Making Headway
The results of steady efforts are starting to emerge
ANNUAL REPORT 2021
For the year ended April 30, 2021

PROFILE

MESSAGE FROM THE PRESIDENTAIN Group operates a dispensing pharmacy business, which is the leader in the Japanese market by sales,
and a cosmetic and drug store business centered on AINZ & TULPE stores, which are mainly located in the

Making Headway

Tokyo metropolitan area and other urban markets.

The results of steady efforts are starting to emerge

In the dispensing pharmacy business, we aim to build a dominant position in the market while playing a
key role in local healthcare infrastructure. In the cosmetic and drug store business, we are working to reinforce
brand power by actively opening AINZ & TULPE stores in prime locations in urban and semi-urban markets.
The AIN Group aims to help create a sustainable society by tackling and solving social issues through its
business activities. Preparations for the Group’s next phase of growth are moving forward, and the results
are already starting to emerge.

Thank you for your continued support of the AIN Group. We hope you are

In December 2020, we defined the Group’s materiality and value creation story. By reinforcing
sustainability management, we aim to continue improving the health and happiness of our customers bysupporting their vitality and beauty through our business activities.

all keeping safe and well amid the continuing impact from the COVID-19
pandemic.
Like many other countries around the world, Japan had a tough year
in 2020, with the pandemic having a broad impact on the economy,
including a drop in consumer spending. However, with the steady rollout

Net sales by segmentof Japan’s vaccination program since February 2021, we expect fiscal

Other Businesses¥14,791 million (5.0%)2022 to be a year when the economy gradually stabilizes, even though
COVID-19 will remain part of all our lives.
Through its business activities, the AIN Group will work to tackle issues
faced by society and press ahead with preparations for the next leap

Fiscal 2021
Consolidated
Net Sales¥297,305 million

Cosmetic and Drug Store Business¥19,419 million (6.5%)

forward, drawing on all the Group’s resources.

Kiichi Ohtani
Dispensing Pharmacy Business¥263,095 million (88.5%)

President
and Representative Director

Fiscal 2021 review
Signs of recovery after a tough year amid the pandemic
For fiscal 2021, ended April 30, 2021, the AIN Group reported net sales of ¥297,305

CONTENTS
1 MESSAGE FROM THE PRESIDENT
6 AIN GROUP’S VALUE CREATION
			6 Value Creation Process
			8 Providing Social Value through Our Business (CSV)					8 Characteristics of Japan’s Dispensing Pharmacy Sector					10 Growth Strategy: Dispensing Pharmacy Business					16 Growth Strategy: Cosmetic and Drug Store Business			20 Human Resources Strategy
22 BASIS OF VALUE CREATION
			
22 Strengthening ESG
		 26 Corporate Governance			28 Risk Management
		 30 Board of Directors and Corporate Auditors

million, up 1.6% year on year, operating income of ¥10,932 million, down 32.0%, and
32 BASIC INFORMATION/DATA
			32 11-year Financial Summary and ESG Data
		 34	Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
		 36 Consolidated Financial Statements					36 Consolidated Balance Sheet					38 Consolidated Statement of Income					38 Consolidated Statement of Comprehensive Income					39 Consolidated Statement of Changes in Net Assets					40 Consolidated Statement of Cash Flows				 41 Notes to Consolidated Financial Statements					67 Independent Auditor’s Report			72 Investor Information

profit attributable to owners of parent of ¥6,697 million, down 27.0%.
Performance was weak in the dispensing pharmacy business, which saw operating
income slump roughly 30% year on year in the first quarter due to the COVID-19
pandemic. However, with the number of prescriptions steadily returning to normal
levels, we forecast a gradual recovery in the business.
The cosmetic and drug store business was hit hard by voluntary restrictions on
store opening hours and other measures to control the pandemic. In response, thebusiness expanded its lineup of AINZ & TULPE products that help people live with the
new realities of the pandemic, improved store layouts to make them as welcoming
as possible for customers and launched proactive measures such as expanding
e-commerce channels.

FORWARD-LOOKING STATEMENTS
This annual report contains forecasts and projections concerning the plans, strategies and performance of AIN HOLDINGS INC. and its subsidiaries and affiliates.
These forecasts and projections constitute forward-looking statements that are not historical facts, but are based on assumptions and beliefs in accordance withdata 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
HOLDINGS INC. wishes to caution readers that actual results may differ materially from those projected.

AIN HOLDINGS ANNUAL REPORT 2021

1

MESSAGE FROM THE PRESIDENT

Growth strategy: dispensing pharmacy business
Aiming to increase market share to take on new challenges
Small and midsize pharmacies are holding their ground in the dispensing pharmacy
market. Despite being the leading company in the sector, the AIN Group’s market shareis still only around 3.5%. We therefore see plenty of potential to become the dominant
player by increasing market share. We also need to expand market share to help us
take on challenges in new areas. For some time, we have been making preparations to
respond to various changes in the Group’s operating environment.

AIN Pharmacy at Okayama University Hospital

One of the steps we have taken is to establish a sound financial base. We needfunding capabilities and robust finances to execute our key strategy of opening

I am pleased to say that we have made steady progress in this area. Even during thelarge-scale dispensing pharmacies that can handle advanced medical treatments.

pandemic, the Group’s finances remained stable, which will help us open a clear gap
over other companies in terms of business competitiveness and strategy execution after
the pandemic subsides. We already have plans to open a large number of dispensing

Sound financial structure—Comparison of financial indexes among major companies operating dispensing pharmacies in Japan

pharmacies through to fiscal 2023 ending April 30, 2023. We will also continue topursue M&A targets, backed by stricter criteria for investment efficiency. Our goal is

Fiscal 2020(¥ million)

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

AIN HOLDINGS Average of 2 competitors
238,781
42,95546,321
24,028
6,422
52,84039,899(28,812)
57.3%
30.4%

Fiscal 2021(¥ million)

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

AIN HOLDINGS
235,318
55,271
12,09943,171
56.8%

Average of 2 competitors
53,37026,271
51,026(24,756)
31.7%

Notes:
1.	Market capitalization data
are as of July 31, 2020 andJuly 30, 2021.
2. Interest-bearing debt =Short- and long-term debts+ Corporate bonds
3. Net cash = Cash on handand in banks – Interestbearing debt
4. 2 competitors:
NIHON CHOUZAI Co., Ltd.
and Qol Holdings Co., Ltd.
Source:Compiled by AIN HOLDINGS
from the above companies’
financial results for fiscal 2020and fiscal 2021.

to contribute to local healthcare by opening new dispensing pharmacies, including
pharmacies on hospital sites, with a focus on larger locations. Our next milestone target
is to achieve a market share of 10%.
We have to secure enough pharmacists to support thisaggressive expansion program. In fiscal 2021 we hired 613
newly graduated pharmacists, exceeding the 560 recruitedin the previous fiscal year. We will also continue to actively
train our existing personnel.

AIN Group’s initiation ceremony

Market distribution of dispensing pharmacies in Japan—Comparison of net sales and operating margin among major companies operating dispensing
pharmacies in Japan

Operating margin (%)

6.0

Notes:
1. Net sales and operating
margin are compiled by
AIN HOLDINGS based oneach company’s summaryof financial statements for
FY 3/21 (AIN HOLDINGS:
FY 4/21).
2. Size of circle is proportional
to market capitalization asof July 30, 2021.

5.0

4.0

AIN HOLDINGSQol Holdings

3.0

NIHON CHOUZAI
2.0
150,000

200,000

250,000

300,000

350,000

Net sales (¥ million)

2 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

3

MESSAGE FROM THE PRESIDENT

Accelerating store openings and offering unique products

Creating an environment that supports our sharedcorporate philosophy

The cosmetic and drug store business opened 11 AINZ & TULPE stores in fiscal 2021.

The role of companies is changing. ESG and the SDGs are vital to growth as key

Due to the pandemic, many stores in other sectors vacated prime locations in cities

elements of business management. Diversity is a particularly urgent issue for the AIN

across Japan. Seeing this as a rare opportunity, we will aggressively open new stores inGroup, as women account for 80% of our workforce, so their empowerment has athese prime locations.

direct impact on the Group’s growth.

Growth strategy: cosmetic and drug store businessAlong with store openings, merchandising is an important strategy in the business.

In fiscal 2021, we established the Sustainability Management Department as a

AINZ & TULPE is working to create an even more differentiated lineup of original

specialist organization tasked with implementing initiatives to realize a sustainableproducts focused on health and beauty, targeting consumers who seek both “innersociety. We also set up a Sustainability Committee in autumn 2020 to oversee

and outer beauty” and “healthy beauty.” Using the AINZ & TULPE WEBSTORE, whichsustainability activities across the Group. We have been a strong supporter of diversity

launched in May 2020, we are improving convenience for customers while also

& inclusion for many years, aiming to create a working environment that motivates

promoting the AINZ & TULPE worldview in conjunction with our physical stores. We

all our employees. Recently, we have defined the Group’s value creation story andalso plan to launch exclusive online products this autumn.

materiality, which has helped us to reorganize and clarify our existing sustainability
activities. We plan to clearly communicate our approach to external stakeholders todeepen understanding of the AIN Group.
Reinforcing the Group’s management base is a key focus of our medium-term
strategy and the value creation story» See page 23 for more details , and cultivating the next

generation of business leaders is part of our efforts to strengthen the managementbase. For the AIN Group to remain viable well into the future, we have to continue
taking on new challenges. As part of that process, we need many executives andemployees to have a stake in how we run our business, guided by the shared
AINZ & TULPE WEBSTOREAINZ & TULPE
Official app

philosophy of making the AIN Group a stronger, better organization. That’s why we arereinforcing systems to train, utilize and evaluate the performance of human resources.

Other steps we have taken include the acquisition of Shidax i Corporation in March
2020, giving the AIN Group a presence in the hospital canteen and kiosk business. In

Other measures to support the Group’s future growth include investing in digitaltransformation, logistics reforms and branding to support the management base.

April 2021, the business opened its first A*STAND-branded retail shop in Tokyo Medical

Strengthening corporate governance will also be crucial. The Board of Directors will

University Hospital. The retail shop sells food, beverages and daily necessities, while also

draw on diverse views and opinions by actively engaging with outside directors andproviding a place for patients to take a break and access rehabilitation services and foroutside corporate auditors, while also further stepping up the disclosure of information

hospital workers to recharge their batteries. We are now looking at opportunities to rollto all investors and employees.

out the format in office buildings and other locations.
Fiscal 2021 was a year that underscored the AIN Group’s resilience. The Group was able
to absorb the impact of the COVID-19 pandemic and generate stable profits. The lastyear also reinforced my belief that the Group has immense growth potential.
As the leader in the industry, we will continue to invest heavily in our businesswithout forgetting our desire to seek out and take on new challenges. I hope we cancount on your continued support and trust as we strive to meet your expectations.

A*STAND-branded retail shop in Tokyo Medical University Hospital

July 29, 2021

Kiichi Ohtani
President and Representative Director

4 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

5

AIN GROUP’S VALUE CREATION

Value Creation Process

The AIN Group is dedicated to improving the health and happiness of its customers. That commitment isenshrined in our Group Statement, which guides all our business activities.
Harnessing the competitive advantages and high-quality management resources built up since the Company
was founded, we aim to create social value through our business activities and contribute to an affluent,sustainable society and increase the Group’s value while carefully responding to the various risks in our operating
environment.

Dedicated to improving the healthand happiness of our customers

Input
Management capital• Diverse, first-class human resources• Accumulated dispensing know-how
and technical capabilities• Distinctive merchandise lineup• Store development capabilities• Strong customer base
• Sound financial structure

OutputCreate social value
through businessactivities
X

Carefully
respond todiverse risks

Financial factors
Sales

ROA

Operating income

ROE

Net income

Total shareholder
return ratio¥297,305 million» See page 10-19¥10,932 million

Business model¥6,697 million

Enhance quality of
product andservices

3.4%
5.9%
56.8%

Anticipate
and flexibly
respond tochangeDefining materiality» See page 22

Management foundation» See page 32-33» See page 20-21

Corporate governance

6 AIN HOLDINGS ANNUAL REPORT 2021

» See page 26-28» See page 22-24

1. Contribute to local healthcare
3. Safety, peace of mind and trust

Environment

4. Protect the environment andreduce environmental impact

CO2 emissions related to operation of pharmacies

5. Ensure sound management base

10,747 t-CO2

6. Cooperate with local
communities and businesses

SocialRelated SDGs

Number of primarycare pharmacists

Full-time employee
turnover rate

1,655

5.2%

Generic drug
dispensing ratio

Average monthly
overtime per
employee

84.3%
Female manager ratio

3.9 hours

32.6%
Personnel strategy

Materiality initiatives

Our
vision2. Provide beauty and happiness

Non-financial factors
Train andutilizehumanresources

Outcomes

GovernanceRatio of independent
outside directors on
Board of Directors

33%

Ratio of female
directors on Boardof Directors

25%

Aim to be
a companythat people
welcometo theircommunities ppraisal by andAcommunication withcustomers, business
partners, communities
Appraisal by stock
marketImprove level of external
appraisaletc.

AIN HOLDINGS ANNUAL REPORT 2021

7

AIN GROUP’S VALUE CREATION

Providing Social Value through Our Business (CSV)
Characteristics of Japan’s Dispensing Pharmacy Sector
Differences in national healthcare policy and other factors mean Japan’s dispensing pharmacies are different
to pharmacies in the US and other countries. In this section, we look at the main characteristics of Japan’s

Dispensing pharmacy earnings can be broadly divided into two
categories – dispensing fees, which include technical fees andpharmaceutical management fees (intelligent fees), and sales fromdrugs. Dispensing fees and drug prices are regularly revised inonly 13.8%. While the market has matured, we see more room for
growth due to new opportunities arising from the end of the banon pharmacies located on hospital sites. Market deregulation, suchas the start of online pharmaceutical guidance services, and a newpharmacy certification scheme, are also set to create wider gaps
in performance between dispensing pharmacy companies, giving
the AIN Group the opportunity to further increase market share byleveraging its ability to adapt to change.

	Growth market(¥ trillion)

Non-hospital dispensing ratio（right scale)

Dispensing pharmacy market value (left scale)

80

7.53

8

56.0%

6

60

Drug price revisions• Case by case ............................
Drug procurement• Low cost, high volume ................
• High cost, low volume ................
Scale (number of prescriptions
and pharmacies)• Increase ......................................
• Decrease .....................................
Dispensing fee revisions (criteria
for additional reimbursement points)• Looser ........................................
• Tighter ........................................

Inventory management• Optimized inventories ..................
• Excess inventories .......................

Dispensing pharmacy earning model
Total store sales*1

Productivity at pharmacies• Improvement:
lower personnel costs .................
• Deterioration:higher personnel costs ................

Purchasing cost of drugs
Drug price marginStore operation costs+ Store labor costs

Head office costs• Consolidation and streamlining ....
• Uncontrolled increase ..................

Intelligent fees
Technical fees(includes premiums forgeneric drug dispensing)

SG&A expenses
OperatingincomeIncrease earnings

Decrease earnings

Government policies

Management capabilities

Hiring and training pharmacists• Higher quality (secure premiums)...
• Lower quality ..............................

*1: Dispensing pharmacies
receive 0-30% of medical
expenses depending on
the type of insurance ofcustomers.
Dispensing pharmacies
then charge the remainderof medical expenses tohealth insurance bodies
such as national healthinsurance.
*2: Dispensing fees comprise
intelligent fees andtechnical fees forpharmacists.
These fees are added
depending on the services
at pharmacies.

4.75
28.8%

4

11.5%
11.0%
0.47

0

100

75.7%

10

2

(%)

Ratio of elderly people（right scale)line with government policy, leading to fluctuations in pharmacy
earnings. Policy is also being adjusted to incentivize dispensing
pharmacies to provide higher-quality services, which is likely toforce out pharmacies that cannot adapt to that change.

Factors that affect dispensing pharmacy profitability

Gross profit

Barriers to entry are high in Japan’s dispensing pharmacy sector due
to various risks faced by pharmacy operators, such as government
policy calling for pharmacies and pharmacists to play a greaterrole in healthcare provision, regular revisions to drug prices anddispensing fees, and a lack of trained pharmacists.
Japan’s dispensing pharmacy market was worth roughly ¥7.5
trillion as of March 2021, but the market remains fragmented, withthe top five companies accounting for a combined market share ofSales from drugs

Market size

Dispensing fees*2

dispensing pharmacies.

12

Earnings structure

1989 1990

40

20.8%
20

1.44
1996

2000

2005

1996-2005: annualized growth of 13.7%

2010

2015

2020 (April to March year)0

2007-2019: annualized growth of 3.4%

Source: AIN HOLDINGS estimates, based on Japan Pharmaceutical Association data, dispensing cost trends published by Ministry of Health, Labour and Welfare, population statistics
published by Statistics Bureau, and Cabinet Office white paper on aging society.

	Dispensing pharmacy company market share	 Market structure —Breakdown by company size

(Fiscal 2021)

Dispensing pharmacy types and features
Dispensing pharmacies near hospitals or on hospital sites are themost popular in Japanese cities, which are less dependent on
cars, meaning they are more convenient for patients, particularly
those who have to visit hospital regularly, such as the elderly andpatients with chronic illnesses. Many pharmacies near hospitals
or on hospital sites also satisfy the government’s conditions forprimary care dispensing pharmacies, making them the mostpopular with patients.

Dispensing pharmacies separated from hospitals by fencesor other barriers to prevent direct entry from hospitals

BeforeHospital
Pharmacy
Entry/exit

Entry/exit

Public roadTop 5 major companies*
13.8%

Differences by type
15.6％
500 or more

54.2％
9 or fewer pharmacies

15.0％
50-499 pharmacies
15.2％
10-49 pharmacies

Small and medium size
pharmacies accountfor more than 50%of the market*Top 5 major companies:	AIN HOLDINGS INC., NIHON CHOUZAI Co., Ltd., KRAFT Inc.,WELCIA HOLDINGS CO., LTD. Qol Holdings Co., Ltd.,
Source: AIN HOLDINGS estimates, based on data from DRUG Magazine (July 1, 2021)
and the dispensing fee statistics for the year ended March 2020 released by the
Ministry of Health, Labour and Welfare.

Source: AIN HOLDINGS estimates based on data compiled and published by health andwelfare authorities as of March 2021.

Close tothe hospital◎(Depends on pharmacy)

Pharmacies located near hospitals○○(Depends on pharmacy)

Pharmacies not located near
hospitals

××Drug stores with dispensing
pharmacy functions(Depends on pharmacy)

Closest to hospital, making them very
convenient

US

Medical insurance (patient cost)

Universal healthcare (0-30%)

Private health insurance (depends on contract terms)

Freedom to select hospitals / pharmacies

No restrictions

Affiliated service providers

Non-hospital dispensing ratio

75.7% (FY2020)

100%

Drug prescriptions

Refills ×

Refills

Drug prices

Set by the government (Revised regularly)

Mail order ×Market priceWell stocked
Drugs usually in stock

Safe and reassuring
Mail order

The following cases are still not permitted:
HospitalpremisesHospital

Entry/exit

Hospital

Pharmacy

Pharmacy

Entry/exit

Entry/exit Entry/exit

Public road△×

Entry/exit

Entry/exit

Public road

Public road

Located inside
the same building

Connected bya private road or passage

Merits of onsite pharmacies

ConvenientJapan

Barriers removed to improve convenience for patients
Pharmacies now permitted to be located on the same premises as hospitals

After

◎

Pharmacies on hospital sites

For patients

Differences between Japan and the US

Compatible
with advanced
healthcare

Pharmacy

Top 50major companies
34.4%

Type / Features

Hospital

Others
65.6%

8 AIN HOLDINGS ANNUAL REPORT 2021

Onsite pharmacies

Access to high-quality healthcare services,such as advanced healthcare and lower risk ofprescription errors

For pharmacies

High sales per pharmacy
High sales per pharmacy due to large volume ofprescriptions and complex prescriptions
Optimized inventories
Detailed understanding of prescription trends
at adjacent hospital enables efficient inventory
management
Opportunity to leverage and improvespecialist capabilities
More opportunities to leverage and improve specialist
skills of pharmacists, such as prepare complex
prescriptions, provide home-based dispensing and deal
with advanced healthcare treatments

For hospitals

Profitable
Receive rental income from onsite pharmacies
Higher-quality healthcare services
Higher quality of local healthcare services throughadvanced healthcare and support for hospitalization
Lower risks
Close links with adjacent dispensing pharmacies help
hospitals rapidly identify drug treatment side-effects
and minimize risk of prescription errors

AIN HOLDINGS ANNUAL REPORT 2021

9

AIN GROUP’S VALUE CREATION
Providing Social Value through Our Business (CSV)

Growth Strategy: Dispensing Pharmacy Business
AIN Group’s dispensing pharmacy network

1,065

pharmacies(As of End-Fiscal 2021)

Hokkaido 104
Koshinetsu 106
Hokuriku 25

Tohoku 167
Kanto 327

AIN Pharmacy
at Toyama Nishi General Hospital

Chugoku / Shikoku 89

AIN Pharmacy
at Sagamihara Kyodo Hospital

AIN Pharmacy
at Ehime University Hospital

Kinki 123

Tokai 81

Kyushu / Okinawa 43

AIN Pharmacy at Okayama University HospitalMarket environment

Key strategies• Changing market structure(ex. end of onsite pharmacy ban)• Top-line growth(ex. open pharmacies in new prime locations)• Pressure on pharmacies to expand role,
increase quality• Further raise quality of pharmacies
and pharmacists• Regular revisions to drug prices
and dispensing fees

• Ensure profitability (ex. use WHOLESALE STARS)• Advances in healthcare and IT

AIN Pharmacy Otemae

AIN Pharmacy Chayagasaka

AIN Pharmacy
at Tondabayashi Hospital

AIN Pharmacy Okazaki HashiraMateriality
Contribution to local healthcare• Respond to advanced healthcare andtechnological innovation

A Message from the Director

Top-line growth
The AIN Group entered the dispensing pharmacy sector in
1993. Despite being a relatively late market entrant, theAIN Group is now the industry leader thanks to businessexpansion driven by an aggressive pharmacy-opening
strategy, including pharmacies acquired through M&A.
Due to the realities of Japan’s operating environmentand healthcare system, dispensing pharmacies near
hospitals have been the best format for patients and ourbusiness. However, the dispensing pharmacy market has
been undergoing some dynamic structural changes inrecent years. The lifting of a ban that prevented dispensing
pharmacies from opening on hospital sites is one of thosechanges. Onsite pharmacies align with the government’s
vision for patient-focused dispensing pharmacies in termsof patient convenience, but they are also well-placed tokeep up with advances in healthcare.
10 AIN HOLDINGS ANNUAL REPORT 2021

Hospitals gain a number of benefits by attracting
dispensing pharmacies to their premises, as closer links
with pharmacies reduce the risk of dispensing errors andother issues and enable deeper cooperation in advanced
healthcare. That’s why a growing number of hospitals,
particularly university hospitals, are stepping up efforts
to attract onsite pharmacies. Advantages for patients
include greater convenience and higher quality services» See page 9 . Meanwhile, onsite pharmacies give us theopportunity to leverage competitive advantages such as the
specialist skills of our pharmacists. Prescription volumes arealso likely to be more reliable.
New onsite pharmacies could lead to a dramatic drop in
the number of prescriptions filled by existing pharmacies
located near hospitals, but the risk to our business is limited,
because as a relatively late entrant to the market, the AINGroup has only a handful of pharmacies located near large
university hospitals. Instead, we view onsite pharmacies asa major opportunity to increase market share.

An opportunity to growthe top line in 2021
Masato Sakai
Director, Division Manager
of Store Development

Since October 2016, regulations have been relaxed to allow
dispensing pharmacies to open on the premises of medical
institutions.
In addition to improving convenience for patients and the
profitability of medical institutions, we see the reforms as anopportunity to increase the capabilities and earnings of ourdispensing pharmacies. That has prompted us to implementa range of initiatives targeting the onsite format.
M o s t o n s i t e p h a r m a c i e s a re s e l e c t e d t h ro u g hcompetitive bidding, so the capabilities of operators are

an important factor in the selection process. Many medical
institutions are currently looking for companies to run
onsite dispensing pharmacies, with over 150 public tenders
already conducted in the period since the laws were relaxed(our estimate, includes no-bid contracts). The number ofonsite pharmacy contracts put out for tender in fiscal 2020
was roughly double the level in fiscal 2018.
In 60% of those cases, medical institutions have selected
the AIN Group. Many of the onsite pharmacies we haveopened have shown they are good at attracting customers
and are highly profitable. Even during the COVID-19
pandemic, we have rapidly recovered our investment inonsite pharmacies.
With medical institutions accelerating efforts to attract
pharmacy operators, we plan to use our proven earnings
model to target and win contracts. Our aim is to continue
growing the top line by stepping up efforts to secure new
business, mainly from large medical institutions.

AIN HOLDINGS ANNUAL REPORT 2021

11

AIN GROUP’S VALUE CREATION
Providing Social Value through Our Business (CSV)

Generic drug dispensing (monthly cases)

Home-based dispensing (monthly cases)

82.6

5.50
27

200

3.96

3.71

5.0

3.74

4.0

23

150

3.0

182

100

134
25
11

50
0

(24)

17/4

18/4

14
6

15
14

(64)

(52)

(54)

(73)

(50)
(100)

(times)
6.0

4.88

19/4

20/4

Number of pharmacies opened (organic growth)
Number of pharmacies acquired through M&A
Number of pharmacies closed and sold

2.0
1.0
0

EV/EBITDA multiples

Number of pharmacies(stores)250

21/4
EV/EBITDA	Changes to AIN Group’s M&A criteria
M&A criteria(Before)M&A criteria(From Fiscal 2020)

Pharmacy size

Annual sales of ¥120
million or higher

Annual sales of atleast ¥200 million

EV/EBITDA
multiple

5-7 times

5-7 times

Contribution to
consolidated
earnings

Fiscal year following
deal

Fiscal year following
deal

Potential risks

None

Onsite pharmacies
Compliance issues

12 AIN HOLDINGS ANNUAL REPORT 2021

30

80

77.4
74.4

75

77.2
19.2

18.9

20.9

21.6

23.0

25

20

18.2
15.8

70

Apr.
17

Mar.
18

Apr.
18

15

Apr.
19

Mar.
20

Apr.
20

（No. of cases）

Apr.
21

25,00020,000

93.3

64.4

90.4

92.5

92.3

14,533 15,371

15,00010,000(%)

91.2

16,876

92.5
19,0750

80
60

11,940
8,952

40

6,628

5,000

10

100

20

Apr.
15

Apr.
16

Apr.
17

Apr.
18

Apr.
19

Share of generic drugs to total prescriptions (generic drug dispensing ratio)*1
Average generic drug reimbursement points*2

No. of home-based dispensing cases
Ratio of pharmacies providing home-based dispensing

Data source: *1: All pharmacies*2: Three main Group companies (AIN PHARMACIEZ, Asahi Pharmacy, DAICHIKU)

Data source: Pharmacies available to be compiled at each month

Apr.
20

Apr.
21

Ratio of pharmacies providing
home-based dispensing

Number of pharmacies and EV/EBITDA multiples

Further improving the quality ofpharmacies and pharmacists

84.3

80.1

65

However, hospitals apply strict criteria when selecting
onsite pharmacy operators. They want stable companies
with a solid track record in pharmacy openings, backed
by sound finances, as well as the ability to hire and train
large numbers of pharmacists who understand advanced
healthcare. Not many companies are capable of consistently
meeting those criteria, but the AIN Group ticks all thoseboxes and is steadily building up experience in the onsite
format. To continue fulfilling the mission envisioned fordispensing pharmacies and to support more efficient
healthcare provision, we will shift to larger locations– focusing on onsite pharmacies – and overhaul ourpharmacy portfolio.
We will also continue to actively pursue M&A deals witha sustained focus on investment efficiency, using both M&A
and openings of large dispensing pharmacies to grow theGroup’s top line and increase market share to 10%.

83.0

No. of home-based dispensing cases

85(points)

Average generic drug reimbursement points

Share of generic drugs to total prescriptions(%)

0

The growing roles of dispensing pharmacies

The Japanese government wants the sector to create moreprimary care pharmacies that can support local healthcare
service provision, which means dispensing pharmacies andpharmacists need to play an even greater role. To fulfill
their primary care role, dispensing pharmacies have tooffer higher quality services, such as promoting genericdrugs, managing leftover prescription medicines, managing
patient health, working with local healthcare providers,providing 24-hour dispensing services and supporting
home-based healthcare services, in addition to theirtraditional role of drug dispensing. In order to deliver thoseservices, pharmacists will need to improve their specialist
skills, as well as their ability to communicate with patientsand medical institutions.
Also, as part of revisions to the Pharmaceuticals andMedical Devices Act, a new function-based pharmacy
certification system will come into effect from August 2021.
Under the system, dispensing pharmacies with primarycare functions can gain certification as community
coordination pharmacies and those with advanced
pharmaceutical management capabilities can be certified as
specialist medical institution coordination pharmacies.
Recognizing the importance of dispensing pharmacies
in local healthcare infrastructure, we have recruitedstable numbers of pharmacists and consistently raised
the standards of our pharmacies and pharmacists since
the earliest days of our dispensing pharmacy business,regardless of fluctuations in earnings. We are also actively
responding to the shift to home-based healthcare andsharing information with medical institutions, aiming tosecure community coordination pharmacies certification for
all our pharmacies.
To improve the quality of dispensing pharmacies, we
provide a range of internal and external training programs,
which are upgraded every year, to enhance the specialist
skills of our pharmacists. Depending on location, we plan togain specialized medical institution coordination pharmacies
certification for pharmacies with those capabilities.

New roles
Healthcare support

Pharmaceutical management•Provide preventive healthcare and healthcare support• Respond to needs for advanced pharmaceutical management

Primary care pharmacists and pharmacies
24-hour support & home-based healthcare

Unified and continuous management of drug usage• Continuous check of drug indications and adverse reactions• Prevention of over-prescription, double medication anddrug interactions• Support for patients throughout the day,all year round home-based healthcare

Cooperation with medical institutions• Check with doctors about possible prescription errors, suggestions about prescription drugs• Feedback to doctors about adverse reactions and drug usage •Patient counselling and provision of drug information• Recommendation for medical checkups

Conventional role

Dispensing drugs

Pharmacy certification system (from August 2021)
Community coordination pharmacy

ProvideSpecialized medical institution coordination pharmacy

Deploy Deploy
specialist cancer
specialist cancer
treatmenttreatment
pharmacists
pharmacists

Providehome-based
home-based
New
roles
healthcarehealthcare

Healthcare support•Provide preventive healthcare and healthcare support

Share
Share Conduct Conduct
information
information
training fortraining forwith medicalwith medical
comprehensive
comprehensive
institutionsinstitutions
local care local care

Pharmaceutical management
Share to needs
Share for advanced pharmaceutical management• Respond
Provide Provide
information
information
specializedspecializedwith specialist
with specialist
cancer-related
cancer-related

medicalPrimary care pharmacists andmedical
pharmacies
training training
institutionsinstitutions

Unified and continuous management of drug usage• Continuous check of drug indications and adverse reactions• Prevention of over-prescription, double medication andPharmaciesdrug
that
can work with other medical institutions
interactions

24-hour support & home-based healthcare• Support for patients throughout the day,all year round home-based healthcare

Pharmacies that can work closely with other medical
institutions while providing advanced prescription drug
to manage prescription information in an integrated andCooperation with medical institutions
management and highly specialized, specific dispensing
continuous way, including for home-based healthcare and• Check with doctors about possible prescription errors, suggestions about prescription drugs
withand other conditions that
hospital admission
discharge,
well reactions
as general• Feedbackand
to doctors
about asadverseandphysician
drug usage •Patient services
counsellingfor
andpatientsprovision of
drugcancer
information• Recommendation for medical checkups
require expert pharmaceutical management.
visits.
Conventional role

Dispensing drugs
AIN HOLDINGS ANNUAL REPORT 2021

13

AIN GROUP’S VALUE CREATION
Providing Social Value through Our Business (CSV)

Examples of advanced healthcare initiatives• Online pharmaceutical guidance services(From July 2018)• Participated in MHLW’s digital drug prescription field trial(From February 2019 )*Japan plans to launch digital drug prescriptions in January 2023

• Trial of prescription drug deliveries using drones(Asahikawa, July 2020; Fukuoka, December 2020)• Trial of prescription drug deliveries using small delivery
robots (From March 2021)• Trial of same-day prescription drug delivery service(From March 2021)

Ensuring profitability
Dispensing pharmacies face a challenging environment.
Standards for calculating dispensing fees are revised
every two years, and from April 2021, drug prices will be
adjusted annually, leading to continued fluctuations in
profits » See page 9 . However, by increasing the number ofprimary care pharmacists and focusing on patient-oriented
services such as advanced pharmaceutical management, wehave raised the quality of our services to generate profits.
We are also steadily expanding home-based dispensing
and generic drug dispensing. Growth in generic drug
dispensing typically leads to a decline in sales in value
terms, putting pressure on pharmacy profits. However, we
use our generic drug wholesaling subsidiary WHOLESALESTARS Co., Ltd. (WSS) to negotiate prices and procure
directly from generic drug manufacturers. We have alreadypurchased more generic drugs than any other company inJapan, but we are further strengthening our buying powerby narrowing down suppliers to just a few firms, helping toboost profitability. This approach is one of our competitive
advantages, as it helps to support the provision of highquality services and maintain profit levels.

Responding to advanced healthcare
and technological innovation
The AIN Group is implementing measures that support
government efforts to create advanced healthcare services,such as online pharmaceutical guidance services and digital

Roles and merits of WSS
Monitors andmanages total
generic drug usage
across the Group

AIN
Group
dispensing
pharmacies

Links with Group’s
dispensing pharmacies

Selects
preferred
generic drugs

Maintains genericdrug pricemargins

WSS

Generic drug
procurement

Generic
drug
makers

Negotiates withand buys directlyfrom genericdrug makers

drug prescriptions, as well as actively participating in joint
research with partners in the academic sector. We aim to
fulfill our responsibility as the leading company in the sector
and steadily prepare for various changes in the market,
such as further deregulation and advances in technology.
Going forward, we will step up collaboration with thehealthcare sector while also aiming to be the first-choicedispensing pharmacy operator for local communities.
We also plan to invest in IT to improve the qualityof dispensing pharmacies and strengthen earnings
capabilities with the aim of rebuilding the Group’s businessbase to support growth.

Prescription drug deliveries using small delivery robots

A Message from the Managing Director

Cultivating pharmacists who
can meet higher standards
Miya Oishi
Managing Director,
in charge of Dispensing Pharmacy
Operating Management

Revision of the Pharmaceuticals and Medical Devices Act
in September 2020 mean that pharmacists are now legallyrequired to continuously monitor pharmaceutical usage by
patients, not only when prescriptions are written. A new
system also comes into force from August 2021 that will
certify pharmacies as community coordination pharmacies
or specialized medical institution coordination pharmacies.
The changes mean that pharmacists will have to be moreclosely involved in individual patient treatments that everbefore. At the same time, their role in the community ischanging dramatically. Pharmacists increasingly need to havethe skills to handle home-based healthcare, collaborate withpeople in various medical professions, provide pharmaceuticalguidance based on expert knowledge of cancer and otherillnesses, and work closely with medical institutions.

The AIN Group has been working for some time tobuild closer relationships with patients and cooperatewith home-based healthcare service providers and medical
institutions to fully leverage the capabilities of its primarycare dispensing pharmacies and pharmacists. We have also
increased or focus on training and education to help ourpharmacists acquire specialist skills and expertise.
Moreover, thanks to our pharmacy-led project, which
was launched in 2012 to overhaul practices in dispensing
pharmacies, a cycle of continuous improvement driven
by pharmacy staff thinking and acting independently has
been embedded across the Group. In addition to improving
operational efficiency and supporting premium levelsof service, this process has accelerated the growth anddevelopment of pharmacists, resulting in highly motivatedhuman resources who are keen to take on new challenges
whatever the conditions they face.
In April 2021, more than 600 newly graduatedpharmacists joined the AIN Group, a new record. Goingforward, we will continue to cultivate high-quality
pharmacists to support the provision of services topatients nationwide as a key part of Japan’s healthcare
infrastructure.

Dispensing of anticancer drugs and others

14 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

15

AIN GROUP’S VALUE CREATION
Providing Social Value through Our Business (CSV)

Growth Strategy: Cosmetic and Drug Store Business

LIPS and HIPS line upAYURA line up

DAZZSHOP line upComparison of AINZ & TULPE and general drug stores:
product mix
AINZ & TULPE *1

Market environment• Narrowing quality gap in the retail sector,
including drug stores• Urbanization• Diversifying values and lifestyles• Faster spread of information via social media, etc.
• Increase in store closures/Exits in other sectors
amid the pandemic

Key strategies

Drug stores have been part of the Group since the Company
was established, but the retail sector has seen a narrowing
gap in quality and a steep drop in profit margins. To avoid
these issues and stand out in the market, we started rollingout unique retail formats under the AINZ & TULPE brand in
fiscal 2016. We also changed the name of the business tothe cosmetic and drug store business to clearly set it apartfrom conventional drug stores.
AINZ & TULPE is enhancing its unique market position
with a merchandise lineup based on a completely different
retail concept to conventional drug stores and department
stores and by building up store operation expertise. These
efforts are also steadily strengthening the brand.
In the fiscal year under review, the cosmetic and drug
store business was hit hard by the pandemic, which forced
stores to temporarily close or reduce opening hours to
16 AIN HOLDINGS ANNUAL REPORT 2021

prevent the spread of infection. However, the businesshas continued to actively build its presence in the market,
launching a number of measures targeting opportunities
ahead, including offering more products that help people
live with the new realities of the COVID-19 pandemic.
Merchandise lineup
The merchandise lineup is part of our differentiation
strategy. Conventional drug stores tend to be discounters
focused on food and a broad range of other products. The
AINZ & TULPE format is very different, with beauty products
such as cosmetics accounting for approximately 90% of
the merchandise lineup. Our stores are particularly strong incosmetics, offering a wide choice of products from naturalcosmetics and premium brands to original brands such as
LIPS and HIPS.
We are also adding original brands in product categories
such as color contact lenses, homewares and fashion
accessories. Manufacturers have welcomed our emphasis on

Customerbase

People who seek
“inner and outer
beauty” and“healthy beauty”

Families, overseas
visitors

Merchandise

Beauty products
account for
approximately
90% of lineup

Brand products
Daily necessities
and food account only
for more than
50% of lineup

Pricing

NormalDiscount

Premium

Sales areas

Customers canpersonally try
various beauty
products in store

Small retail areas,
cluttered displays

Brands soldthrough own
boutiquestores, reducing
accessibility for
shoppers

27.9%

Provide beauty and happiness• Targeting post-pandemic opportunities,
increase store openings in prime locations
with favorable lease terms

Drug stores

12.4%
26.6%

Materiality• Reinforce differentiation strategy
		 . Merchandise lineup (80% cosmetics, items
matched to consumer trends)
		. Store operations that keep sales areas fresh

Reinforce the differentiation strategy

9.1%

87.2%
Beauty products
Foods and health foods

33.1%
Drugs and sanitary products
Daily necessities*1 Data is for the fiscal year ended April 2021
*2 Source: Monthly Report on the Current Survey of Commerce (June 2021),
Ministry of Economy, Trade and Industry

providing value rather than selling products at low prices,and with their support, we are expanding our lineup of
exclusive AINZ & TULPE versions of national brand products.
Going forward, we plan to step up development of ourown products and these tie-in products as part of ourdifferentiation strategy.
M&A deals are another approach we are using tostrengthen our formats. We acquired the AYURA cosmetics
brand from Shiseido in 2015 and the makeup and cosmetics
brand DAZZSHOP in 2019. DAZZSHOP is well-known for its
range of eye makeup products and colored contact lenses.
Using these approaches, we are able to accurately identify
the latest trends in the market to provide products that
consumers want, well before our competitors.
Store operations
Another part of our differentiation strategy is store
operations. One of the features of our cosmetic and drug
store business is its ability to rapidly launch new products,

Department
storesAINZ & TULPE

General drug stores *2

1.9% 1.8%
AINZ & TULPE Dai Nagoya Building	
Differences between AINZ & TULPE and other retail formats

High-income
earners, including
overseas visitors

thanks to the considerable operational independence given
to each store. Stores are allowed to update merchandise
lineups and retail areas on a weekly basis to keep customers
interested. Approaches that are successful at individualstores are immediately rolled out to other stores in the AINZ& TULPE chain, with priority given to strong-selling items,
which helps to drive growth in sales volumes and support
high profit margins.
Even during the pandemic, stores have operated on theprinciple of being as welcoming as possible to customers,
aiming to offer the highest level of service while working
within the scope of measures to prevent the spread of
infection. In its core cosmetics category, AINZ & TULPE is
also expanding its range of products to meet needs thatemerged during the pandemic. New items include eye
makeup, products that alleviate skin problems, foundation,
makeup protection mist, functional face masks, antibacterial
products and premium eyelash lotion, which all incorporate
AINZ & TULPE’s unique merchandising approach.
AIN HOLDINGS ANNUAL REPORT 2021

17

AIN GROUP’S VALUE CREATION
Providing Social Value through Our Business (CSV)The business has also worked to develop its presence in
e-commerce channels to give customers the opportunity
to enjoy the AINZ & TULPE experience without having tovisit stores.
In October 2019 we started offering an official
smartphone app with point card functionality. Since launch,
the number of registered users has risen to roughly 800,000.
We also opened a new webstore (AINZ & TULPE WEBSTORE)
in May 2020. Going forward, we plan to use innovative
approaches to make the site more enjoyable to use and linkit with physical stores to develop the customer base andattract new customers. We are also continuing to develop
our IT and logistics strategy to further increase efficiency andprofitability.

Opening more stores in prime locations
with favorable lease terms
Since 2015 we have opened a string of large flagship
AINZ & TULPE stores in highly convenient locations in
the metropolitan area, including Shinjuku and Ginza incentral Tokyo. In addition to the Tokyo metropolitan area,
we are stepping up store openings in locations with highfoot traffic in major regional cities in the Kansai area andKyushu. In fiscal 2021, we opened 11 stores in large cities,
near major stations and in other locations, taking the total
number of stores to 69.

No two AINZ & TULPE stores are the same, thanks toflexible store designs tailored to each location. In addition
to large stores, compact stores of less than 300m2 are also
proving to be successful. That reflects the appeal of the
AINZ & TULPE brand among younger shoppers, as well
as store designs that can be tailored to location, target
customer segments and retail floor space, an approach thatis one of our strengths. These factors are highly prized byproperty developers, which want tenant stores that can beeasily adapted to different types of locations.
Amid the COVID-19 pandemic, many stores in othersectors vacated prime locations in cities across Japan.
As a result, we have received numerous inquiries about
opening stores in vacant sites. Targeting opportunities after
the pandemic subsides, we plan to further increase store
openings in prime locations with favorable lease terms.
In parallel, we will continue to refurbish existing stores tosupport the provision of high-value-added products andservices.
We plan to grow the cosmetics and drug store business
into a ¥50 billion business over the medium term.
We will continue to follow our strategy of developing
unique retail areas to avoid competition with conventional
retailers and cosmetics makers. Our goal is to further
strengthen earnings and establish a reliably profitablebusiness model to transform the cosmetic and drug store
business into the Group’s growth driver over the medium
and long term.

Improve convenience bylinking EC site and app

Target people who seek
“inner and outer beauty”
and “healthy beauty”

Gain support fromconsumers attuned
to beauty trends

Specialize in cosmetics
and other beauty products
Increase in requests
to open stores

Improved
profitability

StoresResearch into
latest trends
Characteristics
of local area
and customers
Successful
approaches fromother stores

18 AIN HOLDINGS ANNUAL REPORT 2021

tekute Nagamachi (March 2021)

Daimaru Kyoto (June 2020)
Daimaru Umeda (June 2020)

HIKARIGAOKA IMA (December 2020)

AMU PLAZA KUMAMOTO(April 2021)

HIBIYA Chanter (July 2020)

Dai Nagoya Building(April 2021)

Kaori Ishikawa
Greaterbrand power

Unique store designs

Communicates basic
policy on productlaunches, etc.

Sapporo Kokusai Building(December 2020)

Actively opening stores in prime
locations and linking physicaland online stores

Growth inrepeat customers

Management division

storesTOKYU PLAZA TOTSUKA(September 2020)

LaLaport TACHIKAWATACHIHI(March 2021)

A Message from the Executive Officer

Store opening strategy

Create retail spaces tailoredto customers and local area

11

Total

Sun Station Terrace Okayama(September 2020)

Positive growth cycle in cosmetic and drug store businessOpen stores in major urban areasand prime locations

AINS & TULPE’s new store opening in fiscal 2021

Merchandiser
meetings

Held 1-2 times
each week toadjust displays,
product lineup

Provide maximum
levels of service tocustomers

Executive Officer, Division Manager of Cosmetic
and Drug Store Operating Management Division

Fiscal 2021 was a very tough year, with many of our stores
forced to shorten opening hours or close temporarily due
to the growing COVID-19 outbreak.
However, seeing that operating environment as anopportunity, we actively opened new stores in locations
with high foot traffic. Targeting retail facilities directly
connected to terminus stations in residential areas, we
opened AINZ & TULPE stores in TOKYU PLAZA TOTSUKA(Kanagawa Prefecture) in September 2020 and in
HIKARIGAOKA IMA (Tokyo Prefecture) the following
December. We also opened stores in retail facilities
connected to major regional stations, including the AINZ &TULPE AMU PLAZA KUMAMOTO (Kumamoto Prefecture;
April 2021), which is directly linked to Kumamoto station,and the AINZ & TULPE Sun Station Terrace Okayama(Okayama Prefecture; September 2020). In total, we
opened 11 new stores during fiscal 2021. We worked tostrengthen and raise the visibility of the AINZ & TULPE
brand by designing stores and creating merchandise lineups
tailored to each location, and by expanding the range oforiginal brands exclusive to AINZ & TULPE.
In October 2019 we released the official AINZ &TULPE official smartphone app, followed by the launchof the AINZ & TULPE WEBSTORE in May 2020. Using
both channels, we are improving loyalty point integration
between physical stores and online stores, giving customers
more opportunities to enjoy the unique AINZ & TULPE
shopping experience whenever they want.
Going forward, we will continue to focus on creating
stores that attract even more fans to the AINZ & TULPE
brand by enhancing store concepts and original brands andby maximizing their ability to engage and retain customers.

AIN HOLDINGS ANNUAL REPORT 2021

19

AIN GROUP’S VALUE CREATION

Human Resources Strategy
Personnel Strategy: The Basis for Sustained Value Creation
Training programs for pharmacists
Join company

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8Year 9Year 10

New employee training
Employeeetiquette
training

Basic training

Pharmacist
training

OJT
Follow-up training
Learning support content
OJT instructor training

Management training

Nationwide employee training
Supervising pharmacist training, new pharmacy manager training
Management training
Academic conferences, specialist qualifications

Specialist training

Advanced pharmaceutical management study group
Hospital pharmacist training
Overseas training

Key outcomes from pharmacy-led projects

Number of graduates hired(persons)
1,200

Pharmacy-led project

1,000
800

The AIN Group is putting renewed focus on personnel
training as a priority issue to support the transition to thenext stage of growth.
The role of pharmacists continues to change in line withthe government’s vision for patient-focused dispensing
pharmacies. To fulfill their new role, pharmacists need ahigher level of expertise and good communication skills.
Our approach to recruitment is highly regarded by
students and universities, helping the Group to perform
well in pharmacist recruitment. Several factors are behindthat success, including our hiring track record and highquality training systems, opportunities for pharmacists
to fully demonstrate their skills due to the large numberof complex prescriptions at our pharmacies, and the AINGroup’s growth potential.
We need to hire stable numbers of pharmacists and raise
the quality of human resources to support our programof opening large-scale dispensing pharmacies, which will
require large teams of highly skilled pharmacists. That’s why
all levels of management, from the president down, areclosely involved in recruitment activities.
Meanwhile, we are stepping up hiring in the cosmetic
and drug store business to support our aggressive store
expansion program. Each advertised position attracts many
applicants, who are drawn to our unique stores and ourstrategy of standing out in the drug store sector. That gives
us the pick of the best, highly motivated people.
After joining the AIN Group, our personnel have accessto a range of training programs tailored to their career
stage. For example, we have put in place systems to help
pharmacists enhance their skills over the long term, suchas support to acquire specialist qualifications as a cancer
care pharmacist and opportunities to participate in practical
20 AIN HOLDINGS ANNUAL REPORT 2021

training on advanced healthcare at university hospitals.
We also run a number of unique initiatives to improvethe motivation and skills of our employees. One initiative
is our pharmacy-led project, launched back in autumn
2012, which encourages pharmacists to draw on theirown frontline experience to further improve efficiency,
profitability and quality at our dispensing pharmacies. The
pharmacy-led project has reduced patient waiting times andcontributed to profits by reducing inventories and overtime
work. It has also been extended to the cosmetic and drug
store business and head office departments, leading toefficiency gains and an improvement in service quality.
The project has clarified issues faced by each section anddelivered clear improvements, helping to boost motivationand change thinking among frontline personnel, leading toa lower rate of staff turnover.
Going forward, we will improve career development
support and performance evaluation systems as part ofefforts to create a framework that enables all employees
to realize their potential. Our aim is to raise the qualityof personnel and enhance the Group’s ability to adapt tochange.

Responsive todispensing
fee revisions

Issues clarified

Inventory
optimization• Changing thinking• More motivated• Lower staff turnover• Efficient store
operations• Improved profitability

600

400
200

Higher quality
pharmacies andpharmacists

613

600

405

350

0

17/4
18/4
19/4
20/4
21/4
22/4
(plan)
Pharmacists
New hires for cosmetic and drug store business, for general positions,and for medical staffs.

A Message from the Director

Creating welcoming
workplaces for everyone

Rieko Kimei
Director, in charge of Personnel Department

To continue growing as a company, we have to attract andretain talented people and provide working environments
where all employees can continue to grow and develop. The
AIN Group has been taking the following steps to achievethese objectives.
1. Implementing work style reforms
In 2020, we introduced a flexible working hours
system that allows employees to choose between a
32-hour week or a 40-hour week plus additional hours
as needed. The system is designed to improve work-lifebalance for employees by giving them more time for
personal development or to pursue their own interests,
as well as for child care and nursing care. We are also
expanding home working for head office staff.
2. Upgrading training systems
To ensure customers continue to choose AIN

pharmacies, we are training up pharmacists to givethem the specialist knowledge that patients need, suchas specialist cancer care advice. To improve patient andcustomer satisfaction, we are also running training forstaff in other positions to increase their skill levels andtechnical expertise.
3. Recruitment activities that draw on the strengthsof the whole GroupWe are putting considerable effort into hiring talented
university students who want to make a contribution
in the healthcare field. One way we are doing this is bycreating opportunities for the president and other senior
executives to speak directly to students to give them adeeper understanding about the AIN Group.
We also introduced a new personnel system inAugust 2021. The new system allows us to visualize
each employee’s qualifications and skills, which will
help us deepen communication and improve personnel
education and training. The Group’s operating environment
and the values of its customers are becoming increasingly
diverse. Seeing these developments as opportunities,
we will respond flexibly to change while also taking
on new challenges to ensure patients and customers
continue to choose the AIN Group.

AIN HOLDINGS ANNUAL REPORT 2021

21

BASIS OF VALUE CREATION

Strengthening ESG
Sustainability management
The AIN Group is promoting sustainability management in its operations. The goal is to contribute to thesustainable development of society by helping to solve social issues through its business activities, while also
supporting the sustainable growth of its own businesses. In December 2020, we defined the Group’s materiality
and value creation story. We will continue to strengthen sustainability management to achieve our aim of
improving the health and happiness of our customers.

Our value creation story
The AIN Group aims to grow sustainably with society.
Specifically, the Group will ensure finances remain soundwhile further reinforcing its management structure,including corporate governance. The Group will also offer
value that society needs through its two main businesses– by creating dispensing pharmacies that contribute toand support the health of the whole community, and byproviding health and beauty products and services thatmake modern life more enjoyable.
In these business processes, the Group will of course
adhere to all rules that protect health, safety and humanrights, while also improving the health and happiness of its
customers and being mindful of environmental and social
sustainability.

Sustainability management system
We have formed a Sustainability Committee to establish,
promote and embed a sustainability management
system across the Group. The committee discusses anddetermines policies and measures related to the AIN Group’s

sustainability activities and regularly submits reports and puts
forward proposals on key matters to the Board of Directors.
The committee also uses Management Meetings to promotesustainability throughout the whole Group.

Dedicated to the health and happiness of our customers
Patients
Alleviate concerns
about health and nursing care

Employees
Grow and develop in a stable,
motivating workplace

Business partners
Achieve sustainable growth

Customers
Access high-quality services

Board of Directors

Local communities
Create an affluent society
for future generations
Shareholders and investors
Back companies with prospects
for sustainable growth

Stakeholders

ReportSustainability Committee
Chairman: President and Representative Director (Kiichi Ohtani)
Vice Chairman: Representative Senior Managing Director (Toshihide Mizushima)(Members: 17)

Management Meetings

Contributeto localhealthcare
Management Office

Promote awareness

Divisions, Businesses, Group Companies

Promotion support

Safety, peaceof mindand trust

Sustainability Management Department

Providebeauty andhappiness

Ensure soundmanagement
base

Protectthe environmentand reduce
environmental
impactCooperate withlocal communities
and businesses

Process of defining materiality, determining the value creation story
and formulating action plans
In December 2020, we used the following process to define
and disclose the Group’s materiality and the supporting
value creation story.

Step 1

Explore a wide rangeof social issues

We also formed project teams for each area ofmateriality. The teams devised initiatives and set KPIs, whichwere disclosed in May 2021. We are currently implementing
the initiatives to achieve our targets.

Use ISO 26000, the Global Compact, SDGs and criteria set
by ESG assessment bodies to explore a wide range of issues

Board of Directors
Step 2

List up all the Group’s
measures

Compile a list of all the measures the Group
is currently implementing to tackle social issues

Sustainability Committee
Cross-checkDirector
the Group’s
Chairman: President
and3Representative(Kiichi Otani) Cross-check the Group’s CSR/ESG/sustainability measures
Step
external
issues Mizushima)
with external issues and fill in any gaps
Vice Chairman: Representative Senior measures
Managingwith
Director(Toshihide
Members: 17
Step 4

Define materiality

Management Meetings
Create the Group’s
Promote awareness Step 5
Promotion
value creation story
Importance for the AIN GroupsupportDivisions, Businesses, Group Companies

Step 622 AIN HOLDINGS ANNUAL REPORT 2021

Define the Group’s materiality by assessing the importanceof issues identified through Step 3 along two lines: importancefor the Group and importance for stakeholders
Management Office
Organize and finalize the Group’s value creation story
in line with materiality

Regularly review and adjust

Importance for our stakeholders

ReportPromoting materiality
Following discussion and review by the Sustainability
Committee and further discussion by the Board of Directors,
the Group finalized key measures to be implemented ineach area of materiality and KPIs to be achieved by fiscal

2026. The measures and KPIs were disclosed in May 2021.
Directors were also assigned to each project to lead theimplementation of the various measures and achieve thetargets.

Materiality

Key measures

KPIs [Targets for fiscal 2026]

1. Contribute to local healthcare
CSV issue (S)We will surely fulfill the roles requested andexpected of pharmacies to realize the proper use of
medicines, and take the initiative in creating new
mechanisms required by society.

•Number of certified pharmacies*1[All pharmacies have obtained one of the following
certifications:
Specialized medical institution coordination pharmacy
Community coordination pharmacy]•Number of health support pharmacies*2[Secure certification for more than 50% of pharmacies]•Number of home-based services[All pharmacies to conduct at least 24 cases per year]<Project leader>Miya Oishi(Managing Director, In charge ofDispensing Pharmacy Operating
Management)

Related SDGs

Contribute to the sustainability of the social security •Number of primary care pharmacists
system by controlling medical costs through efficient [Deploy primary care pharmacists to all pharmacies]•Generic drug usage rate
pharmaceutical usage and healthcare provision.
[Maintain usage rate at 85% or higher at allpharmacies]

Sustainability Management Department

Take action to achieve
the materiality goals

Form project teams for each area of materiality
to implement measures, set and work towards KPIs

Protect the lives and health of employees and ensure
the continued provision of pharmaceuticals andhealthcare services, even during natural disasters,
pandemics and other major events.

•Continually improve BCP and strengthen
execution capabilities[Achieve 100% response rate for safety verification
drills*3]•Ratio of disaster base hospital pharmacies
with emergency stockpiles[Ensure all pharmacies supporting disaster basehospitals have stockpiles]

AIN HOLDINGS ANNUAL REPORT 2021

23

BASIS OF VALUE CREATION
Strengthening ESG

Materiality

Key measures

2. Provide beauty and happiness
CSV issue (S)Open stores with product ranges aligned with retail •Use app to connect with users and offer moretrends, consumer needs and local areas to empower buying opportunities[Official app
people through beauty.
Number of active users 1 million/month
Number of page views 1.5 million/month]<Project leader>
Kaori Ishikawa(Executive Officer, Division
Manager of Cosmetic and DrugStore Operating Management
Division)
3. Safety, peace of mind and trust
Business process issue (S)<Project leader>Miya Oishi(Managing Director, in charge ofDispensing Pharmacy Operating
Management)
4. Protect the environment andreduce environmental impact
Business process issue (E)<Project leader>
Hideki Fujiwara(Senior Executive Officer, Division
Manager of Operational Support)
5. Ensure sound management
base
Management structure issue (G)<Project leaders>Toshihide Mizushima(Representative Senior Managing
Director, in charge of Operating
Management, Operational
Support and Information
Technology);
Miya Oishi(Managing Director, in charge ofDispensing Pharmacy Operating
Management);
Rieko Kimei(Director, in charge of Personnel
Department);
Hideki Fujiwara(Senior Executive Officer,
Division Manager of Operational
Support);Toshiya Wada
(Executive Officer, Division
Manager of Digital Promotion);
Koji Nozawa(Executive Officer, Division
Manager of Corporate Planning)
6. Cooperate with local
communities and businesses
Local community / partnercooperation issue (S/E)<Project leaders>Toshihide Mizushima(Representative Senior Managing
Director, In charge of Operating
Management, Operational
Support and Information
Technology);
Miya Oishi(Managing Director, in charge ofDispensing Pharmacy Operating
Management)

Related SDGs

Develop innovative and original products that help
customers create their own unique lifestyles.

•Number of manufactured clean beauty*
private brand products[50% of manufactured products]

Continually improve quality assurance and safety
management systems to reinforce product quality
and safety.

•Internal audit performance[Number of issues raised in pharmacy chain: 0][All cosmetic & drug stores with outstanding
ratings*5]

Identify and reduce greenhouse gas emissions.

•Build processes to ascertain the Group’s
greenhouse gas emissions[— Develop reduction plan after emission volume
has been ascertained]

Protect the environment by reducing industrial
waste.

•Pharmaceutical disposal rate
[Disposal rate of less than 0.02%]

Implement human rights initiatives.

•Formulate human rights declaration[Disclose human rights declaration]•Develop awareness checklist and set benchmarks
for test rate and correct answer rate
[Test rate: 100%, correct answer rate: 100%]

Promote diversity and inclusion by hiring diverse
personnel and efficiently deploying humanresources.

•Kurumin / Platinum Kurumin certification*6 andEruboshi / Platinum Eruboshi certification*7[Maintain Platinum Kurumin, Platinum Eruboshi
certification, etc.]•Female manager ratio[Female manager ratio: 40%]
•Disclose LGBT declaration

Step up efforts to improve employee health.

•Address all items needed to receive
outstanding health and productivity
management organization certification*8[Secure certification (White 500)]

4Reinforce systems to protect corporate information assets •Number of security incidents[Major security incidents: 0]
and increase system security; also establish regulations
and standards and overhaul the management framework
to ensure secure system operation.
Deepen engagement with various stakeholders andcontinually reinforce board oversight functions.

Contribute to society through wellness activities
and other initiatives to build mutually beneficial
partnerships with local communities.

•Board of Directors evaluation points[At least 4 or 5 points for all categories]•Number of outside directors[At least two-fifths of board]•Number of female directors[At least one-third of board]• Number of community events held
[At least four each year at all pharmacies]

Promote sustainability across the entire supply chain •Develop CSR procurement guidelines, raise
by implementing CSR procurement.
awareness and implement[Disclose CSR procurement guidelines][Hold briefings for companies in supply chain andmonitor implementation]Work with pharmaceutical wholesalers to build
systems that reduce environmental impact.

*1 Certified pharmacies (specialized medical institution coordination pharmacy /community coordination pharmacy): A new function-based pharmacy certification
system starting in August 2021 as part of revisions to the Pharmaceuticals andMedical Devices Act.
*2 Health support pharmacies: Pharmacies that meet certain standards set out by
the Minister of Health, Labour and Welfare; pharmacies with basic primary carepharmacists and functions that also actively help people in the local community to
independently maintain and improve their health.
*3 Safety verification drills: Training to confirm the safety of employees and their families
and safe conditions at pharmacies/stores as a matter of priority and to assess support
systems to ensure the continued viability of medical service provision.
*4 Clean beauty: Beauty items that contain (i) ingredients that are kind on the bodyand skin (mild formulas), and (ii) natural or naturally derived ingredients (organic)and environmental ingredients (eco-friendly, cruelty-free).
*5 Outstanding stores: Stores with three or fewer categories flagged in internal audits.
*6 Kurumin / Platinum Kurumin certification: A certification system developed by the
Ministry of Health, Labour and Welfare based on the Act for Measures to Support

24 AIN HOLDINGS ANNUAL REPORT 2021

KPIs [Targets for fiscal 2026]•Number of pharmaceutical deliveries atparticipating pharmacies[Implement at 500 pharmacies][Reduce CO2 emissions from deliveries by 75% by
cutting number of deliveries][Reduce delivery inspection time by 75% by cutting
number of deliveries]

the Development of the Next Generation; companies with general employer
action plans that meet certain standards with respect to progress versus targets
are certified as Parenting Support Companies. Kurumin-certified companies that
implement more far-reaching initiatives receive special Platinum status from the
Minister of Health, Labour and Welfare.
*7 Eruboshi / Platinum Eruboshi certification: A certification system developed by
the Ministry of Health, Labour and Welfare based on the Act on the Promotionof Female Participation and Career Advancement in the Workplace; companies
that meet certain standards with respect to supporting women’s participation andcareer advancement in the workplace receive Eruboshi certification as outstanding
companies. Eruboshi-certified companies that implement more far-reaching
initiatives receive special Platinum status.
*8 Outstanding health and productivity management organization: A programadministered by the Ministry of Economy, Trade and Industry (METI) and Nippon
Kenko Kaigi recognizing outstanding companies in health and productivity
management. The top 500 large enterprises for health and productivity
management are included in the White 500.

Materiality Initiatives

Reducing environmental impact with newpharmaceutical distribution model
Materiality area 6:
Cooperate with local communities
and businesses

We started building a new pharmaceutical distribution
model in 2020. Drawing on inventory optimization
controls from our pharmacy-led project to improve
efficiency, we are working with wholesalers to significantly
reduce CO2 emissions by minimizing delivery operations.
Protecting the global environment is our priority, but
we are also rolling out the model nationwide to boost
operational efficiencies, which will improve employee
productivity and reduce costs.

Empowering female employees
Materiality area 5:
Ensure sound management base

The AIN Group has a large number of female employees,
accounting for 81% of the total workforce (as of endApril 2021). We have put in place systems to help female
employees continue their careers with the AIN Groupduring changes in their lives, such as childbirth andparenting. From May 2020, we also introduced a new
system that allows full-time employees to choose theirworking hours. They can select one of three options –32 hours or 40 hours per week, or another schedule oftheir choice – giving them the flexibility to balance workcommitments with parenting, nursing care or otherfamily duties. With work practices becoming increasingly
diverse, the system also allows employees to choose whattime they work to suit
their lifestyles. We aim
to increase the ratio of
female managers to 40%
by fiscal 2026, and wewill continue to actively
help women advance theircareers in the AIN Group.
Fiscal 2021 data

Certified as outstanding health and productivity
management organization

Maternity leave:

351 employeesChildcare leave:

640 employees

Materiality area 5:
Ensure sound management base

Reduced working hours for childcare:

875 employees

On March 4, 2021, the AIN Group received certification
as an Outstanding Health and Productivity Management
Organization 2021 under a program administered by the
Ministry of Economy, Trade and Industry (METI) and Nippon
Kenko Kaigi that recognizes leading companies in healthand productivity management.
Health and productivity management involves
strategically supporting the health of employees andother stakeholders from a management perspective, while
the Outstanding Health and Productivity Management
Organization system recognizes large enterprises and SMEs
that take a particularly advanced approach to health andproductivity management, such as implementing initiatives
that tackle health issues in local communities or that support
Nippon Kenko Kaigi’s health improvement initiatives.

Female manger ratio

32.6%

Response to the COVID-19 pandemic
Materiality area 1:
Contribute to local healthcare

Responding to the COVID-19 pandemic, we immediately
secured logistics supply routes, sourced face masks,
sanitizer and other medical materials to protect ouremployees in the workplace and adapted dispensing
pharmacy environments to ensure the continued provisionof healthcare services. As the outbreak spread andshortages of medical materials emerged, we donated facemasks to medical institutions nationwide and procured
items for Sapporo City as part of its Civic Corporate
Partnership Program.

AIN HOLDINGS ANNUAL REPORT 2021

25

BASIS OF VALUE CREATION

Corporate Governance

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

Basic policy for corporate governance
As a Group that operates a dispensing pharmacy business anda chain of cosmetic & drug stores, which are both responsible
for people’s health, we recognize that it is essential to ensure
robust and transparent business activities that put the highest
priority on compliance.
To achieve that, we have adopted the corporate auditor
system to oversee major business decisions and businessexecution, as well as all other areas of corporate management.

System overview
The Board of Directors, the Company’s main decisionmaking body, is comprised of 12 directors, including four
outside directors. The Chair of the Board is President andRepresentative Director Kiichi Ohtani. Meetings are held 11
times each year to ensure the functioning of shared oversightby directors. Outside directors participate in management by
providing advice for key decisions from multiple perspectives.
The Company has adopted the Company with Board of
Corporate Auditors governance structure, which it regards as
an effective audit framework for management supervision. The
Board of Corporate Auditors is comprised of three corporate
auditors, including two outside corporate auditors.
The Nomination and Remuneration Committee, of whichmore than half the members are independent outside officers,
discusses and makes recommendations to enhance fairness,

Outline of corporate governanceCorporate governance structure
Chairman of the Board
Number of directors
Number of corporate auditors
Board of Directors meetings (Attendance of outside directors)
Board of Corporate Auditor meetings(Attendance of outside corporate auditors)
Voluntary advisory committee of the Board of Directors
Executive officer system
Accounting auditor

Corporate Auditor System
Kiichi Ohtani (President and Representative Director)
12 (including 4 outside directors)
3 (including 2 outside corporate auditors)
Number of meetings: 11 (100%)
Number of meetings: 13 (100%)
Nomination and Remuneration committee (over half of members are outside officers)
Yes
ERNST & YOUNG SHINNIHON LLC*Data is for the fiscal year ended April 2021.

Ratio of Independent Outside
Directors on Boardof Directors

Ratio of Female Directors
on the Board of Directors

33%

Ratio of Independent
Outside Corporate Auditors on
the Board of Corporate Auditors

Ratio of Outside Officers
on the Nomination andRemuneration Committee

25%

67%

60%

Corporate governance structure
General Meeting of Shareholders
Appointment / Dismissal

Appointment/ Dismissal

Board of Directors
Outside Directors
Appointment

Appointment

Suggestion

Appointment

Appointment / Dismissal
Nomination and Remuneration
Committees

Board ofManaging Directors

Accounting Auditors

Audit

Audit

Representative
Directors

ReportingOutside director activities
Internal Audit Office

Ko Mori
Independent

Audit
Dispensing Pharmacy
Operating Management
Division

Cosmetic and Drug StoreOperating Management
Division

Guidance

Digital Promotion
Division

Operational Support
DivisionYasuyuki
HamadaIndependent

ReportingGroup Companies

26 AIN HOLDINGS ANNUAL REPORT 2021

Outside Directors and Outside Corporate Auditors
The Board of Directors is comprised of twelve members,
including four outside directors. Two of the Company’s three
corporate auditors are outside corporate auditors. There areno conflicts of interest between the Company and its outside
directors and outside corporate auditors.
The outside directors and outside corporate auditors havea number of functions and roles in the Group’s corporate
governance. Drawing on their specialist knowledge andexperience, 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 from a neutral, independentand objective standpoint.
The Company currently has no specific standards in place,but the basic policy for recruiting outside directors and outside
corporate auditors is to ensure they can fulfill the above roles
effectively.

NameManagement
Meeting

Sustainability Reporting
Committee
Store Development
Division

Cooperation

ReportingBusiness execution

Executive Officers
Compliance
Committee

Appointment / Dismissal

Board ofCorporate Auditorstransparency and objectivity in procedures for appointing
and dismissing directors and determining remuneration for
executives. The committee is chaired by AIN Holdings’ President
and Representative Director, Kiichi Ohtani, and the fivemembers of the committee (of which three are outside officers)
are selected by the Board of Directors.
The Head of the Internal Audit Office is in charge of theCompany’s internal control system and internal audits. With aposition corresponding to that of a director, the head of theoffice liaises with the Board of Corporate Auditors, and where
necessary, attends meetings of the Board of Directors to submit
reports related to internal audits and the internal control
system, ensuring that accountability to shareholders, investors
and other stakeholders is effectively maintained.
The Management Meeting, which meets regularly and is
attended by all senior managers from the General Manager grade
and above, is tasked with monitoring business operations. Directors
and standing corporate auditors also attend the meetings, which
are used to discuss business execution in each division and tomaintain reciprocal control between business segments.
In addition, to minimize potential risks related to dispensing
errors, which is a key risk factor in dispensing pharmacy
business operations, the Internal Audit Office ensurescomprehensive compliance with basic pharmacy regulations,while the Safety Policy Office conducts analysis and implements
measures to prevent drug dispensing errors. The Compliance
Committee, which is comprised of all directors and corporate
auditors as well as legal advisors, works to widely promote andembed systems that ensure compliance with business ethics,
laws and regulations. We have also formed a Sustainability
Committee, chaired by the President and Representative
Director, to further reinforce CSR and ESG activities as part ofbroader efforts to strengthen corporate governance.

Audit

Drawing on his extensive experience and knowledge
as the manager of a major trading company, Mr. Mori
provides appropriate advice from various perspectives
in discussions about business strategy, board
resolutions and other topics.
Drawing on his specialist knowledge and experience
as an academic, particularly in the field of economics
and finance, Mr. Hamada provides appropriate advice
from various perspectives in discussions about businessstrategy, board resolutions and other topics.

Noriko Endo
Independent

Junro Ito
Independent

Drawing on her extensive knowledge and experiencefrom positions in the editing department of an
economics magazine and a public research institution,
as well as knowledge gained from market research inJapan and overseas, Ms. Endo provides appropriate
advice from various perspectives in discussions aboutbusiness strategy, board resolutions and other topics.
Drawing on his extensive knowledge of environmental,social and corporate governance (ESG) issues at a major
retailer and his experience leading group companies as adirector, Mr. Ito provides appropriate advice from various
perspectives in discussions about business strategy,
board resolutions and other topics.

Outside corporate auditor activities
Name

Akira Ibayashi Provides necessary input based on his specialist knowledge
Independentand experience from working at financial institutions.

Osamu
Muramatsu

Provides necessary input based on his specialist
knowledge and experience from working at a major
securities firm.

Independent

Evaluating the Effectiveness of the Board of Directors
To improve the effectiveness of the Board of the Directors, theboard asks directors and corporate auditors to participate in anannual self-appraisal survey that assesses board performancein 17 categories on a scale of one to five. In the fiscal 2021
survey, inside directors, outside directors and corporate auditors
gave the board above-average marks in all categories. The
results show that the Company’s Board of Directors is generally
fulfilling its duties in an effective manner. However, the survey
highlighted the need to further improve explanations aboutrisk information, growth strategy and other topics.

 election and Dismissal of Directors,
S
Nomination of Corporate Auditors
The selection / dismissal and nomination of candidates for thesenior management team and director positions is based on
a comprehensive set of criteria, including the ability to makeappropriate and rapid decisions, approval from peers, and theintegrity to rigorously observe laws, regulations and corporate
ethics, while also taking into account the current balance ofexpertise, experience and abilities in the senior management
team and the Board of Directors.
In addition, to enhance fairness, transparency and objectivity
in procedures for appointing and dismissing directors, theCompany has established the Nomination and Remuneration
Committee, of which more than half the members are
independent outside directors or corporate auditors. Asan advisory body, the committee discusses and makes
recommendations about the appointment and dismissal of
directors. Corporate auditor candidates are nominated basedon a comprehensive set of criteria from the perspective of
recruiting the most qualified person for the right position,
while also ensuring a balance of various perspectives related
to expertise in finance and accounting, knowledge about theCompany’s businesses, and corporate management. Based on
the above policies, the Board of Directors makes decisions on
candidates put forward by the President.

Remuneration for Directors andCorporate Auditors
Remuneration is composed of basic monthly remuneration and

AIN HOLDINGS ANNUAL REPORT 2021

27

BASIS OF VALUE CREATION

bonuses and is linked to earnings performance to support a
remuneration system that reflects individual responsibilities andperformance.
Monetary remuneration (which is neither earnings-linked
remuneration nor non-monetary remuneration) is defined as“basic monthly remuneration” and is paid at a fixed amounteach month. Basic monthly remuneration is determined basedon a number of criteria, including the position, responsibilities
and number of years in office of the individual, as well as thebalance relative to employee remuneration, trends at othercompanies in the industry and past remuneration.
Earnings-linked remuneration is defined as “bonuses” andis paid yearly as monetary remuneration. Bonuses are based on
consolidated operating income in each fiscal year and take into
account a number of criteria, including the balance relative tobonuses paid to employees, trends at other companies in theindustry and past bonus payments. The Company does not
currently have any non-monetary remuneration systems.
Going forward, the Nomination and Remuneration Committee
will consider the necessity of introducing incentives linked to shortterm and medium-to long-term earnings performance, taking into
account the wishes of shareholders and other stakeholders,trends at other companies in the industry and other factors.
Remuneration for executive directors is composed ofbasic monthly remuneration and bonuses linked to earnings
performance. Outside directors receive only basic monthly
remuneration, reflecting their role and the need to maintainindependence.
Decisions on remuneration amounts for each director are
entrusted to the Company’s President and Representative
Director, Kiichi Ohtani, based on resolutions of the Board of
Directors and in accordance with the types and amounts ofremuneration approved by the Nomination and Remuneration
Committee. The President and Representative Director
is regarded as being in the best position to evaluate theperformance of each director while also taking into accountthe Company’s earnings performance and other factors. The
scope of director responsibilities is determined in accordancewith suggested remuneration amounts submitted beforehandby the Nomination and Remuneration Committee.
To enhance fairness and transparency in processes fordetermining remuneration for directors, the majority of officers
who sit on the Nomination and Remuneration Committee are
independent outside officers and the committee adheres to theabove policies governing remuneration for directors and otherpersonnel.

Remuneration by category of director and corporate auditor
Category

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

Remuneration by type
NumberTotal(¥ million)of eligible
remuneration
Basic
Non-monetary individuals(¥ million)
Bonus
remuneration
remuneration

175

147

28

-

6

7

7

0

-

1

Outside directors

18

18

-

-

3

Outside corporate
auditors

12

12

-

-

2

Cross-shareholdings, etc.
The Company holds shares for reasons other than pureinvestment purposes (cross-shareholdings).
Cross-shareholdings include the stocks of companies thatoffer potential mutual benefits, such as business alliances
related to the Company’s operations or business relationshipsthat need to be maintained and reinforced, and the stocksof companies that the Company requires to maintain links
with local communities. In principle, the Company seeks to
keep the value of cross-shareholdings at less than 5% of total
assets on the consolidated balance sheet. If the value of crossshareholdings exceeds that level, the Company’s basic policy is
to consider steps such as rapidly selling the shares. In addition,
the Board of Directors considers whether the rationale forholding the shares is appropriate, whether benefits and risks
are commensurate with the cost of capital, and if there are
more effective uses of funds, which informs decisions onwhether to continue holding the shares or reduce holdings
through share disposals or other means.
With respect to the exercise of voting rights for crossshareholdings, the Company emphasizes dialogue withinvestees and makes decisions on a case-by-case basis fromthe standpoint of prospects for increased corporate value andshareholder returns, rather than taking a uniform approach toall voting decisions.
Number of company stocks held and balance sheet value
Number ofcompanies

Total value on balance
sheet (¥ million)

Unlisted

16

1,139

Other than unlisted

8

424

Risk Management
The Company has formulated Risk Management Regulations andRisk Management Guidelines that establish the risk management
framework for the whole AIN Group. Departments are assigned
to manage each category of risk, ensuring a comprehensive andexhaustive approach to risk management.
The Risk Management Section in the Administrative Department isin charge of risk matters and is responsible for issues and measuresrelated to the implementation of risk management across theGroup.
The Internal Audit Office conducts field audits to check whether
risk management rules are being strictly observed and to assess
the effectiveness of risk management systems.
In addition, to ensure the AIN Group continues to operate
during times of crisis, we have formulated a Group business
continuity plan (BCP), which is actively disseminated to all senior
executives and employees.

28 AIN HOLDINGS ANNUAL REPORT 2021

Business and other risks
Management has identified the following key risks that could have amaterial impact on the financial position, operating results and cash
flows of the Group’s consolidated companies.
Forward-looking statements are based on judgments made by theGroup as of March 31, 2021.
1. Laws and regulations
a. Regulations under the Law for Ensuring the Quality, Efficacy,and Safety of Pharmaceuticals and Medical Devices
The dispensing pharmacy business operates under various permits,
licenses, registrations and notifications, including those set out by
the Pharmaceuticals and Medical Devices Act (partial revisions to the
Act on Securing Quality, Efficacy and Safety of Products Including

Pharmaceuticals and Medical Devices), the Health Insurance Law
and the Pharmacists Law, and under the supervision of the Ministryof Health, Labour and Welfare and prefectural health and welfare
departments.
Pharmaceuticals sold by the cosmetic & drug store business are also
regulated under the Pharmaceutical and Medical Devices Act.
In addition, in the event of actions by the Group’s dispensing
pharmacy business or cosmetic & drug store business that are deemed
to infringe Article 75-1 of the Pharmaceutical and Medical Devices Act,
Article 80 of the Health Insurance Law, or Article 51-1 of the Narcotics
and Psychotropics Control Law, the authorities may issue businesssuspension orders or cancel business permits, which could have an
impact on the Group’s operating results.
b. Easing of drug sales regulations
In sales of over-the-counter (OTC) drugs, the Pharmaceutical andMedical Devices Act classifies drugs into different categories based onrisk. Only pharmacists are permitted to sell drugs requiring guidance andcategory 1 drugs, while registered sellers, as well as pharmacists, areallowed to sell category 2 and category 3 drugs.
Factors such as the entry into the market of companies from otherindustries as a result of a continuing trend in the future to deregulate
drug sales may affect the Group’s performance.
2. Dispensing pharmacy business
The Group’s dispensing pharmacy business operates a chain of
dispensing pharmacies.
As the dispensing pharmacy business accounted for 88.5% of net
sales in the fiscal year under review, we plan to continue the multi-store
operation mainly based on dispensing pharmacies. Accordingly, theGroup’s operating results may be affected by the success or failure of thestore opening policies including M&A and by trends in store openings bycompetitors 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-hospital prescriptions by the medical
institutions or suspension/discontinuation of operations thereof may
affect the Group’s performance.
In addition, prescription volumes may be affected by seasonal trends
due to outbreaks of influenza, hay fever (allergic rhinitis) and otherseasonal conditions.
3. Industry trends
The revenues in our dispensing pharmacy business come from pharmacy
operations involving the dispensing and supplying of drugs basedon prescriptions. The drug prices and dispensing fees are set by the
Ministry of Health, Labour and Welfare. As a way to contract medical
expenses, both medical treatment fees and drug prices are being revised
incrementally. In the future as well, changes in profit structure resulting
from factors such as revisions in the medical treatment fee system could
continue to affect the Group’s performance and financial position.
4. Securing qualified staff
Dispensing pharmacies and drugstores (Stores for Category 1 Drugs)
are required by the Pharmaceutical and Medical Devices Act to have apharmacist on site; the Pharmacists Law stipulates that the dispensing ofdrugs must be handled by a pharmacist.
The Group continues to have a policy of expansion by aggressively
opening new stores, but if it becomes difficult to secure qualified
pharmacists, this could affect our store openings and the Group’s
performance.
5. Risks of loss of trust in the Company
a. Dispensing operation
In our dispensing pharmacy business, pharmacists dispense and supply
prescription drugs that affect the human body. This business carries therisk 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 the Group, and we place thehighest priority on measures to avoid the risk from all aspects.

medication histories and prescription information, and we possess
personal data in the cosmetic and drug store business obtained from the
AINZ & TULPE official smartphone app.
The Group takes all possible steps to protect personal data throughpersonal information protection systems and the rigorous enforcementof rules on the handling of such information. Also, key subsidiary AIN
PHARMACIEZ INC. has acquired the Social insurance and welfare sector
privacy mark.
However, we believe it is possible that any accidental or illegal leakageof 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 scale of dispensing
pharmacies through actively promoting new store openings and M&A.
Our basic policies regarding M&A strategy require us to carefully
examine target companies and determine the amount to be paid for
acquisitions thereof in order to stably secure a profitability level thatexceeds the amortization of goodwill to be incurred. If matters do not
go as planned, however, we may incur losses on valuation of sharesin subsidiaries and impairment 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 for ordinary store
openings are covered by internal funds within the range of operating
cash flow, while in large-scale M&A, costs are sometimes financed byborrowings 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. Asof the end of the fiscal year under review, cash on hand and in banks
totaled ¥55,271 million, compared with a total balance of short- andlong-term debt of ¥11,967 million.
We focus on the possibility of return on investment and seek to reduce
interest-bearing debt through efficient investment in implementing
M&A deals. However, if the Group fails to secure an adequate returnon its M&A investment, or due to interest rate fluctuations associatedwith conditions in financial markets, the Group’s financial position andoperating results including interest payable may be affected.
8. Impact of consumption tax
Under Japan’s Consumption Tax Act, dispensing sales in the dispensing
pharmacy business related to social insurance medical examinations are
exempt from consumption tax. However, the business is required to pay
consumption tax on pharmaceutical and other products that it procures.
As a result, consumption tax borne by the Group is booked under costof sales in the dispensing pharmacy business.
In the past, when consumption tax was introduced and dispensing
fees were revised, the government took into account the higher rate of
consumption tax when it set drug prices. However, future revisions to
the rate of consumption tax may not be reflected in drug prices, which
could have an impact on the Group’s operating results.
9. Risk information related to the COVID-19 outbreakIn the event of a wide outbreak of COVID-19, the duration ofprescriptions in the dispensing pharmacy business is likely to increase
due to factors such as restrictions on outpatient consultation to preventthe spread of infection. As a result, the business is likely to see a rise in
the average unit price per prescription, but a decline in the number ofprescriptions. The cosmetic & drug store business is likely to be affectedby a drop in customer footfall due to factors such as calls for people tostay at home, temporary store closures and shorter opening hours, anda contraction in inbound tourist demand. As such, the Group’s operating
results could be affected by the spread of COVID-19.
In addition, the Group is taking a number of steps to prevent the
spread of infection, such as providing sanitizer at stores and dispensing
pharmacies, raising awareness about the importance of wearing facemasks and installing partitions at customer-facing counters, as well as
holding group seminars and meetings online to avoid the “three Cs”(closed spaces, crowded places, close-contact settings).

b. Protection of personal data
We possess patient data in the dispensing pharmacy business, including

AIN HOLDINGS ANNUAL REPORT 2021

29

BASIS OF VALUE CREATION (As of July 29, 2021)

Board of Directors and Corporate Auditors*Figures in brackets show the number of AIN HOLDINGS shares held as of April 30, 2021.

Board of Directors

Corporate Auditors

Kiichi Ohtani

Miya Oishi

President and Representative Director(3,238,400 shares)

Managing Director
In charge of Dispensing Pharmacy Operating Management(5,000 shares)

July 1980
November 1981
July 1983
May 1985
May 1988

President and Representative Director of Ohtani
Corporation (now AIN HOLDINGS INC.)
Director of newly established Daiichi Medical
Testing Laboratories Co., Ltd.
(now AIN HOLDINGS INC.)
President and Representative Director of Daiichi
Medical Testing Laboratories Co., Ltd.
Managing Director of the Company
President and Representative Director(current post)

Masahito Sakurai
Representative Senior Managing Director(1,000 shares)
April 1972
April 1987
July 1996
July 1998
January 2001
February 2001
October 2008
July 2009
November 2015

Joined Ministry of Health and Welfare(now Ministry of Health, Labour and Welfare)
Head of Administration Section,
Fund for Drug ADR Relief
Head of Air Protection Section, Japan
Environment Agency
Head of Regional Medical Affairs Office for
Tokai Hokuriku
Retired from Ministry of Health and Welfare
Commissioner of All-Japan Federation of
National Health Insurance Organizations
Advisor of the Company
Senior Managing Director
Representative Senior Managing Director(current post)

Shoichi Shudo
Representative Senior Managing Director
In charge of Store Development(9,500 shares)
April 1978
March 1982
May 1993
July 2000
May 2003
May 2004
May 2012
November 2015
May 2020

Joined Sapporo Medical Testing Laboratories
Co., Ltd.
Joined Daiichi Medical Testing Laboratories Co.,
Ltd. (Asahikawa, now AIN HOLDINGS INC.)
Head of Corporate Planning Division
Director
Managing Director
Division Manager of Dispensing Pharmacy
Business
Senior Managing Director
Representative Senior Managing Director in
charge of Store Development (current post)
Chairman of Nippon Pharmacy Association(NPhA) (current post)

September 1990 Joined KYOEIDO Co., Ltd.
Director of DAICHIKU Co., Ltd.
July 1993(current post)
July 2008
Representative Director of same company
April 2011
Vice President and Representative Directorof AIN MEDICAL SYSTEMS INC.
(now AIN HOLDINGS INC.)
February 2012 President and Representative Director of same
company
July 2012
Director of the Company
Managing Director (current post)
July 2014
November 2015 President and Representative Director of
AIN PHARMACIEZ INC. (current post)
May 2019
In charge of Dispensing Pharmacy Operating
Management (current post)

Rieko Kimei
Director
In charge of Personnel Department(6,000 shares)
April 1986
December 1995
May 2003
May 2004
August 2009
July 2014
July 2016
July 2018

Joined The Daiei, Inc.
Joined Daiichi Medical Testing Laboratories Co.,
Ltd. (now AIN HOLDINGS INC.)
General Manager of Cosmetic and Drug StoreBusiness, Merchandising Business
General Manager of Personnel Department
Executive Officer
Director (current post)
President and Representative Director of AYURALABORATORIES INC. (current post)
In charge of Personnel Department(current post)

Hidehiro Awaji
Director(4,600 shares)
December 1983
December 2000
May 2004
August 2009
May 2010
November 2015
May 2018
July 2018

Joined Daiichi Medical Testing Laboratories Co., Ltd.
(now AIN HOLDINGS INC.)
Manager of Tohoku BranchManager of Hokkaido Branch
Executive Officer
Senior General Manager for Western Japan
Managing Director of AIN PHARMACIEZ INC.,
responsible for Western Japan
Senior Managing Director of AIN PHARMACIEZ
INC., responsible for Western Japan (current post)
Director of the Company (current post)

Masato Sakai

Representative Senior Managing Director
In charge of Operating Management,
Operational Support and Information Technology(27,600 shares)

Director
Division Manager of Store Development(7,400 shares)

Joined SSP Co., Ltd.
Joined Ohtani Corporation(now AIN HOLDINGS INC.)
July 2000
Director
February 2001 Division Manager of Cosmetic and Drug StoreBusiness
May 2003
Managing Director
May 2012
Senior Managing Director
November 2012 President and Representative Director of
WHOLESALE STARS Co., Ltd. (current post)
November 2015 Representative Senior Managing Director(current post)
July 2018
In charge of Operating Management,
Operational Support and Information Technology
May 2020
In charge of Operating Management,
Operational Support and Digital Promotion(current post)

30 AIN HOLDINGS ANNUAL REPORT 2021

April 1995
January 1999
May 2004
May 2006
July 2011
June 2014
December 2016
July 2018
May 2019
August 2019

Joined Nisshin Oil Mills, Ltd.
Joined the Company
Manager of Tohoku Branch
Head of Corporate Planning Office
Executive Officer
President and Representative Director of Asahi
Pharmacy Co., Ltd.
Director of AIN PHARMACIEZ INC., responsible for
Eastern Japan (current post)
Director of the Company (current post)
Division Manager of Store Development
Division Manager of Store Development(current post)
Division Manager of Group Liaison Department(current post)

Koichi Kawamura

Director Outside(- shares)
April 1971
April 2002
April 2004
June 2006
June 2007
July 2012

Independent

Joined Marubeni Corporation
Executive Officer and General Manager ofChemicals Division
Managing Executive Officer
Representative Director and Senior Managing
Executive Officer, Materials Division
President and Representative Director of
Marubeni Safenet Co., Ltd.
Outside Director of the Company (current post)

Yasuyuki Hamada
Director Outside(2,000 shares)
April 1991

Toshihide Mizushima

April 1982
April 1986

Ko Mori

April 1997
April 2003
April 2010
April 2014
December 2014
July 2015

Independent

Professor of Faculty of Economics, Hokkaido
University
Special Assistant for the president of same
university
Professor of Advanced Scientific Research Center,
Hokkaido University (concurrent post)
President of Sapporo International University
Emeritus Professor of Hokkaido University
President and Chairman of Dohto University
President of Hamanasu Foundation (current post)
Outside Director of the Company (current post)

Noriko Endo
Director Outside(200 shares)

Independent

June 1994
Joined DIAMOND, Inc.
Head and Director of Tokyo Office, Kyushu University
April 2004
March 2006
Deputy Editor of Diamond Weekly, DIAMOND, Inc.
September 2013 Visiting Researcher at Policy Alternatives ResearchInstitute, University of Tokyo
April 2015
Project Professor, Graduate School of Media andGovernance, Keio University
June 2016
Outside Director of NTT DOCOMO, INC. (current post)
July 2018
Outside Director of the Company (current post)
Outside Director of Hankyu Hanshin Holdings, Inc.
June 2019(current post)
April 2020
Specially appointed professor of Keio University
Research Institute (current post)
March 2021
Outside Director of Techpoint, Inc. (current post)
June 2021
Outside Director of Japan Elevator Service Holdings
Co., Ltd. (current post)

Corporate Auditor (full-time)(5,000 shares)
October 1985
July 1997
May 2003
July 2012

Joined Daiichi Medical Testing Laboratories Co.,
Ltd. (now AIN HOLDINGS INC.)
Auditor of the Company
General Manager of Administrative Department
Corporate Auditor (current post)

Akira Ibayashi
Corporate Auditor Outside(- shares)
April 1963
June 2001
June 2003
July 2012

Independent

Joined The Hokkaido Bank, Ltd.
Director, Executive Officer and Deputy President
Retired from The Hokkaido Bank, Ltd.
Outside Corporate Auditor of the Company(current post)

Osamu Muramatsu
Corporate Auditor Outside(- shares)
April 1972
June 1994
June 1996
October 2007
August 2011
June 2012
July 2016
August 2018

Independent

Joined Nomura Securities Co., Ltd.
Head of Sapporo Branch
Director
Retired from Nomura Securities Co., Ltd.
President and Representative Director of
Executive Partners, Inc.
Outside Corporate Auditor of Asahi Pharmacy
Co., Ltd.
(current post)
Outside Corporate Auditor of the Company(current post)
Chairman of Executive Partners Inc.
(current post)

Junro Ito
Director Outside(- shares)

Independent

August 1990
May 2009

Joined Seven-Eleven Japan Co., Ltd.
Director of Seven and i Holdings Co., Ltd.
(current post)
Executive Officer, Senior Officer, Corporate
Development Division,
Seven and i Holdings Co., Ltd.
Senior Officer, CSR Management Division,
April 2011
Seven and i Holdings Co., Ltd.
May 2016
Given responsibility for all Group companies ofSeven and i Holdings Co., Ltd.
July 2016
Senior Officer, Affiliate Company Division
Seven and i Holdings Co., Ltd.
December 2016 Managing Executive Officer of Seven & i Holdings
Co., Ltd. (current post),
Head of the Corporate Development Office ofSeven & i Holdings Co., Ltd.
Director, Ito-Yokado Co., Ltd.
March 2017
General Manager of the Corporate Development
March 2018
Division of Seven & i Holdings Co., Ltd. (current post)
July 2019
Outside Director of the Company (current post)

AIN HOLDINGS ANNUAL REPORT 2021

31

BASIC INFORMATION/DATA

11-year Financial Summary and ESG Data

11-year Financial Summary
For the year:
Net sales
Selling, general and administrative expenses
Operating income
Profit attributable to owners of parent
Capital expenditures
Depreciation and amortization
At the end of the year:
Equity capital*1
Total net assets
Total assets
Number of shares outstanding (shares)
Number of employees (persons)
Number of stores: Dispensing pharmacy business
Number of stores: Cosmetic and drug store business
Per share information (¥):
Earings*2
Net assets*2
Cash dividends*2
Stock information (based on the closing price as of April 30) (¥):
Stock price
Ratios (%):
Operating margin
Return on sales *3
Return on assets (ROA) *4
Return on equity (ROE) *5
Shareholders’ equity ratio

2012/42013/4

2014/4

2015/4

2016/42017/42018/4

2019/42020/4

129,387
11,981
8,107
3,916
2,750
1,560

142,790
12,83910,253
4,899
5,870
1,749

154,560
14,740
9,701
5,075
7,235
2,212

170,225
15,635
10,113
5,259
6,328
2,258

187,904
17,50911,452
6,197
6,413
2,553

234,843
23,915
14,619
7,917
11,2093,259

248,110
27,52914,563
7,949
4,786
3,687

268,385
28,37019,622
10,567
5,311
3,596

275,596
29,295
16,067
9,029
9,919
3,903

292,615
30,793
16,0689,179
10,536
4,087

297,305
35,222
10,932
6,697
8,122
4,243

29,45029,49876,94015,941,004
4,561
448
53

33,69533,74585,90815,940,790
5,125
494
56

38,31238,356
95,83915,940,740
5,618
560
61

42,122
42,240101,382
15,854,190
6,074
616
59

47,92848,046
114,149
31,707,617
7,025
754
56

53,25853,324
139,888
31,707,617
8,555
881
52

60,10560,178156,323
31,707,568
9,774
1,066
52

96,697
96,733
183,380
35,427,524
9,603
1,029
48

103,855
103,922
189,02135,427,484
10,652
1,132
54

110,915
111,003
193,451
35,427,484
13,158
1,088
63

115,758
115,837
203,662
35,427,321
13,0651,065
69127.83923.7322.5

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

249.691,679.69
40.0

250.71
1,895.63
50.0

310.082,729.44
50.0

254.872,931.48
55.0

259.113,130.77
55.0

189.04
3,267.49
55.0

3,115

4,290

4,765

4,495

4,245

5,340

7,720

7,300

8,840

6,030

6,070

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

6.2
3.4
6.2
15.6
38.1

5.9
3.2
5.4
14.0
38.4

7.3
3.9
6.2
13.5
52.7

5.8
3.3
4.8
9.0
54.9

5.5
3.1
4.8
8.5
57.3

3.7
2.3
3.4
5.9
56.8

ESG Data
Environment
Environmental protection action plan    Yes (Japanese only)
Environmental data
CO2 emissions* (t-CO2)
CO2 emissions related to operation of pharmacies* (t-CO2)
Electricity use* (kWh, thousand)
Water use* (GJ)

FY2018FY2019FY2020

FY2021

https://www.ainj.co.jp/csr/protection.html
9,830
9,608
18,234
1,387

10,982
10,901
20,893
1,155

11,318
11,22422,073
1,269

11,348
10,74722,748
1,283

9,603
1,966
7,637
4,457
-

10,652
2,119
8,533
4,904
117

13,1582,407
10,751
5,273
97

13,0652,448
10,617
5,477
70

431
279
8.1%
7.3%
-

534
257
7.6%
7.6%
91.7%

952
560
6.7%
6.0%
62.2%

1,018
613
5.2%
4.5%
54.8%

*Data for key operating subsidiary AIN PHARMACIEZ INC.

SocialComposition of Employees
Total employees
MaleFemalePharmacists
Non-Japanese employees
Workforce Data
Total hires
Pharmacists
Full-time employees turnover rate
Pharmacists
Employees rehired at mandatory retirement age
Female Employee Empowerment
Eruboshi certification         Grade three – highest level of certification
Ratio of female hires
Female manager ratio
Directors
Executive officers
Childcare and Maternity Leave
Kurumin certification        YesEmployees using maternity leave
Employees using childcare leave
Employees with reduced hours for childcare
OthersAverage age
Average compensation (¥ thousand)Average monthly overtime per employee (hours)

32 AIN HOLDINGS ANNUAL REPORT 2021(¥ million)

2011/4https://www.ainj.co.jp/csr/maintenance.html
74.9%
80.5%
76.1%
81.4%
30.9%
31.2%
31.7%
32.6%
18.2%
21.6%
16.0%
14.3%
31.3%
29.2%
33.3%
27.3%

2021/4

Note:
Amounts of less than one million yen wererounded down.
*1: Equity capital =Total net assets – Non-controllinginterests*2: The Company conducted a 2-for-1 stock
split of common shares with an effective
date of October 1, 2014. Earnings
per share, net assets per share and cash
dividends per share have been adjusted
retroactively to reflect the impactof the stock split.
*3: Return on sales =Profit attributable to owners of parent /Net sales × 100*4: Return on assets =Profit attributable to owners of parent /Total assets (yearly average) × 100*5: Return on equity =Profit attributable to owners of parent /Equity capital (yearly average) × 100

FY2018FY2019Government
Composition of Board of Directors
Number of directors
12
12Inside directors (male)6
6
Inside directors (female)2
2
Outside directors (male)3
3
Outside directors (female)
1
1
Ratio of female directors (%)
25.0
25.0
Board of Directors Meetings		
Number of meeting
12
12
Average attendance for outside directors
97.8%
97.8%
Average attendance for outside corporate auditors
91.7%
100.0%
Composition of Board of Corporate Auditors				Corporate auditors
3
3
Outside corporate auditors2
2
Board of Corporate Auditor Meetings
Number of meetings
12
12
Average attendance for outside corporate auditors
91.7%
100.0%
Executive Remuneration
Director and corporate auditor remuneration
210
208
Inside directors (¥million)
181
175
Inside corporate auditors (¥million)
7
7
Outside directors (¥million)
10
15
Outside corporate auditors (¥million)
11
11

FY2020

FY2021

12
6
2
3
1
25.0

12
6
2
3
1
25.0

11
90.5%
100.0%

11
100.0%
100.0%

3
2

3
2

11
100.0%

13
100.0%

213
175
7
18
12

213
175
7
18
12

https://www.ainj.co.jp/csr/maintenance.html
361
342
400
351
420
503
584
640
501
686
725
875
34.9
4,440
5.9

35.3
4,540
6.1

34.8
4,610
5.8

35.1
4,480
3.9
AIN HOLDINGS ANNUAL REPORT 2021

33

BASIC INFORMATION/DATA

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
Business environment surrounding
the AIN GroupThe core business of the AIN Group (the Group) is thedispensing pharmacy business that includes preparing anddispensing drugs based on prescriptions. Drug prices anddispensing fees* are stipulated by the Ministry of Health,Labour and Welfare.
As part of its policy to curb national healthcare expenses,
the government regularly revises drug prices and dispensing
fees. Earnings at dispensing pharmacies are the total ofdispensing fees and sales of drugs, so earnings are affected bythese revisions.
Under revisions to the Pharmaceuticals and Medical
Devices Act (partial revisions to the Act on Securing Quality,
Efficacy and Safety of Products Including Pharmaceuticals
and Medical Devices), which come into effect from August
2021, prefectural governments will introduce a new pharmacy
certification system. Dispensing pharmacies with advanced
pharmaceutical management capabilities will be certified as
specialized medical institution coordination pharmacies andpharmacies with primary care functions will be certified as
local community coordination pharmacies. In addition, the gap
in performance between companies in the sector is likely towiden due to developments in the operating environment amid
deregulation and changes to systems such as dispensing fee
reimbursements.
Seeing these developments as an opportunity, the Grouphas been making preparations to adapt to any changes ahead,aiming to ensure sustained growth while also helping to solve
issues faced by society.
*	Dispensing fees comprise intelligent fees and technical fees for pharmacists

Business overview for the fiscal year
under review
During the fiscal year ended April 30, 2021, conditions in theJapanese economy remained challenging due to the impact of
the COVID-19 pandemic. There was also continued uncertainty
in the economic outlook.
In this economic environment, the Group worked to
expand its business and increase earnings. Specifically, theGroup opened new dispensing pharmacies, used M&A togrow its operations and developed its cosmetic and drug
store business. In pharmacy and store operations, the Grouprigorously enforced measures to prevent infection to reassure
patients and customers, and worked to ensure the continued
provision of healthcare and retail services by implementing
strict measures to protect employees from infection.
In the fiscal year under review, net sales rose 1.6% year
on year to ¥297,305 million, operating income decreased
32.0% to ¥10,932 million, ordinary income decreased 24.8%
to ¥12,649 million and profit attributable to owners of parent
decreased 27.0% year on year to ¥6,697 million.

34 AIN HOLDINGS ANNUAL REPORT 2021

Business results by segment
Dispensing Pharmacy Business
In September 2020, under incremental revisions to thePharmaceuticals and Medical Devices Act, dispensing
p h a r m a c i e s w e re g i v e n a p p ro v a l t o p ro v i d e o n l i n epharmaceutical treatment guidance nationwide in accordancewith certain rules. In line with this change, the Groupestablished a system to provide online pharmaceuticaltreatment guidance via all its dispensing pharmacies
nationwide. In addition, the Group actively conducted various
field trials to prepare for an expected increase in the ways thatpatients receive medicines. The trials included using drones
and automated shipping robots to deliver medicines, same-day
delivery schemes, and home delivery storage lockers.
To ensure our pharmacists and dispensing pharmacies
fulfill their primary care role, the Group continues to reinforce
pharmaceutical management and guidance based on the
integrated and continuous management of drug-related
information through cooperation with local medical service
providers, the use of patient medication notebooks and othermeans. The Group is also working to help patients accessmedical services in their local community with peace of mind
by providing online pharmaceutical treatment guidance andhome-based dispensing and by training specialist dispensing
pharmacists.
In business development, the Group is pushing ahead
with further business expansion and measures to improve theefficiency of pharmacy operations, including actively opening
large pharmacies and tightening the criteria for M&A deals, aswell as using its pharmacy opening strategy to withdraw fromsmall-scale locations.
Sales and profits declined year on year, reflecting an
increase in the duration of prescriptions during the COVID-19
pandemic, which led to a rise in the average unit price perprescription but a decline in the number of prescriptions. The
closure and business transfer of 64 pharmacies in the previous
fiscal year to improve the efficiency of pharmacy operations
also had an impact. However, the number of prescriptions is
now recovering.
As a result, for the fiscal year under review, the dispensing
pharmacy business reported sales of ¥263,095 million, down
0.2% year on year, and segment income of ¥20,947 million,
up 0.5%.
During the fiscal year, the Group opened a total of 29
dispensing pharmacies, including those acquired through M&A
deals, and closed 18 dispensing pharmacies and sold 34 as partof an overhaul of pharmacy operations, resulting in a total of
1,065 at the end of the fiscal year.
Cosmetic and Drug Store Business
The cosmetic and drug store business continued to face achallenging market environment due to the impact of the
COVID-19 pandemic and other factors.
The Group continued to open AINZ & TULPE cosmetic
and drug stores, as well as strategically develop retail displays
tailored to the characteristics of each store. Following therelease of the official AINZ & TULPE app, the Group launchedthe official AINZ & TULPE WEBSTORE in May 2020 to improve
convenience and lift service levels for customers.
However, many stores reduced their opening hours or closed
temporarily to prevent the spread of COVID-19 infections.
As a result, the cosmetic and drug store business reported adecline in sales of 21.4% year on year to ¥19,419 million anda segment loss of ¥1,999 million, compared with segment
income of ¥262 million in the previous fiscal year.
During the same period, the Group opened 11 AINZ &TULPE stores and closed five stores, resulting in a total of 69
cosmetic and drug stores at the end of the fiscal year.
Other Businesses
Net sales from other businesses increased 248.2% year on yearto ¥14,894 million, mainly reflecting the acquisition of a retailshop business in March 2020, and segment loss was ¥721
million compared with a loss of ¥342 million a year earlier.

Financial Position
The balance of total assets at the end of the fiscal year
increased ¥10,211 million from the end of the previous fiscal
year to ¥203,662 million. That mainly reflected declines forgoodwill and merchandise, outweighed by increases for cashon hand and in banks and for deposits and guarantees.
Current assets at the end of the fiscal year under review
totaled ¥96,398 million, an increase of ¥8,595 million from¥87,802 million at the end of the previous fiscal year, mainlyreflecting increases in cash and other accounts receivable.
Fixed assets at the end of the fiscal year under review
totaled ¥107,264 million, an increase of ¥1,631 million from¥105,632 million at the end of the previous fiscal year, primarily
due to increases in other investments and other assets.
The balance of current liabilities at the end of the fiscal year
under review was ¥74,160 million, a decrease of ¥539 million
from ¥74,700 million at the end of the previous fiscal year,
while the balance of long-term liabilities was ¥13,664 million,up ¥5,917 million from ¥7,747 million a year earlier.
As a result, the balance of total liabilities was ¥87,825
million, up ¥5,378 million from ¥82,447 million at the end of
the previous fiscal year.
The balance of net assets at the end of the fiscal year
under review was ¥115,837 million, an increase of ¥4,833
million from ¥111,003 million at the end of the previous fiscal
year. As a result, the shareholders’ equity ratio decreased 0.5
percentage points to 56.8%, compared with 57.3% at the endof the previous fiscal year. ROA declined 1.4 percentage points
to 3.4% and ROE dropped 2.6 percentage points to 5.9%.

Basic policies for profit distribution

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 from retained
earnings once each year at the end of the fiscal year.
For the fiscal year under review, the Company paid a fullyear dividend of ¥55 per share, unchanged from the previous
fiscal year.
In view of our profit forecasts, plans for investment andother factors, we intend to pay a full-year dividend fromretained earnings of ¥55 per share in the fiscal year ending
April 30, 2022.

Cash Flows
In the fiscal year under review, cash on hand and in banks(“cash”) increased ¥9,078 million year on year to ¥55,009
million.
Cash flows from each category and their relevant factors are
as follows.
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥14,928 million,
compared with net cash provided of ¥17,747 million in theprevious fiscal year.
The main items that were positive for cash flow wereincome before income taxes of ¥11,767 million, as well
as depreciation and amortization of ¥4,243 million andamortization of goodwill of ¥4,436 million related to businessexpansion through new store openings and M&A.
The main item negative for cash flow was income taxes paidof ¥6,595 million
Cash Flows from Investing Activities
Net cash used in investing activities was ¥9,493 million,
compared with net cash used of ¥11,474 million in theprevious fiscal year.
This mainly reflected payments of ¥997 million forpurchases of shares in subsidiaries due to changes in the scopeof consolidation related to shares acquired in eight companies
through M&A deals, ¥3,930 million for purchases of property,
plant and equipment related to the opening of new cosmetic
and drug stores and dispensing pharmacies, ¥2,219 million
for payments of leasehold and guarantee deposits and ¥3,110
million for increase in other investments.
Cash Flows from Financing Activities
Net cash provided by financing activities was ¥3,643 million,
compared with net cash used in ¥7,837 million in the previous
fiscal year.
The main items were net proceeds of ¥5,811 million fromshort-term and long-term debt repayment and proceeds, and¥1,948 million for cash dividends paid.

The Company considers the return of profits to shareholders as
an important management issue. Our basic policy is to repay
investors proportionately to profits generated, and to maintainpayments at stable levels.
Internal reserves are held to strengthen the corporate
structure and in preparation for new store openings and future

AIN HOLDINGS ANNUAL REPORT 2021

35

BASIC INFORMATION/DATAAIN HOLDINGS INC.
AIN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETCONSOLIDATED BALANCE SHEETAS OF APRIL 30, 2021

ASSETSASSETSAS OF APRIL 30, 2021

Millions of yen
2021
2020

Thousands ofThousands of
U.S. dollars
U.S. dollars(Note 1(1))
Millions of yen(Note 1(1))
2021
2021
2020
LIABILITIES AND
2021
NET ASSETS LIABILITIES AND NET ASSETS

Current assets:
Current assets:
Cash on hand and in banks (Notes
Cash
3 and
on 5)
hand
¥ and
55,271in banks (Notes¥ 46,321
3 and 5) $¥Notes and accounts receivable (Note
Notes5)and accounts
13,475receivable (Note13,653
5)
Other accounts receivable
Other accounts receivable
9,284
8,997
Inventories (Note 4)Inventories (Note14,284
4)15,321
Short-term loans
Short-term loans 144
208
Other current assets
Other current assets
3,936
3,299
Allowance for doubtful accounts Allowance for doubtful accounts(1)
Total current assets
Total current assets
96,39887,802

55,271
507,585
13,475
123,748
9,284
85,26014,284
131,178
1,322
144
3,936
36,146-96,398
885,278

Property, plant and equipment: Property, plant and equipment:
Buildings and structures, net
Buildings and structures,
16,270 net
16,609LandLand
10,39010,960Construction in progress
Construction in progress
638
143
Other property, plant and equipment,
Othernetproperty, plant
2,930
and equipment,
3,161
net
Total property, plant and equipment
Total property,30,229
plant and equipment
30,874

16,270149,416
10,39095,417
5,859
638
2,930
26,90730,229277,610Investments and other assets: Investments and other assets:
Investment securities (Notes 5 andInvestment
6)
securities
2,697(Notes 5 and2,295
6)Deferred tax assets (Note 11) Deferred tax assets
4,415(Note 11)4,211
Net defined benefit asset (Note 10)
Net defined benefit asset
60 (Note 10) 111
Long-term loans
Long-term loans 422
554
Deposits and guarantees
Deposits and guarantees
20,31919,144
Goodwill
Goodwill
39,05742,123
Other intangible fixed assets
Other intangible fixed
3,609
assets2,792
Other investments and other assets
Other investments8,198
and other assets
5,168
Allowance for doubtful accounts Allowance for doubtful(1,743)
accounts (1,644)
Total investments and other assets
Total investments
77,034and other assets
74,757

2,697
24,7684,415
40,545
60
551
3,875
422
20,319186,601
39,057
358,683
3,609
33,143
8,198
75,286(1,743)(16,006)
77,034
707,447

Deferred Assets:
Share issuance cost
Total deferred assets
Total assets

Deferred Assets:
Share issuance cost Total deferred assetsTotal assets¥ 203,662

See accompanying notes.

See accompanying notes.

36 AIN HOLDINGS ANNUAL REPORT 2021

15
15
¥ 193,451--$¥ 1,870,346
203,662

Millions of yen
2021
2020

Current liabilities:
Current liabilities:¥ 46,321
Accounts payable$ 507,585(Note 5)
Accounts payable (Note 5)¥ 46,758
13,653
Short-term debt123,748(Notes 5 and 8) Short-term debt (Notes 5 and 8)
3,670
8,997
Accrued income85,260
taxes
Accrued income taxes
2,157
15,321
Deposits received
131,178
Deposits received
13,979Allowance
208
for bonuses
1,322 to employees
Allowance for bonuses to employees
2,594
3,299
Allowance for bonuses
36,146 to directors
Allowance for bonuses to directors
16
Reserve(1)
for reward obligations
Reserve for reward obligations
461
87,802Other current liabilities
885,278
Other current liabilities
4,522
Total current liabilities
Total current liabilities
74,16016,609Long-term liabilities:
149,416Long-term liabilities:
10,960Long-term debt (Notes
95,417 5 and 8) Long-term debt (Notes 5 and 8)
Lease
143 obligations5,859
Lease obligations
3,161
Net defined benefit
26,907
liability (Note Net10) defined benefit liability (Note 10)30,874
Other long-term277,610
liabilities
Other long-term liabilities
Total long-term liabilities
Total long-term liabilities

8,297
37
3,329
2,000
13,664¥47,187
3,642
3,356
13,094
2,338
16
463
4,600
74,700

2,432
154
3,124
2,035
7,747

2,295
Net
Assets: (Note 24,768
12)
Net Assets: (Note 12)
4,211
Shareholders’ equity
40,545
Shareholders’ equity
Common111
stock (Note551
14)
Common stock (Note 14)
21,894
21,894554
Authorized - 44,000,000
3,875
shares inAuthorized
2021 and -2020
44,000,000 shares in 2021 and 2020
19,144
Issued - 35,428,212
186,601 shares in 2021
Issuedand -2020
35,428,212 shares in 2021 and 2020
42,123
Capital surplus 358,683
Capital surplus
20,50020,5002,792
Retained earnings
33,143Retained earnings
73,50668,758
5,168
Treasury stock (891
75,286
shares in 2021
Treasuryand 728
stock
shares(891inshares2020) in 2021 and 728 (3)shares in 2020) (2)(1,644)
Total shareholders’(16,006)
equityTotal shareholders’ equity
115,899
111,151
74,757
Accumulated other707,447
comprehensive
Accumulated
income: other comprehensive income:Unrealized holding losses on securities
Unrealized holding losses on securities
(12)
(77)
Remeasurements of defined benefit
Remeasurements
plans
of defined benefit plans (128)(159)
Total accumulated other comprehensive
Total accumulated
loss
other comprehensive(141)
loss
(236)
Non-controlling
15
interests
Non-controlling interests
78
88
Total
15 net assets
Total net assets
115,837
111,003¥ 193,451
Total liabilities$ 1,870,346
and net assets Total liabilities and net assets¥ 203,662¥ 193,451

Thousands of
U.S. dollars(Note 1(1))
Millions of yen
2021
2021
2020

Thousands of
U.S. dollars(Note 1(1))
2021

$¥

$

429,405
46,7583,670
33,703
2,157
19,808
13,979128,377
2,594
23,822
16
146
4,233
461
4,522
41,52874,160681,054¥

47,187
3,642
3,356
13,094
2,338
16
463
4,600
74,700429,405
33,70319,808
128,377
23,822
146
4,233
41,528681,0548,297
76,19637
339
3,329
30,5722,000
18,367
13,664125,484

2,432
154
3,124
2,035
7,747

76,196339
30,572
18,367
125,484

201,065
21,894

21,894

201,065

20,500188,263
73,506
675,048(3)(27)
1,064,367
115,899

20,50068,758(2)
111,151

188,263
675,048(27)
1,064,367

(110)
(12)
(1,175)(128)(1,294)
(141)
78
716
1,063,798
115,837$¥ 1,870,346
203,662

(77)
(159)
(236)
88
111,003¥ 193,451(110)(1,175)(1,294)716
1,063,798$ 1,870,346

AIN HOLDINGS ANNUAL REPORT 2021

37

BASIC INFORMATION/DATAAIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSYEAR ENDED APRIL 30, 2021

YEAR ENDED APRIL 30, 2021

Net sales (Note 15)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expense):
Interest and dividend income
Gains on investments in partnership
Real estate rental revenue
Consignment income
Technical advisory fee
Subsidies for employment adjustment
Gain on transfer of business
Gain on sales of shares of subsidiaries and associates
Refund of premium for cancelled insurance
Gain on contribution of securities to retirement benefit trust
Interest expenses
Losses on sales of accounts receivables
Rent expenses on real estates
Provision of allowance for doubtful accounts
Losses on disposal and sales of fixed assets
Impairment losses on fixed assets
Loss on valuation of investment securities
Loss on temporary closing of stores
Other, net

¥

82
68
185
193
68
1,182
408
111
53

Profit before income taxes
Income taxes (Note 11):
Current
DeferredProfit(Loss) profit attributable to non-controlling interests
Profit attributable to owners of parent

Millions of yen
2021
2020
297,305¥ 292,615
251,150
245,753
46,15546,86135,22230,793
10,932
16,068

¥

92
10
368
184
64
138
496

Thousands of
U.S. dollars(Note 1(1))
2021$ 2,730,324
2,306,456
423,868
323,464
100,394
753
624
1,698
1,772
624
10,854
3,746
1,019
486

-

(44)
(79)
(220)
(182)
(410)
(804)
(37)
(52)
312
836
11,767

78
223
(63)
(67)
(134)
(916)
(263)
(218)
(97)
(34)
(138)
15,930(404)(725)(2,020)(1,671)(3,765)(7,383)
(339)
(477)
2,865
7,677
108,063

5,251
(172)
5,079
6,687
(9)
6,697

6,648
81
6,729
9,201
21
9,179

48,222(1,579)46,643
61,410(82)
61,502¥$

YEAR ENDED APRIL 30, 2021

Comprehensive income attributable toowners of parent
Comprehensive (loss) income attributable tonon-controlling interests¥

Millions of yen
2021
2020
6,687
¥
9,201

Thousands of
U.S. dollars(Note 1(1))
2021$
61,410

64
31
95
6,783

(71)
(99)
(170)
9,030

587
284
872
62,292

6,792

9,008

62,374

(9)

21

(82)

Millions of yen
Shareholders' equity

Number ofshares ofcommon stock

Balance at April 30, 2019
Profit attributable to owners of parent
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, 2020
Profit attributable to owners of parent
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, 2021

35,42835,42835,428

Common stock¥¥

21,894
21,894
21,894Retainedearnings

Capital surplus¥¥

20,50020,50020,500¥¥61,526
9,179(1,948)7,231
68,758
6,697(1,948)
4,748
73,506

Total
shareholders’equityTreasury stock

¥

(2)
(2)
(1)
(1)
(3)

¥

¥

¥

103,920
9,179(1,948)7,231
111,151
6,697(1,948)(1)
4,747
115,899

Millions of yen

Balance at April 30, 2019
Profit attributable to owners of parent
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, 2020
Profit attributable to owners of parent
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, 2021¥¥

Accumulated other comprehensive income (loss)
Unrealized
Remeasurement
Total
holding gainssaccumulated(losses) onof definedothersecurities
benefit planscomprehensive

(6)
(71)
(71)
(77)
64
64
(12)

¥

¥

(59)
(99)
(99)
(159)
31
31
(128)

¥

¥

(65)
(170)
(170)
(236)
95
95
(141)

Non-controllinginterests

¥

67
21
21
88
(9)
(9)
78

¥

Total net assets¥¥

103,922
9,179(1,948)(149)
7,081
111,003(1,948)
6,697
(1)
85
4,833
115,837

Thousands of U.S. dollars (Note 1(1))
Shareholders' equity

Common stock

Balance at April 30, 2020
Profit attributable to owners of parent
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, 2021$$

201,065
201,065

Retainedearnings

Capital surplus$$

188,263
188,263$$631,444
61,502(17,889)
43,603675,048

Total
shareholders’equityTreasury stock

$

(18)
(9)
(9)
(27)

$

$

$

1,020,764
61,502(17,889)(9)43,594
1,064,367

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

Balance at April 30, 2020
Profit attributable to owners of parent
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, 2021

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

ProfitOther comprehensive income:Unrealized holding gains (losses) on securities
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income (loss)
Total comprehensive income

Thousands ofsharesSee accompanying notes.

$$

Accumulated other comprehensive income (loss)
Unrealized
Remeasurement
Total
holding gainssaccumulated(losses) onof definedothersecurities
benefit planscomprehensive

(707)
587
587
(110)

$

$

(1,460)284
284(1,175)$$(2,167)872
872(1,294)Non-controllinginterests

$

$

808
(82)
(82)
716

Total net assets$$

1,019,404(17,889)
61,502(9)780
44,384
1,063,798

See accompanying notes.
38 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

39

BASIC INFORMATION/DATAAIN HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED APRIL 30, 2021

YEARS ENDED APRIL 30, 2021 AND 2020

Millions of yen
2021
2020

Thousands of
U.S. dollars(Note 1(1))
2021Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill(Gain) loss on sales of shares of subsidiaries and associates
Impairment losses on fixed assets
Increase (decrease) in allowance for doubtful accounts
Increase in net defined benefit liability
Gain on transfer of business
Gain on contribution of securities to retirement benefit trust
Increase in allowance for bonuses to employees
Interest and dividend income
Interest expenses
Gains on investments in partnerships
Gains on donations of non-current assets
Loss on valuation of investment securities
Losses on disposal and sales of fixed assets
Decrease (increase) in accounts receivable
Decrease (increase) in inventories
Increase in other assets
Increase in other accounts receivable(Decrease) increase in accounts payable(Decrease) increase in other liabilities
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 11,767
4,243
4,436
(111)
804
210
304
(399)
249
(82)
44
(68)
(28)
37
391
138
1,172
(539)
(221)
(844)
(22)
21,48286(44)(6,595)
14,928¥ 15,930
4,087
4,357
34
263
(2)
256
(419)
(223)
183
(92)
63
(10)
(48)
218
880
(429)
(1,939)(1,237)
(530)
1,793
757
23,89392(64)(6,174)
17,747$ 108,063
38,96540,738(1,019)
7,383
1,928
2,791
(3,664)
2,286
(753)
404
(624)
(257)
339
3,590
1,267
10,763(4,949)(2,029)(7,750)(202)
197,281789(404)(60,565)
137,092

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 investment 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 sales of intangible assets
Payments of leasehold and guarantee deposits
Proceeds from refund of leasehold and guarantee deposits
Increase in other investments
Proceeds from withdrawal of time deposits
Payments into time deposits
Other, net
Net cash used in investing activities(3,930)
1,001
(557)
293
(997)
(20)
680
(1,811)
7(2,219)1,070(3,110)
146
(12)
(34)
(9,493)(4,913)
1,014
(874)
39
(1,442)(189)939(1,465)188(4,710)
662
(924)
314
(109)
(3)
(11,474)(36,091)
9,192(5,115)
2,690(9,156)(183)
6,244(16,631)64(20,378)
9,826(28,560)
1,340
(110)
(312)
(87,179)

Cash flows from financing activities:
Proceeds from long-term debts
Repayments of long-term debts
Repayments of lease obligations
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities

12,625(6,792)(218)(1,948)
(22)
3,643

100
(5,598)(375)(1,948)(15)(7,837)

115,942(62,374)(2,002)(17,889)(202)
33,455

9,078
45,931¥ 55,009(1,564)47,495¥ 45,931

83,368421,811$ 505,179

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year (Note 3)
See accompanying notes.

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 HOLDINGS INC. (the “Company”) preparedin accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministryof Finance as required by the Financial Instruments and Exchange Law. Some supplementary
information included in the statutory Japanese language consolidated financial statements, but notrequired 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, 2021, which was ¥108.89 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 39 and 54
subsidiaries as of April 30, 2021 and 2020, 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, AIN PHARMACIE Z INC., MEDIWEL Corp. and AYURA LABORATORIES
INC. close its accounts on April 30. The account closing date for three consolidated subsidiaries in thedispensing pharmacy business is the end of January, July and September, respectively. The accountclosing dates for two consolidated subsidiaries in the dispensing pharmacy business are the end of
February. The account closing dates for two consolidated subsidiaries in the dispensing pharmacy
business are the end of May. The account closing date of other consolidated subsidiaries is the end of
March. 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

40 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

41

BASIC INFORMATION/DATA(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 weighted
average method. Merchandise was stated at lower of cost or market, cost being determined using theretail method. 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 on or after April 1, 1998 and to facilities attached to buildings andstructures acquired on or after April 1, 2016. The useful lives of major property, plant and equipment
are summarized as follows:(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide an allowance for doubtful accounts forprobable collection losses by applying the actual rate of bad debt losses experienced in a pastreference period for normal receivables and by individual assessment of collectability for doubtfulreceivables.
(10) Bonuses to employees
Allowance for bonus to employees is provided for payments to employees of the Company and its
consolidated subsidiaries at the amount expected to be paid in respect of the calculation period ended
on the balance sheet date.
(11) Bonuses to directors
Allowance for bonus to directors is provided for payments to directors of the Company and its
consolidated subsidiaries at the amount expected to be paid in respect of the calculation period ended
on the balance sheet date.
(12) Reserve for reward obligations

Buildings and structures: 10 to 50 years

In terms of the estimated redeemable amount of the purchase points given in the consolidated
subsidiary’s Cosmetic and Drug Store Business, the Company sets a reserve based on actual
redemptions in the past.

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.

(13) Retirement benefits

Amortization of soft ware other than leased assets used by the Company and its consolidated
subsidiaries is computed by the straight-line method over the useful lives, five 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).

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.

Leased assets capitalized under finance leases are depreciated over the lease terms of the respective
assets with no residual value.

Certain consolidated subsidiaries use a simplified method for calculating retirement benefit obligations.

(7) Impairment of fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. When amounts of undiscounted future cash flows of fixed
assets are less than the carrying amounts, the fixed assets are determined to be impaired. Then, anamount by which the carrying amount exceeds the recoverable amount is recognized as an impairment
loss.
The Company and its consolidated subsidiaries identify group of assets by 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 or thevalue in use. The land is assessed based on the appraisal value by an independent real estateappraiser. The fair value of assets other than the land is the disposal value from which costs of disposal
are deducted. Its value in use is calculated by discounting the future cash flows at a discount rate of
1.19% and 1.9% for the year ended April 30, 2021 and 2020, respectively.
(8) Deferred charges
Amortization of share issuance cost is computed by the straight-line method over three years.

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.
(14) Income taxes
Deferred tax assets and liabilities are determined based on the differences between financial reporting
and the tax bases of the assets and liabilities and are measured using the enacted tax rates and laws,
which will be in effect when the differences are expected to reverse.
(15) Amounts per share of common stock
Basic earnings per share is computed based on the weighted average number of shares of common
stock outstanding during the year.
Diluted earnings per share is computed based on the weighted average number of shares of common
stock outstanding each year after giving effect to the dilutive potential of common shares to be issued
upon conversion of the convertible bonds.
Net assets per share are computed based on the net assets excluding non-controlling interests, andthe number of common stock outstanding at the year end.
Cash dividends per share represent the actual amount declared as applicable to the respective years.
(16) 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

42 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

43

BASIC INFORMATION/DATA

expenses are reported in the fiscal year in which they are incurred.

(18) Changes in Presentation Method

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.

The Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31, March 31,2020) is applied in preparing the consolidated financial statements effective from the end of the fiscal
year ended April 30, 2021 and is disclosed in Note 2 “Significant Accounting Estimates” of theconsolidated financial statements. However, the note does not include information for the fiscal year
ended April 30, 2020 that has been omitted in accordance with the transitional treatment stipulated in
the provision in paragraph 11 of the accounting standard.

(17) Unapplied accounting standards(19) Loss on temporary closing of stores

Revenue Recognition
Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 29 revised March 31, 2020)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30
revised March 31, 2020)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ GuidanceNo. 19 revised on March 31, 2020)

In response to requests from national and local governments, the Company and its consolidated
subsidiaries have temporarily closed or shortened the opening hours of many cosmetic and drug storesto prevent the spread of COV ID-19. Fixed expenses, such as personnel expenses, depreciation, rent
and others, incurred by stores during the closures have been booked as “Loss on temporary closing ofstores” under “Other income (expense).”The Accounting Standard and the Implementation Guidance provide comprehensive principles forrevenue recognition. An entity applies the following five steps to recognize revenue.
1. Identify the contracts with a customer
2. Identify the separate performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue when or as the performance obligation is satisfied
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard and the
Implementation Guidance from the beginning of the fiscal year ending April 30, 2022.
Effects of adoption of the Accounting Standard and the Implementation Guidance are currently
evaluated.
Fair Value Measurement
Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30 issued on July 4, 2019)
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No.
31 issued on July 4, 2019)
Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9 revised on July 4, 2019)
Accounting Standard for Financial Instruments (ASBJ Statement No. 10 revised on July 4, 2019)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ GuidanceNo. 19 revised on March 31, 2020)
The ASBJ has developed an “Accounting Standard for Fair Value Measurement” and “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (hereinafter collectively, the “Fair
Value Measurement Standard”), which provide guidance for fair value measurement in order toimprove comparability with internationally recognized accounting standards. The Fair Value
Measurement Standard is applied with respect to the fair value of the following items;• Financial instruments defined in “Accounting Standard for Financial Instruments”• Inventories held for trading purposes defined in “Accounting Standard for Measurement of
Inventories”“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised
requiring disclosure of financial instruments broken down by level in the fair value hierarchy.
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard and the
Implementation Guidance from the beginning of the fiscal year ending April 30, 2022.
Effects of adoption of the Accounting Standard and the Implementation Guidance are currently
evaluated.

2. Significant accounting estimates(1) Impairment of goodwill(a) The amount of impairment loss on the goodwill recorded in the consolidated financial statements
for the year ended April 30, 2021
Goodwill: ¥39,057 million ($358,683 thousand)Impairment losses of goodwill: ¥221 million ($2,029 thousand)(b) Information related to the details of accounting estimates on identified items(i) Calculation method
When acquiring companies, the Company and its consolidated subsidiaries recognize theexcess earning power they anticipate at the time of acquisition as goodwill for thosecompanies, and identify an asset group for each company. When an asset group shows anindication of impairment and the total amount of undiscounted future cash flows from that
asset group arising from the remaining years of goodwill amortization is below the book value,
the Company and its consolidated subsidiaries recognize an impairment loss for that asset
group. The Company and its consolidated subsidiaries calculate value in use from thediscounted present value of future cash flows and record an impairment loss by reducing thebook value to the value in use.
(ii) Key assumptions
Budgets approved by the Board of Directors and operating income forecasts made at the timeof acquisition are used as the basis for estimating future cash flows. The number ofprescriptions and the average unit price per prescription in the dispensing pharmacy business
are the key assumptions for these projections. The Company’s estimation of future cash flows
assume that the COVID-19 pandemic will subside in the next fiscal year or after, and that
performance will become favorable after that point.
(iii) Impact on consolidated financial statements of the following fiscal year
The key assumptions used in estimating future cash flows involve a high degree of uncertainty,
so forecast and actual values may differ substantially. If actual figures diverge significantly
from forecast amounts, impairment losses may be recognized in the next fiscal year.
(2) Impairment of fixed assets excluding goodwill(a) The amount of impairment loss on the fixed assets except for the goodwill recorded in the
consolidated financial statements for the year ended April 30, 2021
Fixed assets: ¥30,229 million ($277,610 thousand)Intangible fixed assets excluding the goodwill: ¥3,609 million ($33,143 thousand)Impairment losses excluding goodwill: ¥583 million ($5,354 thousand)(b) Information related to the details of accounting estimates on identified items(i) Calculation method
The Company and its consolidated subsidiaries basically identify an individual store which is abusiness asset as a lowest level of cash generating unit and also deem each property as a

44 AIN HOLDINGS ANNUAL REPORT 2021

AIN HOLDINGS ANNUAL REPORT 2021

45

BASIC INFORMATION/DATA

cash generating unit with regard to the rental property and the idle assets. An indication of
impairment on an individual asset or an asset group is observed when a store consistently
incurs operating losses, when there is an adverse change in the extent or manner in which astore is used which would significantly lower the recoverable amount, and when the fair valueof an idle asset significantly declines. When an individual asset or an asset group indicates an
impairment, if the undiscounted future cash flows from such an asset or an asset group is
below the book value, its carrying amount is reduced to the recoverable amount, and theamount of reduction is recorded as an impairment loss.
(ii) Key assumptions
Budgets approved by the B oard of Directors are used as the basis for estimating future cash
flows. The number of prescriptions and the average unit price per prescription in thedispensing pharmacy business are the key assumptions for these projections. For thecosmetic and drug store business, the key assumptions are the number of customers, theproduct mix, and average customer spending. The Company’s estimation of future cash flows
assume that the COVID-19 pandemic will subside in the next fiscal year or after, and that
performance will become favorable after that point.
(iii) Impact on consolidated financial statements of the following fiscal year
The key assumptions used in estimating future cash flows involve a high degree of uncertainty,
so forecast and actual values may differ substantially. If actual figures diverge significantly
from forecast amounts, impairment losses may be recognized in the next fiscal year.

3. 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, 2021 and 2020 are as follows:

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

Thousands of
U.S. dollars
2021$
507,585

Millions of yen
2021
2020
¥ 55,271¥ 46,321¥(261)
55,009¥(390)
45,931$(2,396)505,179(2) The following table summarizes assets acquired and liabilities assumed through the acquisition ofshares of the companies, acquisition cost and net disbursement:(a) Acquisition of shares of eight companies in the dispensing pharmacy business for the year
ended April 30, 2021
Thousands ofMillions of yen
U.S. dollars
2021
2021
Current assets
¥
1,855
$
17,035
Fixed assets
220
2,020
Goodwill
1,355
12,443Current liabilities(1,136)(10,432)
Long-term liabilities
(60)
(551)
Acquisition cost of the companies
2,233
20,506
Cash and cash equivalents held by
the companies(1,236)(11,350)
Net disbursement due to theacquisition
¥
997
$
9,156
(b) Acquisition of shares of four companies, including two companies in the dispensing pharmacy
business, for the year ended April 30, 2020

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
2020
¥
1,397
397
1,351
(1,451)
(29)
1,664
(222)
¥

1,442

4. Inventories
Inventories at April 30, 2021 and 2020 consisted of the following:

Merchandise
Supplies

46 AIN HOLDINGS ANNUAL REPORT 2021

Millions of yen
2021
2020
¥ 14,018¥ 15,035
266
286¥ 14,284¥ 15,321

Thousands of
U.S. dollars
2021$
128,735
2,442$
131,178

AIN HOLDINGS ANNUAL REPORT 2021

47

BASIC INFORMATION/DATA

5. Financial instruments(2) Fair values of financial instruments(1) Qualitative information on financial instruments

Carrying values and fair values of the financial instruments on the consolidated balance sheet at April
30, 2021 and 2020 are summarized in the following table:
AssetsThousands ofMillions of yen
U.S. dollars
2021
2020
2021
Carrying value
Cash on hand and in banks¥ 55,271¥ 46,321$
507,585
Notes and accounts receivable
13,475
13,653
123,748
Other accounts receivable
9,284
8,997
85,260Investment securities
855
978
7,851
Deposits and guarantees
20,26519,090186,105
Total
99,152
89,041
910,570
Fair value
Cash on hand and in banks
55,271
46,321
507,585
Notes and accounts receivable
13,475
13,653
123,748
Other accounts receivable
9,284
8,997
85,260Investment securities
853
976
7,833
Deposits and guarantees
20,036
18,956
184,002
Total
98,921
88,906
908,448
Difference
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
(2)
(1)
(18)
Deposits and guarantees
(229)
(133)
(2,103)
Total
¥
(231)
¥
(135)
$
(2,121)(a) Policies for using financial instruments
The Company and its consolidated subsidiaries have expanded business by opening dispensing
pharmacies and cosmetic and drug 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 cosmetic anddrug stores. Such deposits involve lessor credit risk.
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 eight years from theaccount closing date, 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 mark et 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.
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.

48 AIN HOLDINGS ANNUAL REPORT 2021

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
2021
2020

Thousands of
U.S. dollars
2021

46,758$¥47,187429,405

3,670
13,9798,297
72,705

3,642
13,0942,432
66,35633,703
128,377
76,196
667,692

46,75847,187429,405

3,671
13,9798,284
72,694

3,644
13,0942,434
66,36033,712
128,377
76,076
667,591

-

-

-

1
(12)
(10)

1
1
3

9
(110)
(91)

¥

$

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

AIN HOLDINGS ANNUAL REPORT 2021

49

BASIC INFORMATION/DATA(b) Investment securities
The fair values of equity securities are determined by their prices on stock exchanges. The fairvalues of bonds are determined by the prices indicated by the counterparty financial institutions, 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.

The redemption schedule for monetary claims and securities with maturity dates as of April 30,
2021 and 2020 are summarized as follows:
Millions of yen
Due inone yearor less
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
Debt securities
Deposits received
Total

¥

¥

- ¥
-

- ¥
-

-

130
7,104
84,774 ¥30
4,586
4,616 ¥

3,066
3,066 ¥

5,561
5,561

Due inone yearor less

The fair values of unlisted equity securities with carrying amounts of ¥1,841 million ($16,906 thousand)and ¥1,317 million as of April 30, 2021 and 2020, 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

Due after
ten years

54,781 ¥
13,4759,284(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:2021
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Thousands of
U.S. dollars
2021
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Due after
ten years$ 503,085 $
123,748
85,260

- $
-

- $
-

-

1,193
65,240$ 778,528 $275
42,11542,391 $28,15628,156 $51,06951,069Millions of yen
Due inone yearor less
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
Debt securities
Deposits received
Total

50 AIN HOLDINGS ANNUAL REPORT 2021

¥

¥

2020
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Due after
ten years

45,670 ¥13,653
8,997

- ¥
-

- ¥
-

-

140
2,320
70,780 ¥30
4,522
4,552 ¥

3,346
3,346 ¥

8,954
8,954

AIN HOLDINGS ANNUAL REPORT 2021

51

BASIC INFORMATION/DATA

6. Securities(1) The following tables summarize acquisition costs, carrying values and differences of securities withavailable fair values as of April 30, 2021 and 2020:
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
2021
2020
¥

¥

188
-

¥

11
-

Thousands of
U.S. dollars
2021
$

1,726
-

0
188

0
11

0
1,726

214
-

22
-

1,965
-

1
215

0
23

9
1,974

25
-

11
-

229
-

1
26

0
12

9
238

¥

$

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
2021

Millions of yen
2021
2020
¥

303
160

¥

¥

721
170

$

2,782
1,469

207
14
685

170
15
1,076

1,901
128
6,290

259
160

600
170

2,378
1,469

207
13
640

170
13
954

1,901
119
5,877

(43)
-

(121)
-

(394)
-

(1)
(44)

(1)
(122)

(9)
(404)

¥

$

Stocks of non-consolidated subsidiaries and affiliates were ¥475 million ($4,362 thousand) and¥224 million at April 30, 2021 and 2020, 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, 2021 and 2020:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Total sales ofother securities sold
¥
293
¥
39
$
2,690
Related gains
15
137
Related losses(5)(45)(3) The following table summarizes impairment losses on other securities in the years ended April 30,
2021 and 2020:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Other securities with fair value
Other securities without fair value

52 AIN HOLDINGS ANNUAL REPORT 2021

¥

1
35

¥

218
-

$

9
321

AIN HOLDINGS ANNUAL REPORT 2021

53

BASIC INFORMATION/DATA

7. Leases
Remaining lease expenses for non-cancellable operating lease transactions are as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Due within one year
Due after one year
Total

¥

2,570
26,95029,521¥¥

2,214
17,842
20,056¥$

23,601
247,497
271,108$

8. Short-term debt and long-term debt
Short-term debt and long-term debt at April 30, 2021 and 2020 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Short-term bank loans with aweighted-average interest rate of
0.4%
Current portion of long-term debt
with a weighted-average interest rateof 0.2%Current portion of lease obligation
with a weighted-average interest rateof 1.3%Long-term debt (2022-2029) with aweighted-average interest rate of
0.2%
Lease obligation (2022-2023) with aweighted-average interest rate of
0.4%
Total

¥

8

¥

3,662

¥

15

$

3,626

73
33,630

94

193

863

8,297

2,432

76,19637
12,099

154
6,422

339
111,112¥$

The aggregate annual maturities of long-term debt at April 30, 2021 and 2020 are as follows:
Thousands ofMillions of yen
U.S. dollars
Year ending April 30,
2021
2021
2022
¥
3,662
$
33,6302023
2,600
23,8772024
2,661
24,4372025
2,219
20,378
2026
789
7,245
2027
and thereafter
26
238

Year ending April 30,
2021
2022
2023
2024
2025
2026
and thereafter

54 AIN HOLDINGS ANNUAL REPORT 2021

Millions of yen
2020
¥
3,626
1,590
529
47
147
115

The aggregate annual maturities of lease obligations at April 30, 2021 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2022
¥
94
$
863
2023
32
293
2024
5
45

9. Sales, disposal and impairment of fixed assets(1) Gains and losses on sales of fixed assets for the years ended April 30, 2021 and 2020 are as
follows:
Gains on sales of fixed assets:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Buildings and structures
Land
Other property, plant andequipment
Other intangible fixed assets
Total

¥

¥

Losses on sales of fixed assets:

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

2
14
2
0
19

¥

0
9
2
24
36

¥

¥

13
110

¥

$

18
128
18
0
174

Thousands of
U.S. dollars
2021

Millions of yen
2021
2020
¥

$

76
34

$

119
1,010

2
0

3
2

18
0

1
128

3
0
120

9
1,175

¥

$

(2) Losses on disposal of fixed assets for the years ended April 30, 2021 and 2020 are as follows:
Millions of yen
2021
2020
Buildings and structures
Other property, plant andequipment
Goodwill
Other intangible fixed assets
Deposits and guarantees
Other investments and otherassetsConstruction in progress
Disposal cost
Total

¥

¥

88

¥

118

Thousands of
U.S. dollars
2021
$

808

23
10
10
23

28
160
18
116

211
91
91
211

108
7
9
282

18
305
30
796

991
64
82
2,589

¥

$

AIN HOLDINGS ANNUAL REPORT 2021

55

BASIC INFORMATION/DATA(3) For the years ended April 30, 2021 and 2020, the Company recognized impairment losses for thefollowing assets groups:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Description of assets
Land
¥
42
¥
$
385
Buildings and structures
437
202
4,013
Goodwill
221
13
2,029
Other
103
47
945
Total
¥
804
¥
263
$
7,383

Millions of yen
2020
¥
1,072
8
(11)
487
(52)
¥
1,504

Balance as of May 1, 2019
Expected return on plan assets
Actuarial losses incurredBusiness owner’s contribution
Pension and severance payments
Balance as of April 30, 2020

(3) Reconciliation of the beginning and the ending balance of liabilities of the simplified method

10. 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)

Balance as of May 1, 2020
Service costs
Interest cost on retirement benefit obligation
Actuarial losses incurred
Pension and severance payments
Other
Balance as of April 30, 2021

Millions of yen
2021
¥
3,828
530
13
18
(196)
129
¥
4,322

Balance as of May 1, 2019
Service costs
Interest cost on retirement benefit obligation
Actuarial losses incurred
Pension and severance payments
Other
Balance as of April 30, 2020

Millions of yen
2020
¥
3,336
457
9
168
(160)
16
¥
3,828

Thousands of
U.S. dollars
2021$
35,154
4,867
119
165
(1,799)1,184$
39,691

Balance as of May 1, 2020
Expected return on plan assets
Actuarial losses incurredBusiness owner’s contribution
Pension and severance payments
Balance as of April 30, 2021

56 AIN HOLDINGS ANNUAL REPORT 2021

Thousands of
U.S. dollars
2021
$
6,318
982
(55)
(936)

1
(112)
574

9
(1,028)
5,271

¥

$

Millions of yen
2020
¥
697
144
(7)
(137)

Balance as of May 1, 2019
Retirement benefit expenses
Business owner’s contribution
Pension and severance payments
Increases due to a newly consolidated
subsidiary
Other
Balance as of April 30, 2020

3
(12)
688

¥

(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(2) Reconciliation of the beginning and the ending balance of plan assets (excluding the amount of thesimplified method)
Millions of yen
2021
¥
1,504
11
(8)
169
(48)
¥
1,628

Balance as of May 1, 2020
Retirement benefit expenses
Business owner’s contribution
Pension and severance payments
Increases due to a newly consolidated
subsidiary
Other
Balance as of April 30, 2021

Millions of yen
2021
¥
688
107
(6)
(102)

Thousands of
U.S. dollars
2021$
13,812
101
(73)
1,552
(440)
$
14,950Funded retirement benefit obligation
Plan assets
Subtotal
Unfunded retirement benefit obligation
Net of liability and asset reported on the
consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net of liability and asset reported on the
consolidated balance sheet

Millions of yen
2021
2020
¥
1,961
¥
1,788
(1,705)(1,575)
255
213
3,014
2,799
3,269
3,329
(60)
¥

3,269

Thousands of
U.S. dollars
2021$
18,008(15,658)
2,341
27,679

3,013
3,124
(111)
¥

3,013

30,021
30,572(551)$

30,021AIN HOLDINGS ANNUAL REPORT 2021

57

BASIC INFORMATION/DATA(5) Retirement benefit expenses for the years ended April 30, 2021 and 2020 comprised the following:

Service costs
Interest cost on retirement benefit
obligation
Expected return on plan assets
Amortization of actuarial losses
Retirement benefit expenses calculated
under the simplified method
Retirement benefit expenses

Thousands of
U.S. dollars
2021
$
4,867

Millions of yen
2021
2020
¥
530
¥
457
13
(11)
76
¥

107
715

9
(8)
27
¥

144
630

119
(101)
697
982
6,566

$

(6) Remeasurements of defined benefit plans
The breakdown of remeasurements of defined benefit plans (before deducting tax effect) is asshown below:(a) Current

Actuarial gains (losses)
Total

Millions of yen
2021
2020
¥
49
¥
(152)
¥
49
¥
(152)

Thousands of
U.S. dollars
2021
$
449
$
449

Millions of yen
2021
2020
¥
189
¥
239
¥
189
¥
239

Thousands of
U.S. dollars
2021
1,735
$
1,735

(b) Accumulated

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

2021
18%
29%
36%
13%
5%
100%

2020
16%
31%
35%
13%
5%
100%

Retirement benefit trust for a lump-sum benefit plan occupied 18% of total plan assets as of April 30,
2021.
(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, 2021 and 2020are principally as follows:
2021
2020
Weighted average discount rate
Weighted average expected rate of
return on plan assets
Expected rates of salary increase

58 AIN HOLDINGS ANNUAL REPORT 2021

0.54%

0.53%

0.75%
1.00%-3.68%

0.75%
1.00%-3.68%

11. Income taxes
The aggregate statutory income tax rates used for calculation of deferred income tax assets andliabilities for the years ended April 30, 2021 and 2020 were 30.4%.
(1) The following table summarizes the significant differences between the effective statutory tax rate
and the effective tax rates for consolidated financial statement purposes for the years ended April
30, 2021 and 2020:
Effective statutory tax rate
Non-deductible expenses
Per capita inhabitant tax
Amortization of goodwill
Valuation allowance
Tax credits on tax system to expand
incomeDifferent tax rates applied toconsolidated subsidiaries
Other
Effective tax rates

2021
30.4%
0.8
0.9
11.6
(5.6)

2020
30.4%
0.7
0.5
8.2
(0.3)

-

(2.5)

5.2
(0.1)
43.2%

5.1
0.2
42.2%

(2) Significant components of deferred tax assets and liabilities as of April 30, 2021 and 2020 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Deferred tax assets:
Impairment losses
¥
391
¥
387
$
3,590
Excess of depreciation
704
671
6,465
Excess of allowance for bonuses
881
793
8,090
Excess of reserve for rewards obligation
157
158
1,441
Net defined benefit liabilities
1,133
1,064
10,404
Goodwill on transfer of business
474
425
4,353
Asset retirement obligations
387
363
3,554
Income taxes payable
165
349
1,515
Accrued expense
441
352
4,049
Net operating loss carryforwards
444
845
4,077
Allowance for doubtful accounts
594
560
5,455
Other
647
533
5,941
Sub-total deferred tax assets
6,425
6,506
59,004
Valuation allowance on net operating loss
carryforwards
(402)
(795)
(3,691)
Valuation allowance on deductible temporary
differences(994)(1,019)(9,128)Sub-total Valuation allowance(1,397)(1,814)(12,829)
Total deferred tax assets
5,028
4,691
46,175
Deferred tax liabilities:
Capitalized removal costs
(197)
(188)
(1,809)Net unrealized holding gains on securities
(0)
(6)
(0)
Other accounts receivable
(442)
(367)
(4,059)
Other
(36)
(75)
(330)
Total deferred tax liabilities
(676)
(638)
(6,208)Net deferred tax assets
¥
4,351
¥
4,053
$
39,957AIN HOLDINGS ANNUAL REPORT 2021

59

BASIC INFORMATION/DATA(3) The amounts of net operating loss carryforwards and its deferred tax assets by expiration date as ofApril 30, 2021 and 2020 are summarized as follows:
Millions of yen
2021
Due
Due
Due
Due
after
after
after
Due in
after
Due
two
three
four
one
one year
after
years
years
years
Total
year
throughfivethroughthrough throughor less
two
years
three
four
five
years
years
years
years
Net operating loss
carryforwards (a)Valuation allowance
Deferred tax assets

¥

-

$

¥

2

¥

33

¥

32

¥

358

¥

444

(17)

(2)

(33)

(32)

(316)

(402)

-

-

-

-

-

42

42

-

Due inone
year
or less17-

Due inone
year
or less

Net operating loss
carryforwards (a)Valuation allowance
Deferred tax assets

¥

Due
after
one
year
throughtwoyears

Thousands of U.S. dollars
2021
Due
Due
Due after
after
after
two
three
four
years
years
years
throughthrough through
three
four
five
years
years
years

$

$

156
(156)
-

Due
after
one yearthrough
two
years

18
(18)
-

$

303
(303)
-

$

293
(293)
-

Millions of yen
2020
Due
Due
Due
after
after
after
two
three
four
years
years
years
throughthrough through
three
four
five
years
years
years

Due
after
five
years

$

3,287
(2,902)
385

Due
after
five
years

Total

$

4,077
(3,691)385

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.

13. Commitment
The Company entered into overdraft agreements with 16 and 18 banks as of April 30, 2021 and 2020,
respectively, to finance working capital requirements. The outstanding balances of such overdrafts asof April 30, 2021 and 2020 are as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2020
2021
Total overdraft available¥ 22,050¥ 22,350$
202,497
Amount utilized
8
1473
Outstanding balance¥ 22,042¥ 22,336$
202,424

14. Amounts per share
Net assets per share at April 30, 2021 and 2020 and basic and diluted earnings per share for the years
then ended are as follows:
Yen
U.S. dollars
2021
2020
2021
Net assets per share¥ 3,267.49¥ 3,130.77$
30
Basic earnings per share
189.04259.11
1.73
Diluted earnings per share
Cash dividends per share attributable to the year
55
55
0.50
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. Total dividends paid were ¥1,948 million ($17,889 thousand) and¥1,948 million for the years ended April 2021 and 2020, respectively.

Total

Net operating loss
¥
- ¥
17
¥
22
¥
9
¥
48
¥
748 ¥
845
carryforwards (a)Valuation allowance
(17)
(22)
(9)
(48)
(698)
(795)
Deferred tax assets
5050(a) The amount is determined by multiplying the corresponding net operating loss carryforwards by
the effective statutory tax rate.

The basis for calculation of basic earnings per share is as follows:

Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit attributable to owners of parent pertaining
to common stock
Average number of shares outstanding (shares)

Millions of yen
2021
2020
¥
6,697
¥
9,179
6,697
35,427,408

9,179
35,427,484

Thousands of
U.S. dollars
2021$
61,502
61,502

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

60 AIN HOLDINGS ANNUAL REPORT 2021

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61

BASIC INFORMATION/DATA

15. Segment information
Thousands of U.S. dollars
2021(1) Overview of reporting segments
Reporting segments of the Company and its consolidated subsidiaries are composed of thoseindividual business units for which separate financial information is available, from which the boardof directors makes decisions regarding the allocation of management resources and for which
operating performance can be evaluated, allowing the reporting segments to be analyzed
periodically.
The Company and its consolidated subsidiaries divide their operations into two main businesses,
the Dispensing Pharmacy Business and the Cosmetic and Drug 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 Cosmetic and Drug Store Business primarily consists of the management of cosmetic and drug
stores. The Other Business primarily involves retail store business and 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, Cosmetic and DrugStore and Other.
Due to a realignment of consolidated subsidiaries, WHOLESALE STARS Co., Ltd., which wasclassified as a company in Dispensing Pharmacy Business in the previous fiscal year, has been
reclassified as a consolidated subsidiary associated with multiple reportable segments from the year
ended April 30, 2021. As a result, based on the revised classifications for reportable segments,
some assets have been transferred from Dispensing Pharmacy Business to administrative divisions,which are not part of reportable segments.
(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, 2021 and 2020 are summarized as follows:
Millions of yen
2021
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
assets62 AIN HOLDINGS ANNUAL REPORT 2021¥

Dispensing

Cosmetic andpharmacy

Drug store

263,095-¥

263,095

19,419
-

Other

¥

Total

14,791
103¥

297,305103

19,41914,894297,408

Adjustments¥

Consolidated

- ¥
(103)

297,305-(103)

297,305¥

20,947
161,497¥(1,999)13,326 ¥(721)
9,469 ¥

18,227
184,293¥(5,577)
19,368 ¥12,649203,662

¥

2,571

¥

536

303
151

3,411

¥

291

3,702

¥

¥

¥

4,278
516

6
288

-

4,436
804

-

4,436
804

3,299

1,218

352

4,871

1,031

5,903

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
assetsDispensing

Cosmetic andpharmacy

Drug store$ 2,416,153
2,416,153$

178,335
178,335

Other$

192,368$ 1,483,120$(18,357)
122,380 $

$

$

4,922

23,610$Total

135,834
945
136,780$ 2,730,324
945
2,731,270

Adjustments$(6,621)
167,389
89,959 $ 1,692,469

$

2,782

$

$

31,325

Consolidated- $ 2,730,324
(945)
(945)
2,730,324(51,216)
116,163
177,867 $ 1,870,346

2,672

$

33,99739,287
4,738

55
2,644

1,386
-

40,738
7,383-

40,738
7,383

30,296

11,185

3,232

44,733

9,468

54,210Millions of yen
2020
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

Cosmetic andpharmacy

Drug store

263,750
263,750¥

24,701
24,701

Other

¥

Total

4,163
114
4,277

¥

292,615
114
292,729

Adjustments¥

Consolidated

- ¥
(114)
(114)

292,615
292,615¥

20,850163,667¥

262
12,771¥(342)
11,869 ¥

20,771
188,308¥(3,948)5,143 ¥

16,822
193,451

¥

2,676

¥

391

¥

279

3,347

¥

199

3,547

¥

¥

4,336
91

3
172

18
-

4,357
263

-

4,357
263

3,688

1,488

311

5,488

337

5,825

AIN HOLDINGS ANNUAL REPORT 2021

63

BASIC INFORMATION/DATA

Amortization of goodwill and unamortized balances by reporting segment as of and for the years endedApril 30, 2021 and 2020 are summarized as follows:
Millions of yen
2021
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Cosmetic andpharmacy

Drug store

4,278
37,821

¥

Other

6
54

¥

Adjustments

151
1,182

¥

Consolidated

-

¥

4,436
39,057

Thousands of U.S. dollars
2021
Dispensing

Amortization of goodwill
Unamortized balances of goodwill

Cosmetic andpharmacy$

39,287347,332

Other

Drug store

$

55
495

$

Adjustments

1,386
10,854$

Consolidated-$

40,738358,683

Millions of yen
2020
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Cosmetic andpharmacy

Drug store

4,336
40,699

¥

3
60

Other

¥

Adjustments

18
1,363

¥

Consolidated

-

¥

4,357
42,123

16. Comprehensive income
Each component of other comprehensive income (loss) for the years ended April 30, 2021 and 2020
was the following:

Unrealized holding gains (losses) on securities:
Losses arising during the year
Reclassification adjustments to gains(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
2021
2020
¥

¥

57

¥

(92)

Thousands of
U.S. dollars
2021
$

523

27
85
(20)
64

(4)
(97)
26
(71)

247
780
(183)
587

(26)
76
49
(18)
31
95

(180)
27
(152)
52
(99)
(170)

(238)
697
449
(165)
284
872

¥

$

17. Quarterly information(1) Quarterly net sales for the year ended April 30, 2021 are as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2021
Three months ended July 31, 2020¥
71,463$656,286
Six months ended October 31, 2020
145,352
1,334,851
Nine months ended January 31, 2021
220,135
2,021,627
Twelve months ended April 30, 2021
297,305
2,730,324(2) Quarterly income before income taxes and non-controlling interests for the year ended April 30,
2021 is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2021
Three months ended July 31, 2020
¥
1,484
$
13,628Six months ended October 31, 2020
4,524
41,546Nine months ended January 31, 2021
7,903
72,577
Twelve months ended April 30, 2021
11,767108,063(3) Quarterly profit attributable to owners of parent for the year ended April 30, 2021 is as follows:
Thousands ofMillions of yen
U.S. dollars
2021
2021
Three months ended July 31, 2020
¥
846
$
7,769
Six months ended October 31, 2020
2,630
24,152Nine months ended January 31, 2021
4,575
42,014
Twelve months ended April 30, 2021
6,697
61,502(4) Quarterly earnings per share for the year ended April 30, 2021 is as follows:
Yen
U.S. dollars
2021
2021
Three months ended July 31, 2020
¥
23.90
$
0.21
Six months ended October 31, 2020
74.24
0.68
Nine months ended January 31, 2021
129.16
1.18
Twelve months ended April 30, 2021
189.04
1.73(5) Quarterly earnings per share for each accounting period of the year ended April 30, 2021 is asfollows:
Yen
U.S. dollars
2021
2021
Three months ended July 31, 2020
¥
23.90
$
0.21
Three months ended October 31, 2020
50.33
0.46
Three months ended January 31, 2021
54.92
0.50
Three months ended April 30, 2021
59.88
0.54
The quarterly information is outside the scope of audit procedures.

18. Subsequent events
Acquisition of treasury stock
The Company decided at the meeting of the Board of Directors held on June 7, 2021 to acquire thetreasury stock in accordance with Article 156 of the Law, as applied pursuant to Paragraph 3, Article
165 of the Law.
(1) Reason for acquiring the treasury stock
The Company acquired the treasury stock for the purpose of executing the flexible capital strategy
to improve capital efficiency and respond to changes in operating environment.
(2) Details of the acquisition(a) Type of stock to be acquired: Common stock(b) Total number of stocks to be acquired: maximum 200,000 shares(c) Total acquisition cost: maximum ¥1,400 million ($12, 857 thousand)

64 AIN HOLDINGS ANNUAL REPORT 2021

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65

BASIC INFORMATION/DATA(d) Period: From June 8, 2021 to September 30, 2021(e) Methods of acquisition: Off-Auction Own Share Repurchase Trading (ToS TNeT-3) of theTokyo Stock Exchange(3) Results of the acquisition
In accordance with the resolution made at the meeting of the Board of Directors, the Company
acquired 200,000 shares of its common stock (acquisition cost: ¥1,400 million ($12,857 thousand))on June 8, 2021, and completed the acquisition of treasury stock as planned.

66 AIN HOLDINGS ANNUAL REPORT 2021

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67

BASIC INFORMATION/DATA

68 AIN HOLDINGS ANNUAL REPORT 2021

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BASIC INFORMATION/DATA

70 AIN HOLDINGS ANNUAL REPORT 2021

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BASIC INFORMATION/DATA

Investor Information

Corporate Data

Stock Information(Fiscal 2021)(Fiscal 2021)

Corporate NameAIN HOLDINGS 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¥21,894 million

Fiscal Year
May 1 to April 30 of the following year

Number of Employees
Consolidated: 13,065
Non-consolidated: 192

Ordinary General Meeting of
Shareholders
July

Business Lines
Planning, management and operationof the corporate Group, focused ondispensing pharmacy and cosmetic anddrug store operations, generic drug
wholesaling, sales of cosmetics, and
the Group’s other businesses

Date of Record
April 30
(The Company will announce otherdates as and when required.)

Number of Shares Outstanding
35,428,212 shares(including treasury stock)
Number of Shareholders
9,937

Major Shareholders		

(As of April 30, 2021)

Shareholders

Number ofshares held
(thousandshares)Shareholding
ratio*1(%)

Kiichi Ohtani

3,238

9.14

Seven & i Holdings Co., Ltd.

2,750

7.76

The Master Trust Bank of Japan. Ltd (Trust account)

2,215

6.25

North Pacific Bank, Ltd.

1,758

4.96

Retirement Benefit Trust managed
by Mizuho Trust & Banking Co., Ltd.
(Marubeni Corporation account)*2

1,594

4.50

The Hokkaido Bank, Ltd.

1,472

4.15

Custody Bank of Japan, Ltd.

1,275

3.60

THE BANK OF NEW YORK MELLON 140044

776

2.19

STATE STREET BANK AND TRUST COMPANY 505103

661

1.87

The Norinchukin Bank

600

1.69

Notes: 1. Shareholding ratios are calculated excluding 891 treasury shares.
2. All shares held by the Master Trust Bank of Japan, Ltd. and Custody Bank of Japan, Ltd. are held forfiduciary services purposes.
3. 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.

72 AIN HOLDINGS ANNUAL REPORT 2021