Positioned to Succeed
ANNUAL REPORT 2016
For the year ended April 30, 2016

Profile

Message from the President

AIN HOLDINGS has grownby consistently staying ahead of change

Aiming to increase corporate value by
taking advantage of far-reaching change

AIN HOLDINGS INC. operates Japan’s leading dispensing pharmacy business and a unique drug and cosmetic store businessfocused on female consumers in urban markets. We have generated sustained growth by expanding these businesses whileconsistently anticipating and responding flexibly to changes in the operating environment.
We aim to increase corporate value further as a distinctive corporate group.
Dispensing Pharmacy Business
The dispensing pharmacy sector is one of Japan’s few growth markets. By responding
to new demands on dispensing pharmacies, we aim to play a key role in society bysupporting Japan’s healthcare system and reinforce our position as the preeminentcompany in the sector.
Drug and Cosmetic Store Business
We operate a chain of drug and cosmetic stores under the ainz & tulpe brand, which
has built a distinctive position in the market in terms of target customers, store
locations and products. We are developing the business into a second key sourceof earnings by creating and nurturing original brands and opening stores in prime
locations.

History of Growth
Net sales(¥ million)

Kiichi Otani

Dispensing pharmacy business

Drug and cosmetic store business

Other businesses

Market capitalization (right scale)President andRepresentative Director(¥ million)
18,000250,000

16,000200,000

14,00012,000150,000
100,000

8,000

In fiscal 2016, ended April 30, 2016, the dispensing pharmacy business actively opened new stores,

6,000

including locations acquired through M&A deals. A number of factors helped support this expansion.

4,000

50,0000

Fiscal 2016 Review

10,0002006/4

2007/4

2008/4

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/4

2016/42,000

During the course of the year, we improved our frontline capabilities further, leading to gains in business

0

efficiency and higher-quality services, and we put in place the necessary structures to address changes tohealthcare and dispensing systems in Japan.
However, the drug and cosmetic store business reported a loss, falling short of our forecast for profits
at the start of the fiscal year. Although our chain of ainz & tulpe stores performed well, profits in thebusiness were hit by costs related to the opening of new retail formats, including our large flagship ainz

Contents
1

Message from the President

6

Feature: Positioned to Succeed
6 Operating Environment of Dispensign Phamacy		Sector in Japan
8 Growth Strategy: Dispensing Pharmacy Business
14 Growth Strategy: Drug and Cosmetic Store Business18 Corporate Governance
20 Board of Directors and Corporate Auditors

22 Financial Section
22 11-year Financial Summary
22 Management’s Discussion and Analysis		of Financial Condition and Results of Operations
26 Consolidated Balance Sheet
28 Consolidated Statement of Income
28 Consolidated Statement of Comprehensive Income
29 Consolidated Statement of Changes in Net Assets
30 Consolidated Statement of Cash Flows
31 Notes to Consolidated Financial Statements
56 Independent Auditor’s Report
57 Investor Information

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.

& tulpe SHINJUKU HIGASHIGUCHI near the east exit of Tokyo’s Shinjuku Station and ainz & tulpe Le trois
in Sapporo, Hokkaido. Gross margins at both new formats are improving due to a tighter focus on target
customers and the launch of original brands. These steps, along with the closure of a large number ofsuburban drug and cosmetic stores, meant fiscal 2016 marked a major turning point for the Group.
As a result of these efforts, net sales in fiscal 2016 rose 25.0% year on year to ¥234,843 million,
operating income increased 27.7% to ¥14,619 million and profit attributable to owners of parent rose
27.8% to ¥7,917 million.
We also moved to a holding company structure on November 1, 2015. This step was taken to improve
corporate governance by separating the Group’s management and business execution functions and tocreate a more efficient business development structure by clarifying the roles of each Group company,
allowing us to respond more rapidly to feedback from the business frontline. This is part of wider efforts
to create an operating structure that will support further business expansion.

AIN HOLDINGS ANNUAL REPORT 20161

Message from the President

AIN HOLDINGS Growth Strategy

Business Strategy:
Dispensing Pharmacy BusinessOur medium-term growth strategy is anchored by four key objectives:
1. Top-line growth

Our strategy has been to grow the dispensing

2. Improve the primary care capabilities of pharmacists and dispensing pharmacies*

pharmacy business by expanding our nationwide

3. Attract and train personnel

network of pharmacies located near hospitals.

4. Grow the ainz & tulpe business

Top-line growth has increased our buying power,
which in turn has lifted margins at each pharmacy,* In the April 2016 dispensing fee revisions, the government used the terms Kakaritsuke pharmacists and Kakaritsuke dispensing
pharmacies, which roughly translates as primary care pharmacists and primary care dispensing pharmacies. For the first time, thegovernment defined the criteria for Kakaritsuke pharmacists, stepping up its efforts to promote the primary care role of pharmacists inthe community (see pages 10-11 for more details).

creating a positive business cycle. We have also
focused on hiring and training pharmacists,

In order to generate further growth, we also need to anticipate and respond to changes in thea key driver of growth, improved the efficiency

market. Moving to the holding company structure means we can easily integrate new companiesof existing dispensing pharmacies and systemized

acquired through M&A deals without changing our operating structure. Going forward, we plan topharmacy operations. These efforts have helped us counter the impact of drug price and dispensing

consolidate some Group companies to leverage business synergies.

fee revisions, supporting sector-leading profit margins and a healthy financial position.
The government is currently promoting the concept of primary care dispensing pharmacies. We

Growth Strategy 1:
Dispensing Pharmacy Business
Use
dispensing
expertise

Quality

Assignpersonnel

Recruitment& training• Number ofpharmacist
graduates
hired

Assignpersonnel
Use
dispensing
expertiseplan to step up our efforts in this area, as it gives us the potential to fully leverage our competitive

Investadvantages and continue playing a key role in society.

Scale
Top-line growth
Forge M&A deals
・Open dispensing pharmacies
・Develop medical malls

Flexibility• Net sales

Address changes in healthcare
policy, operating environment
Primary care dispensing
pharmacies and pharmacists

Strengthen
procurement
capabilities

Over the last few years, companies in the sector have been targeting other dispensing pharmacy• Interest-bearing
debt ratio• EV/EBITDA multiples
of M&A deals

Improve
pharmacy
efficiency
Contribute
Securetechnical fees

Greatertrust,
strongerbrand

Contribute•Average prescription priceto local• Average number of additional
healthcare
reimbursement points• Generic drug dispensing ratio•Number of pharmacies providing home-based
dispensing services•Number of pharmacies providing 24-hour support

Contribute

hire pharmacists. We have also been expanding our network at an annual pace of around 120 dispensing
pharmacies, including locations acquired through M&A deals. An opportunity in the future to forge amajor M&A deal would significantly boost that pace of expansion (see pages 8-13 for more details about

Strongfinances

Contributechains for acquisition or merger, particularly small and medium-sized companies that are struggling toReturns

Dividends,
salaries

Stableprofitgrowth• Operating income

our growth strategy for the dispensing pharmacy business).

Scale of BusinessSound Financial Structure—Comparison of financial indexes among major companies
operating dispensing pharmacies in Japan
Fiscal 2015

Potential
Growth Strategy 2:
Drug and Cosmetic
Store Business

Expandainz & tulpe
business

Establish new
businessmodel

Invest• KPI

Market capitalization
Cash on hand in banks
Interest-bearing debt
Net cash
Shareholders’ equity ratio(¥ million)AIN
HOLDINGS
171,240
19,553
13,9705,583
42.0%

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

AIN
HOLDINGS
226,087
22,64722,410236
38.1%

Average of
3 competitors
61,57818,42834,452(16,024)
30.0%

Fiscal 2016

The Changing Role of Dispensing Pharmacies
In the past

In the future

Trends in Dispensing Fees

(criteria for primary caredispensing pharmacies)
Guidance for drug usage
Integrated management of drug usage
and other treatments
Pre-avoid activities
Management of leftover medicines

Primary careservices receive
more reimbursement
points24-hour support

Focused on dispensingdrug

Support for home-based healthcare
and nursing care

Guidance for drug usage

Promote generic drugs

Dispensing drugs

Dispensing drugs

Market capitalization
Cash on hand in banks
Interest-bearing debt
Net cash
Shareholders’ equity ratio—Our dispensing pharmacy store network

933 pharmacies nationwide(As of end-fiscal 2016)

Hokkaido 114

Tohoku 106(¥ million)

Chugoku, Shikoku
Kyushu, Okinawa
104

Hokuriku
Tokai, Kinki
220

Kanto, Koshinetsu 389

Branches
Major group companies

Notes:
1. Market capitalization data are as of July 29, 2016.
2. Interest-bearing debt = Short- and long-term debts + Corporate bond (excluding
Lease obligations)
3. Net cash = Cash on hand and in banks – Interest-bearing debt
4. 3 competitors: NIHON CHOUZAI Co., Ltd., SOGO MEDICAL CO., LTD., Qol Co., Ltd.
Source:		Compiled by AIN HOLDINGS from the above companies’ financial results forfiscal 2016.

Conventional
dispensing services
receive lessreimbursement points
See pages 7, 10-11, for more details.

2 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 20163

Message from the President

Business Strategy:
Drug and Cosmetic Store Business
The AIN Group initially started out as drug store business,but as the non-hospital dispensing system expanded, wechanneled business resources into dispensing pharmacies,
leading to rapid growth and the Group’s current focus
on dispensing pharmacy operations. We aim to expand
the drug and cosmetic store business into a second key
source of earnings.
Amid Japan’s falling birthrate and aging society, we
see significant growth potential for urban drug andCapital Strategy
In fiscal 2016, we raised the full-year dividend to ¥40 per share, an increase of ¥10 from theprevious fiscal year. In future, we plan to increase the dividend payout ratio from the current 16% to20%.
At the moment, we are putting priority on investment to drive growth, such as store openings,
rather than on shareholder returns.
M&A deals are likely to be the main use of capital. We are receiving a growing number ofinquiries about potential deals. We plan to actively acquire or merge with other dispensing
pharmacy companies while maintaining a stable EV/EBITDA ratio, in order to expand our businessand increase our market capitalization.
We aim to maintain ROE at around 15% and continue growing profits.

cosmetic stores. In recent years, we have therefore been focusing business resources on our chain ofainz & tulpe drug and cosmetic stores targeting female consumers in urban markets. We are aiming
for rapid growth, supported by a raft of initiatives such as improvements in staff training and productdevelopment.

Targeting Sustained Growth

In 2015, we opened two new formats – ainz & tulpe SHINJUKU HIGASHIGUCHI, a new flagship

The dispensing pharmacy market in Japan isstore near the east exit of Tokyo’s Shinjuku Station, and ainz & tulpe Le trois in Sapporo, Hokkaido. All

currently worth ¥7.2 trillion and is projected

our existing ainz & tulpe urban stores also performed well.

to reach ¥9 trillion over the next decade. The

Going forward, we plan to boost margins by increasing the sales ratio for original brands. We also aim

dispensing pharmacy sector is one of Japan’s

to open stores in prime locations to strengthen the ainz & tulpe brand and create a more distinct position

few growth markets. However, it remains

in the market. Our goal is to create a second major stream of earnings by establishing a retail format that is

highly fragmented, with the top five companies

completely different to existing drug stores in the sector (see pages 14-17 for more details about our growthaccounting for only 10.7% of the market, including

strategy for the drug and cosmetic store business).

the Group’s leading share of 2.9%. We therefore
see considerable scope for further growth inmarket share. We expect our share to increase as

Personnel Strategy
In April 2016 we hired 375 pharmacists, exceeding our target of 300. AIN Group dispensing
pharmacies have captured 2.9% of the domestic market based on sales, but we recruited around
8% of all newly graduated pharmacists who started work at dispensing pharmacies in April 2016.
We think that reflects growing trust in the AIN Group among universities and students due toincreased awareness of our high-level training systems and good working conditions. But we willneed to attract even more pharmacists in the future to help our dispensing pharmacies improvetheir primary care capabilities. Japan currently faces a severe structural shortage of pharmacists,
so the ability of companies to attract new pharmacists has a direct impact on their ability to dobusiness. Our business scale and healthy financial position means we have a major advantage inthe job market, as we have the resources to consistently invest in hiring new personnel.
The drug and cosmetic store business also hired 94 new employees in fiscal 2016. We plan
to hire and train around 100 new people each year to support growth in the business, including
major new store openings.
We are also actively promoting women to management positions. There are currently 30.8%(as of April 2016) female managers in the AIN Group and we are aiming to increase the ratio of
female managers to 50% by the end of April 2019. The first step in this process is to conduct
opinion surveys at each level of the Group and implement training programs.

the dispensing pharmacy market expands.
Although the sector is likely to face growing

Dispensing Pharmacy Company Market Share(Fiscal 2016)

Top 5 major companies*
10.7%

Others73.0%

Top 50major companies
27.0%*Top 5 major companies:
AIN HOLDINGS INC., NIHON CHOUZAI Co., Ltd., KRAFT Inc., Qol Co.,
Ltd., Kyoso Mirai Group
Source: AIN HOLDINGS estimates, based on data from DRUG Magazine(March 9, 2016) and FY2016 dispensing fee statistics released by
the Ministry of Health, Labour and Welfare.

headwinds from regular revisions to drug prices
and dispensing fees, we see those changes as an opportunity due to our strong finances. We plan touse funds to actively invest in M&A deals and pharmacist recruitment in order to sustain growth, while
also maintaining margins.
The drug and cosmetic store business currently accounts for 10% of consolidated sales, with theremaining 90% coming from the dispensing pharmacy business. Going forward, we will overhaul ourbusiness portfolio in order to increase the drug and cosmetic store sales ratio to 30%, using our new
retail formats to expand the ainz & tulpe brand.
The AIN Group has consistently adapted to change in the operating environment, to the extent
that constant change is at the heart of our corporate philosophy. Our dispensing pharmacy businessand drug and cosmetic store business both face major challenges in their operating environments.
Against that backdrop, to continue contributing to society and increasing corporate value, we need toconstantly evolve as a unique corporate group that provides products and services that customers andsociety really value.
July 30, 2016

Kiichi Otani
President and Representative Director

4 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 20165

Feature: Positioned to Succeed

Operating Environment of Dispensing Pharmacy Sector in JapanThe dispensing pharmacy business is our core business and has the leading position in the sector.
The dispensing pharmacy sector is one of only a few markets in Japan with prospects for growthover the medium to long term. However, with successive governments revising social insurance policy
as part of wider efforts to curb national medical expenses, dispensing pharmacies face an increasingly
challenging operating environment, raising the possibility of restructuring in the sector. However, after
pushing ahead with strategies that anticipated those changes, we view them as a business opportunity.
In this section, we look at the nature of the operating environment in Japan and our strategy for
generating sustained value in our dispensing pharmacy business under those conditions.

A Growth Market(¥ trillion)

Dispensing pharmacy market value

Non-hospital dispensing ratio

Ratio of elderly people

12

70.0%

6

0

80

7.2

8

2

(%)

80.0%

10

4

4.6

60

25.9％

20.2%

11.5%
11.0%

40

29.1%

20

0.47
1989 1990

1995

As Japan’s society ages and national
medical expenses rise, dispensing
pharmacies are being asked to play aradically different role in local healthcare
services. The April 2016 dispensing
fee revisions include new criteria forprimary care pharmacists that support
local communities (see pages 10–11

2000

2005

2010

2015

2020 (April to

The government is actively promoting
wider use of generic drugs to help
reduce national medical expenses. As
of February 31, 2016, generic drugs
accounted for 62.4% of all prescriptions.
The government aims to increase the ratio
to 80.0% by March 2020 by awarding
dispensing pharmacies additional
reimbursement points (premiums) for

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

to a home-based one, as part of efforts
to curb a continued rise in national
medical expenses. As part of thosechanges, the government is adjusting

Promotion ofgeneric drugs

Promotion of primarycare dispensing pharmacies(restructuring in the dispensing
pharmacy sector)

the reimbursement point system fordispensing fees to encourage growth indispensing pharmacies that can act as
primary healthcare service providers.

Characteristics of Japan’s Dispensing Pharmacy Sector
Market distribution of dispensing pharmacies in Japan

Average prescription price (¥)

15,00014,00013,00012,00011,000Drug storeswith dispensing
pharmacyfunctions
Dispensing
pharmacies
not locatednear hospitals

10,0009,000

AIN HOLDINGS dispensing
pharmacies
locatednear hospitals

8,000
7,000
6,000
0

500

1,000

1,500

2,000

2,500

3,000

Prescription volume (sheets/month)
Source: Compiled by AIN HOLDINGS from various data.

6 AIN HOLDINGS ANNUAL REPORT 2016

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

Roadmap to Further Promote the Useof Generic Drugs (Apr. 2013~)

National average based on previous methodology
National average based on international methodology
80.0%
AIN HOLDINGS results
et(%)

70.3% New targ

80

60

60

40

40

20

20

0

2010

2015 2016

0

2020(Target)*Figures for bar graph as of March 31.
Figures for line graph as of April 30.

Dispensing Pharmacy Earnings Model
Total store sales *1

Dispensing
fees *2

Separation of drug prescription and dispensing(growth in dispensing pharmacies)

Unique industry structure
Japan has three main types ofdispensing pharmacy. Patientschose which type to use based onconvenience and other factors,
but dispensing pharmacies locatednear hospitals tend to have thehighest average prescription priceand number of prescriptions,
supporting high margins (seepage 7 for more details about why
dispensing pharmacies locatednear hospitals are popular inJapan).

generic drug dispensing. The future ofdispensing pharmacies will largely dependon their ability to contribute to this policyby increasing the generic drug dispensing
ratio, and on whether they can build
operating structures that are resilient to
declines in earnings caused by factors
such as lower generic drug price margins.

0

Successive Changes to Government Policy

Universal healthcare
and free access
Japan introduced a universal
healthcare system in 1961. The
public bears between 10%
and 30% of treatment costs
depending on factors such as
income and age. The system does
not restrict treatment or drug
dispensing to certain hospitals
or pharmacies based on the typeof insurance or other conditions,allowing any patient to chosewhen and where they want theirillness or injury to be treated.

being revised so that only dispensing
pharmacies that provide these services
will be able to generate profits.
Dispensing pharmacies that can adapt
to these changes will be rewarded
accordingly, while those that cannot
could fall by the wayside.

March year)
13 onwards:
2005-2014:
annualized growth of 5.1% annualized growth of 3.0–5.0%

Sales fromdrugs

In Japan, the government determines
drug prices and dispensing fees, which areusually adjusted once every two years. The
government began encouraging a shift tonon-hospital dispensing services in 1994,
spurring rapid growth in the number ofdispensing pharmacies. However, thegovernment is now shifting its policy
from a hospital-based healthcare model

for more details). Pharmacists are now
required to provide an even higher levelof services, such as management ofleftover prescription medication andsupport for patient health managementa n d l o c a l h e a l t h c a re p ro v i s i o n , i naddition to dispensing prescription
drugs. Dispensing fees are gradually

Promoting Generic Drugs

Dispensing Pharmacy Market

Japan’s dispensing pharmacy market hasdeveloped in unique ways, supported bygovernment policy.
The market was worth roughly ¥7.2
trillion in fiscal 2014 and we estimate it
will continue to expand at around 3–5%
annually. Japan is one of the first countries
in the world to become a super-aging
society and roughly 30% of prescriptions
are still filled by hospitals. As moreprescriptions are filled outside hospitals andmore hospitals are rebuilt and relocated, we
see scope for further growth in dispensing
pharmacies located near hospitals.

The Changing Role of Pharmacists and Trends in Dispensing Fees

*1: Dispensing pharmacies receive 0-30% of medical
expenses depending on the type of insurance ofcustomers.
Dispensing pharmacies then charge the remainder of
medical expenses to health insurance bodies such as
national health insurance.

Purchasing cost of drugs
Drug price margin
Pharmaceuticalmanagement fees
Technical fees(includes premiums forgeneric drug dispensing) hy dispensing pharmacies
W
located near hospitals are
popular in Japan
Dispensing pharmacies locatednear hospitals are the mostpopular format in Japan becauseof clear benefits for users. We
expect this format to remain
popular over the medium andlong term, as many pharmacies
located near hospitals satisfy
the government’s conditions
for primary care dispensing
pharmacies at the heart oflocal communities, rather thandrugstores with dispensing
pharmacy functions.
•Familiarity
Non-hospital dispensing services
really began gaining ground fromaround 1994. Many patientsin Japan currently pick up theirprescription drugs from pharmacies
located near hospitals due toconvenience and familiarity, because
their local hospital dispensed drugs
to them in the past.

Store operation costs+ Store labor costs*2: Dispensing fees comprise pharmaceutical management
fees and technical fees for pharmacists.
These fees are added depending on the services at
pharmacies.

SG&A expenses
Gross profit
Operating income•Well stocked
Many prescriptions written in
Japan specify certain drug brands,
which means pharmacies needto stock a wide range of drugs.
Dispensing pharmacies locatednear hospitals work closely with
their local hospital to ensure theystock the right brands, so patientsusually get the drugs they havebeen prescribed. This cooperation
also supports efficient inventory
management, as dispensing
pharmacies know which drugs
they do not need to stock.
•Convenient
In Japan, patients have to see theirdoctor again to receive repeat
prescriptions. The elderly andpatients with chronic disorders
who have to visit hospitals
regularly tend to use dispensing
pharmacies near hospitals becauseof the convenience.

•Safe and reassuring
Dispensing pharmacies locatednear hospitals handle complex
prescriptions and a much greater
volume than drugstores withdispensing pharmacy functions,which means pharmacists who
work at dispensing pharmacies
near hospitals gain moreexperience, supporting a higher

level of specialization at thoselocations. Dispensing pharmacies
near hospitals also regularly
share information with their local
hospital, helping to mitigate
risk related to inappropriate
combinations of prescribed drugs
and dispensing errors, which
supports a high level of safety andpeace of mind for patients.

Consumer survey: What makes a good dispensing pharmacy?
(multiple responses allowed)
60
50
40
30
20
10
0

Accurateand careful
explanations

Goodcustomer
service,well-presented
staff

Appropriate
Close tohandling of medical facility
personal
where
information prescription
was written

Short
waiting
times

Other

Source: DRUG Magazine (March 9, 2016)

AIN HOLDINGS ANNUAL REPORT 20167

Feature: Positioned to Succeed

Growth Strategy: Dispensing Pharmacy Business

Channeling business resources into dispensing
pharmacies located near hospitals and medical malls

Top-line Growth

The number of M&A deals in the dispensing pharmacy sector is rising amid changes in theoperating environment. We plan to step up M&A activity even further while also keeping a close
eye on investment efficiency. We will also continue to channel business resources into dispensing
pharmacies located near hospitals and into the development of medical malls, as these locations
are ideally suited to efficiently tapping prescription demand. Our goal is to expand the dispensing
pharmacy business further to build a dominant position in the sector.

Stepping up M&A activity
The dispensing fee revisions in April 2016 underscored thegovernment’s policy of favoring dispensing pharmacies that
can help reduce national medical expenses and support
community-based healthcare. Criteria for securing additional
reimbursement points were adjusted to reflect that policy.
To address these changes, dispensing pharmacies haveto increase the quality and number of pharmacists andmake pharmacy operations more efficient. However, many
dispensing pharmacy operators are struggling to secure
enough pharmacists, which is adding to the increasingly
tough operating environment. As a result, the number of
M&A deals is on the rise.
The AIN Group has been actively opening new storesand using M&A to expand its dispensing pharmacy network
for some time. That track record, along with the trust we
have built up as the leading company in the sector, as wellas our strong financial position and high-quality training
programs for pharmacists, means we are often given firstrefusal on a large number of potential M&A deals. Using
those opportunities, we plan to further step up M&A
activity to accelerate business expansion, while also taking
into account investment efficiency.
We have narrowed our investment focus to potential
deals with prospective EV/EBITDA multiples no higher than
five to seven times and companies that can contribute toprofits in their first fiscal year in the AIN Group.
After deals are completed, we work to integrate thebusiness systems and corporate culture of the acquiredcompanies into the AIN Group in order to improve
dispensing pharmacy efficiency and enhance the skills ofpharmacists. On average, this process more than doubles
profit margins at acquired companies, so the deals have asignificant impact on the Group’s bottom line, as well as onsales and the number of pharmacists.

Impact of M&A on sales
Sales indispensing
pharmacybusiness(¥ million)
250,000

236,100

Contribution from M&A

211,009200,000

137,291

150,000

114,164

128,772

111,602

100,000

66,78579,79765,25839,90450,0000

2007/4

2008/4

2009/4

2010/4

2011/4

2012/42013/4

M&As of dispensing
pharmacy companies

1 company(18 stores)

2 companies(91 stores)

1 company(3 stores)—(3 stores)

6 companies(35 stores)

9 companies(28 stores)

11 companies 13 companies 15 companies 23 companies
73 stores(38 stores)(26 stores)(119 stores)(110 stores)

2014/4

2015/4

2016/42017/4 (plan)

Impact of M&A on operating margin
Before M&A

After M&A

Increase/decrease

2.3%

11.6%

+9.3%

Average forfiscal 2011 to
fiscal 2015

Before M&A: based on due diligence documents; after M&A: full year of resultsin fiscal year following the M&A

8 AIN HOLDINGS ANNUAL REPORT 2016

Reasons for improvement in operating margin after M&A
1) Decline in procurement costs due to switch to AIN Group’s drug procurement
pricing standards2) Increase in operational efficiency due to introduction of AIN Group’s businesssystems3) Drop in personnel expenses due to optimal positioning of AIN Group employees,
reducing the need for high-cost temporary and contract staff4) Greater success in securing reimbursements for intelligent fees due tointroduction of AIN Group training systems

Under Japan’s current healthcare system, dispensing
pharmacies located near hospitals offer significant benefits
for patients (see page 7 for more details). This format is
also the closest to the government’s vision for primary caredispensing pharmacies, giving us the opportunity to fully
leverage our competitive advantages. Over the medium
term, we plan to continue channeling business resources
into these pharmacies, as we believe they are the bestformat to develop our dispensing pharmacy business. We
will also continue to focus on developing medical malls,
aiming to open them near stations and other urban areas
with high customer traffic.

Ain Pharmacy NEWoMan SHINJUKU

Ain Pharmacy Medical Garden SHINURAYASU

A Message from the Managing Director

Miya Oishi(Managing Director andSenior General Manager, Operations Department)

In the fiscal year ended April 30, 2016, there was no
impact on earnings from dispensing fee revisions andthe initiatives that we have been implementing started
to bear fruit. In other words, it was an important year
on our path to the next phase of growth.
Our pharmacy-led project to improve efficiency
and services encouraged more employees to think
for themselves about ways of expanding the businessthrough our dispensing pharmacy operations, rather
than just following steps in operating manuals to theletter. This approach delivered incremental progress,
with frontline staff developing their own ideas toachieve targets for inventory control and otherperformance indicators.
Some people in the industry believe the latest
dispensing fee revisions will have a particularly severe
impact on large dispensing pharmacy chains. However,
the revisions increased the number of additional
reimbursement points companies can claim for essential
pharmacist duties, such as providing guidance abouthigh-risk medicines and carrying out pre-avoid activities(see pages 10 and 13 for more details). A key pointof the revisions is that dispensing pharmacies canleverage the qualifications of individual pharmacists tosecure additional reimbursement points. We will focus
on areas that attract points, or in other words, ensure
our pharmacists fill the role the government is askingof them. In that sense, the government is testing theabilities of pharmacists. We believe the latest dispensing
fee revisions mark a major turning point for the industry,creating a clear line between companies that can satisfy
the new criteria and those that cannot.
There are likely to be fewer locations for new
dispensing pharmacies as the healthcare sector moves
increasingly towards non-hospital dispensing. Thatmeans M&A deals will become more important forbusiness expansion. As somebody who joined the Group
via a company absorbed by AIN HOLDINGS, I plan to use
my own experience to communicate our approach andspread our corporate culture to other companies thatjoin us in the future. I believe that process will enhanceservice quality and profit margins at acquired companies,
contributing to growth for the entire AIN Group.
We are also working to make the Group a place
where as many pharmacists as possible take theinitiative and expand their area of responsibility, giving
them even more job satisfaction and a greater role in
the local community.

AIN HOLDINGS ANNUAL REPORT 20169

Feature: Positioned to Succeed

Growth Strategy: Dispensing Pharmacy BusinessInitiatives to Create Primary Care
Dispensing Pharmacies
AIN HOLDINGS is well aware that dispensing pharmacies play an important role in society. Basedon that thinking, our strategy has been to focus on dispensing pharmacies located near hospitals*1,
nurture highly qualified pharmacists and improve the efficiency of existing pharmacies*2. The
government is currently promoting its vision for primary care dispensing pharmacies*3, which gives
us an opportunity to fully leverage our competitive advantages. We therefore plan to step up our
initiatives in this area to give all our pharmacies the capabilities to play a key role in healthcare
provision for local communities.
*1 See pages 7-9 for more details*2 See pages 12-13 for more details*3 See pages 2 and 11 for more details

Integrated, continuous managementof prescriptions
The government has raised the number of additional
reimbursement points for high-quality guidance
about medicines. As a result, pharmacist one-onone communication with patients is set to become an
important area in performance evaluations. AIN Group
pharmacists provide detailed advice about medicine
usage, maintain up-to-date medication histories andencourage patients to keep track of usage with their
medication notebooks. We are also using IT to improve
convenience for patients, including the development of apatient medication notebook app.

Working with local medical facilities
Dispensing pharmacies
are being asked toreinforce their links withlocal medical facilities.
Through our growing
network of dispensing
pharmacies located near hospitals, we have been
exchanging information and enhancing cooperation withlocal hospitals for some time. We are now working tobuild even closer links through home-based healthcare,prescription checks and the provision of feedback to
doctors about medication and other areas.

Pre-avoid activities
Pharmacists carry out
pre-avoid activities
t o p re v e n t t re a t m e n tthat is detrimental tothe health of patients,
such as duplicated drug
administration, dangerous combinations of prescribeddrugs and side effects, and to identify potential issues
at an early stage. We have been actively focusing on
this area for some time using the specialist skills of ourpharmacists. This has helped up us build up experience,
which we are now sharing with other pharmacists acrossthe Group (see page 13 for more details).

Management of leftover medicines
Managing drug usage
and leftover medicines isa key role of pharmacists.
In the AIN Group, we
strive to maximize theefficacy of drug treatments
by ensuring appropriate use of prescription medicines,
such as using dialog with patients to confirm how much
medicine is unused. We also provide feedback to medical
facilities about leftover medicine in order to reduce overprescription.

10 AIN HOLDINGS ANNUAL REPORT 201624-hour support
All our dispensing
pharmacies offer24-hour support via
mobile phone and Ain
Pharmacy NOBORITO(Kanagawa Prefecture)
Ain Pharmacy NOBORITO
offering 24-hour services
is open all day. We
are using lessons learnt at this pharmacy to accumulate
the expertise and build the operating structure we needfor 24-hour operations. We will continue to implement
initiatives in this area, while also increasing efficiency,
because we recognize that 24-hour services will be
crucial to ensuring dispensing pharmacies fulfill their rolein supporting local healthcare.

Promoting wider use of generic drugs
Anticipating moves by thegovernment to expand its
generic drug promotion
policies, we established
WHOLESALE STARS Co.,
Ltd. (WSS) in 2006, thefirst dedicated generic drug wholesaler to be set up by
a dispensing pharmacy company in Japan. WSS helps us
mitigate the risk of falling drug price margins caused by
the rising generic drug dispensing ratio. The company
also offers other benefits such as access to stablesupplies of generic drugs. WSS is a key competitive
advantage for the Group, as any increase in the genericdrug dispensing ratio significantly boosts our earnings
capabilities.

Home-based dispensing
As healthcare becomes
more advanced andJapan’s population ages,
dispensing pharmacies
are being asked to playa greater role as local
health centers supporting home-based healthcare andother services. The AIN Group started implementing
initiatives in home-based dispensing in 2012 after
realizing it was likely to become an important functionof dispensing pharmacies. As of April 30, 2016, over
80% of our dispensing pharmacies provide home-based
dispensing services. We plan to expand these services
to all our pharmacies as part of active efforts to support
home-based healthcare.

Advice about OTC drugs and health
Dispensing pharmacies arebeing asked to become
centers of health provisionembedded in local
communities. The AINGroup is responding to thiscall, using its pharmacists to promote self-medication by
selling OTC medication and providing support and advice
about health. Since 2010, we have also been working
with partner hospitals to provide advice about how to quit
smoking.

What is the role of primary care pharmacists?
Primary care pharmacists that support local communities
are required to provide a number of services, such as theintegrated and continuous management of patient drug
usage, which they use to tailor guidance for each patient.
They also work with local doctors to check the details ofprescriptions and offer suggestions about prescriptions. The

April 2016 dispensing fee revisions incorporated new criteria
for pharmacists that support local communities. In addition toreceiving points for providing existing services via primary caredispensing pharmacies, companies can now receive higher
points for guidance provided by primary care pharmacists ifthey meet the new set of criteria.

New criteria for primary care pharmacists• More than three years working in dispensing pharmacies• More than six months at current dispensing pharmacy• Working week of more than 32 hours• Certified training course completed• Participation in local healthcare activities• Approval from patientsAIN HOLDINGS ANNUAL REPORT 201611

Feature: Positioned to Succeed

Growth Strategy: Dispensing Pharmacy

Human Resources

Today’s dispensing pharmacies now need to be able to provide a wider range of high-quality
services. To address these demands, the biggest issue for dispensing pharmacy companies is how
to increase the quality and number of pharmacists. Hiring and training pharmacists on a sustained
basis is also vital to support an active dispensing pharmacy opening program. AIN HOLDINGS
therefore puts the highest priority on attracting and retaining personnel. We are also pushingahead with initiatives to increase the efficiency of existing pharmacies, which is deliveringsignificant improvements.
Continuous recruitment and high-quality training
Since its founding, the AIN Group has focused on hiring andtraining pharmacists on an ongoing basis.
To ensure our dispensing pharmacies fulfill their primarycare role in communities by working closely with local
medical facilities and providing 24-hour services and homebased dispensing, our pharmacists need to have moreexpertise and experience and better communication skills.
We also need to hire more pharmacists to deliver the higher
level of service provision.
After joining the AIN Group, our pharmacists undergo
an extensive and sustained training program tailored to thecurrent stage in their careers. Our pharmacists also build up
a high level of expertise because they work at AIN Group
dispensing pharmacies that tend to handle a large number ofcomplex prescriptions.
Japan is currently facing a shortage of pharmacists, making it hard for dispensing pharmacies to secure the staff theyneed. This problem is particularly acute for small and medium-sized companies. However, thanks to our track recordin the industry and growing awareness of our high-quality
training system, we have been able to hire enough staff.

Number of New Pharmacist Graduates Hired
Increase in number ofpharmacists hired(persons)
600

8.8

500
400

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

7.0

7.0

8.0

7.5

10

8.0
375

6
4

100
0

93

173

2006/4 2007/4 2008/4 2009/4 2010/4 2011/4 2012/4 2013/4 2014/4 2015/4 2016/4
Pharmacists
General positions
Ratio of newly qualified pharmacists hired by the Company

12 AIN HOLDINGS ANNUAL REPORT 2016

FY2013
Sales of dispensing
pharmacy business¥134,372 million
An initiation ceremony

20Providing accurate dispensing services

FY 2016
Sales of dispensing
pharmacy business¥207,142 million

FY2015
Sales of dispensing
pharmacy business¥165,744 million

FY2014
Sales of dispensing
pharmacy business¥148,375 million(¥ million)

13,54914,00011,627

12,00010,000
8,000

9,162

9,472
611
7,141
(19.9)

6,000

539

591

4,000

8,356
(–)

7,105
(–)

2,000

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

Apr.
2014
Optimized inventory value (left scale)(stores)
1,500

4,898
874

750
8,423
(18.2)

1,000

8,651
(16.3)

Apr.
Apr.
2015
2016
Number of operational pharmacies (right scale)5000Notes:
1. Total inventory value = (AIN
PHARMACIEZ, AIN MEDIO,DAICHIKU, Asahi Chozai + inventoriesof those four companies at WSS) ÷number of operational pharmacies at
those four companies x total numberof operational dispensing pharmacies
2. Optimized inventory value = total
inventory value – estimated inventory
value; estimated inventory value isprojected value of inventories due togrowth in number of pharmacies
3. The number of operational pharmacies
is as of the end of each quarter.
4. Inventory turnover days shown inbrackets.

On-the job training

This success in attracting large numbers of high-quality
pharmacists allows us to contribute to the government’s
policy of community healthcare and helps us to boost profits
by securing more reimbursement points.
To support our aggressive business expansion plans overthe medium and long term, we plan to improve on our sector-leading employee training and education programs andcontinue actively hiring pharmacists.

Improving pharmacy efficiency from the bottom up

229

200

In-house training

Impact of Pharmacy-led Project: Optimizing Inventories

8

7.0
5.7

300

(%)

Under this project, pharmacists at all our dispensing
pharmacies are being asked to find new ways of increasing
efficiency, improving profitability and enhancing service
provision. The project has already yielded a range ofoutcomes, with new ideas first trialed at model dispensing
pharmacies then rolled out nationwide. The biggest
improvement has been in inventory value. As of April 30,
2016, there were 335 more dispensing pharmacies in our
network than in April 2013, before the project started.
Despite this expansion, we estimate inventory value wasroughly ¥4.9 billion lower than it would have been before
the project started, contributing to an increase in cash flow.
The project has clarified issues that need to be addressedand delivered clear results, helping to change thinking
among frontline personnel and boost motivation, leading toa lower level of staff turnover.

As part of efforts to curb national medical expenses, thegovernment is changing the dispensing fee system withevery revision. This is having a major impact on the earningsof dispensing pharmacies. In response, we launched a
new pharmacy-led project in autumn 2012 as one of ourstrategies to reinforce the operations of existing dispensing
pharmacies.

Pre-avoid activities – one of the essential roles of pharmacists
Pre-avoid activities are carried out by pharmacists throughtheir direct involvement in drug-based treatments and aredesigned to avoid or mitigate negative pharmaceutical
impacts, such as side effects and insufficient treatment
effects. AIN HOLDINGS is actively promoting pre-avoid
activities as one of the core roles of dispensing pharmacists.
This approach was validated by the April 2016 drug pricerevisions, which increased the number of reimbursement
points for pre-avoid activities. Also, through a partnershipwith Professor Yasufumi Sawada at the University of Tokyo,
we compile information on roughly 6,000 pre-avoid cases
each year, which is shared within the Group and the
University of Tokyo. Some of those cases are used in “ThePre-avoid Activity Databook” that we publish to improve theskills and understanding of pharmacists inside and outside
the Group.

Pre-avoid cases by category(data for July 2015 to June 2016)

14.6%
2.2%

14.6%
10.1%

2.2%
41.4%

13.0%
18.6%
Drug efficacy / formulation / characteristic
Duplicated drug administration
Contraindications / careful administration/ interactions
Side effect-related
Difficulties with administration
Other

10.1%
13.0%

Drug efficacy / formu
Duplicated drug adm
Pre-avoid Activity Databook Contraindications / ca
/ interactions
Side effect-related
Difficulties with admi
Other

AIN HOLDINGS ANNUAL REPORT 201613

Feature: Positioned to Succeed

Growth Strategy: Drug and Cosmetic Store Business

Differentiation

Our drug and cosmetic store business is focused on the ainz & tulpe brand. In recent years, we havebeen channeling business resources into urban stores, working to establish our brand and improve
profitability by implementing a strategy that sets our stores apart from general drugstores. Our
goal is to create a second earnings stream to complement our dispensing pharmacy business.

Over the last few years, we have withdrawn from suburban
locations due to a narrowing quality gap and falling margins
in that segment. Instead, we have been redirecting businessresources into our chain of ainz & tulpe urban stores, whichtarget female consumers.
Our main target customer segment is fashion-conscious
women in their 20s and 30s, and we are opening stores inprime locations in city centers, retail facilities and stationbuildings to raise brand awareness.
We are also working to create a unique lineup of products. To counter rising competition in the sector due to a narrowing quality gap, drug stores have typically increased theratio of food items in their merchandise lineup to stand out
in the market. However, we made a conscious decision not
to compete with chains that offer OTC drugs, food and daily
necessities, instead choosing to focus on beauty products.
Cosmetics, accessories and other beauty items account for
more than 70% of merchandise at ainz & tulpe stores.
We are aiming to make the business profitable in the fiscal year ending April 30, 2018. In the next fiscal year, ending
April 30, 2017, we plan to open six new stores and grow existing store sales by 2% year on year. We also aim to improve
the gross margin by 2.5 percentage points by introducing
more original brand products.

Drug and cosmetic store business: sales by store type
FY05

FY16

ainz & tulpe SHINJUKU HIGASHIGUCHI

Drug and Cosmetic Store Business: Message from General Manager

Kaori Ishikawa
ainz & tulpe Le trois

Looking further ahead, we are targeting net sales of ¥50
billion and an operating margin of 10% in the fiscal year
ending April 30, 2020. To achieve those goals, we will open
more stores in prime locations to raise brand visibility andsupport aggressive business expansion.

Comparison of ainz & tulpe and general drugstores:
product mix and target
ainz & tulpe

General drugstore

5.4% 3.6%
15.1%
91.5%

39.2%

Urban ainz & tulpe stores

Suburban drugstoresainz & tulpe CHITOSE AIRPORT

27.0%

14.6%

28.5%

76.5%

29.4%

Beauty products
Foods and health foods

Drugs and sanitary products
Daily necessities(General Manager of Drug andCosmetic Store Business)

Ainz & tulpe is aimed at women with a youthful outlook
and a strong curiosity in the latest trends. By targetingthat type of consumer, we aim to expand our fan baseacross an even broader range of customer segments.
We are also making inroads into new customer
segments with our latest formats – the ainz & tulpe
SHINJUKU HIGASHIGUCHI flagship store near the east
exit of Tokyo’s Shinjuku Station and ainz & tulpe Le trois
in Sapporo. Our entire chain of urban ainz & tulpe drug
and cosmetic stores is also currently performing well.
One factor in this success is our decision to let store
staff have more input about how stores are designed
and set up, rather than personnel at head office.
The opening of the ainz & tulpe SHINJUKUHIGASHIGUCHI has led to an increase in building
owners offering us retail space. We plan to take up
those opportunities by first developing stores with
300–700m2 of retail space in locations near or insidestations, then two to three years from now, look forsites with around 1,000m2 of space. By putting moreemphasis on profit margins, we will open stores at sitesthat will generate profits two years after opening.
Over the medium to long term, we plan tostrengthen our lineup of original brands and enhance
the skills of our store staff. We will also constantly
refresh the product range in each original brand. And
given our plans to open larger stores two to three years
from now, we will continue to hire and train around
100 new people each year.
We will continue to aggressively develop the drug
and cosmetic store business. Over the long term,
this will involve establishing new formats and raisingawareness of the ainz & tulpe brand so that it isrecognized as a retail format in its own right. To achieve
those objectives, everyone in the drug and cosmetic
store business will have to push themselves to excel.

Source: Monthly Report on the Current Survey of Commerce (April 2016), Ministryof Economy, Trade and Industry

14 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201615

Feature: Positioned to Succeed

Growth Strategy: Drug and Cosmetic Store Business

New Formats and Original Brands
The drug and cosmetic store business began the full-scale development of new retail formats
and original brands in the fiscal year under review. We are now aggressively developing thebusiness, aiming to establish new formats that are completely different to general drugstores anddepartment stores.

After carefully tweaking merchandise lineups and retail areas,
we achieved rapid growth in sales at the ainz & tulpe HARAJUKU QUEST following its refurbishment in December 2014.
This and other initiatives have supported a dramatic improvement in ainz & tulpe merchandising and brand visibility,
reinforcing our earnings capabilities. We took this approacha step further in the fiscal year under review with the launchof new retail formats: the ainz & tulpe SHINJUKU HIGASHIGUCHI (Shinjuku, Tokyo; retail space: roughly 1,290m2) andthe Le trois beauty retail complex (Sapporo, Hokkaido; retailspace: 1,490m2), both major flagship stores for the ainz &tulpe brand.
We also launched a new original cosmetics brand called
LIPS and HIPS and a new beauty supply brand called cocodecica to coincide with the roll out of the retail formats.
Going forward, we will develop these brands by expanding
merchandise lineups, opening standalone street-level storesand growing sales using online channels. We also intend toincrease our range of original brand products in other categories such as skincare and inner wear, aiming to boost thegross margin and enhance our ability to attract shoppers.
In the fiscal year ended April 30, 2016, we sold 1,900
SKUs (Stock Keeping Units) of our original brands, accounting for 4.1% of sales in the drug and cosmetic store business. We aim to grow sales to 15,500 SKUs and 36% ofsales in the business by the fiscal year ending April 30, 2020.

Drug and cosmetic store business: Medium-term growth plan
(plan)
50,00046.6(¥ million)
50,00040,00050

After initially launching the brand at the ainz & tulpe SHINJUKU HIGASHIGUCHI and then in an internal shop at ainz &tulpe Le trois in Sapporo, we plan to eventually open a network of standalone LIPS and HIPS stores.
LIPS and HIPS is now available in 13 ainz & tulpe stores.
We plan to carefully cultivate LIPS and HIPS as a complete
cosmetics brand, setting up small retail corners in all of ourstores.
cocodecica
We are using this beauty supply brand to make the shopping
experience more fun, giving our customers more choice byconstantly updating the lineup of merchandise.
AYURA
We acquired the AYURA brand from Shiseido Company, Limited in 2015. The brand is still available in department stores,
but we have also started selling it at the ainz & tulpe SHINJUKU HIGASHIGUCHI and the ainz & tulpe Le trois in Sapporo. Over the next fiscal year, we plan to push ahead withrebranding, including possible changes to how the brand issold and the product lineup.
Original products’ sales composition and plan
FY16 results

30,000

FY17 plan

FY20 plan

4.1

40

34.6

30.0

(%)

LIPS and HIPS

12.0%
36.0%

30

20,88420,00020

13,61910,00010

2010/4 2011/4 2012/4 2013/4 2014/4 2015/4 2016/4

0

Numberof stores

49

Net sales

53

56

61

59

56

52

2020/4

1,923 SKUs

3,500 SKUs

15,500 SKUs

085

Gross profit margin (left scale)

16 AIN HOLDINGS ANNUAL REPORT 2016

Urban ainz & tulpe

Suburbandrugsotre

AIN HOLDINGS ANNUAL REPORT 201617

Corporate Governance(As of July 28, 2016)

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

BASIC POLICY FOR CORPORATE GOVERNANCE
Dispensing pharmacies and drug and cosmetic store chains
are the key business areas being developed by AIN HOLDINGS.
Both of these businesses are characterized by a responsibility
towards people’s health, and as such, we recognize theindispensability of continuing with sound and transparent
business activities that prioritize compliance.
We have adopted a corporate auditor system to oversee
not only key management decisions and the business executionof directors, but also general corporate management. In orderto ensure the effective mutual management oversight of
directors, the Board of Directors convenes more than once amonth, while a management meeting is held for directors andthe standing corporate auditor on a weekly basis.
To minimize potential risks, the Internal Audit Officeensures comprehensive compliance with basic pharmacy
regulations, while the Safety Policy Office conducts analysis andimplements measures to prevent drug dispensing errors.
As part of efforts to enhance corporate governance, wehave established a Compliance Committee to promote andembed systems that ensure compliance with business ethics,
laws and regulations. The committee is made up of all the
Company’s directors and auditors and legal advisors.

OUTLINE OF CORPORATE GOVERNANCE
Corporate governance structure

Corporate Auditor System

Chairman of the Board

Kiichi Otani

Number of directors

10 (including 3 outside directors)

Number of corporate auditors

3 (including 2 outside corporate auditors)

Board of Directors meetings in fiscal 2015

Number of meetings: 16 (more than once every month)
Examples of resolutions: Annual budget, issues related to new businesses, store openings

OUTSIDE DIRECTORS AND OUTSIDE CORPORATE
AUDITORSThe Board of Directors is comprised of 10 members, including
three outside directors. Two of the Company’s three corporate
auditors are outside corporate auditors. There are no conflictsof interest between the Company and its outside directors andoutside corporate auditors. The outside directors and outside
corporate auditors have a number of functions and roles tofulfill in the Group’s corporate governance system. Drawing on
their specialist knowledge and experience, they contribute to
the Group’s business strategy, discussions on board resolutions,and internal control mainly by monitoring business execution
and providing input at meetings of the Board of Directors froma neutral, independent and objective standpoint.
The Company has no specific standards in place at the
moment, but the basic policy for appointing outside directors
and outside corporate auditors is to ensure they can effectively
fulfill the above roles. Four outside directors and one outside
corporate auditor have been designated as independent
officers in accordance with the provisions of the Tokyo Stock
Exchange.
Reasons for selection of outside directors

Outside Director attendance at Board of Directors meetings: 81%
Outside Corporate Auditor attendanceat Board of Directors meetings:

100%

Board of Corporate Auditor meetingsin fiscal 2016

Number of meetings: 16
Examples of resolutions: Audit policy, audit plans and business division audits

Management meetings in fiscal 2016

52

Key meetings attended by corporate auditors

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

Independent director appointment

Outside directors Ko Mori, Seiichiro Sato and Yasuyuki Hamada have all been designatedas independent officers in accordance with the provisions of the Tokyo Stock Exchange.

Systems to strengthen and promote Group management

Group management meetings (weekly)

Accounting auditor

ERNST & YOUNG SHINNIHON LLC

Ko Mori

Seiichiro Sato
General Meeting of Shareholders
Appointment

Appointment

Board ofCorporate Auditors

Board of Directors
Outside Directors
Appointment

Appointment

Audit
Appointment

Representative
Directors

Executive Officers

Compliance
Committee

Board ofManaging Directors

Management
Meeting

Store Development Division

Guidance
Group Companies

18 AIN HOLDINGS ANNUAL REPORT 2016

Audit

ReportingBusiness execution

Cooperation

Reporting

ReportingOperating Management
Division

Appointment
Accounting Auditors

Audit
Operational Support
Division
ReportingInternal Audit Office

Yasuyuki Hamada

Ko Mori was appointed as an outside director tobroadly contribute to the Company’s activities
by providing advice to the Board of Directors
and other bodies and by monitoring businessexecution, drawing on his extensive knowledge
and experience as the manager of a major
trading company. Mr. Mori is judged to be ahighly independent and objective appointment,
as he has no affiliation with the parent company,
its subsidiaries, major corporate shareholders or
key customers of the Group.
Seiichiro Sato was appointed as an outside
director to broadly contribute to the Company’s
activities by providing advice to the Board of
Directors and other bodies and by monitoringbusiness execution, drawing on his specialist
knowledge and experience from working
in the legal and planning departments of amajor retailer. Mr. Sato previously worked for
Ito-Yokado Co., Ltd., which has a business
relationship and lease contracts with theCompany. However, he is judged to be a
sufficiently independent appointment, as theinterdependence of Ito-Yokado Co., Ltd. andthe Company is low due to a minimal level ofbusiness between the two companies.
Yasuyuki Hamada was appointed as an outside
director to broadly contribute to the Company’s
activities by providing advice to the Board of
Directors and other bodies and by monitoringbusiness execution. Although Mr. Hamada has
no experience of business management, he isable to draw on his specialist knowledge andexperience as an academic, particularly in thefield of economics and finance.
Since April 2010, Mr. Hamada has been an
emeritus professor at Hokkaido University, which
has received donations from the Company in thepast. However, he is judged to be a sufficiently
independent appointment, as the purpose of the
donations was limited and they were not directly
related to Mr. Hamada’s research activities.

Reasons for selection of outside corporate auditors

Akira Ibayashi

Akira Ibayashi was appointed as an
outside corporate auditor to contribute toimprovements in sound and efficient business
management, drawing on his specialistk n o w l e d g e f ro m w o r k i n g a t f i n a n c i a linstitutions and his experience in business
management.

Osamu Muramatsu was appointed as an
outside corporate auditor to contribute toimprovements in sound and efficient business
management, drawing on his specialist
Osamu Muramatsu
knowledge from working at a major securities
firm, experience in business management
and track record as an outside auditor for theGroup.

REMUNERATION FOR DIRECTORS AND AUDITORSThe maximum total amount of remuneration for directors
was determined by a resolution at the 44th Ordinary General
Meeting of Shareholders held on July 30, 2013 to be ¥300
million annually (does not include payments made to directors
for their duties as employees; the maximum total amount foroutside directors was determined to be ¥50 million annually).
The maximum total amount of remuneration for corporate
auditors was set at ¥30 million annually at the 22nd Ordinary
General Meeting of Shareholders held on July 30, 1991.The
actual amount each year is determined within this limit via
discussions among the corporate auditors.
The amount of remuneration for directors and corporate
auditors for the year ended April 2016 is as follows:
Item

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

Total
remuneration(¥ million)

Remuneration by type(¥ million)
Basic
Bonus
remuneration

Numberof eligible
individuals

202

175

27

10

6

6

–

1

17

17

–

5

STATUS OF ACCOUNTING AUDITS
Three certified public accountants from ERNST & YOUNG
SHINNIHON LLC conducted the accounting audits of AIN
HOLDINGS based on the Companies Act and Financial
Instruments and Exchange Act. Audit fees for the year endedApril 2016 are as follows:(¥ thousand)

The Company
Consolidated
subsidiaries
Total

Compensation paid foraudit certification activities

Compensation paid for *non-audit activities

41,700

3,710

–

–

41,7003,710*The Company pays fees to ERNST & YOUNG SHINNIHON LLC for advisory services
related to compliance with the Act on the Use of Numbers to Identify a Specific
Individual in the Administrative Procedure.

AIN HOLDINGS ANNUAL REPORT 201619

Board of Directors and Corporate Auditors(As of July 29, 2016)*Figures in brackets show the number of AIN HOLDINGS shares held as of April 30, 2016.

BOARD OF DIRECTORSCORPORATE AUDITORS

Kiichi Otani

Shoichi Shudo

Rieko Kimei

Koichi Kawamura

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

Representative Senior Managing Director
In charge of development(10,400 shares)

Director
Head of Personnel Department(6,000 shares)

Corporate Auditor (full-time)(5,000 shares)

April 1978

April 1986
Joined The Daiei, Inc.
December 1995 Joined Daiichi Medical Testing
Laboratories Co., Ltd. (now AINHOLDINGS INC.)
May 2003
General Manager of Drugand Cosmetic Store Business,
Merchandising Business
May 2004
General Manager of Personnel
Department
August 2009 Executive Officer
July 2014
Director (current post)
July 2016
President and Representative Director of
AYURA LABORATORIES INC. (current post)

July 1980

President and Representative Directorof Otani Corporation (now AINHOLDINGS INC.)
November 1981 Director of newly established Daiichi
Medical Testing Laboratories Co., Ltd.
(Asahikawa, now AIN HOLDINGS INC.)
July 1983
President and Representative Directorof Daiichi Medical Testing Laboratories
Co., Ltd.
May 1985
Managing Director of the Company
May 1988
President and Representative Director(current post)
June 2009
Director of Seven Health Care Co., Ltd.
(now Seven Bi no Garden Co., Ltd.)

Joined Sapporo Medical Testing
Laboratories Co., Ltd.
March 1982
Joined Daiichi Medical Testing
Laboratories Co., Ltd. (Asahikawa, now
AIN HOLDINGS INC.)
May 1993
Head of Corporate Planning Division
July 2000
Director
May 2003
Managing Director
May 2004
General Manager of Dispensing
Pharmacy Business
May 2012
Senior Managing Director
November 2015 Senior Managing Director andRepresentative Director (current post)

April 1971
April 2002

Hiromi KatoToshihide Mizushima

Executive Vice President and Representative Director(28,600 shares)

Representative Senior Managing Director
In charge of business operations and business support(27,600 shares)

April 1973
May 1983

Joined Iwasaki Publishing Co., Ltd.
Joined Daiichi Medical Testing
Laboratories Co., Ltd. (Asahikawa, now
AIN HOLDINGS INC.)
April 1989
General Manager of Administrative
Department
July 1992
Director
May 1995
General Manager of Personnel
Department
July 1996
Managing Director
September 1996 General Manager of Management
Department
May 2003
Senior Managing Director
May 2012
Executive Vice President andRepresentative Director(current post)

Joined SSP Co., Ltd.
Joined Otani Corporation (now AINHOLDINGS INC.)
July 2000
Director
February 2001 General Manager of Drug andCosmetic Store Business
May 2003
Managing Director
June 2009
President and Representative Directorof Seven Health Care Co., Ltd. (nowSeven Bi no Garden Co., Ltd.)May 2012
Senior Managing Director of theCompany, Director of Seven Bi no
Garden Co., Ltd. (current post)
November 2015 Senior Managing Director andRepresentative Director of theCompany (current post)

Masahito Sakurai

Miya Oishi

Representative Senior Managing Director(1,000 shares)

Managing Director
Senior General Manager, Operations Department(1,000 shares)

April 1972

Joined Ministry of Health and Welfare(now Ministry of Health, Labour andWelfare)April 1987
Head of Administration Section, Fundfor Drug ADR Relief
July 1996
Head of Air Protection Section, Japan
Environment Agency
July 1998
Head of Regional Medical Affairs Office
for Tokai Hokuriku
January 2001 Retired from Ministry of Health andWelfareFebruary 2001 Commissioner of All-Japan Federationof National Health Insurance
Organizations
October 2008 Joined the Company
July 2009
Senior Managing Director
November 2015 Senior Managing Director andRepresentative Director(current post)

20 AIN HOLDINGS ANNUAL REPORT 2016

April 1982
April 1986

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

April 2004
June 2006
June 2007
July 2012

July 1997
May 2003
July 2012

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

Akira Ibayashi

Ko Mori
Director Outside(- shares)

October 1985

Independent

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

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

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

Seiichiro Sato

Osamu Muramatsu

Director Outside(- shares)

Corporate Auditor Outside(- shares)

Independent

April 1982

Joined the Finance Ministry (now the
Ministry of Finance)
October 1998 Joined Price Waterhouse & Co. (nowPricewaterhouseCoopers LLC)
September 2001 Joined Yamato Mutual Life Insurance
Co. (now The Prudential Gibraltar
Financial Life Insurance Co., Ltd.)
September 2003 Joined Ito-Yokado Co., Ltd.
December 2008 Joined Seven & i Holdings Co., Ltd.
July 2015
Outside Director of the Company(current post)

April 1972
June 1994
June 1996
October 2007
August 2011
June 2012

Independent

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

Yasuyuki Hamada
Director Outside(2,000 shares)

Independent

April 1991

Professor of Faculty of Economics,
Hokkaido University
April 1997
Special Assistant for the president ofsame university
April 2003
Professor of Advanced Scientific
Research Center, Hokkaido University(concurrent post)
April 2010
President of Sapporo International
University
Emeritus Professor of Hokkaido
University
April 2014
President and Charman of Dohto
University
December 2014 President of Hamanasu Foundation(current post)
July 2015
Outside Director of the Company(current post)

AIN HOLDINGS ANNUAL REPORT 201621

Financial Section

Management’s Discussion and Analysis of Financial Condition
and Results of Operations
BUSINESS ENVIRONMENT SURROUNDING
THE AIN HOLDINGS GROUP
The core business of the AIN HOLDINGS Group (the Group)is the dispensing pharmacy business that includes preparing
and dispensing drugs based on prescriptions. Drug prices anddispensing fees* are stipulated by the Ministry of Health, Labourand Welfare.
The Japanese government is progressively revising drug prices
and dispensing fees as part of its policy to curb national medical
expenses. Earnings at dispensing pharmacies are the total ofdispensing fees and sales of drugs, so earnings are affected bythese revisions.
Under drug price revisions in April 2016, the average drug
price was reduced by 5.57%. Including special reductions forhigh-cost drugs, the average drug price was cut by 7.77%. Also,
under dispensing fee revisions, the role of pharmacies located near
hospitals was reevaluated, but in order to realize patient-focused
non-hospital dispensing services, pharmacists and dispensing
pharmacies are now being required to play a primary care role inhealthcare provision.
The gap in performance is widening between companies in
the industry, which are struggling with changes to their profit
structures resulting from revisions to dispensing fees. However,the Group regards these changes in the operating environment asa perfect opportunity to push ahead with its strategy of further
increasing profitability.

As of the end of the fiscal year, the number of stores in theGroup totaled 933, a net increase of 123 stores from the end of
the previous fiscal year.

BUSINESS RESULTS BY SEGMENT* Dispensing fees comprise pharmaceutical management fees and technical feesfor pharmacists.

Dispensing Pharmacy BusinessIn the dispensing pharmacy business, sales continued to rise
at existing dispensing pharmacies, supported by an increase inaverage sales per prescription due to growth in prescriptions for
new medicines.
To ensure our pharmacists and dispensing pharmacies fulfill
their role at the heart of local communities, the Group continues tobuild links with local healthcare service providers, mainly in the areaof home-based dispensing, step up the integration and continuous
management of drug information using patient medication
notebooks and other means, and promote wider use of genericdrugs.
The shortage of pharmacists in the healthcare sector is
becoming more serious. To address this issue, the Group is working
to attract new graduates, with 375 new pharmacist graduates
joining the Group in April 2016. The Group is also upgrading
pharmacist training programs to enhance their capabilities so thatthey can fill their role as primary care pharmacists.
In business development, the Group continued to push ahead
with business expansion by opening new dispensing pharmacies
and using M&A, including the acquisition of NP HOLDINGS Co.,
Ltd. (Takamatsu-shi, Kagawa Prefecture) in November 2015. NP
HOLDINGS is the largest dispensing pharmacy chain in the Shikoku
region and is now a subsidiary of the Group.
During the fiscal year under review, the Group opened 142
dispensing pharmacies, including M&A deals, and closed 15
dispensing pharmacies, resulting in a total of 881.

BUSINESS OVERVIEW FOR THE FISCAL YEARUNDER REVIEW
During the fiscal year ended April 30, 2016, corporate earnings
in Japan improved amid largely steady production activity andconsumer spending. However, the impact of the Kumamoto
Earthquake in 2016 is a potential risk for the economy going
forward.
In this economic environment, the Group worked to expand its
business and increase earnings. Specifically, the Group opened new
dispensing pharmacies and used M&A to expand the business. It
also developed its urban drug and cosmetic store business.
In addition, effective from November 1, 2015, the Group
moved to a holding company structure. By separating the Group’s
management and business execution functions, the Group aims
to enhance corporate governance, clarify the authority andresponsibility of each business segment and promote greater
management autonomy, creating the foundations for further
business expansion.
For the fiscal year under review, net sales rose 25.0% year on
year to ¥234,843 million and operating income increased 27.7%
to ¥14,619 million.
Profit attributable to owners of parent increased 27.8% to¥7,917 million, a record high.

The dispensing pharmacy business reported sales and profit
growth with sales rising 24.8% year on year to ¥211,009 million,
and segment income increasing 33.0% to ¥19,219 million.
Drug and Cosmetic Store BusinessIn the drug and cosmetic store business, the market environment
remained challenging due to a narrowing competitive gap between
companies in the sector and the emergence of new competitorsfrom sector consolidation and realignment that also extends toother business sectors.
Against this backdrop, the Group continued to open ainz &tulpe urban drug and cosmetic stores, strengthened merchandise
lineups, particularly drug and cosmetics products, and worked tocapture inbound demand. As a result, sales at existing drug andcosmetic stores increased year on year.
In addition, the Group is working to strengthen the ainz & tulpe
format with the launch of two proprietary merchandise brands,
LIPS and HIPS and cocodecica.
The Le trios retail facility (Chuo Ward, Sapporo), which was
opened in September 2015, is steadily gaining ground as alandmark beauty destination, supported by efforts to promote
it as a mixed-use integrated beauty complex in Sapporo’s Odori
area.
In addition, in February 2016, the Group opened ainz & tulpe
NEW CHITOSE AIRPORT (Chitose-shi, Hokkaido) in the airport’s
international passenger terminal, in order to further strengthen
efforts to capture inbound demand.
During the fiscal year under review, the Group opened anumber of ainz & tulpe stores, including ainz & tulpe MARUI CITY
YOKOHAMA (Nishi Ward, Yokohama), ainz & tulpe SHINJUKUHIGASHIGUCHI (Shinjuku Ward, Tokyo), ainz & tulpe Le trois (Chuo
Ward, Sapporo), ainz & tulpe NEW CHITOSE AIRPORT (Chitose-shi,
Hokkaido), and ainz & tulpe OMIYA MARUI (Omiya Ward, Saitama).
At the same time, the Group closed nine stores, mainly in suburban

11-YEAR FINANCIAL SUMMARY
For the year:
Net sales
Selling, general and administrative expenses
Operating income
Profit attributable to owners of parent
Capital expenditures*1
Depreciation and amortization *1
At the end of the year:
Equity capital*2
Total net assets
Total assets
Number of shares outstanding (shares)
Number of employees (persons)
Number of stores: Dispensing pharmacy business
Number of stores: Drug and cosmetic store business
Per share information (¥):
Net income*3
Net assets*3
Cash dividends*3
Stock information (based on the closing price as of April 30) (¥):
Stock price
Ratios (%):
Operating margin
Return on sales *4
Return on assets (ROA) *5
Return on equity (ROE) *6
Shareholders’ equity ratio

22 AIN HOLDINGS ANNUAL REPORT 2016(¥ million)

2005/4

2006/4

2007/4

2008/4

2009/4

2010/4

2011/4

2012/42013/4

2014/4

2015/4

2016/457,091
5,230
2,875
930
1,536
458

76,303
7,145
3,083
1,215
2,087
648

81,307
7,970
2,888
1,010
1,620
773

106,231
9,203
4,444
1,615
1,914
968

115,387
9,948
5,296
2,127
2,891
1,119

125,495
10,744
6,492
3,131
2,573
1,286

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
11,209
3,259

9,095
9,095
38,887
11,210,350
1,446
193
44

10,352
10,352
41,66911,304,000
1,684
218
43

10,71011,326
49,84911,320,000
1,947
247
43

12,04012,70757,546
11,361,000
2,582
356
45

16,071
16,10962,032
12,831,376
2,741
375
46

21,445
21,49265,898
14,101,164
2,918
397
49

29,45029,49876,94015,941,004
3,104
448
53

33,69533,74585,90815,940,790
3,326
494
56

38,31238,356
95,83915,940,740
3,551
560
61

42,122
42,240101,382
15,854,190
3,806
616
59

47,92848,046
114,149
31,707,617
4,429
754
56

53,25853,324
139,888
31,707,617
5,511
881
52

39.96
403.847.5

52.26
456.219.0

44.67
473.089.0

71.18
529.8910.0

85.37
626.2715.0

114.04760.4020.0

127.83923.7322.5

153.67
1,056.89
25.0

159.181,201.71
30.0

165.04
1,328.43
30.0

195.45
1,511.57
30.0

249.691,679.69
40.0

2,050

2,370

1,500

1,490

1,481

2,920

3,115

4,290

4,765

4,495

4,245

5,340

5.0
1.6
2.9
10.9
23.4

4.0
1.6
3.0
12.5
24.8

3.6
1.2
2.2
9.6
21.5

4.2
1.5
3.0
14.2
20.9

4.6
1.8
3.6
15.1
25.9

5.2
2.5
4.9
16.7
32.5

6.3
3.0
5.5
15.4
38.3

7.2
3.4
6.0
15.5
39.2

6.3
3.3
5.6
14.1
40.0

5.9
3.1
5.3
13.1
41.5

6.1
3.3
5.8
13.8
42.0

6.2
3.4
6.2
15.6
38.1

Note:
Amounts of less than one million yen wererounded down.
*1: The amounts of capital expenditures anddepreciation and amortization prior to thefiscal year ended April 30, 2007 are on a
non-consolidated basis.
*2: Equity capital =Total net assets – Non-controlling interests*3: The Company conducted a 2-for-1 stock
split of common shares with an effective
date of October 1, 2014. Net income
per share, net assets per share and cash
dividends per share have been adjusted
retroactively to reflect the impactof the stock split.
*4: Return on sales =Profit attributable to owners of parent /Net sales × 100*5: Return on assets =Profit attributable to owners of parent /Total assets(yearly average) × 100*6: Return on equity =Profit attributable to owners of parent /Equity capital(yearly average) × 100

AIN HOLDINGS ANNUAL REPORT 201623

Financial Section

locations, resulting in a total of 52 stores.
The drug and cosmetic store business reported an increase insales of 17.3% year on year to ¥20,884 million. However, segment
loss was ¥459 million, compared with segment income of ¥117
million a year earlier.
Other Businesses
Net sales from other businesses rose 184.2% year on year to¥2,949 million but segment loss was ¥1,142 million compared withthe loss of ¥614 million a year earlier.

FINANCIAL POSITION
The balance of total assets at the end of the fiscal year underreview increased by ¥25,738 million to ¥139,888 million.
This mainly reflected increases in cash on hand and in banks
and increases in property, notes and accounts receivable – trade,inventories, plant and equipment such as land, buildings andstructures, and goodwill due to the Group’s business expansion
through new store openings and M&A.
Consolidated current assets at the end of the fiscal year underreview increased by ¥10,227 million to ¥56,593 million comparedto ¥46,365 million at the end of the previous fiscal year. This
mainly reflected cash on hand and in banks of ¥22,647 million, an
increase of ¥3,093 million compared with the previous fiscal year,
notes and accounts receivable of ¥12,385 million, an increase of¥4,016 million due to business expansion.
Fixed assets at the end of the fiscal year under review increasedby ¥15,510 million to ¥83,294 million compared to ¥67,783
million at the end of the previous fiscal year. This was mainly due
to an increase in fixed assets related to investment in new storesand expansion in the asset base at consolidated subsidiaries that
became part of the Group through M&A deals. Property, plant andequipment, mainly buildings and structures, increased by ¥5,680
million to ¥28,153 million, while goodwill rose ¥6,997 million to¥33,337 million.
Liabilities increased by ¥20,460 million to ¥86,563 million,
compared with ¥66,103 million at the end of the previous fiscal
year. This primarily reflected accounts payable of ¥39,987 million,up ¥8,161 million year on year, and long-term debt of ¥14,854
million, up ¥7,214 million year on year due to debt procurement tofund M&A deals.
The balance of current liabilities increased by ¥12,311 million
from the previous year-end balance of ¥54,433 million to ¥66,744
million, and the balance of long-term liabilities increased by ¥8,148
million from the previous year-end balance of ¥11,669 million to¥19,818 million.
Net assets increased by ¥5,278 million to ¥53,324 million
compared to ¥48,046 million at the end of the previous fiscal year.
As a result of the above factors, the shareholders’ equity ratio
decreased 3.9 percentage points to 38.1%, compared with 42.0%
at the end of the previous fiscal year. ROA improved 0.4 percentage
points to 6.2%, while ROE rose 1.8 percentage points to 15.6%.

BASIC POLICIES FOR PROFIT DISTRIBUTION
The Company considers the return of profits to shareholders as
an important management issue. Our basic policy is to repay ourinvestors proportionate to the profit we make, and to maintainthese payments at stable levels.

24 AIN HOLDINGS ANNUAL REPORT 2016

Internal reserves are held to strengthen the corporate structure
and in preparation for new store openings and future developmentof the business. We will make effective use of these funds togenerate profits to be returned to shareholders in the future.
The Company’s basic policy is to pay dividends from retained
earnings once per year at the end of the fiscal year.
For the fiscal year under review, the Company paid a dividend
from retained earnings of ¥40 per share, compared with theprevious fiscal year’s ordinary dividend of ¥30.
In view of our profit forecasts, plans for investment and otherfactors, we intend to pay an ordinary dividend from retained
earnings of ¥50 per share in the fiscal year ending April 30, 2017,an increase of ¥10 from the fiscal year ended April 30, 2016.

CASH FLOWSIn the fiscal year under review, cash and cash equivalents (“cash”)
increased ¥2,503 million (12.9%) year on year to ¥21,892 million.
This reflected operating cash flow generated by dispensing
pharmacy and drug and cosmetic store businesses, which was
mainly used to actively invest in new store openings and M&A.
Some cash was also retained to provide constant access to a certain
level of funds.
Cash flows from each category and their relevant factors are as
follows:
Cash Flows from Operating Activities
Net cash provided by operating activities was ¥21,352 million, an
increase of 43.9% year on year.
The main items that were positive for cash flow were income
before income taxes of ¥13,949 million, as well as depreciation
and amortization of ¥3,259 million, amortization of goodwill of¥2,938 million, and an increase in accounts payable of ¥3,031
million related to business expansion through new store openings
and M&A. The main items that were negative for cash flow wasincome taxes paid of ¥4,579 million.
Cash Flows from Investing Activities
Net cash used in investing activities totaled ¥20,877 million, an
increase of 43.4% year on year.
This mainly reflected payments of ¥7,407 million for purchasesof property, plant and equipment related to the opening of new
urban drug stores, retail facilities and dispensing pharmacies, and¥10,954 million for purchases of shares in subsidiaries due tochanges in the scope of consolidation related to shares acquired in
28 companies through M&A deals.
Cash Flows from Financing Activities
Net cash provided by financing activities rose 441.2% year on yearto ¥2,028 million.
This was mainly attributable to net short-term debt repaymentof ¥2,085 million and net long-term debt procurement of ¥7,367
million. Cash dividends paid of ¥951 million also had a negative
impact on cash flows from financing activities.

BUSINESS AND OTHER RISKS
The following factors may affect the Group’s operating results,
stock price and financial position. Statements in the text referringto the future reflect the judgment of the Group at the end of the
fiscal year under review.

1. Laws and regulations
a. Regulations under the Law for Ensuring the Quality,
Efficacy, and Safety of Pharmaceuticals and Medical Devices
We operate dispensing pharmacy business under various permits,
licenses, registrations and notifications including those set
forth by the Law for Ensuring the Quality, Efficacy, and Safetyof Pharmaceuticals and Medical Devices (the Pharmaceuticaland Medical Device Law), the Health Insurance Law, and thePharmacists Law, under the supervision of the Ministry of Health,Labour and Welfare, and of prefectural health and welfare
departments.
The drugstore business in our drug and cosmetic store businessalso involves drug sales, which are similarly regulated under the
Pharmaceutical and Medical Device Law.
b. Easing of drug sales regulations
In sales of over-the-counter (OTC) drugs, the Pharmaceuticaland Medical Device Law classifies drugs into different categories
based on risk. Only qualified pharmacists are permitted to selldrugs requiring guidance and category 1 drugs, while registeredsellers, as well as pharmacists, are permitted to sell category 2 andcategory 3 drugs.
In addition, the “Law for Partial Revision of the Pharmaceutical
Affairs Law” (enacted June 12, 2014) ended restrictions on thesale of OTC drugs online. Factors such as the entry into the market
of firms from other industries as a result of a continuing trend
in the future to deregulate drug sales may affect the Group’s
performance.
2. Details of business
The Group’s dispensing pharmacy business operates a chain of
dispensing pharmacies.
As the dispensing pharmacy business accounted for 89.9% of
net sales in the fiscal year under review, we plan to continue themulti-store operation mainly based on dispensing pharmacies.
Accordingly, the Group’s operating results may be affected by the
success or failure of the store opening policies and by trends instore openings by competitors in the same industry.
Furthermore, sales of dispensing pharmacies significantly dependon 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.
3. Industry trends
The revenues in our dispensing pharmacy business come frompharmacy operations involving the dispensing and supplying ofdrugs based on prescriptions. The drug prices and dispensing fees
are set by the Ministry of Health, Labour and Welfare. As a way
to contract medical expenses, both medical treatment fees anddrug 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 theGroup’s performance and financial position.
4. Securing qualified staff
Dispensing pharmacies and drugstores (Stores for Category 1
Drugs) are required by the Pharmaceutical and Medical Device
Law to have a pharmacist on site; the Pharmacists Law stipulates
that the dispensing of drugs must be handled by 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 andsupply prescription drugs that affect the human body. This businesscarries the risk that medical accidents might be caused throughdispensing errors.
The Group recognizes that any medical accidents could have aseverely damaging effect on society’s confidence in the Group, andwe place the highest priority on measures to avoid the risk from all
aspects.
b. Protection of personal data
We possess patient data in the dispensing pharmacy business,
including medical histories and prescription information, and we
possess personal data in the drug and cosmetic store businessobtained from the Ainz Point Club Card and Tulpe Mobile Club.
The Group takes all possible steps to protect personal data
through personal information protection systems and the rigorous
enforcement of rules on the handling of such information. Also,
key subsidiary AIN PHARMACIEZ INC. has acquired Privacy Markaccreditation in the healthcare, medical and social service fields.
However, we believe it is possible that any accidental or
illegal leakage of personal data may not only affect the Group’s
performance but also lead to a loss of society’s confidence in theGroup.
6. Risk in business strategy
The Group has promoted the expansion of the business scaleof dispensing pharmacies through actively promoting new store
openings and M&A.
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 levelthat exceeds the amortization of goodwill to be incurred. If matters
do not go as planned, however, we may incur losses on valuationof shares in subsidiaries and impairment losses on goodwill, which
may have an adverse impact on the Group’s operating results andfinancial 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 by borrowings from financial institutions.
In order to ensure flexible access to funds to support these
activities, the Group maintains a certain level of liquidity on its
balance sheet. As of the end of the fiscal year under review, cashon hand and in banks totaled ¥22,647 million, compared with a
total balance of short- and long-term debt of ¥20,544 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 return on its M&A investment, or due to interest rate
fluctuations associated with conditions in financial markets, theGroup’s financial position and operating results including interest
payable may be affected.

AIN HOLDINGS ANNUAL REPORT 201625

AIN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETAS OF APRIL 30, 2016

ASSETS

Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1(1))
2016

LIABILITIES AND NET ASSETS

208,920
114,252
55,193
101,328
10,5995,894
25,885(27)
522,075

Current liabilities:
Accounts payable (Note 4)
Short-term debt (Notes 4 and 7)
Accrued income taxes
Deposits received
Allowance for bonuses to employees
Allowance for bonuses to directors
Reserve for reward obligations
Provision for sales returns
Other current liabilities
Total current liabilities

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

135,553
87,9797,500
28,671
259,714Long-term liabilities:
Long-term debt (Notes 4 and 7)
Lease obligations
Net defined benefit liability (Note 9)
Other long-term liabilities
Total long-term liabilities

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

24,69518,8001,605
16,614
92,370307,536
20,73837,693(11,411)508,680$ 1,290,479

Current assets:
Cash on hand and in banks (Notes 2 and 4)
Notes and accounts receivable (Note 4)
Other accounts receivable
Inventories (Note 3)
Deferred tax assets (Note 10)
Short-term loans
Other current assets
Allowance for doubtful accounts
Total current assets¥ 22,647
12,385
5,983
10,984
1,149
639
2,806
(3)
56,593¥ 19,553
8,369
5,291
9,909
894
739
1,765
(157)
46,365

Property, plant and equipment (Note 6):
Buildings and structures, net
LandConstruction in progress
Other property, plant and equipment, net
Total property, plant and equipment

14,694
9,537
813
3,108
28,153

Investments and other assets:
Investments in securities (Notes 4 and 5)
Deferred tax assets (Note 10)
Net defined benefit asset (Note 9)Long-term loans
Deposits and guarantees
Goodwill
Other intangible fixed assets
Other investments and other assets
Allowance for doubtful accounts
Total investments and other assets
Total assets

2,677
2,038
174
1,801
10,01333,337
2,248
4,086(1,237)55,141¥ 139,888$

Net Assets: (Note 11)
Shareholders’ equity
Common stock (Note 14)
Authorized - 44,000,000 shares in 2016 and 2015
Issued - 31,888,212 shares in 2016 and 2015
Capital surplus
Retained earnings
Treasury stock (180,595 shares in 2016 and 2015)
Total shareholders’ equity
Accumulated other comprehensive income:Unrealized holding (losses) gains on securities
Remeasurments of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1(1))
2016¥ 39,987
5,690
4,448
10,112
1,633
13
390
15
4,452
66,744¥ 31,826
6,330
2,320
9,052
1,353
11
338
3,199
54,433$368,883
52,49041,03393,284
15,064
119
3,597
138
41,070615,719

14,854
1,198
2,228
1,537
19,818

7,640
1,341
1,636
1,052
11,669137,029
11,051
20,553
14,178
182,822

8,682

8,682

80,092

6,367
38,605(419)
53,237

7,872
31,639(419)
47,77658,736356,134(3,865)491,116

(63)
84
21
65
53,324¥ 139,888

227
(75)
151
118
48,046¥ 114,149

(581)
774
193
599
491,918$ 1,290,479

See accompanying notes.

26 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201627

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSYEAR ENDED APRIL 30, 2016

YEAR ENDED APRIL 30, 2016

Thousands ofshares

Net sales (Note 15)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (Note 15)
Other income (expense):
Interest and dividend income
Gains on investments in partnership
Commissions received
Real estate rental revenue
Consignment income
Technical advisory fee
Co-sponsor fee
Penalty income
Gain on bargain purchase
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
Directors’ retirement benefits
Other, net¥

Profit before income taxes
Income taxes (Note 10):
Current
DeferredProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent¥

Millions of yen
2016
2015
234,843¥ 187,904
196,308
158,943
38,53528,961
23,91517,50914,61911,452Thousands of
U.S. dollars(Note 1(1))
2016$ 2,166,448
1,810,959
355,488
220,618
134,861

94
143
72
186
189
63
157
68
58
(96)
(78)
(87)
(282)
(409)
(856)
(8)
116
(669)
13,949

99
108
50
159
157
54
(84)
(81)
(88)
(282)
(345)
(371)
(106)
111
(619)
10,832

867
1,319
664
1,715
1,743
581
1,448
627
535
(885)
(719)
(802)
(2,601)(3,773)(7,896)(73)
1,070(6,171)
128,680

6,698
(710)
5,987
7,961
44
7,917

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

61,789(6,549)55,23073,440405
73,035¥$

Balance at April 30, 2014
Cumulative effect of changes in accounting policies
Effect of 2-for-1 stock split of common shares
Balance at May 1, 2014
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, 2015
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Purchase of shares of consolidated subsidiaries
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2016

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

Shareholders' equity

Number ofshares ofcommon stock-

Capital surplus

8,682

7,872

8,682

-

Common stock

8,682

¥

8,682

-

7,872

-

7,872

¥

Retainedearnings

26,007386-

26,393-(1,505)(1,505)
6,367

Treasury stock

-

6,197

(951)
5,245
31,639
7,917

¥

(951)
6,965
38,605

¥

(417)
(417)
(1)
(1)
(419)
(419)

42,146386
42,532

Balance at April 30, 2015
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Purchase of shares of consolidated subsidiaries
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2016$

80,092$80,092-$$

72,619(13,883)(13,883)
58,736$$

291,872
73,035(8,773)64,252356,134

192
192
227

7,917

(951)
(1,505)
5,460
53,237

¥

-

(290)
(290)
(63)

¥

Remeasurmentsof defined
benefit plans

Total
accumulated
othercomprehensive
income (loss)

(58)
(58)
(16)
(16)
(75)
160
160
84

(23)
(23)
175
175
151
(130)
(130)
21

¥

¥

Non-controllinginterests

117
117

¥

¥

0
0
118

Total net assets

42,240386-

42,626

-

(52)
(52)
65

-

6,197

¥

(951)
(1)
176
5,419
48,046¥(951)(1,505)(182)
5,278
53,324

7,917

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

Accumulated other comprehensive income (loss)

Retainedearnings

Capital surplus

34

(951)
(1)
5,243
47,776

Shareholders' equity

Common stock

34
-

6,197

¥

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

Total
shareholders’equity$$(3,865)(3,865)

Unrealized
holding gains(losses) on
securities

Total
shareholders’equityTreasury stock$$

440,738
73,035(8,773)(13,883)
50,369491,116

$

$

2,094

(2,675)(2,675)
(581)

Total
accumulated
othercomprehensive
income (loss)

Remeasurmentsof defined
benefit plans

$

$

(691)
1,476
1,476
774

$

$

1,392

(1,199)(1,199)193

Non-controllinginterests

$

$

1,088

(479)
(479)
599

Total net assets$$

443,22873,035(8,773)(13,883)(1,678)48,690491,918

See accompanying notes.

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED APRIL 30, 2016

ProfitOther comprehensive income:Unrealized holding (losses) gains on securities
Remeasurements of defined benefit plans, net of tax
Total other comprehensive (loss) income
Total comprehensive income
Comprehensive income attributable toowners of parent
Comprehensive income attributable tonon-controlling interests

Millions of yen
2016
¥
7,961

Millions of yen
2015
¥
6,260

Thousands of
U.S. dollars(Note 1(1))
2016$
73,440

(290)
160
(130)
7,831

192
(16)
175
6,436

(2,675)
1,476(1,199)72,241

7,786

6,372

71,826

44

63

405

See accompanying notes.
28 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 2016

29

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

YEAR ENDED APRIL 30, 2016

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Impairment losses on fixed assets
Amortization of goodwill
Increase in allowance for doubtful accounts
Increase in reserve for reward obligations
Increase in net defined benefit liability
Increase in allowance for bonuses to employees
Interest and dividend income
Interest expenses
Gains on investments in partnerships
Gains on donations of property, plant and equipment
Gain on bargain purchase
Losses on disposal and sales of fixed assets
Decrease in accounts receivable
Decrease in inventories
Increase in other assets(Increase) decrease in other accounts receivable
Increase in accounts payable
Increase (decrease) in other liabilities
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investments in securities
Proceeds from sales of investments in securities
Purchases of subsidiaries' shares resulting in obtaining controls
Payments for loans receivable
Proceeds from collections of loans receivable
Payments for purchase of intangible fixed assets
Increase in other investments
Proceeds from withdrawal of time deposits
Other, net
Net cash used in investing activities
Cash flows from financing activities:
Net repayments from short-term debts
Proceeds from long-term debts
Repayments of long-term debts
Repayments of lease obligations
Payments for purchase of treasury stock
Payments from changes in ownership interests in subsidiaries
that do not result in change in scope of consolidation
Cash dividends paid
Net cash provided by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of the year (Note 2)
See accompanying notes.

YEARS ENDED APRIL 30, 2016 AND 2015

Millions of yen
2016
2015

Thousands of
U.S. dollars(Note 1(1))
2016¥ 13,949
3,259
856
2,938
565
48
164
104
(94)
96
(143)
(24)
(58)
384
236
495
(194)
(600)
3,031
917
25,93293(94)(4,579)21,352¥ 10,832
2,553
371
2,278
419
6
114
130
(99)
84
(108)
(12)
324
455
969
(214)
414
1,544
(117)
19,948100(82)(5,126)
14,839$ 128,680
30,064
7,896
27,103
5,212
442
1,512
959
(867)
885
(1,319)
(221)
(535)
3,542
2,177
4,566
(1,789)(5,535)27,961
8,459
239,225857(867)(42,241)
196,974(7,407)
709
(10)
260
(10,954)(960)
74(2,509)
(298)
223
(2)
(20,877)(2,848)
98
(145)
559
(10,024)(2,233)
2,655(926)(1,862)260(92)(14,560)(68,330)
6,540
(92)
2,398
(101,051)(8,856)682(23,145)(2,749)2,057(18)(192,592)(2,085)
12,987(5,619)(710)(1,591)(1,593)8,650(5,082)
(646)
(1)
-

(19,234)
119,806(51,835)(6,549)(14,677)

(951)
2,028

(951)
374

(8,773)18,7082,503
19,389¥ 21,892

653
18,735¥ 19,389

23,090178,865$ 201,955

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, 2016, which was ¥108.4 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 61 and 37
subsidiaries as of April 30, 2016 and 2015, 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 PHARMACIEZ INC. and MEDIWEL Corp. close its accounts on April
30. The account closing date for eight consolidated subsidiaries in the dispensing pharmacy businessis the end of February. The account closing dates for three consolidated subsidiaries in the dispensing
pharmacy business are the end of June, September and October, respectively. The account closing
date of other consolidated subsidiaries is the end of March 31. Financial statements as of theserespective closing dates are used in preparing the consolidated financial statements. However,necessary adjustments are made to important transactions 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(hereafter, "held-to-maturity debt securities"), (c) other securities that are not classified in any of theabove categories (hereafter, "available-for-sale securities").

30 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201631

Trading securities are carried at fair value and held-to-maturity debt securities are carried at amortizedcost. Marketable securities classified as available-for-sale securities are carried at fair value withchanges in unrealized holding gains or losses, net of the applicable income taxes, included directly in
net assets. Non-marketable securities classified as available-for-sale securities are carried at cost.
Cost of securities sold is determined by the moving average method.
(5) Inventories
Dispensed drugs were stated at lower of cost or market, cost being determined using the gross averagemethod. Merchandise was stated at lower of cost or market, cost being determined using the retailmethod. Supplies were stated at cost determined using the last purchase method.
(6) Depreciation and amortization
Depreciation of property, plant and equipment other than leased assets is computed by the
declining-balance method at rates based on the useful lives, except that the straight-line method isapplied to buildings acquired on or after April 1, 1998 and to facilities and structures acquired on orafter April 1, 2016. The useful lives of major property, plant and equipment are summarized as follows:
Buildings and structures: 10 to 50 years
The straight-line method is applied over a three-year period for assets with an acquisition price of¥100,000 or more and less than ¥200,000.
Amortization of software 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).
Leased assets capitalized under finance leases are depreciated over the lease terms of the respective
assets with no residual value. Finance lease transactions that do not transfer ownership thatcommenced prior to April 1, 2008, are accounted for under methods pertaining to standard leasetransactions.
(7) Impairment of fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. When amounts of undiscounted future cash flows of fixed
assets are less than the carrying amounts, the fixed assets are determined to be impaired. Then, anamount by which the carrying amount exceeds the recoverable amount is recognized as an impairment
loss.
The Company and its consolidated subsidiaries identify group of assets by store as the smallest
identifiable group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows from other assets or groups of assets. With respect to non-performing
assets, real estate is regarded as an independent asset group.
The recoverable amount of the asset group is measured by the respective net selling prices. The land
is assessed based on the appraisal value by an independent real estate appraiser. The fair value of
construction in progress and store facilities is the disposal value from which costs of disposal are
deducted.
(8) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide an allowance for doubtful accounts forprobable collection losses by applying the actual rate of bad debt losses experienced in a pastreference period for normal receivables and by individual assessment of collectability for doubtfulreceivables.
(9) Bonuses to employees
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.

32 AIN HOLDINGS ANNUAL REPORT 2016(10) Bonuses to directors
Allowance for bonus to directors is provided for payments to directors of the Company and its
consolidated subsidiaries at the amount expected to be paid in respect of the calculation period ended
on the balance sheet date.
(11) Reserve for reward obligations
In terms of the estimated redeemable amount of the purchase points given in the parent company’s
Drug and Cosmetic Store Business, the Company sets a reserve based on actual redemptions in thepast.
(12) Provision for sales returns
As a provision for losses associated with sales returns, the Company and its consolidated subsidiaries
record an estimated loss amount considering past return rates and distribution in the market.
(13) Retirement benefits
Retirement benefits covering all employees are provided through two plans: a lump-sum benefit plan
and a defined-benefit pension plan. Upon retirement or termination of employment, employees are
generally entitled to lump-sum or annuity payments based on their current rate of pay, length of service
and cause of termination.
The Company and some of its consolidated subsidiaries employ the simplified method when computing
retirement benefit obligations.
In calculating the retirement benefit obligation, the benefit formula basis is used to attribute theexpected benefit attributable to the respective fiscal year. Unrecognized prior service cost is amortizedon a straight-line basis over a period (six years) within the employees’ average remaining service
period at incurrence. Unrecognized actuarial gains and losses are recognized in expenses using thedeclining-balance method over a period (six years) within the average of the estimated remaining
service period, commencing from the year after the year in which they are incurred.
(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
expenses are reported in the fiscal year in which they are incurred.
However, consumption taxes and other taxes that are not subject to deduction but related to fixed
assets are recorded in “Other investments and other assets” within “Investments and other assets” andamortized using the straight-line method.
Accrued consumption taxes are indicated in the corresponding “other” sections within current assets
and current liabilities.

AIN HOLDINGS ANNUAL REPORT 201633

(17) Changes in accounting policies
Application of the Accounting Standard for Business Combinations
The Company has applied “Revised Accounting Standard for Business Combinations” (AccountingStandards Board of Japan (“ASBJ”) Statement No. 21, revised on September 13, 2013), “Revised
Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, revised on
September 13, 2013), “Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
revised on September 13, 2013), and other standards from the fiscal year ended April 30, 2016. As aresult, the accounting method has been changed to record the difference associated with a change in
the Company’s ownership interest in a subsidiary as capital surplus in the case where the Company
retains control over the subsidiary, and to record acquisition-related costs as expenses for the fiscal
year in which the costs were incurred. Furthermore, for business combinations carried out on or after
the beginning of the fiscal year ended April 30, 2016, the accounting method was retroactively changed
to reflect the revised acquisition cost allocation resulting from the finalization of the provisional
accounting treatment in the consolidated financial statements of the period in which the businesscombination occurs. In addition, the Company has changed its presentation of net income and related
items, and renamed “minority interests” as “non-controlling interests.” The consolidated financial
statements for the year ended April 30, 2015, have been reclassified to reflect this change.
Application of “Revised Accounting Standard for Business Combinations” and other standards is inaccordance with the transitional measures provided for in Article 58-2 (4) of “Revised AccountingStandard for Business Combinations,” Article 44-5 (4) of “Revised Accounting Standard forConsolidated Financial Statements,” and Article 57-4 (4) of “Revised Accounting Standard for Business
Divestitures.” The Company has continued to apply the standards from the beginning of the fiscal year
ended April 30, 2016.
As a result, capital surplus as of April 30, 2016, decreased by ¥1,505 million ($13,883 thousand). In
addition, operating income and ordinary income for the fiscal year ended April 30, 2016 eachdecreased by ¥724 million ($6,678 thousand), and profit before income taxes decreased by ¥720
million ($6,642 thousand).
In the consolidated statement of cash flows for the year ended April 30, 2016, cash flows related topurchase or sale of shares of subsidiaries not affecting the scope of consolidation are classified into
“Cash flows from financing activities,” while cash flows related to expenses arising from purchase ofshares of subsidiaries affecting the scope of consolidation are classified into “Cash flows fromoperating activities.”
As a result, net assets and earnings per share for the year ended April 30, 2016 decreased by¥47.47 ($0.43) and ¥21.55 ($0.19), respectively.
Application of Practical Solution on a Change in Depreciation Method due to Tax Reform 2016
Following revisions to the Corporation Tax Act, the Company and its consolidated subsidiaries haveapplied the “Practical Solution on a Change in Depreciation Method due to Tax Reform 2016” (Practical
Issues Task Force No. 32), and have changed its depreciation method for facilities attached tobuildings and structures acquired on or after April 1, 2016, from the declining-balance method to thestraight-line method.
(18) Unapplied accounting standards
Revised Implementation Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26
revised on March 28, 2016)
The practical guidance on accounting standards and auditing standards (sections related to accounting
treatment) for tax effect accounting, issued by the Japanese Institute of Certified Public Accountants, isto be transferred to the competence of ASBJ. For the sake of the said transfer, “Implementation
Guidance on Recoverability of Deferred Tax Assets (Implementation Guidance)” has been issued by
ASBJ, based in principle on the framework used in the Japanese Institute of Certified Public
Accountants Audit Committee Report No. 66, “Audit Treatment on Determining the Recoverability ofDeferred Tax Assets,” where the recoverability is assessed in accordance with the five categories of acorporate entity. The Implementation Guidance made certain necessary changes in the criteria forthese categories and also in the treatment of the amount of deferred tax assets. The Implementation
Guidance thereby provides the guidelines in applying the “Accounting Standards for Tax EffectAccounting,” by the Business Accounting Council, in view of recoverability of deferred tax assets.

34 AIN HOLDINGS ANNUAL REPORT 2016

Changes in the criteria for the five categories and in the treatment of the amount of deferred tax assets(a) Treatment of companies that do not satisfy any of the category requirements for (Category 1)
through (Category 5)(b) Category requirements for (Category 2) and (Category 3)(c) Treatment related to future deductible temporary differences which cannot be scheduled incompanies that qualify as (Category 2)(d) Treatment related to the reasonable estimable period of future pre-adjusted taxable income incompanies that qualify as (Category 3)(e) Treatment in cases that companies that satisfy the category requirements for (Category 4) but
qualify as (Category 2) or (Category 3)
The Company and its consolidated subsidiaries intend to adopt the Implementation Guidance from thefiscal year beginning on May 1, 2016.
Effects of adoption of the Implementation Guidance are currently evaluated.
(19) Reclassification and restatement
Certain prior year amounts have been reclassified to conform to the current year presentation.
These reclassifications and restatement had no impact on previously reported results of operations.

2. Cash and cash equivalents(1) Reconciliations of cash on hand and in banks shown in the consolidated balance sheet and cash
and cash equivalents shown in the consolidated statement of cash flows as of and for the years
ended April 30, 2016 and 2015 are as follows:

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

Millions of yen
2016
2015
¥ 22,647¥ 19,553

Thousands of
U.S. dollars
2016$
208,920(755)¥ 21,892$(164)¥ 19,389(6,964)201,955(2) The following table summarizes assets acquired and liabilities assumed through the acquisition ofshares of the companies relating acquisition cost and net disbursement:(a) Major breakdown of assets and liabilities of companies newly included in the consolidated
financial statements for the years ended April 30, 2016 and 2015 due to the acquisition of shares(i) Acquisition of shares of 24 companies in the dispensing pharmacy business and four othercompanies for the year ended April 30, 2016
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.

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

Millions of yen
2016¥
11,344
3,315
9,190(8,155)(1,668)14,026

Thousands of
U.S. dollars
2016$
104,649
30,581
84,778(75,230)(15,387)
129,391(3,071)(28,330)¥

10,954$

101,051AIN HOLDINGS ANNUAL REPORT 201635

(ii) Acquisition of shares of 15 companies in the dispensing pharmacy business and one othercompany for the year ended April 30, 2015(c) Policies and systems for risk management
Management of credit risk (the risk that a business partner will default on its business transactions)

The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies relating acquisition cost and net disbursement.

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.

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

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

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.

(1,672)

Management of market risk (the risk of exchange and interest rate fluctuations)
The Company and its consolidated subsidiaries raise funds mainly through long-term debt. With
regard to investment securities, the Company and its consolidated subsidiaries regularly check thefinancial conditions of the issuers of unlisted securities. The Company and its consolidated
subsidiaries review on an ongoing basis the status of their holdings of listed securities, taking into
consideration market conditions and their relationships with the issuing companies.

¥

10,024

3. Inventories
Inventories at April 30, 2016 and 2015 consisted of the following:

Merchandise
Supplies

Millions of yen
2016
2015
¥ 10,661
¥
9,747
323
162
¥ 10,984¥
9,909

Thousands of
U.S. dollars
2016$
98,3482,979$
101,328

4. Financial instruments(1) Qualitative information on financial instruments(a) Policies for using financial instruments
The Company and its consolidated subsidiaries have expanded business by opening dispensing
pharmacies and drug and cosmetic stores and through M&A activities. Operating cash flows
provide the majority of the funds the Company and its consolidated subsidiaries require to fund its
shop openings. The Company and its consolidated subsidiaries secure additional funding as
needed for M&A activities through bank borrowings and issuance of new shares and invests inhighly liquid financial assets.
(b) Details of financial instruments used and the exposures to risk and how they arise
Notes and accounts receivable, which relate to trade receivables, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and theSocial Insurance Medical Care Fee Payment Fund. In addition, most of other accounts receivable
are collected in a short period. Therefore, these do not entail any risk.
Investment securities, which are principally equity securities held for the purpose of maintaining
operating relationships with other companies, involve the risk of market price fluctuations.
Lease deposits and guarantee deposits are primarily deposits placed with the owners ofproperties that the Company leases for the operation of dispensing pharmacies and drugstores.
Such deposits involve lessor credit risk.
Notes and accounts payable, which relate to purchases, are payable within three months.
With respect to borrowings, the Company raises funds primarily as working capital or in relation tocapital expenditures. Redemption periods on such debts are typically eight years from the date ofborrowing, at the longest.

36 AIN HOLDINGS ANNUAL REPORT 2016

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 liquidity risk associated with fund procurement (the risk of being unable to execute
payments when due)
To manage liquidity risk, the Company and its consolidated subsidiaries create cash flow plans
based on annual capital expenditures forecasts. These plans are updated each month, based onrevised operating performance and forecast figures. To ensure the Company’s ability to respondflexibly to sudden demands for funding in relation to M&A activities, the Company maintains acertain level of liquidity, including through issuance of new shares.
(2) Fair values of financial instruments
Carrying values and fair values of the financial instruments on the consolidated balance sheet at April
30, 2016 and 2015 are summarized in the following table:
AssetsThousands ofMillions of yen
U.S. dollars
2016
2015
2016
Carrying value
Cash on hand and in banks¥ 22,647¥ 19,553$
208,920
Notes and accounts receivable
12,385
8,369
114,252
Other accounts receivable
5,983
5,291
55,193
Investment in securities
1,408
1,885
12,988Deposits and guarantees
9,956
9,577
91,845
Total
52,382
44,676483,228
Fair value
Cash on hand and in banks
22,647
19,553208,920
Notes and accounts receivable
12,385
8,369
114,252
Other accounts receivable
5,983
5,291
55,193
Investment in securities
1,438
1,918
13,265
Deposits and guarantees
9,970
9,408
91,974
Total
52,42544,540483,625
Difference
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment in securities
29
33
267
Deposits and guarantees
14
(168)
129
Total
¥
43
¥
(135)
$
396

AIN HOLDINGS ANNUAL REPORT 201637

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
2016
2015

Thousands of
U.S. dollars
2016

39,987$¥

31,826
6,330
9,052
7,640
54,84952,49093,284137,029
651,697

39,987

31,826368,883

5,696
10,112
14,89470,691

6,332
9,052
7,628
54,84052,546
93,284
137,398
652,130

-

-

-

6
40
47

1
(11)
(9)

55
369
433

$

Millions of yen

368,883

5,690
10,112
14,85470,644¥

The redemption schedule for monetary claims and securities with maturity dates as of April 30,
2016 and 2015 are summarized as follows:

Method of calculating the fair value of financial instruments and matters related to available-for-salesecurities and derivative transactions:
Assets:(a) Cash on hand and in banks, notes and accounts receivable, and other accounts receivable
As these instruments are settled in the short term, their carrying value approximates fair value.
(b) Investment in securities
The fair values of equity securities are determined by their prices on stock exchanges. The fairvalues of bonds are determined by the prices indicated by the counterparty financial institutions, or
the Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period, and these amounts are discounted to their present value
using appropriate rates of interest.

1 year or
less

Cash on hand and in banks
Notes and accounts receivable

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total(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.

¥21,687 ¥12,385
5,983

-

179
1,671
41,907 ¥

39
3,511
3,551

1 year or
less

Cash on hand and in banks
Notes and accounts receivable

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total$ 200,064
114,252
55,193

¥

¥

- ¥
-

-

100
2,751
2,851 ¥

2,078
2,078

Thousands of
U.S. dollars
2016
More
More
than 1than 5year but
years butless thanless than
5 years
10 years$

1,651
15,415$ 386,595 $-More than
10 yearsMore than
10 years

$

- $
-

-

359
32,38932,758 $922
25,37826,300 $19,16919,169Millions of yen(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.

¥

2016
More
More
than 1than 5year but
years butless thanless than
5 years
10 years

1 year or
less

Cash on hand and in banks
Notes and accounts receivable¥

Other accounts receivable

Investment securities
Debt securities
Deposits received
Total

¥

2015
More
More
than 1than 5year but
years butless thanless than
5 years
10 years

18,962 ¥
8,369
5,291

-

179
1,759
34,561 ¥

69
3,018
3,087

¥

¥

More than
10 years

- ¥
-

-

100
2,721
2,821 ¥

2,210
2,210

Financial instruments for which fair value is not readily determinable:
The fair values of unlisted equity securities with carrying amounts of ¥1,268 million ($11,697 thousand)and ¥986 million as of April 30, 2016 and 2015, respectively, are not readily determinable.

38 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201639

5. Securities(1) The following tables summarize acquisition costs, carrying values and differences of securities withavailable fair values as of April 30, 2016 and 2015:
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
2016
2015
¥

¥

147
-

¥

716
-

Thousands of
U.S. dollars
2016
$

1,356
-

29
177

51
768

267
1,632

223
-

1,034
-

2,057
-

35
259

70
1,105

322
2,389

75
-

318
-

691
-

5
81

19
337

46
747

¥

$

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
2016

Millions of yen
2016
2015
¥

605
319

¥

¥

22
349

$

5,581
2,942

379
19
1,324

390
19
781

3,496
175
12,214

431
319

20
349

3,976
2,942

379
19
1,149

390
19
779

3,496
175
10,599

(174)
-

(2)
-

(1,605)
-

(0)
(174)

(0)
(2)

(0)
(1,605)¥$Equity securities included stocks of non-consolidated subsidiaries and affiliates of ¥114 million($1,051thousand) and ¥114 million at April 30, 2016 and 2015, 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, 2016 and 2015:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Total sales ofother securities sold
¥
0
¥
229
$
0
Related gains
7
Related losses00(3) The following table summarizes impairment losses on other securities in the years ended April 30,
2016 and 2015:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Other securities with fair value
Other securities without fair value

40 AIN HOLDINGS ANNUAL REPORT 2016

¥

0

¥

6

$

0

AIN HOLDINGS ANNUAL REPORT 201641

6. Leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation,
impairment losses and net balance of leased assets as of April 30, 2016 and 2015, which would havebeen reflected in the consolidated balance sheets if finance lease accounting had been applied to thefinance leases currently accounted for as operating leases as allowed under Japanese GAAP.

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

Thousands of
U.S. dollars
2016

Millions of yen
2016
2015
¥

¥

68
68

¥

68
68

$

627
627

64
64

61
61

590
590

-

-

-

4
4

7
7

36
36

¥

$

Future minimum lease payments as of April 30, 2016 and 2015 for finance leases currently accounted
for as operating leases are summarized as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Due within one year
Due after one year
Total

¥
¥

11
1
12

¥
¥

9
12
22

$
$

101
9
110

The following table summarizes details of lease expenses, reversal of impairment losses for leased
assets, depreciation, interest expense and impairment losses, if they had been capitalized:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Lease expense
Reversal of impairment losses forleased assets
Depreciation
Interest expense
Impairment losses

¥

13
3
3
-

¥

23
6
10
-

$

Remaining lease expenses for non-cancellable operating lease transactions are as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Due within one year
Due after one year
Total

¥

1,293
10,244
11,538

¥

584
4,807
5,392

¥

$

11,92894,501
106,439$

7. Short-term debt and long-term debt
Short-term debt and long-term debt at April 30, 2016 and 2015 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Short-term bank loans with aweighted-average interest rate of
0.7%
Current portion of long-term debt
with a weighted-average interest rateof 0.3%Current portion of lease obligation
with a weighted-average interest rateof 1.1%Long-term debt (2017-2034) with aweighted-average interest rate of
0.3%
Lease obligation (2017-2022) with aweighted-average interest rate of
1.3%
Total

¥

¥

77

¥

1,964

$

710

5,612

4,365

51,771

668

628

6,162

14,854

7,640

137,029

1,198
22,410¥1,341
15,940$11,051
206,734

At April 30, 2016 and 2015, the carrying amounts of assets pledged as collateral for long-term debt are
as follows:
Assets pledged as collateral:Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Buildings
Land
Investments in securities
Total

¥
¥

56
23
5
85

¥
¥

5
5

Liabilities corresponding to collateral:

Accounts payable
Long-term debt
Total

¥
¥

0
39
40

¥
¥

$
$

516
212
46
784

Thousands of
U.S. dollars
2016

Millions of yen
2016
2015

119
27
27
-

¥

1
1

$
$

0
359
369

Equivalent interest is calculated by applying the interest method to allocate for each fiscal year over theterm of the lease the difference between the total lease amount and the equivalent acquisition price ofthe leased asset.

42 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201643

(3) For the years ended April 30, 2016 and 2015, the Company recognized impairment losses for thefollowing property groups:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Property group
Description of assets
StoresStore facilities
¥
641
¥
224
$
5,913
StoresLand
11Stores and LeaseholdStore facilities
properties
135
Real estate
Land
47
433
Stores and real estateStore facilities and land
167
1,540
Total
¥
856
¥
371
$
7,896

The aggregate annual maturities of long-term debt at April 30, 2016 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2017
¥
5,612
$
51,771
2018
4,991
46,042
2019
4,293
39,6032020
2,750
25,3692021
1,551
14,308The aggregate annual maturities of lease obligations at April 30, 2016 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2017
¥
668
$
6,162
2018
522
4,815
2019
343
3,164
2020
215
1,983
2021
83
765

8. Sales, disposal and impairment of fixed assets(1) Gains and losses on sales of fixed assets for the years ended April 30, 2016 and 2015 are as
follows:
Gains on sales of fixed assets:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Buildings and structures
Land
Other property, plant andequipment
Total

¥

¥

Losses on sales of fixed assets:

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

17
4
1
24

¥

10
3
8
21

¥

¥

0
107
1
9
119

¥

4
31
12
0
0
49

¥

$

156
36
9
221

Thousands of
U.S. dollars
2016

Millions of yen
2016
2015
¥

$

$

$

0
987
9
83
1,097

9. Retirement benefits
Defined-benefit pension plan
(1) Reconciliation of the beginning and the ending balance of retirement benefit obligation (excluding
the amount of the simplified method)
Thousands ofMillions of yen
U.S. dollars
2016
2016
Balance as of May 1, 2015
¥
1,724
$
15,904Service costs
282
2,601
Interest cost on retirement benefit obligation
11
101
Actuarial gains incurred
(101)
(931)
Pension and severance payments
(85)
(784)
Increases due to a newly consolidated
subsidiary
469
4,326
Other
(0)
(0)
Balance as of April 30, 2016
¥
2,300
$
21,217

Balance as of April 30, 2014
Cumulative effect of changes in accounting
policies
Balance as of May 1, 2014
Service costs
Interest cost on retirement benefit obligation
Actuarial losses incurred
Pension and severance payments
Other
Balance as of April 30, 2015

Millions of yen
2015
¥
2,087

¥

(600)
1,486
235
10
86
(92)
(1)
1,724

(2) Losses on disposal of fixed assets for the years ended April 30, 2016 and 2015 are as follows:
Thousands of
U.S. dollars
2016

Millions of yen
2016
2015
Buildings and structures
Construction in progress
Other property, plant andequipment
Goodwill
Other intangible fixed assets
Deposits and guarantees
Other investments and otherassets
Disposal costTotal

44 AIN HOLDINGS ANNUAL REPORT 2016

¥

¥

192
6

¥

224
1

$

1,771
55

14
2
42

7
7
15
12

129
18
387

5
25
290

5
21
296

46
230
2,675

¥

$

AIN HOLDINGS ANNUAL REPORT 201645

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

Balance as of May 1, 2015
Expected return on plan assets
Actuarial losses incurredBusiness owner’s contribution
Pension and severance payments
Increases due to a newly consolidated
subsidiary
Balance as of April 30, 2016

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

Millions of yen
2016
¥
493
6
(32)
102
(11)
¥

213
772

Thousands of
U.S. dollars
2016
$
4,547
55
(295)
940
(101)
$

1,964
7,121

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

(3) Reconciliation of the beginning and the ending balance of liabilities of the simplified method
Thousands ofMillions of yen
U.S. dollars
2016
2016
Balance as of May 1, 2015
¥
392
$
3,616
Retirement benefit expenses
135
1,245
Business owner’s contribution
(27)
(249)
Pension and severance payments
(71)
(654)
Other
96
885
Balance as of April 30, 2016
¥
525
$
4,843

Balance as of May 1, 2014
Retirement benefit expenses
Business owner’s contribution
Pension and severance payments
Other
Balance as of April 30, 2015

Millions of yen
2015
¥
246
66
(34)
(24)
138
¥
392

(4) Reconciliation of the retirement benefit obligation and plan assets to net defined benefit liability andnet defined benefit asset reported on the consolidated balance sheet
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Funded retirement benefit obligation
¥
969
¥
758
$
8,939
Plan assets
(895)
(590)
(8,256)
Subtotal
73
167
673
Unfunded retirement benefit obligation
1,981
1,455
18,274
Net of liability and asset reported on the
consolidated balance sheet
2,054
1,623
18,948Net defined benefit liability
2,228
1,636
20,553Net defined benefit asset
(174)
(12)
(1,605)
Net of liability and asset reported on the
consolidated balance sheet
¥
2,054
¥
1,623
$
18,94846 AIN HOLDINGS ANNUAL REPORT 2016

(5) Retirement benefit expenses for the years ended April 30, 2016 and 2015 comprised the following:Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Service costs
¥
282
¥
235
$
2,601
Interest cost on retirement benefit
obligation
11
10
101
Expected return on plan assets
(6)
(3)
(55)
Amortization of actuarial losses
69
77
636
Amortization of prior service costs
(34)
(34)
(313)
Retirement benefit expenses calculated
under the simplified method
135
66
1,245
Other
3
27
Retirement benefit expenses
¥
461
¥
352
$
4,252
(6) Remeasurements of defined benefit plans
The breakdown of remeasurements of defined benefit plans (before deducting tax effect) is asshown below:(a) Current
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Unrecognized actuarial gains
¥
(72)
¥
64
$
(664)
Total
¥
(72)
¥
64
$
(664)
(b) Accumulated

Unrecognized prior service costs
Unrecognized actuarial gains
Total

Millions of yen
2016
2015
¥
(82)
¥
(117)
89
231
¥
6
¥
113

Thousands of
U.S. dollars
2016
$
(756)
821
$
55

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

2016

7%
4%
63%
26%
100%

2015

7%
5%
60%
28%
100%

(b) Method of establishing the long-term expected return on plan assets
The long-term expected return on plan assets is determined by taking into consideration current
and expected allocation of plan assets, as well as the current and future long-term expected
profitability of the diverse assets that constitute the plan assets.
(8) Actuarial assumptions used in accounting for the Company’s plans as of April 30, 2016 and 2015
are principally as follows:
2016
2015
Weighted average discount rate
Weighted average expected rate of
return on plan assets
Expected rates of salary increase

0.46%

0.91%

0.75%
1.00%-4.24%

0.75%
1.00%-4.24%

AIN HOLDINGS ANNUAL REPORT 201647

10. Income taxes

11. Net assets

The aggregate statutory income tax rates used for calculation of deferred income tax assets andliabilities for the years ended April 30, 2016 and 2015 were 31.7% and 35.3%, respectively.
(1) The following table summarizes the significant differences between the statutory tax rate and theeffective tax rates for consolidated financial statement purposes for the years ended April 30, 2016
and 2015:

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.

Statutory tax rate
Non-deductible expenses
Per capita inhabitant tax
Amortization of goodwill
Valuation allowance
Tax credits on tax system to expand
incomeTax credits on tax system forpromoting equipments andinvestment to improve productivity
Different tax rates applied to foreignsubsidiaries
Other
Effective tax rates

2016
31.7%
0.5
1.0
5.4
0.5

2015
35.3%
0.6
1.8
6.9
0.1

(0.5)

(2.4)

(0.5)

(0.3)

3.9
0.9
42.9%

0.2
42.2%

(2) Significant components of deferred tax assets and liabilities as of April 30, 2016 and 2015 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Deferred tax assets:
Impairment losses
¥
291
¥
254
$
2,684
Excess of depreciation
442
305
4,077
Excess of allowance for bonuses
510
417
4,704
Excess of reserve for rewards obligation
133
110
1,226
Net defined benefit liabilities
558
438
5,147
Other
1,773
911
16,356Sub-total deferred tax assets
3,708
2,439
34,206
Valuation allowance
383
354
3,533
Total deferred tax assets
3,324
2,084
30,664
Deferred tax liabilities:
Capitalized removal costs
(131)
(94)
(1,208)Net unrealized holding gains on securities
(0)
(106)
(0)
Other
(125)
(102)
(1,153)
Total deferred tax liabilities
(257)
(303)
(2,370)Net deferred tax assets
¥
3,067
¥
1,780
$
28,293(3) Adjustment of deferred tax assets and liabilities for enacted changes in tax laws and rates
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No.15, 2016) and the “Act to Amend
the Local Taxation Act, etc.” (Act No.13, 2016) were enacted in the Diet on March 29, 2016.
Accordingly, the statutory tax rate of 32.0% previously used for calculating deferred income tax assets
and deferred income tax liabilities, which are reversed on or after May 1, 2016, is changed to 30.0% for
temporary differences expected to be reversed from May 1, 2016 to April 30, 2017 and 29.7% for
temporary differences expected to be reversed after April 30, 2017.
As a result of this change, net deferred tax assets decreased by ¥89 million ($821 thousand), deferredincome taxes and unrealized holding gains on securities increased by ¥87 million ($802 thousand) and¥2 million ($18 thousand), respectively.

48 AIN HOLDINGS ANNUAL REPORT 2016

Under the Japanese Corporate Law (the “Law”), in cases where a dividend distribution of surplus ismade, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common
stock over the total of additional paid-in-capital and legal earnings reserve must be set aside asadditional paid-in capital or legal earnings reserve. The legal earnings reserve is included in retained
earnings in the accompanying consolidated balance sheets.
Under the Law, the legal earnings reserve and additional paid-in capital could be used to eliminate or
reduce a deficit or could be capitalized by resolution of the shareholders’ meeting.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, alladditional paid-in capital and all legal earnings reserve may be transferred to other capital surplus andretained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with the Law.

12. Commitment
The Company entered into overdraft agreements with 17 and 22 banks as of April 30, 2016 and 2015,
respectively, to finance working capital requirements. The outstanding balances of such overdrafts asof April 30, 2016 and 2015 are as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2015
2016
Total overdraft available¥ 23,870¥ 25,260$
220,202
Amount utilized
38
1,960
350
Outstanding balance¥ 23,832¥ 23,300$
219,852

13. Contingencies
The Company has contingent liabilities for the claims for lease deposits and guarantee deposits paid toowners of shops, due to their transfers to third parties. Such contingent liabilities amounted to ¥811
million ($7,481 thousand) and ¥1,153 million as of April 30, 2016 and 2015, respectively.

14. Amounts per share
Net assets per share at April 30, 2016 and 2015 and basic and diluted earnings per share for the years
then ended are as follows:
Yen
U.S. dollars
2016
2015
2016
Net assets per share¥ 1,679.69¥ 1,511.57$
15.49
Basic earnings per share
249.69195.452.30
Diluted earnings per share
Cash dividends per share attributable to the year
40
30
0.36
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.

AIN HOLDINGS ANNUAL REPORT 201649

15. Segment information

Thousands of U.S. dollars
2016(1) Overview of reporting segments
Reporting segments of the Company and its consolidated subsidiaries are composed of thoseindividual business units for which separate financial information is available, from which the boardof directors makes decisions regarding the allocation of management resources and for which
operating performance can be evaluated, allowing the reporting segments to be analyzed
periodically.
The Company and its consolidated subsidiaries divide their operations into two main businesses,
the Dispensing Pharmacy Business and the Drug and Cosmetic Store Business, and the Other
Business. The Dispensing Pharmacy Business primarily includes the dispensing pharmacy
business, sale of generic drugs, staff dispatching and introduction services and consulting business.
The Drug and Cosmetic Store Business primarily includes the urban and suburban drug stores andcosmetic specialty stores. The Other Business primarily involves real estate rental business. The
Company and its consolidated subsidiaries plan and execute strategies for each business.
Consequently, the business operations of the Company and its consolidated subsidiaries areclassified into the three following reporting segments: Dispensing Pharmacy, Drug and Cosmetic
Store and Other.

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

Drug andpharmacy

cosmetic store$ 1,946,577
1,946,577

$

Other

192,656
192,656$

177,297$ 1,283,394$(4,234)
68,118 $

$

$

2,416

19,095$

Total

27,2043,228
30,433Adjustments$ 2,166,448
3,228
2,169,677(10,535)
162,518
91,162 $ 1,442,684

3,468

$

25,000$$$Consolidated- $ 2,166,448(3,228)(3,228)2,166,448(22,684)
139,833(152,204) $ 1,290,479

1,577

$

26,577

26,946
4,797

1,392

147
-

27,103
6,199

1,697

27,103
7,896

51,725

10,22130,931

92,8782,970

95,848(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, 2016 and 2015 is summarized as follows:
Millions of yen
2016
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
assets50 AIN HOLDINGS ANNUAL REPORT 2016

¥

¥

¥

Dispensing

Drug andpharmacy

cosmetic store

211,009
211,009
19,219139,120

2,070

¥

¥

¥

Other

20,884
20,884¥(459)
7,384 ¥

262

¥

Total

2,949
350
3,299

¥

(1,142)9,882 ¥

376¥

Adjustments

234,843350
235,193
17,617
156,387

2,710

¥

¥

¥

Consolidated

- ¥
(350)
(350)

234,843234,843(2,459)(16,499) ¥15,158139,888

171¥

Millions of yen
2015
Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assets¥Dispensing

Drug andpharmacy

cosmetic store

169,063
169,063¥

Other

17,80317,803

¥

Total

1,037
323
1,361

Adjustments¥

187,904
323
188,228¥

Consolidated

- ¥
(323)
(323)

187,904
187,904¥

14,449105,238

¥

117
8,852

¥

(614)
6,852 ¥

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

¥

1,810

¥

206

¥

131

2,149

¥

146

2,295

¥

¥

2,271

-

6

2,278

-

2,278

166

144

60

371

-

371

2,525

553

1,268

4,347

40

4,388

2,881

2,921

-

16

2,938

-

2,938

520

151

-

672

184

856

5,607

1,108

3,353

10,068322

10,390AIN HOLDINGS ANNUAL REPORT 201651

Amortization of goodwill and unamortized balances by reporting segment as of and for the years endedApril 30, 2016 and 2015 are summarized as follows:
Millions of yen
2016
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Drug andpharmacy

cosmetic store

2,921
33,111

¥

Other

-

¥

Adjustments

16
226

¥

Consolidated

-

¥

2,938
33,337

Thousands of U.S. dollars
2016
Amortization of goodwill
Unamortized balances of goodwill$

Dispensing

Drug andpharmacy

cosmetic store

26,946
305,452

$

Other

-

$

Adjustments

147
2,084

$

Consolidated-$

27,103
307,536

Millions of yen
2015
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Drug andpharmacy

cosmetic store

2,271
26,286

¥

Other

-

¥

Adjustments

6
53

¥

Consolidated

-

¥

2,278
26,34016. Comprehensive income
Each component of other comprehensive income (loss) for the years ended April 30, 2016 and 2015
was the following:

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

Millions of yen
2016
2015
¥

¥

(428)
0
(427)
(137)

¥

287
(6)
280
88

Thousands of
U.S. dollars
2016$(3,948)0(3,939)(1,263)

(290)

192

(2,675)

72
34
107
52
160
(130)

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

664
313
987
479
1,476
(1,199)¥$17. Business combinations
For the year ended April 30, 2016
(1) Transaction under common control(a) Overview of transaction(i) Names and details of businesses subject to the business combination
All business units with the exception of the Company’s Group management(ii) Date of the business combination
November 1, 2015(iii) Legal form of the business combination
An absorption-type split, with the Company as the Splitting Company and Ain Company Split
Preparation Co., Ltd., a 100% subsidiary of the Company, as the Split Preparation Company

AIN PHARMACIEZ INC.
(v) Background of and objective of the business combination
In the dispensing pharmacy business, the AIN HOLDINGS Group is accelerating its businessdevelopment through new store launches and M&A activity. In addition, the Group is enhancing its
drugstore function through “family pharmacies” and expanding the scale of its urban drugstores. To
achieve further growth, the Group has decided to transition to a holding company system in order toclarify authority and responsibility of Group company in each segment, to promote management
autonomy and to bolster corporate competitiveness as a group. In addition, separating groupmanagement and administration from business execution, we intend to enhance corporate
governance, and we believe the holding company structure is best suited to realizing continual
increases in corporate value in this manner.
(b) Outline of accounting method used
In accordance with "Accounting Standard for Business Combinations" and " Guidance on
Accounting Standard for Business Combinations and Accounting Standard for Business
Divestitures, we treated the merger as a transaction under common control.
(2) Business combination through acquisition(a) Business combinations(i) Name of the acquired company and its business
Name of acquired company - NP HOLDINGS Co., Ltd.
Content of business - Group management and real estate leasing business(ii) Main reasons for the business combination
Nishinihon Pharmacy Co., Ltd., and Setouchi Pharmacy Co., Ltd., subsidiaries of NP HOLDINGS
Co., Ltd., operate 41 dispensing pharmacies centered on Kagawa Prefecture, solidly dominatingthat region.
In addition to internal workshops and study sessions, departmental meetings are held regularly
for each specialized department. The company’s business policies have many points in common
with those of AIN HOLDINGS INC., such as contributing to regional healthcare through “dispensing
pharmacies at the heart of local communities” and expanding patient services.
We welcome the NP HOLDINGS Group, Shikoku’s leading dispensing pharmacy chain, into the
AIN HOLDINGS Group. The addition enables us to strengthen our operations in the Shikoku region,
where we have few pharmacies, as well as promoting the development of more pharmacies in theregion than before. By also combining our mutual business expertise and enhancing patient
services, we expect to augment the corporate value of the Group.
(iii) Date of the business combination
November 2, 2015(iv) Legal form of the business combination
Acquisition of shares for cash consideration(v) Name of the entity after the business combination
No changes were made to the name of NP HOLDINGS Co., Ltd.
(vi) Share of voting rights acquired
100%(vii) Main grounds for decision to acquire the company
The Company acquired shares in NP HOLDINGS Co., Ltd. for cash consideration.
(b) Period of operations of the acquired company included in the consolidated financial statements
From October 1, 2015 to March 31, 2016(c) Acquisition cost and consideration of the acquired business
Cash consideration for acquisition¥5,400 million ($49,815 thousand)Cost of acquisition¥5,400 million ($49,815 thousand)(d) Major acquisition-related costs
Advisory fees¥201 million ($1,854 thousand)(e) Amount of goodwill generated, its sources, and its amortization method and term(iv) Name of the entity after the business combination

52 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201653

18. Quarterly Information(i) Amount of goodwill generated¥3,356 million ($30,959 thousand)(ii) Sources of goodwill
Goodwill is the cost amount paid over the fair value of asset acquired and liabilities assumed andrecoverable through the future operation by utilizing the AIN HOLDINGS Group’s management
resources and economies of scale.
(iii) Goodwill amortization method and term
Straight-line method over 15 years(f) Amounts of assets and liabilities acquired on the date of the business combination
Current assets¥3,038 million ($28,025 thousand)Fixed assets¥973 million ($8,976 thousand)Total assets¥4,011 million ($37,001 thousand)Current liabilities¥1,609 million ($14,843 thousand)Fixed liabilities¥358 million ($3,302 thousand)Total liabilities¥1,968 million ($18,154 thousand)For the year ended April 30, 2015
(1) Business combinations
During the fiscal year ended April 30, 2015, the Company and its consolidated subsidiaries Asahi
Pharmacy Co., Ltd. and MEDIO PHARMACY Inc. acquired for cash consideration the shares in 15
companies in the dispensing pharmacy business and one other company, which became
consolidated subsidiaries.
Through this business combination, the AIN PHARMACIEZ Group aims to increase its market sharein the dispensing pharmacy business and anticipates greater economies of scale.
The Group decided to conduct this acquisition after taking into due consideration the profitability of
the acquired companies, their potential return on investment and their ability to secure stablerevenues and profits above and beyond the amortizable goodwill generated through this acquisition.
(2) Acquisition price and details
Consideration for acquisition
Expenses related directly to acquisition
Cost of acquisition¥11,489 million¥208 million¥11,697 million(3) Amount of goodwill generated, its sources, and its amortization method and term(a) Amount of goodwill generated¥8,266 million(b) Sources of goodwill
Goodwill is the cost amount paid over the fair value of asset acquired and liabilities assumed andrecoverable through the future operation by utilizing the AIN PHARMACIEZ Group’s management
resources and economies of scale.
(c) Goodwill amortization method and term
Straight-line method over 9–20 years

54 AIN HOLDINGS ANNUAL REPORT 2016

(1) Quarterly net sales for the year ended April 30, 2016 are as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2016
Three months ended July 31, 2015¥
52,146$
481,051
Six months ended October 31, 2015
106,924
986,383
Nine months ended January 31, 2016
169,395
1,562,684
Twelve months ended April 30, 2016
234,843
2,166,448(2) Quarterly income before income taxes and non-controlling interests for the year ended April 30,
2016 is as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2016
Three months ended July 31, 2015
¥
2,738
$
25,258Six months ended October 31, 2015
5,825
53,736Nine months ended January 31, 2016
9,974
92,011
Twelve months ended April 30, 2016
13,949128,680(3) Quarterly profit attributable to owners of parent for the year ended April 30, 2016 is as follows:
Thousands ofMillions of yen
U.S. dollars
2016
2016
Three months ended July 31, 2015
¥
1,533
$
14,142Six months ended October 31, 2015
3,295
30,396Nine months ended January 31, 2016
5,531
51,023
Twelve months ended April 30, 2016
7,917
73,035(4) Quarterly earnings per share for the year ended April 30, 2016 is as follows:
Yen
U.S. dollars
2016
2016
Three months ended July 31, 2015
¥
48.35
$
0.44
Six months ended October 31, 2015
103.930.95
Nine months ended January 31, 2016
174.44
1.60
Twelve months ended April 30, 2016249.692.30(5) Quarterly earnings per share for each accounting period of the year ended April 30, 2016 is asfollows:
Yen
U.S. dollars
2016
2016
Three months ended July 31, 2015
¥
48.35
$
0.44
Three months ended October 31, 2015
55.58
0.51
Three months ended January 31, 2016
70.51
0.65
Three months ended April 30, 2016
75.25
0.69

AIN HOLDINGS ANNUAL REPORT 2016

55

Investor Information

CORPORATE DATASTOCK INFORMATION

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¥8,682 million

Fiscal Year
May 1 to April 30 of the following year

Number of Employees
Consolidated: 5,511
Non-consolidated: 137

Ordinary General Meeting of
Shareholders
July

Business Lines
Planning, management and operationof the corporate Group, focused ondispensing pharmacy and drugstore
operation, 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.)(Fiscal 2016)(Fiscal 2016)

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

Number of Shareholders
3,817

Major Shareholders		

(As of April 30, 2016)

Shareholders

Number ofshares held
(thousandshares)Shareholding
ratio (%)

Kiichi Otani

3,238

10.21

Seven & i Holdings Co., Ltd.

2,480

7.82

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

1,594

5.03

The Hokkaido Bank, Ltd.

1,472

4.64

JPMC OPPENHEIMER JASDEC LENDING ACCOUNT

1,163

3.67

North Pacific Bank, LTD.

1,085

3.42

ML PRO SEGREGATION ACCOUNT

1,012

3.19

STATE STREET BANK AND TRUST COMPANY

974

3.07

Japan Trustee Services Bank, Ltd. (Trust Account)

812

2.56

The Norinchukin Bank

600

1.89

Notes: 1. The figure excludes 180,595 shares of the treasury stock owned by the Company.
2. Shares held in the Retirement Benefit Trust managed by Mizuho Trust & Banking Co., Ltd. (Marubeni
Corporation account) are part of Marubeni Corporation’s retirement benefit trust.
3. All shares held in Japan Trustee Services Bank, Ltd. (Trust Account) are related to trust services.

56 AIN HOLDINGS ANNUAL REPORT 2016

AIN HOLDINGS ANNUAL REPORT 201657