 24hour dispensing services. The
government is seeking topromote dispensing pharmacies
at the heart of the community.
Effective from the April 2014
dispensing fee revisions,dispensing pharmacies that
fulfill this role are rewarded
with additional reimbursement
points (see P9 and P13 formore details).

AIN PHARMACIEZ INC. ANNUAL REPORT 20151

Message from the President

Business Strategy:
Dispensing Pharmacy BusinessBusiness Strategy:
Drug and Cosmetic Store BusinessIn the dispensing pharmacy business, fiscal 2015 was a year when we

The drug and cosmetic store business is performing very well. Over thestarted to see the benefits of our pharmacy-led project to improvelast few years, we have channeled business resources into urban stores.

efficiency and services. This included clear reductions in patient waiting

We see significant growth potential in these stores, which offer better

times and inventory turnover days. Despite an increase in the total

prospects for demand amid Japan’s falling population and aging society.

number of dispensing pharmacies, the project has resulted in a system

All our ainz & tulpe stores in the Tokyo Metropolitan Area are doingwith the potential to reduce inventory turnover days to 15 from roughly

well, with the ainz & tulpe Harajuku Quest in particular registering

30 days before the project started. This success in increasing the turnover

50% sales growth year on year after its refurbishment in December

ratio while preventing stock shortages was achieved by strengthening the2014. A raft of steps to adjust product lineups and sales areas haveGroup’s capabilities. We are aiming to deliver a further improvement in

led to major improvements in merchandising at ainz & tulpe and ainventory turnover.

significant increase in brand visibility, supporting higher earnings.

Under our pharmacy-led project, we have worked closely with all

Building on this success, we started rolling out new variations of theemployees to create a set of shared values, which led to a more open

ainz & tulpe format in fiscal 2016. One new store, opened in July 2015

corporate culture and resulted in a stronger sense of unity amongnear the east exit of Tokyo’s Shinjuku Station, covers three floors (roughly

our staff. The dispensing pharmacy sector faces a serious shortage

1,290m 2) of a large mixed-use building. A second store, opened inof pharmacists, but by using this project to prevent our experienced

September 2015, is located in a mixed-use building in Sapporo calledpharmacists from leaving the Group, we can maintain and improve service

Le trois and is centered on the ainz & tulpe brand. This store has a total

levels and profitability.

sales area of 1,490m2. We also launched a new proprietary cosmetic

ainz & tulpe Harajuku Quest

LIPS and HIPS store at ainz & tulpe Shinjuku HIGASHIGUCHI

brand called LIPS and HIPS to coincide with the roll out of the new
ainz & tulpe formats. After initially launching the brand at ainz & tulpe
Shinjuku HIGASHIGUCHI and then in an internal shop at ainz & tulpe
Le trois in Sapporo, we eventually plan to open a network of standalone
LIPS and HIPS stores. We also intend to increase our range of private
brand products in other categories, aiming to boost the gross margin
Pharmacy-led project at AIN Pharmacy ITABASHIHigh Profitability and Stable Recruitment

Operating margin (%)

Aisei
Pharmacy
[105]

4.0

Qol
[150]

2.0

0

50,000100,000

Hokkaido 89

200,000

Tohoku 102
Hokuriku 16

250,000

Net sales (¥ million)
AIN PHARMACIEZ INC.
NIHON CHOUZAI Co., Ltd.
Qol Co., Ltd.
SOGO MEDICAL CO., LTD.
Aisei Pharmacy Co., Ltd.

Notes: 1. Spheres represent market capitalization asof July 8, 2015.
2. The figures in square brackets [ ] represent
the number of newly graduated pharmacists
hired in 2015.

Source: Operating margin and net sales are compiled by AIN PHARMACIEZ
from the above companies’ financial results for fiscal 2015. Numberof newly graduated pharmacists is based on the PHARMACY
NEWSBREAK on April 13, 2015.

2 AIN PHARMACIEZ INC. ANNUAL REPORT 2015754 pharmacies nationwideNIHON
CHOUZAI[NA]

150,000

Le trois – Our New Drug and Cosmetic Store Format—Our dispensing pharmacy store network(As of end-Fiscal 2015)

AIN
PHARMACIEZ
[229]

SOGO
MEDICAL[140]

6.0

ainz & tulpe SHINJUKU HIGASHIGUCHI

Scale of Business—Comparison of net sales, operating margin and number of newly
graduated pharmacists hired among major companies operating
dispensing pharmacies in Japan
8.0

and enhance our ability to attract shoppers.

Chugoku, Shikoku
Kyushu, Okinawa
51

In a new departure for the Company, Le trois is a new beauty
retail complex developed and operated by AIN PHARMACIEZ
and opened in Sapporo in September 2015. We have leased
the entire building, comprising eight aboveground floors andtwo underground floors. The complex includes women-onlysalons and clinics and popular restaurant outlets, resulting
in an exciting “beauty destination” specifically aimed at
women. The building’s flagship ainz & tulpe store is one ofJapan’s largest comprehensive beauty outlets, with prospects
for attracting inbound demand from overseas visitors. Ainz
& tulpe Shinjuku HIGASHIGUCHI, opened in July 2015,
and ainz & tulpe Le trois, are both in prime locations and arebigger than any store we have opened so far, giving us theopportunity to offer innovative comprehensive retail proposals
to consumers. Both stores will play a key role in defining thefuture direction of the ainz & tulpe brand.

Kanto, Koshinetsu 335
Kinki
85

Tokai
76

Branches
Major group companies

AIN PHARMACIEZ INC. ANNUAL REPORT 20153

Message from the President

Personnel Strategy

We will ensure our balance sheet is healthy enough to makemajor investments so that we can take advantage of key

In April 2015 we hired 229 newly graduated pharmacists, comparedwith our target of 300. Hiring conditions are likely to remainSound Financial Structure

opportunities when they arise. I believe we are well-placed to—Comparison of financial indexes among major companies
operating dispensing pharmacies in Japanestablish a dominant position in the sector, as we have taken

Fiscal 2014

the necessary steps to prepare for changes in the operating

challenging, but we will implement initiatives across the Group toenvironment. We will also continue to work on creating highensure we attract the people we need.

value-added “dispensing pharmacies at the heart of local

One of those initiatives is Ain College, a new in-house training

communities.”

facility for the Group set up in May 2015 amid falling pass rates for

In fiscal 2016, we plan to open 120 new dispensing

the national pharmacist exam. Aimed at students who already have

Market capitalization
Cash on hand in banks
Interest-bearing debt
Net cash
Shareholders’ equity ratio(¥ million)

AIN
PHARMACIEZ
71,264
18,846
13,0585,787
41.5%

Average of
3 competitors
23,547
8,821
28,965(20,144)
26.9%

AIN
PHARMACIEZ
171,240
19,553
13,9705,583
42.0%

Average of
3 competitors
53,826
9,058
30,879(21,820)27.8%

pharmacies, including those acquired through M&A deals. In

job offers from the Company but failed the pharmacist exam, thethe drug and cosmetic store business, our target is a modest

college helps these prospective employees to achieve passes on the

Fiscal 2015

four stores, but we will focus on store location and size, notnext exam. We also intend to use the college to offer enhanced specialist training for existingon numbers. Our goal is to create large urban stores capable

pharmacists. This will all cost money, but we think the investment is worthwhile, as it willof generating annual sales of over ¥1 billion, while alsoenhance the Group’s image and have a positive impact on recruitment, leading to even higher

further strengthening the drug and cosmetic store business.

employee standards.

The business currently accounts for only about 10% of

To remain competitive, dispensing pharmacy companies will have to attract sufficientconsolidated net sales, but we plan to raise this to 30%,

numbers of high-quality pharmacists, enabling them to respond appropriately to changes inaiming to transform the drug and cosmetic store businessgovernment policy. Our goal is to hire 300 new pharmacist graduates. Also, we plan to recruit

into the AIN PHARMACIEZ Group’s second growth driver.

100 people in the drug and cosmetic store business, where the number of larger stores is

We are also targeting consolidated ROE of 15%. To

increasing. We also need 50 people to fill back-office positions.

Market capitalization
Cash on hand in banks
Interest-bearing debt
Net cash
Shareholders’ equity ratio(¥ million)

Notes:
1. Market capitalization data are as of July 8, 2015.
2. Interest-bearing debt = Short- and long-term debts
			+ Corporate bond (excluding Lease obligations)
3. Net cash = Cash on hand and in banks – Interest-bearing debt
4. 3 competitors: NIHON CHOUZAI Co., Ltd., SOGO MEDICAL CO., LTD., Qol Co., Ltd.
Source:		Compiled by AIN PHARMACIEZ from the above companies’ financial results
for fiscal 2015.

achieve this, we plan to increase shareholders’ equity but
increase earnings at an even faster pace.
We are also committed to our current shareholder return policy of paying stable dividends in

Corporate Governance and Risk Management

line with earnings.

In corporate governance, we need to have a system that everyone agrees is appropriate
for a listed company, but it is our outside directors that ensure the system works properly.
That’s why we are upgrading our governance system, including adding another outside
director to increase the number to four. We will continue to look at other ways of
improving corporate governance, such as adopting the “company with committees”
corporate structure.
In risk management, which includes systems to prevent dispensing errors, we have
set up a new strategy team that is working with each business division to develop new
systems and continually improve procedures. We are also automating dispensing processes
to minimize risk, as well as training up people to mitigate risk and raising risk awareness.
Our pharmacy-led project, mentioned earlier, is also delivering results in this area throughinitiatives developed by our frontline employees.

Our Vision and Purpose
We have implemented various measures to prepare for anticipated changes in the dispensing
pharmacy sector. As a result, our business and profits have grown, giving us the capability tomove into other areas over the medium and long term. Building on our pharmacy-led project,which was launched in 2012, we are putting in place a framework to deliver consistent bottomup improvements across all our divisions, including head office and the drug and cosmetic
store business. These efforts are supporting personnel development and are creating stronger
foundations for the Group.
Over time, and as the operating environment becomes more challenging, these forwardlooking initiatives will help set the AIN PHARMACIEZ Group apart from its competitors. I believethat growing headwinds in the sector present a major opportunity for the Group.
As the leading player in Japan’s dispensing pharmacy sector and a company aiming to play a

Business Strategies

key role in society, we will continue to fulfill our responsibility as a provider of frontline healthcare,while also aiming for even higher goals to deliver sustained growth in corporate value.

Fiscal 2016, ending April 30, 2016, marks a major turning point for the dispensing pharmacy
sector, because companies will have to start showing their value as dispensing pharmacies that
fulfill the role set out for them in the April 2014 dispensing fee revisions.
The drug price and dispensing fee revisions scheduled for April 2016 could be the first of threesuccessive fiscal years of revisions Note 2. Small and mid-size dispensing pharmacies also face a toughoutlook due to a lack of people to take over their businesses and a shortage of pharmacists.
This suggests there could be a sudden wave of M&A deals and sector restructuring at any time.

4 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

Note 2:
April 2016 scheduled drug
price and dispensing fee
revisions; April 2017: possible
drug price and dispensing
fee revisions related tothe planned increase in
consumption tax in October
2016; April 2018: scheduled
drug price and dispensing fee
revisions.

July 30, 2015

Kiichi Otani
President and Representative Director

AIN PHARMACIEZ INC. ANNUAL REPORT 2015

5

Financial and Non-Financial Highlights

Net Sales and Growth Rate(¥ million)

187,904

200,000

150,000

Operating Income and Operating Margin(%)(¥ million)

20

Net Sales

Up 10.4%15

10.4
100,000

10

550,0000

2011/4 2012/4 2013/4 2014/4 2015/4

Net Sales

Net sales increased 10.4%
year on year on the backof new store openings and
M&A deals.

0

(%)

8,000

5

6,197

6

6,000
4

4,000

2

2,000

2011/4 2012/4 2013/4 2014/4 2015/4

6,000

3.3
4,000

2
2,000

1

2011/4 2012/4 2013/4 2014/4 2015/4(¥ million)

Up 17.8%

30

Up 13.2%

Net income rose 17.8%
year on year to reach arecord high for the Group.

0

Return on Sales

100,000

42.0

80,000

50
40
30
20

40,00010

20,0002011/4 2012/4 2013/4 2014/4 2015/4

Total Assets

Dividend per share¥30; dividend payout
ratio 15.3%, down 2.9
percentage points year on
year.

10

0

2011/4 2012/4 2013/4 2014/4 2015/4

Total Number of Stores2011/4 2012/4 2013/4 2014/4 2015/4

0Prescription Volume(thousands)

( )

(%)

60,000020Operating Margin

114,149

120,000¥ +- 030

The increase mainlyreflected growth in net
income.

50

Cash Dividends
per Share30

Up ¥30.41

100

0

(¥)
40

Net Income
per Share

150

Operating income
increased 13.2% year
on year, supported
by technical fees andimprovements in operating
efficiency.

Cash Dividends per Share*3

195.45200

Operating
IncomeTotal Assets and Shareholders’ Equity Ratio
Net Income

4

10

6.1

8,000

(¥)

(%)

8

Operating Income

Growth Rate(¥ million)

Net Income

10,0000

Net Income and Return on Sales

0

11,452

12,000Net Income per Share*3

1,000

Shareholders’Equity Ratio

Up 0.5percentage
points

The shareholders’ equity
ratio rose 0.5 percentage
points year on year due
to an increase in retained
earnings.

810
56

800
600

754

400
200
0

2011/4 2012/4 2013/4 2014/4 2015/4

14,36515,000Total Numberof Stores

Up 135 stores

Up 11.5%

10,000

The Group added 162
stores through openings
and M&A deals and closed
27 stores, resulting in a
total of 810.

5,000

0

2011/4 2012/4 2013/4 2014/4 2015/4(¥ million)

2005/4

2006/4

2007/4

2008/4

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/457,091
5,230
2,875
930

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

154,560
14,7409,701
5,075

170,225
15,635
10,113
5,259

187,904
17,50911,452
6,197

1,536
458

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

7,235
2,212

6,328
2,258

6,413
2,553

9,095
9,095
38,887

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

16,071
16,10962,032

21,445
21,49265,89829,45029,49876,94033,69533,74585,90838,31238,356
95,83942,122
42,240101,382

47,92848,046
114,149

11,210,350
1,446
193
44

11,304,000
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

15,940,740
3,551
560
61

15,854,190
3,806
616
59

31,707,617
4,429
754
56

Per share information (¥):
Net income*3
Net assets*3
Cash dividends*3

39.96
403.847.5

52.26
456.219.0

44.67
473.089.0

71.18
529.8910.0

85.37
626.2715.0

114.04760.4020.0

127.83923.7322.5

153.67
1,056.89
25.0

159.181,201.71
30.0

165.04
1,328.43
30.0

195.45
1,511.57
30.0

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

2,050

2,370

1,500

1,490

1,481

2,920

3,115

4,290

4,765

4,495

4,245

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

5.0
1.6
2.9
10.9
23.4

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

6.3
3.3
5.6
14.1
40.0

5.9
3.1
5.3
13.1
41.5

6.1
3.3
5.8
13.8
42.0

Capital expenditures*1
Depreciation and amortization *1
At the end of the year:
Equity capital*2
Total 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

6 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

The number ofprescriptions written rose
1,476 thousand year on
year, reflecting growthin the Group’s pharmacy
network.

Dispensing pharmacy
Drug and cosmetic store

Shareholders’ Equity Ratio

11-year Financial Summary
For the year:
Net sales
Selling, general and administrative expenses
Operating income
Net income

Prescription
VolumeNote:Amounts of less than one million yen
were rounded down.
*1: The amounts of capital expendituresand depreciation and amortization
prior to the fiscal year ended April
30, 2007 are on a non-consolidated
basis.
*2: Equity capital =Total net assets – Minority interests*3: The Company conducted a 2-for1 stock split of common shareswith an effective date of October
1, 2014. Net income per share, net
assets per share and cash dividends
per share have been adjusted
retroactively to reflect the impactof the stock split.
*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 / Equity capital(yearly average) × 100

AIN PHARMACIEZ INC. ANNUAL REPORT 20157

Growth Strategy:

Building the Foundations for Growth

Japan’s dispensing pharmacy sector faces a tough operating environment, but we see this as anopportunity to leverage our competitive advantage, which has been built on farsighted strategies.
In this section, we look at the strategies we are implementing to generate sustained value andremain competitive in the sector.

Shift in Government Policy
The Japanese government beganencouraging a shift to non-hospital
dispensing services in 1994, leading
to rapid growth in the number ofdispensing pharmacies outside hospitals.
However, the gover nment is now
looking for new approaches to curb
continued growth in national medical
expenses.

Operating Environment
Japan’s dispensing pharmacy market has developed in unique ways, supported by government policy. The
dispensing pharmacy sector is one of Japan’s few markets offering prospects for growth over the medium
to long term, but it is approaching a major turning point due to shift in government policy and intensifying
competition. Companies that can generate sustained value and fulfill the new role being asked of them by
the government are poised to take a leading role in sector realignment.

From 1994

From 2006

Separate dispensing
and prescribing drugs

From 2014

Accelerate the promotion ofgeneric drugs

Reduce drug prices
2016 ⇒ 2017 ⇒ 2018
Three successive revisions ofdrug prices and dispensing
fees (planned)

Generic Drug Promotion

A Growth Market
Japan’s dispensing pharmacy market
was worth roughly ¥7.2 trillion in fiscal
2014 and we estimate the market willcontinue expanding at around 3–5%
annually. Japan is one of the first
countries in the world to become asuper-aging society, and over 30% ofprescriptions are still filled by hospitals,
which will increasingly be filled outside
hospitals. These factors are likely tos u p p o r t c o n t i n u e d g ro w t h i n t h edispensing pharmacy market.

Dispensing Pharmacy Market
Dispensing pharmacy market value(¥ trillion)

Non-hospital dispensing ratio

Ratio of elderly people

12

80.0%
80

69.0%

10

54.0%

8

60

7.0

6

4.2
4
2
0

29.1%

25.1％

19.5%

11.5%
11.0%

40

20

0.47
1989 1990

1995

2000

2005

2010

2004-2013:
annualized growth of 5.8%

20152020 (April to 0
March year)

A Fragmented Market
Japan has roughly 57,000 dispensing
pharmacies, which are mostly run
by small-scale family businesses.
Japan’s dispensing pharmacy market
is fragmented, with the top five major
companies accounting for only 9.0%of the market, including the Group’s
leading market share of 2.4%.

(Fiscal 2015)

Top 5 major companies*
9.0%
Top 50major companies
23.4%
Others76.6%*Top 5 major companies:
AIN PHARMACIEZ INC., NIHON CHOUZAICo., Ltd. , KRAFT Inc., Qol Co., Ltd.,
Kyoso Mirai Group
Source: AIN PHARMACIEZ estimates,
based on data from DRUG
Magazine (July 2015) andFY2015 dispensing fee statistics
released by the Ministry of
Health, Labour and Welfare.

Structural Changes in Japan’s Dispensing Pharmacy Sector

Large
companies

6,000 pharmacies¥1.3 trillion market(Average annual sales
per pharmacy of ¥220 million)

FY2018(forecast)

In May 2015, the government announced
its new target for generic drug uptake,aiming to lift the generic drug dispensing
ratio from 58.2% at the end of February
2015 to 80.0% by March 2020. The
government is actively promoting genericdrugs by awarding dispensing pharmacies
additional reimbursement points(premiums) for generic drug dispensing.
Note: Based on data for March each year.
Source: AIN PHARMACIEZ compiles based on thepolicies released by the Ministry of Health,Labour and Welfare.

(Average annual sales per pharmacy of ¥150 million)*Including unlisted companies with 5-20 pharmacies

Individual pharmacies run as secondary businesses*
19,000 pharmacies¥1.2 trillion market

Action Program for the Promotionof the Use of Generic Drugs(Oct. 2007 to Mar. 2013)(%)
80

The Japanese government is graduallyrevising drug prices and dispensing fees aspart of its strategy to curb national medical
expenses. This has led to a downward
trend in drug prices.

Roadmap to Further
Promote the Use ofGeneric Drugs (Apr. 2013~)

Based on previous methodology
Based on international methodology

New

80.0%

et

targ

58.2%
60

38.2%
40
20
0

2009 2010 2011 2012 2013 2014 20152020

(Target)Largecompanies

10,000 pharmacies¥3.0 trillion market

The Changing Role of Dispensing Pharmacies
As Japan’s society ages, dispensing
pharmacies are being asked to play aradically different role in patient health.
Under the 2014 dispensing fee revisions,dispensing pharmacies receive higher
fees for services such as managementof left over prescription medication,
support for patient health management
and home-based dispensing services.
This change in policy is aimed at creating“dispensing pharmacies at the heart oflocal communities” that contribute to
local healthcare and provide high-quality
services, in addition to the conventionalrole of drug dispensing. Dispensing
fees could also be revised so that only
dispensing pharmacies that can provide
these types of services will receive(Average annual sales
per pharmacy of ¥300 million)

Mid-tier companies*
25,000 pharmacies¥4.2 trillion market(Average annual sales per pharmacy of ¥170 million)*Including unlisted companies with 5-20 pharmacies

Individual pharmacies run as secondary businesses*
15,000 pharmacies ¥0.8 trillion market(Average annual sales per pharmacy of ¥63 million)*Including private owners with 1-5 pharmacies(Average annual sales per pharmacy of ¥53 million)*Including private owners with 1-5 pharmacies

Total sector: 55,000 dispensing pharmacies, ¥7.0 trillion market

Total sector: 50,000 dispensing pharmacies, ¥7.6 trillion market

premiums. Dispensing pharmacies that step
up to this new role by adapting to changes

will be rewarded appropriately, while thosethat cannot could fall by the wayside.

Main Roles of Dispensing Pharmacies at the Heart of Local Communities
Envisaged by the Government(1) Home-based healthcare

Expanding comprehensive care services(2) Team-based healthcare

Work with local doctors; provide feedback to doctors
about possible prescription errors; etc.

(3) Integrated and continuous
management of prescriptions

Effectively use prescription medicines history andpatient medication notebooks; manage left overprescription medication; prevent over-prescription
and double medication; etc.

(4) Stable supplies of generic drugs
and promoting wider uptake

Respond to government’s target of increasing
generic drug dispensing ratio to 80% by 2020(5) 24-hour support

Open 24-hour dispensing pharmacies or provide
24-hour medication advice services for customers

Dispensing Pharmacy Earnings Model
Total store sales *1

Mid-tier companies*
30,000 pharmacies¥4.5 trillion market

Drug Price Reductions

14 onwards:
annualized growth of 3.0–5.0%

Source: AIN PHARMACIEZ estimates, based on data from the Japan Pharmaceutical Association, dispensing
cost trends issued by the Ministry of Health, Labour and Welfare, Population Estimates of the Ministryof Internal Affairs and Communications Statistical Bureau, and Cabinet Office White Paper on the
Aging Society.

Dispensing Pharmacy Company Market ShareFY2013(%)

Expand role ofdispensing pharmacies

Sales fromdrugs

Dispensing
fees *2

Purchasing cost of drugs
Drug price margin
Pharmaceuticalmanagement fees
Technical fees(includes premiums forgeneric drug dispensing)Store operation costs+ Store labor costs
SG&A expenses
Gross profit
Operating income*1: Dispensing pharmacies receive 0-30% of
medical expenses depending on the typeof insurance of customers.
Dispensing pharmacies then charge theremainder of medical expenses to healthinsurance bodies such as national healthinsurance.
*2: Dispensing fees comprise pharmaceuticalmanagement fees and technical fees forpharmacists.
These fees are added depending on theservices at pharmacies.

Source: Analyst report on February 5, 2015; Merrill Lynch Japan Securities Company, Limited

8 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 20159

Growth Strategy: Building the Foundations for GrowthManagement Challenges and Business Strategies
Management
Challenges

Our Business Strategies

The AIN PHARMACIEZ Groupneeds to address the following
key issues to help it adapt
to changes in the operating
environment, deliver sustained
growth in value and remaincompetitive.

Scale
Dispensing pharmacies
located near hospitals

Medical malls

Increase business scale

M&A deals

Expected Impact

We are actively opening dispensing
pharmacies and pursuing M&A
opportunities to drive top-line
growth. Our strategy is to channel
business resources into dispensing
pharmacies located near hospitals,
as these locations can efficiently
tap into prescription demand. We
are also focusing on developing
medical malls.

Key Performance Indicators

Efficiently tap
prescription demand• Prescription volume » See page 7

Expand pharmacy
network and drive
top-line growth• Number of pharmacies(new + acquired through M&A deals) » See page 13• Net sales » See pages 6-7

Build updispensing expertise• Average prescription price » See page 14

Reinforce the brand• Generic drug dispensing ratio » See page 16• Number of pharmacies providing
home-based dispensing services » See page 17»» See pages 12-13

Quality
Secure dispensing fees
Hiring and training pharmacists

Increasing the efficiencyof existing pharmacies
Hire sufficient numbersof high-quality
pharmacists»» See pages 14-15

Increase quality andnumber of pharmacists• Number of pharmacist graduates hired » See page 15

Flexibility
Generic drug wholesale subsidiary

Generate profits
from generic drugs

Since the early days of theCompany, we have put priority on
hiring and training pharmacists to
support our aggressive pharmacy
opening program and provide
high-quality services. We are alsoseeing good results from initiatives
to boost the efficiency of existing
pharmacies.

Promoting home-based
dispensing services
Initiatives to provide
24-hour support

In 2006, we were the firstdispensing pharmacy company
to establish a dedicated genericdrug wholesaler, WHOLESALESTARS Co., Ltd. (WSS), andsince then have continued totake the initiative with measuresthat preempt changes in thegovernment’s social welfare policy,
such as actively promoting homebased dispensing and 24-hour
dispensing services.

Generate sustained
growth in profits• Operating income » See pages 6-7• Net cash » See page 5»» See pages 16-17

10 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201511

Growth Strategy: Building the Foundations for Growth
Creating Dispensing Pharmacies at the Heart of the Community: Initiatives and Progress

Our Strategies:

Dispensing pharmacies are now being asked to play a greater role in the community.

Scale

1 Home-based healthcare: 393 pharmacies currently provide home-based dispensing services(as of end-April 2015)2 	Team-based healthcare

To maintain our position as a growth company, we aim to increase the scale of our business to
become the dominant player in the market. We are actively opening new dispensing pharmacies
and acquiring more pharmacies through M&A deals to realize this goal. Specifically, we arechanneling business resources into dispensing pharmacies located near hospitals and into
the development of medical malls, as these locations are ideally suited to efficiently tappingprescription demand.

12 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

Number ofcases

AIN PHARMACIEZ Dispensing Pharmacies LocatedNear Hospitals: Breakdown by Location
Others14%

Primary location
75%

Comparison of Profitability by Type of Pharmacy
Comparison of Dispensing Pharmacies by Number ofMonthly Prescriptions
National
average

Dispensing pharmacies
38.3 hospitals 13.0
located near

24.2

AIN
PHARMACIEZ 5.7
Group

0
–599

0

12.7 4.6 7.2

600–1,39920

1,400–1,79940

Number of pharmacies

1,800–2,499
60

113
751
232
188
1,864

17.5%
13.6%

6.1% * Pre-avoid activities: Through their involvement in drug-based treatment and their
40.3%
specialist roles in drug use management, guidance and care, pharmacists carry out
12.4%
activities to prevent treatment that is detrimental to the health of patients, such as
10.1%
side effects, drug interactions, and insufficient treatment effects, and to identify
100.0%
potential issues at an early stage to avoid serious incidents.

5 24-hour support: Phone-based support anddispensing services where necessary, now
available at almost all dispensing pharmacies;
roughly 468,000 cases each year
AIN Pharmacy NOBORITO open 24 hours

Generic drug dispensing ratio
AIN PHARMACIEZ
65.3% (as of end-April 2015)
National average
58.4% (as of end-January 2015)(see page 17 for more details).

Medical malls
We began the full-scale development of medical malls in
April 2012. We are involved in all stages of the process,from medical mall design and efforts to attract tenants
through to the actual development of the facility. Our
strategy is to create more locations for our dispensing
pharmacies. We plan to accelerate growth by actively
working to develop medical zones.
We are targeting locations in urban areas with a highlevel of customer traffic, such as station buildings. These
locations boost the visibility of the clinics, resulting in higher
profitability. We see these medical malls driving the Group’s
growth over the medium term, and we plan to open
roughly 10 medical malls each year.
M&A deals
In conjunction with store openings, we are actively pursuing
M&A opportunities as another important part of our growthstrategy. Under our M&A strategy, we emphasize investment
efficiency, only targeting dispensing pharmacies with thepotential to increase their profitability after joining theGroup. Over the last few years, M&A deal costs have been
rising due to increased competition for acquisition targets.
Due to our leading position in the sector, we have access toextensive information about M&A opportunities, allowing
us to consistently acquire new targets while ensuring we
pay a fair price. The Group has other advantages in M&A
negotiations, such as a solid financial base, strong cash flow
and high-quality training for pharmacists.
Due to the drug price and dispensing fee revisions
in April 2014, dispensing pharmacies are likely to find it
harder to remain competitive, particularly small and mid-tieroperators. We plan to target M&A deals that are a good
fit for the Group, seizing opportunities when they emerge
while also ensuring investment efficiency.

New Store Openings, Pharmacies acquired through M&A deals and EV/EBITDA Multiples

Dispensing pharmacies

33.8not located near
18.2 hospitals
20.4

327
253

AIN PHARMACIEZ and NTT DOCOMO havedeveloped a free patient medication notebook app.
The app has been downloaded 60,000 times.

Ratio

4 	Stable supplies of generic drugs and promoting
wider uptake

6.8

15.1

2,500 More than
–2,999 3,000
80

100
(%)

Source: Comparison of dispensing pharmacies by number of prescriptions (Ministry of Health, Labour andDispensing
pharmacies
locatednear hospitals- operated
by AIN(AsPHARMACIEZ
Group
Welfaredata for March2013) andAIN PHARMACIEZ
dispensing
pharmacies
of October 2013)

Dispensing pharmacies not located near hospitals- operated by other dispensing pharmacy companies
Dispensing pharmacies not located near hospitals - operated by drugstore companies(times)8.0

160

Number of pharmacies

Secondary location11%

Duplicated drug administration
Contraindications / careful administration /interactions
Side-effect history / side-effects identified
Directions for use / dosage
Directions for effect / efficacy
Directions for formulation / dose timing / other
Total< Free patient medication notebook app >

119

140
120

7.0
6.0

4.77

100

5.0

80

4.0

60

3.0

40

2.0

40

20
0

EV/EBITDA multiples

Dispensing pharmacies located near hospitals
Under Japan’s current healthcare system, dispensing
pharmacies near hospitals offer significant benefits forpatients and also allow us to leverage our competitive
advantages. Over the medium term, we plan to continue
channeling business resources into these pharmacies, as we
believe they are the best location to develop our dispensing
pharmacy business.
These dispensing pharmacies build close links with local
hospitals, exchanging information to ensure sufficient drugs
are in stock and minimizing the risk of dispensing errors.
We expect this format to remain the most popular typeof pharmacy in Japan over the medium and long term, as
they are in convenient locations and have won the trustof patients. Dispensing pharmacies near hospitals can also
efficiently capture prescription demand, leading to higher
profits (see figure on the right). They can also monitor
prescription trends and medicine usage at local hospitals,
allowing them to manage inventories more accurately.
In addition, building a nationwide chain of thesedispensing pharmacies generates economies of scale indrug procurement and dispensing equipment development,
resulting in lower costs and more efficient pharmacy
operations.
The April 2014 dispensing fee revisions have led toa major shift in the earnings structure of the dispensing
pharmacy sector. Now, only dispensing pharmacies that
contribute to the government’s goal of curbing national
medical expenses can remain profitable. Specifically, inorder to cut back over-prescription of medicines, dispensing
pharmacies are being asked to carefully check doctors’prescriptions, manage leftover medicines and prevent
dangerous combinations of prescribed drugs. Pharmacies
are also being encouraged to recommend generic drug
options, as well as provide 24-hour services and homebased dispensing services. The government is implementing
policies to encourage a shift to dispensing pharmacies at
the heart of the community that can fulfill this role. AIN< Dispensing pharmacy pre-avoid reports* >PHARMACIEZ is already taking steps to address this shift inpolicy (see details on the following page).
To address these changes, dispensing pharmacies also
have to increase the quality and number of pharmacists andmake pharmacy operations more efficient.
Recognizing that dispensing pharmacies will have toplay an increasingly important role in society, we havebeen implementing a range of measures in recent years,
such as stepping up pharmacist training and increasing theefficiency of dispensing operations (see page 15 for moredetails). As a result, we are now well-placed to respond tochanges in government policy.

Sales of dispensing
pharmacy business per store

Store opening strategy

3 	Integrated and continuous management of prescriptions

2005/4

New store openings

2006/4

2007/4

2008/4

Pharmacies acquired through M&A deals

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/41.0
0EV/EBITDA multiples

Notes: 1. EV/EBITDA multiples = EV (M&A: acquisition price) / EBITDA (Operating income + Depreciation and amortization)
2. From fiscal 2011, number of pharmacies includes pharmacies that were subsequently closed.

AIN PHARMACIEZ INC. ANNUAL REPORT 201513

Growth Strategy: Building the Foundations for Growth

Our Strategies:

Quality

Number of New Pharmacist Graduates Hired
Increase in number ofpharmacists hired

The role of dispensing pharmacies is changing in Japan (see page 9 for more details). Today’s
pharmacies now need to be able to provide a wider range of high-quality services, such as homebased and 24-hour dispensing. In order to address these changes, the biggest issue for dispensing
pharmacy companies is how to increase the quality and number of pharmacists. Hiring and training
pharmacists on a sustained basis is also vital to support an active dispensing pharmacy opening
program. AIN PHARMACIEZ has therefore put the highest priority on securing personnel. We
are also pushing ahead with initiatives to increase the efficiency of existing pharmacies, which isdelivering concrete results.
Personnel strategy
Since its founding, AIN PHARMACIEZ has focused on hiring
and training pharmacists on an ongoing basis as part ofconsistent efforts to improve the quality and number ofpharmacists. In home healthcare, pharmacists have a muchcloser connection to the lives of patients, so they need tohave an even higher level of expertise and communication
skills. AIN PHARMACIEZ works to continually improve theskills of its pharmacists after they join the Group as new
graduates. As part of this approach, we opened a new
training facility called Ain College in May 2015 to address
falling pass rates for the national pharmacist exam. Aimed
at students who already have job offers from the Company
but failed the pharmacist exam, the college helps prospective
employees work to achieve passes on the next exam.
By attracting large numbers of high-quality pharmacists,
we can contribute to the government’s policy of community
healthcare and boost profits by securing more additional
reimbursement points (premiums).

To support aggressive business expansion over the
medium and long term, we plan to improve on our sectorleading employing training and education programs andcontinue actively hiring pharmacists.

(persons)
400

251

200

1.9

100

51.7%
8.2%
59.9%

63.9%
16.0%
80.0%

National
AverageAIN
PHARMACIEZ

27.5%
17.9%
45.4%

19.7%
67.2%
86.9%

Source: National average based on Survey of Medical Care Activities in Public Health Insurance
2014, Ministry of Health, Labour and Welfare; AIN PHARMACIEZ as of April 2015.

2.6

2.9

2.2

2.8

3.4

4

2.5

0

2

A dedecated vehicle for home-based dispensing services0

Pharmacists
General positions
Ratio of newly qualified pharmacists hired by the Company

Increasing the efficiency of existing pharmacies
As part of efforts to curb national medical expenses, thegovernment is changing the dispensing fee system withevery revision. This is having a major impact on the earningsof dispensing pharmacies. Against this backdrop, welaunched a new pharmacy-led project in autumn 2012 as
one of our strategies to reinforce the operations of existing
dispensing pharmacies.
Under this project, pharmacists at all of our dispensing
pharmacies are being asked to find new ways of increasing
efficiency, improving profitability and enhancing service
provision. The project has yielded a range of outcomesin the two years since it was launched. The biggest
improvement has been in inventory value. Despite theaddition of 211 dispensing pharmacies to the Group’s
network compared with April 2013, before the project
started, inventory value as of April 2015 was roughly¥3.2 billion lower than estimated inventory value under
the previous system (see graph below). This reduction ininventories has contributed to an increase in cash flow. The
project has clarified issues that need to be addressed anddelivered clear results, helping to change thinking among
frontline personnel and boost motivation, leading to alower level of staff turnover.

FY2013
Sales of dispensing
pharmacy business¥134,372 million

14,000Estimatedinventory value
9,162

12,000Ain College

6,000
4,000

539

591

8,356
(–)

7,105
(–)

Apr.
Jan.
2013
2014
Total inventory value (right scale)0

Prescription Volume and Average Prescription Price(thousands)

FY2015
Sales of dispensing
pharmacy business¥169,063 million

FY2014
Sales of dispensing
pharmacy business¥148,375 million

9,472
611

9,689
625

10,123

10,510653

678

11,627(stores)
1,500

3,203
750

1,000

500

8,423
7,141
7,897
8,269
8,811
(18.2)(19.9)(21.7)(21.2)(23.0)
Apr.
Jul.
Oct.
Jan.
Apr.
2014
2015
Optimized inventory value (right scale)
Number of operational pharmacies (left scale)0

Notes:
1. Total inventory value = (AIN
PHARMACIEZ, AIN MEDIO,DAICHIKU, Asahi Chozai + inventoriesof those four companies at WSS) ÷number of operational pharmacies at
those four companies x total numberof operational dispensing pharmacies
2. Optimized inventory value = total
inventory value – estimated inventory
value; estimated inventory value isprojected value of inventories due togrowth in number of pharmacies
3. The number of operational pharmacies
is as of the end of each quarter.
4. Inventory turnover days shown inbrackets.

(¥)

20,00011,53814,36512,00011,00015,00010,0005,000

Average prescription price

Ratio of Prescriptions that Meet Standards
for Generic Drug Dispensing Premiums

14 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

2.3

2,000

Note: Standards for dispensing system premiums: Dispensing pharmacies receive premiums
if they meet certain standards requested by the government, such as the number of visits forhome-based dispensing services and the required number of inventory items.
Source: National average based on Survey of Medical Care Activities in Public Health Insurance
2014, Ministry of Health, Labour and Welfare; AIN PHARMACIEZ as of April 2015.

Generic drug dispensing system premiums 1
Generic drug dispensing system premiums 2
Total

2.7

93
28
2006/4 2007/4 2008/4 2009/4 2010/4 2011/4 2012/4 2013/4 2014/4 2015/4(¥ million)

Prescription volume

Standards for dispensing system premiums 1
Standards for dispensing system premiums 2
Total

1.9

6

229

Impact of Pharmacy-led Project: Optimizing Inventories

Ratio of Prescriptions that Meet Standards
for Dispensing System Premiums*
AIN
PHARMACIEZ

10
8

8,000

National
Average(%)

300

10,000Comparison of Ability to Secure Dispensing Premiums

No new
New graduates
graduatesfrom six-year pharmacy
from pharmacy college courses
college courses (new curriculum)

9,000

0

2010/4

2011/4Prescription volume

2012/42013/4

2014/4

Average prescription price2015/48,000

AIN Pharmacy NISHI-SHINJUKUAIN PHARMACIEZ INC. ANNUAL REPORT 201515

Growth Strategy: Building the Foundations for Growth

Our Strategies:

Flexibility• Maintain margins: WSS can instruct Group
dispensing pharmacies to promote certain genericdrugs, giving it significant control over drug selection
and usage volume and enabling it to maintainmargins.

Changes in social welfare policy have a major impact on the dispensing pharmacy sector. That’s
why we need to respond flexibly to developments in the operating environment in order to fulfill
the role envisaged for dispensing pharmacies. Over the years, we have consistently prepared forthese changes, including setting up a generic drug wholesale company. These steps have resulted
in the competitive advantage we have today. We aim to build a dominant position in the sector
by enhancing this competitive advantage and setting ourselves apart more clearly from ourcompetitors.

24-hour support
The government is accelerating plans to promote genericdrug uptake. In May 2015, it announced a new target, aiming
to sharply lift the generic drug dispensing ratio to 80% by
March 2020. In this environment, WSS will allow us to further
boost the competitiveness of the AIN PHARMACIEZ Group.
Net Sales and Ordinary Income of WSS

Generic drug strategy(¥ million)

Roles and Merits of WSS

Links with Group’s
dispensing pharmacies

WSS

Selects
preferred
generic drugs

Generic drug procurement

Generic
drug
makers

Negotiates withand buys directlyfrom genericdrug makers(stores)
500

333

No premiums

Mar.
2014

Apr.

113
May

Jun.

Generic drug dispensing system
premiums 1 (18 points)

Jul.

500
400
300

200

40

397

364

252

151

2011

Dispensing equipment, etc.

2012

1,140
2013 2014 2015 (FY) 0*All our pharmacies already offer 24-hour support via mobile phone.

Ordinary income

AIN Pharmacy NOBORITO offering 24-hour services

Aug.

Sep.

150

124

105

200

96
Oct.

98

91

100

Apr.

0

Generic drug dispensing system
premiums 2 (22 points)

Nov.

Dec.

Jan.
Feb.
2015
Generic drug dispensing ratio by volume

Mar.

6,628
5,921

400

300

200

4,881

4,520
3,500
157

393

339

7,000
6,000
5,000

274

3,690

(cases)

4,000

230
181

3,000

Number of home visits

800

154

54

2010

As healthcare becomes more advanced and Japan’s
population ages, dispensing pharmacies are being asked toplay a greater role as local health centers supporting homebased healthcare and other services. The AIN PHARMACIEZGroup started implementing initiatives in home-based
dispensing from 2012, realizing it was likely to become an
important function of dispensing pharmacies. As of end-

Number of pharmacies

61.2

257

45

2008 2009

Home-based dispensing

900

700

390

2007

Drugs

(stores)Number of pharmacies

Generic drug dispensing ratio by volume

65.3

63.1

600

50

1,000

500

Benefits of using WSS• Secure profits: WSS allows us to negotiate directlywith generic drug makers, so wholesaler margins also
feed through to Group profits.
• Negotiating power: WSS sells roughly 90% of its
products to Group companies, which means it canaccurately monitor total generic drug usage volume
across the Group, making it easier to negotiate withdrug companies. AIN PHARMACIEZ is also the largest
buyer of generic drugs in Japan’s dispensing pharmacy
sector, giving us a strong position in negotiations withdrug makers.

64.8

55

11,760The AIN PHARMACIEZ Group has started shifting to 24hour opening hours* in response to changes in the
April 2014 dispensing fee revisions. In August 2014, Ain
Pharmacy NOBORITO (Kanagawa Prefecture) became ourfirst pharmacy to open all day. The store has full security
measures, the most important feature for pharmacies
that stay open all night. We are using this location to gain
know-how about running a 24-hour pharmacy and build
an optimum operating structure. The Group has access toa large number of pharmacists and operates an extensive
network, giving us the scope to create nightshifts schedules
that are not taxing on our pharmacists.
We will continue to implement initiatives in this area,
while also increasing efficiency, because we recognize that24-hour services will be crucial to ensuring dispensing
pharmacies fulfill their role in supporting localized
healthcare.

Number of Pharmacies Providing Home-based Dispensing Services

65

60.1

1,500
10,000

0

(%)

58.9

12,8645,000

Growth in Generic Drug Dispensing

60

2,500

2,000

15,000Net sales

AIN
PHARMACIEZ
Group
dispensing
pharmacies

Maintains genericdrug pricemargins

2,287

Ordinary income

The government is actively promoting wider use of genericdrugs to help reduce national medical expenses. The futureof dispensing pharmacy companies will largely depend on
their ability to contribute to this policy by increasing thegeneric drug dispensing ratio, and on whether they can build
operating structures that are resilient to declines in earnings
caused by factors such as lower generic drug price margins.
One of our strengths has been the steps we have taken topreempt changes in the government’s generic drug policy.
Anticipating moves by the government to expand its
generic drug promotion policies, we established WHOLESALESTARS Co., Ltd. (WSS) in 2006, the first dedicated genericdrug wholesaler to be set up by a dispensing pharmacy
company in Japan. WSS is playing a key role in boosting theGroup’s earnings.
Normally, an increase in the generic drug dispensing ratio
results in lower drug price margins, which can weigh ondispensing pharmacy sales and profits. However, WSS allows
AIN PHARMACIEZ to avoid this risk. The subsidiary offers
other benefits as well.

(¥ million)

20,000

Monitors andmanages total
generic drug usage
across the Group

April 2015, 64% (393 stores) of our dispensing pharmacies
provide home-based dispensing. We plan to expand these
services to all our pharmacies as part of active efforts to
support home-based healthcare.

2,000
100
1,000
0

Mar.
Apr.
May
Jun.
Jul.
2014
Number of pharmacies providing home-based dispensing services

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.
2015

Feb.

Mar.

Apr.

0

Number of home visits

Notes: 1. Graph shows breakdown of Group pharmacies based on premiums received for generic drug dispensing.
2. 1 point = ¥ 10

16 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201517

Corporate Governance(As of July 30, 2015)

AIN PHARMACIEZ assumes responsibility for people’s health and the well-being of the wider
community through its business activities. We promote a highly efficient and transparent 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 theindispensability of continuing with sound and transparent
business activities that prioritize compliance.
We have adopted a corporate auditor system to oversee
not only key management decisions and the business executionof directors, but also general corporate management. In orderto ensure the effective mutual management oversight of
directors, the Board of Directors convenes more than once amonth, while a management meeting is held for directors andthe 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 andimplements measures to prevent drug dispensing errors.
As part of efforts to enhance corporate governance, wehave established a Compliance Committee to promote andembed systems that ensure compliance with business ethics,
laws and regulations. The committee is made up of all the
Company’s directors and auditors and legal advisors.

Outline of Corporate Governance

OUTSIDE DIRECTORS AND OUTSIDE CORPORATE
AUDITORSThe Board of Directors is comprised of 14 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 a number of functions and roles tofulfill in the Group’s corporate governance system. Drawing on
their specialist knowledge and experience, they contribute to
the Group’s business strategy, discussions on board resolutions,and internal control mainly by monitoring business execution
and providing input at meetings of the Board of Directors froma neutral, independent and objective standpoint.
The Company has no specific standards in place at the
moment, but the basic policy for appointing outside directors
and outside corporate auditors is to ensure they can effectively
fulfill the above roles. Four outside directors and one outside
corporate auditor have been designated as independent
officers in accordance with the provisions of the Tokyo Stock
Exchange.
Reasons for selection of outside directors

Corporate governance structure

Corporate Auditor System

Chairman of the Board

Kiichi Otani

Number of directors

14 (including 4 outside directors)

Number of corporate auditors

3 (including 2 outside corporate auditors)

Board of Directors meetings in fiscal 2015

Number of meetings: 18 (more than once every month)
Examples of resolutions: Annual budget, issues related to new businesses, store openings

Ko Mori

Ko Mori’s background is with Marubeni
Corporation, which contributes to the Retirement
Benefit Trust (Marubeni Corporation accountmanaged by Mizuho Trust & Banking Co., Ltd.), a
major shareholder in the Company. Ko Mori also
has experience working at MARUBENI SAFENET
CO., LTD., which has a business relationship with
the Company through insurance contracts.

Koji Kabumoto

Koji Kabumoto has specialist knowledge andexperience from working in the IT and logistics
departments of a major trading company. He
was selected as an outside director to contributeto all areas of the Company’s management
by drawing on his knowledge and experienceto provide input to meetings of the Board of
Directors and monitor business execution.

Outside Director attendance at Board of Directors meetings: 87%
Outside Corporate Auditor attendanceat Board of Directors meetings:

91%

Board of Corporate Auditor meetingsin fiscal 2015

Number of meetings: 18
Examples of resolutions: Audit policy, audit plans and business division audits

Management Meetings in fiscal 2015

52

Key meetings attended by corporate auditors

Board of Directors meetings, Board of Corporate Auditor meetings, Management Meetings

Independent director appointment

Outside directors Ko Mori, Koji Kabumoto, Seiichiro Sato and Yasuyuki Hamada, andoutside corporate auditor Toshiaki Kobayashi have all been designated as independent
officers in accordance with the provisions of the Tokyo Stock Exchange.

Systems to strengthen and promote Group management

Group Management Meetings (weekly)

Accounting auditor

Ernst & Young ShinNihon LLC

Seiichiro Sato

Seiichiro Sato has specialist knowledge andexperience from working in the legal andplanning departments of a major retailer. He wasselected as an outside director to contribute to allareas of the Company’s management by drawing
on his knowledge and experience to provide
input to meetings of the Board of Directors andmonitor business execution.

Yasuyuki Hamada

Yasuyuki Hamada has specialist knowledge andexperience as an academic, with a particularfocus on economics and finance. He was selected
as an outside director to contribute to all areas of
the Company’s management by drawing on his
knowledge and experience to provide input tomeetings of the Board of Directors and monitor
business execution.

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 2015

Cooperation

Akira Ibayashi

Dispensing Pharmacy Division

Akira Ibayashi has specialist knowledge fromworking at financial institutions and experience
as a corporate auditor at other companies. We
believe he can contribute to the Company’s
internal control system by providing advice tothe Board of Directors, the Board of Corporate
Auditors and other bodies and by monitoringbusiness execution.

Toshiaki Kobayashi has accumulated significant
experience through an extensive career withthe former Ministry of Finance and otherorganizations. We believe he can contributeToshiaki Kobayashi
to the Company’s internal control system byproviding advice to the Board of Directors, theBoard of Corporate Auditors and other bodies
and by monitoring business execution.

REMUNERATION FOR DIRECTORS AND AUDITORSThe maximum total amount of remuneration for directors
was determined by a resolution at the 44th Ordinary General
Meeting of Shareholders held on July 30, 2013 to be ¥300
million annually (does not include payments made to directors
for their duties as employees; the maximum total amount foroutside directors was determined to be ¥50 million annually).
The maximum total amount of remuneration for corporate
auditors was set at ¥30 million annually at the 22th 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 2015 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

176

164

11

12

6

6

–

1

19

19

–

5

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 2015 are as follows.
(¥ thousand)ReportingCompensation paid foraudit certification activities

Reporting
Drug and Cosmetic Store Division

Accounting Auditors
Audit

ReportingBusiness execution

Executive Officers

Appointment

Reasons for selection of outside corporate auditors

Audit
Administration
Department

Internal Audit Office

The Company
Consolidated
subsidiaries
Total

Compensation paid for
non-audit activities

40,200–––40,200–AIN PHARMACIEZ INC. ANNUAL REPORT 201519

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.
The Japanese government is progressively revising drug
prices and dispensing fees as part of its policy to curb national
medical expenses. Earnings at dispensing pharmacies are thetotal of dispensing fees and sales of drugs, so earnings areaffected by these revisions.
Under drug price revisions in April 2014, the averagedrug price was reduced by 2.65%. Also, under dispensing
fee revisions, the dispensing fee system is being changed toreflect the functions of dispensing pharmacies in order toimprove pharmaceutical management and promote homebased healthcare services. The dispensing fee revisions are also
designed to encourage even wider use of generic drugs.
The gap in performance is widening between companies in
the industry, which are struggling with changes to their profit
structures resulting from revisions to dispensing fees and othersystems. However, the Group regards these changes in theoperating environment as a perfect opportunity to push ahead
with its strategy of further increasing profitability.
* Dispensing fees comprise pharmaceutical management fees and technical feesfor pharmacists.

BUSINESS OVERVIEW FOR THE FISCAL YEARUNDER REVIEW
During the fiscal year ended April 30, 2015, the Japanese
economy recovered steadily, supported by firm consumer
spending and an upturn in corporate earnings and employment
conditions.
In this economic environment, the Group worked to
expand its business by opening new dispensing pharmacies andusing M&A, while also pushing ahead with the comprehensive
development of medical malls and the urban drug and cosmetic
store business. The Group also aimed to boost profitability byrevitalizing existing stores and dispensing pharmacies.
For the fiscal year under review, the Group reported net
sales of ¥187,904 million, an increase of 10.4% year on year,
reflecting the opening of new dispensing pharmacies andM&As. Operating income rose 13.2% to ¥11,452 million andnet income increased 17.8% year on year to ¥6,197 million, a
new record for the Group.

20 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

As of the end of the fiscal year, the number of stores in theGroup totaled 810, a net increase of 135 stores from the endof the previous fiscal year.

BUSINESS RESULTS BY SEGMENT
Dispensing Pharmacy BusinessIn the dispensing pharmacy business, average sales perprescription continued to rise at existing dispensing pharmacies
due to increases in the number of new drugs and in longerterm prescriptions, offsetting the impact from wider use ofgeneric drugs.
In order to fulfill the new role being asked of dispensing
pharmacies, the Group will build links with local medical
service providers, mainly in the area of home-based dispensing,and promote wider use of generic drugs. The Group will
also continue to implement its pharmacy-led project aimed
at reviewing and rebuilding all dispensing processes at eachdispensing pharmacy in order to improve efficiency andupgrade patient services.
In business development, the Group continued to pushahead with business expansion by opening new dispensing
pharmacies, primarily dispensing pharmacies near hospitals andmedical malls, and through M&A deals. During the fiscal year
under review, 15 dispensing pharmacy companies joined theGroup, including Medio Pharmacy Co., Ltd. which became asubsidiary in February 2015. Medio Pharmacy Co., Ltd. is basedin Numazu City, Shizuoka Prefecture and operates a chain of
52 dispensing pharmacies, mainly in Shizuoka Prefecture.
The dispensing pharmacy business reported net sales of¥169,063 million, an increase of 11.6% year on year, andsegment income of ¥14,449 million, up 13.1%. During the
fiscal year under review, the Group opened 159 dispensing
pharmacies, including M&A deals, and closed 21 dispensing
pharmacies, resulting in a total of 754.
Drug and Cosmetic Store BusinessIn the drug and cosmetic store business, the market
environment remained challenging due to a narrowing
competitive gap between companies in the sector and theemergence of new competitors from sector consolidation andrealignment that also extends to other business sectors, as well
as regulatory changes related to online sales of OTC drugs.
Against this backdrop, the Group continued to open ainz &tulpe urban drug stores.
Ainz & tulpe is a specialist, highly original drug andcosmetic store brand that the Group is rolling out in urban
areas with high customer traffic. The Group continued
to reinforce merchandising lineups at ainz & tulpe stores,

particularly private brand products, leading to higher sales atexisting stores compared with the previous fiscal year.
In response to growing inbound demand, spurred by newrules from October 2014 that expand the type of products on
which overseas visitors to Japan are exempt from consumption
tax, the Group now offers duty-free services at 28 of its drug
and cosmetic stores (as of April 30, 2015), making a large
contribution to improvements in profitability.
The Group also actively refurbished urban stores torevitalize its store network. In December 2014, the Group
refurbished the ainz & tulpe HARAJUKU QUEST (Shibuya Ward,
Tokyo), which included adding organic and natural cosmetic
products to the merchandise lineup, and upgraded other urban
locations such as the ainz & tulpe IKEBUKURO SEIBU (Toshima
Ward, Tokyo) and the ainz & tulpe frente MINAMI-OSAWA(Hachioji City, Tokyo).
During the fiscal year under review, the Group opened
a number of ainz & tulpe stores, including the ainz & tulpe
SANNOMIYA Yuzawaya (Chuo Ward, Kobe City), the ainz &tulpe OYAMA STATION (Oyama City, Tochigi Prefecture), andthe ainz & tulpe HIGASHI KUYAKUSHO MAE, (Higashi Ward,
Sapporo City), aiming to increase the number of stores in prime
locations near stations. At the same time, the Group closed six
stores, mainly in suburban locations, resulting in a total of 56
stores.
As a result, the drug and cosmetic store business reported
net sales of ¥17,803 million, a decrease of 1.0% year on year,
and segment income of ¥117 million, up 394.7%.
Furthermore, the Group opened an ainz & tulpe store on
three floors of the MIRRAZA SHINJUKU Building near the east
exit of Shinjuku Station (Shinjuku Ward, Tokyo) in July 2015, anda specialist health and beauty retail complex focused on the ainz
& tulpe brand in Le troi Building in Sapporo’s Odori area (Chuo
Ward, Sapporo; 10 floors) in September 2015.
Other Businesses
Net sales of other businesses totaled ¥1,037 million, an
increase of 35.2% year on year, and segment losses totaled¥614 million, an increase of 181.3% year on year.

Financial Position
Total assets at the end of the fiscal year under review totaled¥114,149 million, up ¥12,767 million due to an increase ininventories and fixed assets related to new store openings andM&A.
Consolidated current assets at the end of the fiscal year
under review increased by ¥2,031 million to ¥46,365 million
compared to ¥44,334 million at the end of the previous
fiscal year. This mainly reflected cash on hand and in banksof ¥19,553 million, an increase of ¥706 million comparedwith the previous fiscal year, notes and accounts receivable of¥8,369 million, an increase of ¥1,650 million and merchandiseof ¥9,747 million, an increase of ¥168 million due to businessexpansion, and other accounts receivable of ¥5,291 million,

down ¥388 million.
Fixed assets at the end of the fiscal year under review
increased by ¥10,735 million to ¥67,783 million compared to¥57,048 million at the end of the previous 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 and equipment, mainly buildings and structures,increased by ¥2,888 million to ¥22,472 million, while goodwillrose ¥6,322 million to ¥26,340 million.
In addition, investments and other assets increasedby ¥1,353 million year on year to ¥17,688 million, chiefly
reflecting an increase in deposits and guarantees.
Liabilities increased by ¥6,960 million to ¥66,103 million
compared to ¥59,142 million at the end of the previous fiscal
year. This primarily reflected accounts payable of ¥31,826
million, up ¥3,824 million year on year, short-term debt of¥6,330 million, down ¥204 million, and long-term debt of¥7,640 million, up ¥3,137 million.
As a result of the above, the balance of current liabilities
increased by ¥4,083 million from the previous year-end balanceof ¥50,349 million to ¥54,433 million, and the balance of longterm liabilities increased by ¥2,876 million from the previous
year-end balance of ¥8,793 million to ¥11,669 million.
Net assets increased by ¥5,806 million to ¥48,046 million
compared to ¥42,240 million at the end of the previous fiscal
year.
Retained earnings increased ¥5,632 million year on year to¥31,639 million due to growth in surplus funds.
As a result of the above factors, the shareholders’ equity
ratio increased 0.5 percentage points to 42.0%, compared with
41.5% at the end of the previous fiscal year. ROA improved
0.5 percentage points to 5.8%, while ROE rose 0.7 percentage
points to 13.8%.

BASIC POLICIES FOR PROFIT DISTRIBUTION
The Company considers the return of profits to shareholders as
an important management issue. Our basic policy is to repay
our investors proportionate to the profit we make, and tomaintain these at stable levels.
Internal reserves are held to strengthen the corporate
structure and in preparation for new store openings and future
development of the business. We will make effective use of
these funds to generate profits to be returned to shareholders
in the future.
The Company’s basic policy is to pay dividends fromretained earnings once per year at the end of the fiscal year.
For the fiscal year under review, the Company paid a
dividend from retained earnings of ¥30 per share, comparedwith the previous fiscal year’s ordinary dividends of ¥60. On
October 1, 2014, the Company conducted a 2-for-1 stock splitof common shares. Dividends for the fiscal year under review
are based on the number of shares after the 2-for-1 stock split.
Based on the number of shares before the stock split, the full-

AIN PHARMACIEZ INC. ANNUAL REPORT 201521

year dividend is ¥60 per share, the same as in the previous
fiscal year.
In view of our profit forecasts, plans for investment andother factors, we intend to pay an ordinary dividend fromretained earnings of ¥40 per share in the fiscal year ending
April 30. 2016, an increase of ¥10 from the fiscal year endedApril 30, 2015.

Cash Flows
In the fiscal year under review, cash and cash equivalents(“cash”) increased ¥653 million (3.5%) year on year to ¥19,389
million. This reflected operating cash flow generated bydispensing pharmacy and drug and cosmetic store businesses,
which was mainly used to actively invest in new store openings
and M&A. Some cash was also retained to provide constantaccess to a certain level of funds.
Cash flows from each category and their relevant factors
are as follows:
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥14,839 million,
an increase of 1.2% year on year.
The main items that were positive for cash flow wereincome before income taxes and minority interests of ¥10,832
million, as well as depreciation and amortization of ¥2,553
million, amortization of goodwill of ¥2,278 million, decrease ininventories of ¥969 million, and increase in notes and accounts
payable—trade of ¥1,544 million related to business expansion
through new store openings and M&A.
The main item that was negative for cash flow was income
taxes paid of ¥5,126 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥14,560 million,
an increase of 87.9% year on year.
This mainly reflected payments of ¥2,848 million forpurchases of property, plant and equipment related to the
opening of new urban drug stores and dispensing pharmacies,and ¥10,024 million for purchases of shares in subsidiaries
due to changes in the scope of consolidation related to sharesacquired in 16 companies through M&A deals.
Cash Flows from Financing Activities
Net cash provided by financing activities totaled ¥374 million,
compared with cash of ¥6,617 million used in the previous
fiscal year.
This was mainly attributable to net short-term debt
repayment of ¥1,593 million and net long-term debt
procurement of ¥3,567 million.
Cash dividends paid of ¥951 million also had a negative
impact on cash flows from financing activities.

22 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

Business and Other Risks
The following factors may affect the Group’s operating results,
stock price and financial position. Statements in the text
referring to the future reflect the judgment of the Group at theend of the fiscal year under review.
1. Laws and Regulations
a. Regulations under the Law for Ensuring the Quality,
Efficacy, and Safety of Pharmaceuticals and Medical
Devices
We operate dispensing pharmacy business under various
permits, licenses, registrations and notifications including
those set forth by the Law for Ensuring the Quality, Efficacy,and Safety of Pharmaceuticals and Medical Devices (thePharmaceutical and Medical Device Law), the Health Insurance
Law, and the Pharmacists Law, under the supervision of the
Ministry of Health, Labour and Welfare, and of prefectural
health and welfare departments.
The drug and cosmetic business also involves drug sales,
which are similarly regulated under the Pharmaceutical andMedical Device Law.
b. Easing of drug sales regulations
In sales of over-the-counter (OTC) drugs, the Pharmaceuticaland Medical Device Law classifies drugs into different
categories based on risk. Only qualified pharmacists are
permitted to sell drugs requiring guidance and category 1
drugs, while registered sellers, as well as pharmacists, arepermitted to sell category 2 and category 3 drugs.
In addition, the “Law for Partial Revision of thePharmaceutical Affairs Law” (enacted June 12, 2014) ended
restrictions on the sale of OTC drugs online. Factors such as theentry into the market of firms from other industries as a resultof a continuing trend in the future to deregulate drug sales
may affect the Group’s performance.
2. Details of Business
The Group’s dispensing pharmacy business operates a chainof dispensing pharmacies. These dispensing pharmacies aremainly located near major hospitals (national health insurance
scheme dispensing pharmacies, located near hospitals for userconvenience) and in medical malls developed by the Group(national health insurance scheme dispensing pharmacies,
located near mixed medical facilities for user convenience).
As the dispensing pharmacy business accounted for
90.0% 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 store openings by competitors in the same
industry.
Furthermore, sales of dispensing pharmacies significantly
depend on the medical institutions that write prescriptions.
Therefore, uncertainties such as the issuance of non-hospitalprescriptions by the medical institutions or suspension /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 supplying ofdrugs based on prescriptions. The drug prices and dispensing
fees are set by the Ministry of Health, Labour and Welfare. As
a way to contract national medical expenses, both medical
treatment fees and drug prices are being revised incrementally.
In the future as well, changes in profit structure resulting fromfactors such as revisions in the medical treatment fee system
could continue to affect the Group’s performance and financial
position.
4. Securing qualified staff
Dispensing pharmacies and drugstores (Stores for category
1 drugs) are required by the Pharmaceutical and Medical
Device Law to have a pharmacist on site; the Pharmacists Law
stipulates that the dispensing of drugs must be handled by apharmacist. 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 and the Group’s performance.
5. Risks of loss of trust in the Company
a. Dispensing operation
In our dispensing pharmacy business, pharmacists dispenseand supply prescription drugs that affect the human body. Thisbusiness carries the risk that medical accidents might be caused
through dispensing errors.
The Group recognizes that any medical accidents could
have a severely damaging effect on society’s confidence in theGroup, and we place the highest priority on measures to avoid
the risk from all aspects.

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 losses on valuation of shares in subsidiaries andimpairment losses on goodwill, which may have an adverse
impact on the Group’s operating results and financial position.
7. Interest rate risks
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 internal funds within
the range of operating cash flow, while in large-scale M&A,
costs are sometimes financed by borrowings from financial
institutions.
In order to ensure flexible access to funds to support these
activities, the Group maintains a certain level of liquidity on its
balance sheet. As of the end of the fiscal year under review,
cash on hand and in banks totaled ¥19,553 million, comparedwith a total balance of short- and long-term debts of ¥13,970
million.
We focus on the possibility of return on investment
and seek to reduce interest-bearing debt through efficientinvestment in implementing M&A deal. However, if the Groupfails to secure an adequate return on its M&A investment, ordue to interest rate fluctuations associated with conditions infinancial markets, the Group’s financial position and operating
results, including interest payable, may be affected.

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 from the Ainz Point Club Card and Tulpe
Mobile Club.
The Group has completed development of personal
information protection systems and rules for the handling ofsuch information. The Company acquired the Privacy Markaccreditation in the healthcare, medical and social service fields.
However, we believe it is possible that any accidental or
illegal leakage of personal data may not only affect the Group’s
performance but also lead to a loss of society’s confidence in
the Group.
6. Risk in business strategy
The Group has promoted the expansion of the business scaleof dispensing pharmacies through actively promoting new store
openings and M&A.

AIN PHARMACIEZ INC. ANNUAL REPORT 201523

AIN PHARMACIEZ INC.
CONSOLIDATED BALANCE SHEETAS OF APRIL 30, 2015

Millions of yen
2015
2014

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 10)
Short-term loans
Other current assets
Allowance for doubtful accounts
Total current assets
Property, plant and equipment (Note 6):
Buildings and structures, net
LandConstruction in progress
Other property, plant and equipment, net
Total property, plant and equipment
Investments and other assets:
Investments in securities (Notes 4 and 5)
Deferred tax assets (Note 10)
Net defined benefit asset (Note 9)Long-term loans
Deposits and guarantees
Goodwill
Other intangible fixed assets
Other investments and other assets
Allowance for doubtful accounts
Total investments and other assets
Total assets

Thousands of
U.S. dollars(Note 1(1))
2015¥

19,553
8,369
5,291
9,909
894
739
1,765
(157)
46,365

11,678
7,931
519
2,342
22,472

2,872
984
12
1,369
9,710
26,340
1,283
3,262
(522)
45,311¥ 114,149¥

18,846
6,718
5,679
9,759
1,245
708
1,376
44,334

$

-

9,962
6,698
681
2,241
19,583

98,20866,697
4,364
19,695
188,983

2,559
1,068

1,801
8,081
20,017
1,111
3,065
(240)
37,464¥ 101,382

164,435
70,38044,495
83,331
7,518
6,214
14,843(1,320)389,916$

24,1528,275
100
11,51281,658
221,512
10,78927,432(4,389)381,052
959,961

Millions of yen
2015
2014

LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable (Note 4)
Short-term debt (Notes 4 and 7)
Accrued income taxes
Deposits received
Allowance for bonuses to employees
Allowance for bonuses to directors
Reserve for reward obligations
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 4 and 7)
Lease obligations
Net defined benefit liability (Note 9)
Other long-term liabilities
Total long-term liabilities

Thousands of
U.S. dollars(Note 1(1))
2015¥

31,826
6,330
2,320
9,052
1,353
11
338
3,199
54,433

7,640
1,341
1,636
1,052
11,669Net Assets: (Note 11)
Shareholders’ equity
Common stock (Note 14)
8,682
Authorized - 44,000,000 shares in 2015 and 2014
Issued - 31,888,212 shares in 2015 and 15,944,106 shares in 2014
Capital surplus
7,872
Retained earnings
31,639Treasury stock (180,595 shares in 2015 and 89,916 shares in 2014)(419)
Total shareholders’ equity
47,776
Accumulated other comprehensive income:Unrealized holding gains on securities
227
Remeasurments of defined benefit plans(75)
Total accumulated other comprehensive (loss) income
151
Minority interests
118
Total net assets
48,046
Total liabilities and net assets¥ 114,149¥

28,002
6,535
3,079
8,686
1,149
11
332
2,551
50,349$267,647
53,233
19,51076,124
11,37892
2,842
26,902457,766

4,502
1,454
1,927
909
8,793

64,25011,277
13,758
8,847
98,133

8,682

73,013

7,872
26,007(417)
42,146

66,201
266,075(3,523)401,782

34
(58)
(23)
117
42,240¥ 101,382

1,909
(630)
1,269
992
404,053
959,961$

See accompanying notes.

24 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201525

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENT OF INCOME

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSYEAR ENDED APRIL 30, 2015

YEAR ENDED APRIL 30, 2015

Thousands ofshares

Net sales (Note 15)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (Note 15)
Other income (expense):
Interest and dividend income
Gains on investments in partnership
Commissions received
Real estate rental revenue
Consignment income
Interest expenses
Losses on sales of accounts receivables
Provision of allowance for doubtful accounts
Gains on sales of investments in securities
Refund of premium for cancelled insurance
Losses on disposal and sales of fixed assets
Impairment losses on fixed assets
Directors’ retirement benefits
Other, net¥

Income before income taxes and minority interests
Income taxes (Note 10):
Current
DeferredIncome before minority interests
Minority interests in income
Net income¥

Millions of yen
2015
2014
187,904¥ 170,225
158,943
144,476
28,961
25,74817,50915,635
11,452
10,113Thousands of
U.S. dollars(Note 1(1))
2015$ 1,580,220
1,336,666
243,553
147,245
96,308

99
108
50
159
157
(84)
(81)
(282)
7
(345)
(371)
(106)
70
(619)
10,832

111
45
33
74
144
(101)
(85)
49
214
(336)
(189)
193
152
10,265

832
908
420
1,337
1,320
(706)
(681)
(2,371)58(2,901)(3,120)(891)
588(5,205)91,094

4,428
143
4,571
6,260
63
6,197

5,206
(273)
4,932
5,333
73
5,259

37,2381,202
38,44052,644529
52,115¥$

Balance at April 30, 2013
Net income
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2014
Cumulative effect of changes in accounting policies
Effect of 2-for-1 stock split of common shares
Balance at May 1, 2014
Net income
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2015

15,944

15,944
15,94431,88831,888Millions of yen

Shareholders' equity

Number ofshares ofcommon stock

Common stock

-

¥

8,682

-

8,682

8,682

¥

8,682

-

¥

7,872

7,872

-

Retainedearnings

Capital surplus

7,872

¥

7,872

-

¥

-

21,704
5,259
(956)
4,302
26,007386
26,393

Treasury stock

¥

6,197

¥

(951)
5,245
31,639

¥

(5)
(411)
(411)
(417)
(417)
(1)
(1)
(419)

¥

¥

Balance at April 30, 2014
Cumulative effect of changes in accounting policies
Effect of 2-for-1 stock split of common shares
Balance at May 1, 2014
Net income
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2015$

73,01373,013$73,013-$

66,201
66,201$

66,201-$$

218,7113,246
221,957
52,115(7,997)
44,108266,075

(951)
(1)
5,243
47,776¥

Total
accumulated
othercomprehensive
income (loss)

Remeasurmentsof defined
benefit plans

57

(23)
(23)
34
34
192
192
227

¥

¥

(58)
(58)
(58)
(58)
(16)
(16)
(75)

¥

57

(81)
(81)
(23)
(23)
175
175
151

¥

Minority
interests¥

Total net assets

44

73
73
117
117

¥

0
0
118

-

¥

-

38,356
5,259
(956)
(411)
(7)
3,883
42,240386
42,626
6,197

¥

(951)
(1)
176
5,419
48,046

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

Accumulated other comprehensive income (loss)

Retainedearnings

Capital surplus

¥

6,197

Shareholders' equity

Common stock

38,254
5,259
(956)
(411)
3,891
42,146386
42,532

Accumulated other comprehensive income (loss)
Unrealized
holding gains(losses) on
securities

Total
shareholders’equity$$(3,506)(3,506)(8)(8)(3,523)

Unrealized
holding gains(losses) on
securities

Total
shareholders’equityTreasury stock$$

354,4363,246
357,682
52,115(7,997)(8)
44,092401,782

$

285
285

$

1,614
1,614
1,909

Total
accumulated
othercomprehensive
income (loss)

Remeasurmentsof defined
benefit plans

-

$

$

(487)
(487)
(134)
(134)
(630)

$

$

(193)
(193)
1,471
1,471
1,269

Minority
interests

$

983
983

$

0
0
992

Total net assets

-

$

$

355,226
3,246
358,472
52,115(7,997)(8)
1,480
45,572404,053

See accompanying notes.

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED APRIL 30, 2015

Income before minority interests
Other comprehensive income
Unrealized holding gains (losses) on securities
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income (loss)
Total comprehensive income
Comprehensive income attributable toshareholders of the parent
Comprehensive income attributable tominority interests

Millions of yen
2015
¥
6,260

Millions of yen
2014
¥
5,333

Thousands of
U.S. dollars(Note 1(1))
2015$
52,644

192
(16)
175
6,436

(23)
(23)
5,309

1,614
(134)
1,471
54,124

6,372

5,236

53,586

63

73

529

See accompanying notes.

26 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201527

AIN PHARMACIEZ INC.
CONSOLIDATED STATEMENT OF CASH FLOWSAIN PHARMACIEZ INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED APRIL 30, 2015

Cash flows from operating activities:
Income before income taxes and minority interests
Depreciation and amortization
Impairment losses on fixed assets
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase in reserve for reward obligations
Increase in net defined benefit liability
Increase in allowance for bonuses to employees
Interest and dividend income
Interest expenses
Gains on investments in partnerships
Gains on donations of property, plant and equipment
Gains on sales of investments in securities
Losses on disposal and sales of fixed assets
Decrease in accounts receivable
Decrease (increase) in inventories
Increase in other assets
Decrease in other accounts receivable
Increase in accounts payable(Decrease) increase in other liabilities
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

YEARS ENDED APRIL 30, 2015 AND 2014

Millions of yen
2015
2014

Thousands of
U.S. dollars(Note 1(1))
2015¥ 10,832
2,553
371
2,278
419
6
114
130
(99)
84
(108)
(12)
(7)
324
455
969
(214)
414
1,544
(109)
19,948100(82)(5,126)
14,839¥ 10,265
2,258
189
2,033
(44)
16
153
38
(111)
101
(45)
(12)
(49)
332
1,110
(1,485)
(199)
1,551
3,075
84
19,264105(102)(4,603)
14,662

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
Purchases of subsidiaries' shares resulting in obtaining controls
Payments for loans receivable
Proceeds from collections of loans receivable
Payments for purchase of intangible fixed assets
Proceeds from withdrawal of time deposits
Increase in other investments
Net cash used in investing activities(2,848)
98
(145)
559
(10,024)(2,233)
2,655
(926)
260
(1,955)(14,560)(3,460)
466
(120)
322
(2,410)(3,172)
2,545
(793)
27
(1,153)(7,749)(23,950)824(1,219)4,701(84,299)(18,778)
22,327(7,787)
2,186(16,441)(122,445)

Cash flows from financing activities:
Net repayments from short-term debts
Proceeds from long-term debts
Repayments of long-term debts
Repayments of lease obligations
Payments for purchase of treasury stock
Cash dividends paid
Net cash provided (used in) by financing activities(1,593)8,650(5,082)
(646)
(1)
(951)
374

(318)
137
(4,510)
(558)
(411)
(956)
(6,617)(13,396)
72,744(42,738)(5,432)(8)(7,997)3,145

653
18,735¥ 19,389

295
18,439¥ 18,735

5,491
157,556$ 163,056

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

$

91,094
21,4703,120
19,157
3,523
50
958
1,093
(832)
706
(908)
(100)
(58)
2,724
3,826
8,149
(1,799)3,481
12,984(916)
167,757
840(689)(43,108)
124,791

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 reclassified 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, 2015, which was ¥118.91 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 statement of cash flows
In preparing the consolidated statement 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 37 and 24
subsidiaries as of April 30, 2015 and 2014, respectively. All significant intercompany accounts andtransactions have been eliminated in consolidation. All companies are required to consolidate all
significant investees which are controlled 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
date for four consolidated subsidiaries in the dispensing pharmacy business is the end of February.
The account closing date for two consolidated subsidiaries in the dispensing pharmacy business is theend of April. The account closing date for a consolidated subsidiary in the dispensing pharmacy
business is the end of September. The account closing date of other consolidated subsidiaries is theend of March 31. Financial statements as of these respective closing dates are used in preparing theconsolidated financial statements. However, necessary adjustments are made to importanttransactions that occur between these subsidiaries’ account closing dates and the account closing date
for the consolidated financial statements.
(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

28 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201529

(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 other than leased assets is computed by the
declining-balance method at rates based on the useful lives, except that the straight-line method isapplied to buildings acquired after April 1, 1998. The useful lives of major property, plant andequipment 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 other than leased assets used by the Company and its consolidated
subsidiaries is computed by the straight-line method over the useful lives, 5 years. Amortization of
long-term prepaid expenses is computed by the straight-line method. Amortization of goodwill iscomputed by the straight-line method over a period (5 to 20 years).

on the balance sheet date.
(10) 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.
(11) 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.
(12) Retirement benefits
Retirement benefits covering all employees are provided through two plans: a lump-sum benefit plan
and a defined-benefit 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 and some of its consolidated subsidiaries employ the simplified method when computing
retirement benefit obligations.
In calculating the retirement benefit obligation, the benefit formula basis is used to attribute theexpected benefit attributable to the respective fiscal year. Unrecognized prior service cost is amortizedon a straight-line basis over a period (six years) within the employees’ average remaining service
period at incurrence. Unrecognized actuarial gains and losses are recognized in expenses using thedeclining-balance method over a period (six years) within the average of the estimated remaining
service period, commencing from the year after the year in which they are incurred.
(13) Income taxes

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.

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.

(7) Impairment of fixed assets(14) Amounts per share of common stock

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.

Basic net income per share is computed based on the weighted average number of shares of common
stock outstanding during the year.

The Company and its consolidated subsidiaries identify group of assets by store 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.
(8) 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.
(9) Bonuses to employees

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.
(15) 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 not subject to deduction, the related
expenses are reported in the fiscal year in which they are incurred.
However, consumption taxes and other taxes that are not subject to deduction but 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.

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

30 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201531

(16) Changes in accounting policies due to application of revised accounting standards
The Company and its subsidiaries have adopted Paragraph 35 of “Accounting Standard for Retirement
Benefits” (Accounting Standards Board of Japan (“ASBJ”) Statement No. 26 issued on May 17, 2012,
the “Accounting Standard”) and Paragraph 67 of “Guidance on Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25 issued on March 26, 2015, the “Guidance”) from the beginning of the
fiscal year ended April 30, 2015. Accordingly, the Company and its subsidiaries reviewed its calculation
methods for the projected benefit obligation and service cost, and changed the method for attributing
the expected benefit to periods of service from a straight-line basis to a benefit formula basis. In
addition, the method of determining the discount rates applied in the calculation of projected benefit
obligation was changed from the method using the maturity period of bonds close to the employees’
average remaining service period as a basis of the discount rate to the method using the single
weighted-average discount rate that reflects the estimated period and amount of benefit payment ineach period.
In accordance with the transitional treatment stipulated in Paragraph 37 of the Accounting Standard,
the effect of the changes is reflected in retained earnings as of the beginning of the fiscal year endedApril 30, 2015.
As a result, net defined benefit asset increased by ¥8 million ($67 thousand), net defined benefit liability
decreased by ¥592 million ($4,978 thousand) and retained earnings increased by ¥386 million ($3,246
thousand) as of the beginning of the fiscal year ended April 30, 2015. The effect of these changes on
operating income, ordinary income and income before income taxes and minority interests for the fiscal
year ended April 30, 2015 is immaterial. Net assets per share as of April 30, 2015 increased by ¥11($0).
(17) Unapplied accounting standards
Revised Accounting Standard for Business Combinations (ASBJ Statement No. 21, revised on
September 13, 2013)
Revised Accounting Standard for Consolidated Financial Statements (ASBJ Statement No. 22, revised
on September 13, 2013)
Revised Accounting Standard for Business Divestitures (ASBJ Statement No. 7, revised on September
13, 2013)
Revised Accounting Standard for Earnings per Share (ASBJ Statement No. 2, revised on September
13, 2013)
Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard forBusiness Divestitures (ASBJ Guidance No. 10, revised on September 13, 2013)
Revised Guidance on Accounting Standard for Earnings per Share (ASBJ Guidance No. 4, revised on
September 13, 2013)
The accounting standard has been revised mainly on (i) the treatment of a change in the parent
company’s ownership interest in a subsidiary in the case where the parent company retains control
over the subsidiary upon additionally acquiring the shares of the subsidiary or other cases, (ii) thetreatment of acquisition-related costs, (iii) the presentation of net income and the change inpresentation from minority interests to non-controlling interests, and (iv) the provisional accounting
treatment.
The Company and its consolidated subsidiaries intend to adopt (i) to (iii) from the beginning of the fiscal
year ending April 30, 2016, and (iv) for business combinations made at the beginning of the fiscal year
ending April 30, 2016 and thereafter.
Effects of adoption of the revised accounting standards are currently evaluated.
(18) 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.

Cash on hand and in banks
Less: Time deposits with maturities
exceeding three months
Cash and cash equivalents

Millions of yen
2015
2014
¥ 19,553¥ 18,846

Thousands of
U.S. dollars
2015$
164,435(164)¥ 19,389$(111)¥ 18,735(1,379)163,056(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, 2015 and 2014 due to the acquisition of shares(i) Acquisition of shares of 15 companies in the dispensing pharmacy business and one othercompany for the year ended April 30, 2015
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.

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
2015
¥
5,312
2,549
8,266
(3,498)(932)
11,697

Thousands of
U.S. dollars
2015$
44,672
21,436
69,514(29,417)(7,837)
98,368(1,672)(14,061)¥

10,024$84,299(ii) Acquisition of shares of 13 companies in the dispensing pharmacy business for the year endedApril 30, 2014
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.

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
2014
¥
2,111
936
2,164
(1,862)
(224)
3,124
(714)
¥

2,410

2. Cash and cash equivalents(1) Reconciliations of cash on hand and in banks shown in the consolidated balance sheet and cash
and cash equivalents shown in the consolidated statement of cash flows as of and for the years
ended April 30, 2015 and 2014 are as follows:

32 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201533

3. Inventories
Inventories at April 30, 2015 and 2014 consisted of the following:

Merchandise
Supplies

Millions of yen
2015
2014
¥
9,747
¥
9,578
162
180
¥
9,909
¥
9,759

Thousands of
U.S. dollars
2015$
81,9691,362$
83,331

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 drug and cosmetic stores and through M&A activities. Operating cash flows
provide the majority of 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 inhighly liquid financial assets.
(b) Details of financial instruments used and the exposures to risk and how they arise
Notes and accounts receivable, which relate to trade receivables, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and theSocial Insurance Medical Care Fee Payment Fund. In addition, most of other accounts receivable
are collected in a short period. Therefore, these do not entail any risk.
Investment securities, which are principally equity securities held for the purpose of maintaining
operating relationships with other companies, involve the risk of market 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 8 years from the date ofborrowing, at the longest.
(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, and most of other accounts receivable are alsocollected in a short period, 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 credit
control upon making contract periods and regular credit screening.
Management of market risk (the risk of exchange and interest rate fluctuations)
The Company and its consolidated subsidiaries raise funds mainly through long-term debt. With
regard to investment securities, the Company and its consolidated subsidiaries regularly check thefinancial 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.

34 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

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, 2015 and 2014 are summarized in the following table:
AssetsThousands ofMillions of yen
U.S. dollars
2015
2014
2015
Carrying value
Cash on hand and in banks¥ 19,553¥ 18,846$
164,435
Notes and accounts receivable
8,369
6,718
70,380
Other accounts receivable
5,291
5,679
44,495Investment in securities
1,885
1,761
15,852
Deposits and guarantees
9,577
7,947
80,539Total
44,676
40,954
375,712Fair value
Cash on hand and in banks
19,553
18,846
164,435
Notes and accounts receivable
8,369
6,718
70,380
Other accounts receivable
5,291
5,679
44,495Investment in securities
1,918
1,777
16,129Deposits and guarantees
9,408
7,717
79,118
Total
44,54040,740347,569
Difference
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment in securities
33
15
277
Deposits and guarantees
(168)
(230)
(1,412)
Total
¥
(135)
¥
(214)
$
(1,135)
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

¥

¥

Millions of yen
2015
2014

Thousands of
U.S. dollars
2015

31,826$¥28,002

267,647

6,330
9,052
7,640
54,849

6,535
8,686
4,502
47,72753,23376,12464,250461,264

31,82628,002

267,647

6,332
9,052
7,628
54,840

6,539
8,686
4,511
47,73953,25076,12464,149461,189

-

-

-

1
(11)
(9)

3
8
12

8
(92)
(75)

¥

$

AIN PHARMACIEZ INC. ANNUAL REPORT 201535

Method of calculating the fair value of financial instruments and matters related to available-for-salesecurities and derivative transactions:

The redemption schedule for monetary claims and securities with maturity dates as of April 30,
2015 and 2014 are summarized as follows:

Assets:(a) Cash on hand and in banks, notes and accounts receivable, and other accounts receivable
As these instruments are settled in the short term, their carrying value approximates fair value.
(b) Investment in 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, or
the Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period, and these amounts are discounted to their present value
using appropriate rates of interest.
(c) Deposits and guarantees
The Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period. These amounts are discounted to their present 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.

Millions of yen

1 year or
less

Cash on hand and in banks
Notes and accounts receivable

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total

The fair values of unlisted equity securities with carrying amounts of ¥986 million ($8,291 thousand)and ¥797 million as of April 30, 2015 and 2014, respectively, are not readily determinable.

¥

Cash on hand and in banks
Notes and accounts receivable

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total

More than
10 years

18,962 ¥
8,369
5,291

-

¥

- ¥
-

-

179
1,759
34,561 ¥69
3,018
3,087 ¥

100
2,721
2,821 ¥

2,210
2,210

1 year or
less(b) Long-term debt
The fair value of long-term debt is determined by discounting the total amount of principal andinterest by the assumed interest rate on new borrowings of the same type.
Financial instruments for which fair value is not readily determinable:

¥

2015
More
More
than 1than 5year but
years butless thanless than
5 years
10 yearsThousands of
U.S. dollars
2015
More
More
than 1than 5year but
years butless thanless than
5 years
10 yearsMore than
10 years$ 159,465 $
70,38044,495

-

$

- $
-

-

1,505
14,792$ 290,648 $

580
25,38025,960 $840
22,882
23,723 $18,585
18,585

Millions of yen

1 year or
less

Cash on hand and in banks
Notes and accounts receivable¥

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total

36 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

¥

2014
More
More
than 1than 5year but
years butless thanless than
5 years
10 yearsMore than
10 years

18,455 ¥
6,718
5,679

-

¥

- ¥
-

-

479
1,525
32,859 ¥89
2,392
2,481 ¥

2,609
2,609 ¥

1,553
1,553

AIN PHARMACIEZ INC. ANNUAL REPORT 201537

5. Securities(1) The following tables summarize acquisition costs, carrying values and differences of securities withavailable fair values as of April 30, 2015 and 2014:
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

Millions of yen
2015
2014
¥

¥

716
-

¥

368
-

Thousands of
U.S. dollars
2015
$

6,021
-

51
768

91
459

428
6,458

1,034
-

455
-

8,695
-

70
1,105

102
557

588
9,292

318
-

87
-

2,674
-

19
337

10
97

159
2,834

¥

$

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
2015

Millions of yen
2015
2014
¥

22
349

¥

¥

368
568

$

185
2,934

390
19
781

300
10
1,248

3,279
159
6,567

20
349

324
568

168
2,934

390
19
779

300
10
1,204

3,279
159
6,551

(2)
-

(44)
-

(16)
-

(0)
(2)

(44)

(0)
(16)

¥

$

Equity securities included stocks of non-consolidated subsidiaries and affiliates of ¥114 million($958 thousand) and ¥2 million at April 30, 2015 and 2014, 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, 2015 and 2014:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Total sales ofother securities sold
¥
229
¥
292
$
1,925
Related gains
7
49
58
Related losses(3) The following table summarizes impairment losses on other securities in the years ended April 30,
2015 and 2014:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Other securities with fair value
Other securities without fair value

38 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

¥

6

¥

0

$

50

AIN PHARMACIEZ INC. ANNUAL REPORT 201539

6. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation,
impairment losses and net balance of leased assets as of April 30, 2015 and 2014, 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.

Acquisition cost
Buildings
Other fixed assets
Intangible fixed assets
Total
Accumulated depreciation
Buildings
Other fixed assets
Intangible fixed assets
Total
Impairment losses
Buildings
Other fixed assets
Intangible fixed assets
Total
Net balance
Buildings
Other fixed assets
Intangible fixed assets
Total

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014
¥

¥

68
68

¥

206
56
22
285

$

571
571

61
61

170
36
22
228

512
512

-

-

-

7
7

36
20
56

58
58

¥

$

Future minimum lease payments as of April 30, 2015 and 2014 for finance leases currently accounted
for as operating leases are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Due within one year
Due after one year
Total

¥
¥

9
12
22

¥
¥

28
87
116

$
$

75
100
185

The following table summarizes details of lease expenses, reversal of impairment losses for leased
assets, depreciation, interest expense and impairment losses, if they had been capitalized:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Lease expense
Reversal of impairment losses forleased assets
Depreciation
Interest expense
Impairment losses

¥

23
6
10
-

¥

45
16
20
-

$

Remaining lease expenses for non-cancellable operating lease transactions are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Due within one year
Due after one year
Total

¥

584
4,807
5,392

¥

607
4,138
4,746

¥

$

4,911
40,42545,345$

7. Short-term debt and long-term debt
Short-term debt and long-term debt at April 30, 2015 and 2014 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Short-term bank loans with aweighted-average interest rate of
0.5%
Current portion of long-term debt
with a weighted-average interest rateof 0.4%Current portion of lease obligation
with a weighted-average interest rateof 1.0%Long-term debt (2016-2022) with aweighted-average interest rate of
0.4%
Lease obligation (2016-2022) with aweighted-average interest rate of
1.1%
Total

¥

¥

1,964

¥

3,306

$

16,516

4,365

3,228

36,708

628

566

5,281

7,640

4,502

64,2501,341
15,940¥1,454
13,058$

11,277
134,050At April 30, 2015 and 2014, the carrying amounts of assets pledged as collateral for long-term debt are
as follows:
Assets pledged as collateral:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Buildings
Land
Investments in securities
Total

¥
¥

5
5

¥
¥

19
11
5
36

Liabilities corresponding to collateral:

Accounts payable
Long-term debt
Total

¥
¥

1
1

¥
¥

$
$

42
42

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014

193
50
84
-

¥

1
60
61

$
$

8
8

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.

40 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201541

(2) Losses on disposal of fixed assets for the years ended April 30, 2015 and 2014 are as follows:

The aggregate annual maturities of long-term debt at April 30, 2015 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2016
¥
4,365
$
36,7082017
3,084
25,9352018
2,320
19,5102019
1,686
14,178
2020
532
4,473

Buildings and structures
Construction in progress
Other property, plant andequipment
Goodwill
Other intangible fixed assets
Deposits and guarantees
Other investments and otherassets
Disposal cost
Total

The aggregate annual maturities of lease obligations at April 30, 2015 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2016
¥
628
$
5,281
2017
553
4,650
2018
402
3,380
2019
223
1,875
2020
94
790

8. Sales, disposal and impairment of fixed assets(1) Gains and losses on sales of fixed assets for the years ended April 30, 2015 and 2014 are as
follows:
Gains on sales of fixed assets:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Buildings and structures
Land
Other property, plant andequipment
Other intangible fixed assets
Total

¥

¥

Losses on sales of fixed assets:

Buildings and structures
Land
Construction in progress
Other property, plant andequipment
Other intangible fixed assets
Total

10
3
8
21

¥

4
0
0
4

¥

Millions of yen
2015
2014
¥

¥

4
31
12
0
0
49

¥

¥

6
174
0
180

$

$

84
25
67
176

Thousands of
U.S. dollars
2015
$

$

33
260
100
0
0
412

¥

¥

224
1

¥

26
-

$

1,883
8

7
7
15
12

7
2
4
62

58
58
126
100

5
21
296

20
30
155

42
176
2,489

¥

$

(3) For the years ended April 30, 2015 and 2014, the Company recognized impairment losses for thefollowing property groups:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Property group
Description of assets
StoresStore facilities
¥
224
¥
119
$
1,883
StoresLand
1192
Stores and LeaseholdStore facilities
properties
135
1,135
Real estateLand
20Stores and real estateStore facilities and land
43
Leasehold properties
Store facilities
6
Total
¥
371
¥
189
$
3,120

9. Retirement benefits
Defined-benefit pension plan
(1) Reconciliation of the beginning and the ending balance of retirement benefit obligation (excluding
the amount of the simplified method)
Thousands ofMillions of yen
U.S. dollars
2015
2015
Balance as of April 30, 2014
¥
2,087
$
17,551
Cumulative effect of changes in accounting
policies(600)(5,045)
Balance as of May 1, 2014
1,486
12,496
Service costs
235
1,976
Interest cost on retirement benefit obligation
1084
Actuarial gains (losses) incurred
86723
Pension and severance payments
(92)
(773)
Other
(1)
(8)
Balance as of April 30, 2015
¥
1,724
$
14,498

Balance as of May 1, 2013
Service costs
Interest cost on retirement benefit obligation
Actuarial gains (losses) incurred
Pension and severance payments
Other
Balance as of April 30, 201442 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

Thousands of
U.S. dollars
2015

Millions of yen
2015
2014

Millions of yen
2014
¥
1,802
225
18
101
(59)
(0)
¥
2,087

AIN PHARMACIEZ INC. ANNUAL REPORT 201543

(2) Reconciliation of the beginning and the ending balance of plan assets (excluding the amount of thesimplified method)

Balance as of May 1, 2014
Expected return on plan assets
Actuarial gains (losses) incurredBusiness owner’s contribution
Pension and severance payments
Balance as of April 30, 2015

Millions of yen
2015
¥
406
3
21
91
(28)
¥
493

Balance as of May 1, 2013
Expected return on plan assets
Actuarial gains (losses) incurredBusiness owner’s contribution
Pension and severance payments
Balance as of April 30, 2014

Millions of yen
2014
¥
325
2
7
86
(14)
¥
406

Thousands of
U.S. dollars
2015
$
3,414
25
176
765
(235)
$
4,145

(3) Reconciliation of the beginning and the ending balance of liabilities of the simplified method
Thousands ofMillions of yen
U.S. dollars
2015
2015
Balance as of May 1, 2014
¥
246
$
2,068
Retirement benefit expenses
66
555
Business owner’s contribution
(34)
(285)
Pension and severance payments
(24)
(201)
Other
138
1,160
Balance as of April 30, 2015
¥
392
$
3,296

Balance as of May 1, 2013
Retirement benefit expenses
Business owner’s contribution
Pension and severance payments
Other
Balance as of April 30, 2014

Millions of yen
2014
¥
212
72
(35)
(26)
23
¥
246

(4) Reconciliation of the retirement benefit obligation and plan assets to net defined benefit liability andnet defined benefit asset reported on the consolidated balance sheet
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Funded retirement benefit obligation
¥
758
¥
849
$
6,374
Plan assets
(590)
(451)
(4,961)
Subtotal
167
398
1,404
Unfunded retirement benefit obligation
1,455
1,528
12,236
Net of liability and asset reported on the
consolidated balance sheet
1,623
1,927
13,648Net defined benefit liability
1,636
1,927
13,758Net defined benefit asset
(12)
(100)
Net of liability and asset reported on the
consolidated balance sheet
¥
1,623
¥
1,927
$
13,64844 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

(5) Retirement benefit expenses for the years ended April 30, 2015 and 2014 comprised the following:Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Service costs
¥
235
¥
225
$
1,976
Interest cost on retirement benefit
obligation
1018
84
Expected return on plan assets
(3)
(2)
(25)
Amortization of actuarial losses
77
68
647
Amortization of prior service costs
(34)
(34)
(285)
Retirement benefit expenses calculated
under the simplified method
66
72
555
Retirement benefit expenses
¥
352
¥
346
$
2,960
(6) Remeasurements of defined benefit plans
The breakdown of remeasurements of defined benefit plans (before deducting tax effect) is asshown below:(a) Current
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Unrecognized actuarial gains
¥
64
¥
$
538
Total
¥
64
¥
$
538
(b) Accumulated

Unrecognized prior service costs
Unrecognized actuarial gains
Total

Millions of yen
2015
2014
¥
(117)
¥
(152)
231
244
¥
113
¥
92

Thousands of
U.S. dollars
2015
$
(983)
1,942
$
950

(7) Plan assets(a) Percentages for major categories within total plan assets are as follows:
Bonds
StocksGeneral account
Other
Total

2015

7%
5%
60%
28%
100%

2014

6%
5%
63%
26%
100%

(b) Method of establishing the long-term expected return on plan assets
The long-term expected return on plan assets is determined by taking into consideration current
and expected allocation of plan assets, as well as the current and future long-term expected
profitability of the diverse assets that constitute the plan assets.
(8) Actuarial assumptions used in accounting for the Company’s plans as of April 30, 2015 and 2014
are principally as follows:
2015
2014
Weighted average discount rate
Weighted average expected rate of
return on plan assets
Expected rates of salary increase

0.91%

1.0%

0.75%
1.00%-4.24%

0.75%
1.00%-4.24%

AIN PHARMACIEZ INC. ANNUAL REPORT 201545

10. Income taxes
The aggregate statutory income tax rates used for calculation of deferred income tax assets andliabilities for the years ended April 30, 2015 and 2014 were 35.3% and 37.7%, respectively.
(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, 2015
and 2014:
Statutory tax rate
Non-deductible expenses
Per capita inhabitant tax
Amortization of goodwill
Valuation allowance
Tax credits on tax system to expand
incomeTax credits on tax system forpromoting equipments andinvestment to improve productivity
Other
Effective tax rates

2015
35.3%
0.6
1.8
6.9
0.1

2014
37.7%
0.6
1.8
4.9
0.5

(2.4)

-

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 andretained 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.

12. Commitment
(0.3)
0.2
42.2%

2.6
48.1%

(2) Significant components of deferred tax assets and liabilities as of April 30, 2015 and 2014 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Deferred tax assets:
Impairment losses
¥
254
¥
463
$
2,136
Excess of depreciation
305
133
2,564
Excess of allowance for bonuses
417
403
3,506
Excess of reserve for rewards obligation
110
117
925
Net defined benefit liabilities
438
649
3,683
Other
911
1,156
7,661
Sub-total deferred tax assets
2,439
2,923
20,511
Valuation allowance
354
475
2,977
Total deferred tax assets
2,084
2,447
17,525
Deferred tax liabilities:
Capitalized removal costs
(94)
(88)
(790)
Net unrealized holding gains on securities
(106)
(18)
(891)
Other
(102)
(57)
(857)
Total deferred tax liabilities
(303)
(164)
(2,548)Net deferred tax assets
¥
1,780
¥
2,282
$
14,969(3) Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No.9, 2015) and the “Act to Amend
the Local Taxation Act, etc.” (Act No.2, 2015) were promulgated on March 31, 2015.
Accordingly, the statutory tax rate of 35.3% previously used for calculating deferred income tax assets
and deferred income tax liabilities, which are reversed on or after May 1, 2015, is changed to 32.7% for
temporary differences expected to be reversed from May 1, 2015 to April 30, 2016 and 32.0% for
temporary differences expected to be reversed after April 30, 2016.
As a result of this change, net deferred tax assets decreased by ¥130 million ($1,093 thousand),deferred income taxes and unrealized holding gains on securities increased by ¥141 million ($1,185
thousand) and ¥10 million ($84 thousand), respectively.

11. 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.

46 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

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.

The Company entered into overdraft agreements with 22 and 20 banks as of April 30, 2015 and 2014,
respectively, to finance working capital requirements. The outstanding balances of such overdrafts asof April 30, 2015 and 2014 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2014
2015
Total overdraft available¥ 25,260¥ 23,950$
212,429
Amount utilized
1,960
3,300
16,483
Outstanding balance¥ 23,300¥ 20,650$
195,946

13. Contingencies
The Company has contingent liabilities for the claims for lease deposits and guarantee deposits paid toowners of shops, due to their transfers to third parties. Such contingent liabilities amounted to ¥1,153
million ($9,696 thousand) and ¥1,256 million as of April 30, 2015 and 2014, respectively.

14. Amounts per share
Net assets per share at April 30, 2015 and 2014 and basic and diluted net income per share for theyears then ended are as follows:
Yen
U.S. dollars
2015
2014
2015
Net assets per share¥ 1,511.57¥ 1,328.43$
12.71
Basic net income per share
195.45165.04
1.64
Diluted net income per share
Cash dividends per share attributable to the year
30
60
0.25
On October 1, 2014, the Company conducted a 2-for-1 stock split of common shares. Net assets per
share and net income per share is calculated, assuming that stock splits occurred at the beginning of
the previous fiscal year.
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.

15. 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.
AIN PHARMACIEZ INC. ANNUAL REPORT 2015

47

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 Drug and Cosmetic Store Business primarily includes the urban and suburban drug stores andcosmetic specialty stores. The Other Business primarily involves real estate rental business. The
Company 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 loss of reporting segments are
based on ordinary income. Income or loss 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, 2015 and 2014 is summarized as follows:
Millions of yen
2015
Dispensing

Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assetspharmacy¥

169,063
169,063

Drug and

Other

cosmetic store¥

17,80317,803

¥

Total

1,037
323
1,361

¥

187,904
323
188,228

Adjustments

¥

Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assets¥Dispensing

Drug andpharmacy

cosmetic store

151,472
151,472¥

17,985
17,985

- ¥
(323)
(323)

187,904
187,904

14,449105,238

¥

117
8,852

¥

(614)
6,852 ¥

13,951
120,943¥(2,254)(6,793) ¥11,697
114,149

¥

1,810

¥

206

¥

131

2,149

¥

146

2,295

¥

2,271
166

144

6
60

2,278
371

-

2,278
371

2,525

553

1,268

4,347

40

4,388

Other

¥

Total

767
479
1,246

¥

170,225
479
170,704

Adjustments¥

Consolidated

- ¥
(479)
(479)

170,225
170,225¥

12,77285,490

¥

23
7,649

¥

(218)
5,419 ¥

12,57798,559¥(1,990)2,822 ¥

10,587
101,382

¥

1,632

¥

234

¥

90

1,957

¥

129

2,086

¥

¥

2,028
77

5
106

6

2,033
189

-

2,033
189

3,062

369

377

3,809

759

4,568

Amortization of goodwill and unamortized balances by reporting segment as of and for the years endedApril 30, 2015 and 2014 are summarized as follows:
Millions of yen
2015

Consolidated¥¥

Millions of yen
2014

Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Drug andpharmacy

cosmetic store

2,271
26,286

¥

Other

-

¥

Adjustments

6
53

¥

Consolidated

-

¥

2,278
26,340Thousands of U.S. dollars
2015
Amortization of goodwill
Unamortized balances of goodwill$

Dispensing

Drug andpharmacy

cosmetic store

19,098221,057

$

Other

-

$

Adjustments

50
445

$

Consolidated-$

19,157
221,512

Millions of yen
2014
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Drug andpharmacy

cosmetic store

2,028
20,017

¥

5
-

Other

¥

Adjustments-¥

Consolidated

-

¥

2,033
20,017

Thousands of U.S. dollars
2015
Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assets48 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

Dispensing

Drug andpharmacy

cosmetic store$ 1,421,772
1,421,772$

149,718
149,718

Other

$

Total

8,720
2,716
11,445$ 1,580,220
2,716
1,582,945

Adjustments$

Consolidated- $ 1,580,220(2,716)(2,716)
1,580,220$

121,512885,022$983
74,442$(5,163)
117,324
57,623 $ 1,017,096$(18,955)(57,127) $98,368959,961$

15,221

$

1,732

$

1,101

$

1,227

19,300$18,072$

19,098
1,396

1,210

50
504

19,157
3,120-

19,157
3,120

21,234

4,650

10,66336,557336

36,901AIN PHARMACIEZ INC. ANNUAL REPORT 201549

16. Comprehensive income
Each component of other comprehensive income (loss) for the years ended April 30, 2015 and 2014
was the following:

Unrealized holding gains (losses) on securities:
Gains arising during the year
Reclassification adjustments to losses
Amount before income tax effect
Income tax effectTotal unrealized holding gains (losses) on
securities
Remeasurments of defined benefit plans:Losses arising during the year
Reclassification adjustments to gains
Amount before income tax effect
Income tax effectTotal remeasurments of defined benefit plans
Total other comprehensive income (loss)

Millions of yen
2015
2014
¥

¥

287
(6)
280
88

¥

13
(49)
(35)
(12)

Thousands of
U.S. dollars
2015
$

2,413
(50)
2,354
740

(2) Acquisition price and details
Consideration for acquisition
Expenses related directly to acquisition
Cost of acquisition¥2,937 million¥187 million¥3,124 million

192

(23)

1,614

(3) Amount of goodwill generated, its sources, and its amortization method and term

(64)
43
(21)
(4)
(16)
175

(23)

(538)
361
(176)
(33)
(134)
1,471

(a) Amount of goodwill generated¥2,164 million
The identification or evaluation of assets and liabilities, such as estimates of deferred tax assets,
valuations of land and estimates of various reserves, are based on reasonable information available
as of April 30, 2014. As the period between their acquisition and the end of the fiscal year is short,the available information is insufficient, therefore the allocation of acquisition costs is not complete.
Consequently, asset and liability amounts, including goodwill, may change.

¥$

17. Business combinations
For the year ended April 30, 2015
(1) Business combinations
During the fiscal year ended April 30, 2015, the Company and its consolidated subsidiaries Asahi
Pharmacy Co., Ltd. and MEDIO Pharmacy Co., Ltd. acquired for cash consideration the shares in
15 companies in the dispensing pharmacy business and one other company, which became
consolidated subsidiaries.
Through this business combination, the AIN PHARMACIEZ Group aims to increase its market sharein the dispensing pharmacy business and anticipates greater economies of scale.
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 to secure stablerevenues 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

the dispensing pharmacy business, which became consolidated subsidiaries.
Through this business combination, the AIN PHARMACIEZ Group aims to increase its market sharein the dispensing pharmacy business and anticipates greater economies of scale.
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 to secure stablerevenues and profits above and beyond the amortizable goodwill generated through this acquisition.

¥11,489 million ($96,619 thousand)¥208 million ($1,749 thousand)¥11,697 million ($98,368 thousand)(3) Amount of goodwill generated, its sources, and its amortization method and term(a) Amount of goodwill generated¥8,266 million ($69,514 thousand)
The identification or evaluation of assets and liabilities, such as estimates of deferred tax assets,
valuations of land and estimates of various reserves, are based on reasonable information available
as of April 30, 2015. As the period between their acquisition and the end of the fiscal year is short,the available information is insufficient, therefore the allocation of acquisition costs is not complete.
Consequently, asset and liability amounts, including goodwill, may change.
(b) Sources of goodwill
Goodwill is the cost amount paid over the fair value of asset acquired and liabilities assumed andrecoverable through the future operation by utilizing the AIN PHARMACIEZ Group’s management
resources and economies of scale.

(b) Sources of goodwill
Goodwill is the cost amount paid over the fair value of asset acquired and liabilities assumed andrecoverable through the future operation by utilizing the AIN PHARMACIEZ Group’s management
resources and economies of scale.
(c) Goodwill amortization method and term
Straight-line method over 15–20 years

18. Subsequent events
Transition to a Holding Company by Company Split
At a Board of Directors meeting on June 24, 2015, a resolution was reached to transfer the rights andobligations of all the AIN PHARMACIEZ Group’s operations excluding management and administrative
departments (the “Business”), with an effective date of November 1, 2015, to a wholly owned subsidiary,
Ain Company Split Preparation Co., Ltd. (the “Split Preparation Company”) by absorption-typecompany split (the “Absorption-Type Company Split”). By entering into an absorption-type company
split agreement (the “Absorption-Type Company Split Agreement”) and to establish Ain Company Split
Preparation Co., Ltd. as a wholly owned subsidiary to prepare for the split.
At a Board of Directors meeting on the same day, it was the Company’s name to Ain Holdings Co., Ltd.,effective November 1, 2015, and to revise the Company’s Articles of Incorporation to reflect thebusiness objectives of the post-transition holding company (the “Revisions to the Articles ofIncorporation.”)The Absorption-Type Company Split Agreement and the partial revisions to the Articles of Incorporation(change of business name and partial revision of business objectives, etc.) were approved at its 46th
General Ordinary Meeting of Shareholders on July 30, 2015.
In line with its transition to a holding company structure, as of November 1, 2015, the Company’s namewill be changed to AIN HOLDINGS INC. , and the name of the succeeding company, Ain Company
Split Preparation Co., Ltd., will be changed to AIN PHARMACEIZ INC.
(1) Background of and Objective for Transition to a Holding Company System
The Group operates a nationwide chain of dispensing pharmacies under the AIN Pharmacy brandand is developing ainz & tulpe urban drugstores in Japan’s leading metropolises.

(c) Goodwill amortization method and term
Straight-line method over 9–20 years

The dispensing pharmacy business comprises more than 760 Group stores. These shops operate
as insurance pharmacies response to the needs by regional communities and promote genericdrugs, provide medical cooperation mainly by home dispensing and also 24-hour service thatconnect closely with their communities.

For the year ended April 30, 2014
(1) Business combinations
During the fiscal year ended April 30, 2014, the Company and its consolidated subsidiaries AINMEDIO Inc. and Daichiku Co., Ltd. acquired for cash consideration the shares in 13 companies inRegarding store strategy, in addition to new business developments by the Company and Group
companies, the Group actively pursues M&A opportunities and is promoting economy of scale byexpanding the scale of its business. In line with the changes taking place in the dispensing
pharmacy business environment, the number of M&A projects is increasing. During the past three
years, 39 companies have joined the Group through share transfers.
In Drug and Cosmetic Store Business, the Group is increasing its level of specialization in the drug

50 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 201551

and cosmetic stores based on the ainz & tulpe urban drugstore concept. In addition to launching
new stores focused on originality and stepping up the refurbishment of existing stores, the Group is
promoting the development of commercial complexes specializing in beauty and health, with new
ainz & tulpe stores as key tenants.
In the dispensing pharmacy business, the Group is accelerating its business development throughnew store launches and M&A activity. In addition, the Group is enhancing its drugstore function
through “family pharmacies” and expanding the scale of its urban drugstores. To achieve further
growth, the Group has decided to transition to a holding company system in order to clarify authority
and responsibility of Group company in each segment, to promote management autonomy and to
bolster corporate competitiveness as a group. In addition, separating group management andadministration from business execution, we intend to enhance corporate governance, and webelieve the holding company structure is best suited to realizing continues increases in corporate
value in this manner.
(2) The Absorption-Type Company Split Method
When the Company changes to a holding company, the company plans to establish the Split
Preparation Company as a 100% subsidiary in advance of absorption-type split, and to transfer thebusiness to the Split Preparation Company by absorption-type split, in order to start the businesssmoothly from the effective date of this absorption-type split.
(3) Overview of the Splitting Company(a) Corporate Name(b) Head office(c) Name and Title ofrepresentative(d) Business(e) Paid-in capital(f) Date ofincorporation(g) Number of Shares
outstanding(h) End of the fiscal
year(i) Major shareholders
and their
percentage ofshares outstanding

The Splitting Company as of April 30
2015
AIN PHARMACIEZ INC.
5-2-4-30, Higashisapporo,
Shiroishi-ku, Sapporo
Kiichi Otani
President and Representative
Director
Operating dispensing pharmacies
and drug stores¥8,682 million ($73,013 thousand)

The Split Preparation Company asof June 24, 2015
Ain Company Split Preparation Co.,Ltd.
5-2-4-30, Higashisapporo,
Shiroishi-ku, Sapporo
Kiichi Otani
President and Representative
Director
Operating dispensing pharmacies
and drug stores¥10 million ($84 thousand)August 2, 1969

June 24, 2015

31,888,212

1,000

April 30
Kiichi Otani ......................... 10.37%
Retirement Benefit Trust managed
by Mizuho Trust & Banking Co., Ltd.
(Marubeni Corporation account).............................................. 7.78%
Seven & i Holdings Co., Ltd. 7.78%
The Hokkaido Bank, Ltd. ...... 4.62%(j) Operating results and financial position
Net assets¥48,046 million ($404,053 thousand)Total assets¥114,149 million ($959,961
thousand)Net assets per share¥1,511.57 ($12.71)
Sales¥187,904 million($1,580,220thousand)Operating income¥11,452 million ($96,308 thousand)Ordinary income¥11,697 million ($98,368 thousand)Net income¥6,197 million ($52,115 thousand)Net income per share¥195.45 ($1.64)
Cash dividends per¥30 ($0.25)
share

April 30
AIN PHARMACIEZ INC. ......... 100%

¥10 million ($84 thousand)¥10 million ($84 thousand)¥10,000 ($84.09)-

Note:(i) On October 1, 2014, the Company conducted a 2-for-1 stock split of common shares. Net assets per share andnet income per share is calculated, assuming that stock splits occurred at May 1, 2014.
(ii) The operating results and financial positon of the splitting company are consolidated amounts except the cash
dividends per share.
(iii) The Split Preparation Company that will be the successor was established on June 24, 2015. As the company
has no preceding business year, net assets and total assets are indicated as of its establishment date.
52 AIN PHARMACIEZ INC. ANNUAL REPORT 2015(4) Outline of accounting method used
In accordance with "Accounting Standard for Business Combinations" and " Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures, we will treat the merger as a transaction under common control.

19. Quarterly Information(1) Quarterly net sales for the year ended April 30, 2015 are as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2015
Three months ended July 31, 2014¥
43,354$
364,595
Six months ended October 31, 2014
88,220741,905
Nine months ended January 31, 2015
136,394
1,147,035
Twelve months ended April 30, 2015
187,904
1,580,220(2) Quarterly income before income taxes and minority interests for the year ended April 30, 2015 is asfollows:
Thousands ofMillions of yen
U.S. dollars
2015
2015
Three months ended July 31, 2014
¥
1,706
$
14,346Six months ended October 31, 2014
4,197
35,295
Nine months ended January 31, 2015
7,512
63,173
Twelve months ended April 30, 2015
10,832
91,094(3) Quarterly net income for the year ended April 30, 2015 is as follows:
Thousands ofMillions of yen
U.S. dollars
2015
2015
Three months ended July 31, 2014
¥
1,004
$
8,443
Six months ended October 31, 2014
2,525
21,234
Nine months ended January 31, 2015
4,471
37,599Twelve months ended April 30, 2015
6,197
52,115(4) Quarterly net income per share for the year ended April 30, 2015 is as follows:
Yen
U.S. dollars
2015
2015
Three months ended July 31, 2014
¥
31.67
$
0.26
Six months ended October 31, 2014
79.64
0.66
Nine months ended January 31, 2015
141.04
1.18
Twelve months ended April 30, 2015
195.45
1.64
On October 1, 2014, the Company conducted a 2-for-1 stock split of common shares. Quarterly net
income per share for the year ended April 30, 2015 is calculated, assuming that stock splits occurred at
the beginning of the previous fiscal year.
(5) Quarterly net income per share for each accounting period of the year ended April 30, 2015 is asfollows:
Yen
U.S. dollars
2015
2015
Three months ended July 31, 2014
¥
31.67
$
0.26
Three months ended October 31, 2014
47.97
0.40
Three months ended January 31, 2015
61.40
0.51
Three months ended April 30, 2015
54.41
0.45
On October 1, 2014, the Company conducted a 2-for-1 stock split of common shares. Quarterly net
income per share for each accounting period for the year ended April 30, 2015 is calculated, assumingthat stock splits occurred at the beginning of the previous fiscal year.

AIN PHARMACIEZ INC. ANNUAL REPORT 2015

53

Investor Information

Directors and Corporate
Auditors

Corporate Data

Stock Information

Corporate NameAIN PHARMACIEZ INC.

Transfer Agent
Mizuho Trust & Banking Co., Ltd.

Head Office
5-2-4-30, Higashisapporo,
Shiroishi-ku, Sapporo,
Hokkaido 003-0005, Japan

Stock Listings
First Section of the Tokyo Stock
Exchange and Sapporo Securities
Exchange

Established
August 1969

Securities Code Number
9627

Paid-in Capital¥8,682 million

Fiscal Year
May 1 to April 30 of the following year

Number of Employees
Consolidated: 4,429
Non-consolidated: 2,596

Ordinary General Meeting of
Shareholders
July

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 for the
opening of shopping centers

Date of Record
April 30
(The Company will announce otherdates as and when required.)(Fiscal 2015)(Fiscal 2015)(As of July 31, 2015)

President and Representative
Director
Kiichi Otani
		
Executive Vice President andRepresentative Director
Hiromi Kato		
Senior Managing Directors
Masahito Sakurai
Shoichi Shudo
Toshihide Mizushima
Managing Director
Miya Oishi
		
Directors
Mitsugu Takazawa
Rieko Kimei
Hidehiro Awaji
Masato Sakai
Ko Mori*1
Koji Kabumoto*1
Seiichiro Sato*1
Yasuyuki Hamada*1
Corporate Auditors
Kouichi Kawamura
Akira Ibayashi*2
Toshiaki Kobayashi*2
Notes: 1. Outside directors
2. Outside corporate auditors

Number of Shares Outstanding
31,888,212 shares(including treasury stock)* The Company conducted a 2-for-1 stock splitof common shares with an effective date ofOctober 1, 2014.

Number of Shareholders
4,084

Major Shareholders		

(As of April 30, 2015)

Shareholders

Number ofshares held
(thousandshares)Shareholding
ratio (%)

Kiichi Otani

3,308

10.43

Retirement Benefit Trust managed
by Mizuho Trust & Banking Co., Ltd.
(Marubeni Corporation account)*2;
Trust & Custody Services Bank, Ltd. as a Trustee of Retrust

2,480

7.82

Seven & i Holdings Co., Ltd.

2,480

7.82

The Hokkaido Bank, Ltd.

1,472

4.64

Japan Trustee Services Bank, Ltd. (Trust Account)

929

2.93

ML PRO SEGREGATION ACCOUNT

866

2.73

Yoshiaki Imagawa

637

2.01

The Master Trust Bank of Japan, Ltd.

617

1.95

The Norinchukin Bank

600

1.89

STATE STREET BANK AND TRUST COMPANY

566

1.79

Notes: 1. The figure excludes 180,595 shares of the treasury stock owned by the Company.
2. 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.

54 AIN PHARMACIEZ INC. ANNUAL REPORT 2015

AIN PHARMACIEZ INC. ANNUAL REPORT 2015

55

AIN PHARMACIEZ INC.