Actively Building a New Future
ANNUAL REPORT 2020
For the year ended April 30, 2020

PROFILE

MESSAGE FROM THE PRESIDENTAIN HOLDINGS operates a dispensing pharmacy business,

Net sales by segment

Thank you for continued support for the AIN Group. We hope you

which is the leader in Japan by sales, and a cosmetic &drug store business centered on ainz & tulpe stores, which

are all keeping safe and well amid the COVID-19 outbreak, which is
Other Businesses¥4,163 million (1.5%)

having a significant impact on our work and daily lives.

Cosmetic andDrug Store Business¥24,701 million (8.4%)

continue to work hard each day in our dispensing pharmacies, which

are mainly aimed at women. In the dispensing pharmacy
business, we aim to build a dominant position in the market
while playing a key role in local healthcare infrastructure.

In our dispensing pharmacy business, roughly 5,000 pharmacists
are close to the frontline of healthcare. This crisis has shown again

In the cosmetic & drug store business, we are opening

how the AIN Group plays a vital role in local healthcare provision in

specialist cosmetics stores under the ainz & tulpe brand inJapan. Also, in our cosmetic and drug store business, we are taking

prime urban locations. Our unique store designs are proving
popular with customers, helping to reinforce our brands andincrease earnings.

Fiscal 2020
Consolidated
Net Sales¥292,615 million

Amid the fast-changing operating environment, one ofinnovative steps to protect the health and ensure the comfort ofpeople every day.
Going forward, the AIN Group will continue to work as a unified,single team to generate sustained value by adapting to changes inour missions is to create value by harnessing the AIN Group’s

our operating environment.

strengths to tackle issues faced by society. To realize thatmission and generate sustained growth, the AIN Group isreinforcing its management base and rapidly implementing

Dispensing Pharmacy Business¥263,750 million (90.1%)

Sales and profits rise despite tough operating
environment

strategies to launch the next stage of growth.

CONTENTS
1 MESSAGE FROM THE PRESIDENT
6 AIN GROUP’S VALUE CREATION
			 6 AIN Group Businesses
			 8 Value Creation Process
			 10 Dispensing Pharmacy Business					10 Scale					12 Quality
			 14 Cosmetic and Drug Store Business					14 Original					16	Brand
			 18 Personnel Strategy
20 BASIS OF SUSTAINED VALUE CREATION
			 20 Addressing ESG Issues
			 22 Corporate Governance			 25 Risk Management
			 26 Board of Directors and Corporate Auditors

For fiscal 2020, ended April 30, 2020, we reported net sales of
28 BASIC INFORMATION / DATA
			 28 Characteristics of Dispensing Pharmacies in Japan
			 30 11-year Financial Summary			 30 ESG Data
			 32	Management’s Discussion and Analysis ofFinancial Condition and Results of Operations
			 34 Consolidated Financial Statements					34 Consolidated Balance Sheet					 36 Consolidated Statement of Income					 36 Consolidated Statement of Comprehensive Income					 37 Consolidated Statement of Changes in Net Assets					 38 Consolidated Statement of Cash Flows					 39 Notes to Consolidated Financial Statements					 63 Independent Auditor’s Report			 66 Investor Information¥292,615 million, up 6.2% year on year, operating income of¥16,068 million, flat year on year, and profit attributable to ownersof parent of ¥9,179 million, up 1.7%.
In the dispensing pharmacy business, sales continue to increasesteadily, supported by new growth drivers such as the opening of
onsite dispensing pharmacies including three pharmacies openedat university hospitals in April 2020. Towards the end of the fiscal year under review,

Kiichi Otani

the number of prescriptions declined amid calls for people to stay at home during

President and Representative Director

the COVID-19 outbreak. However, there was no significant impact on sales, as theaverage unit price per prescription increased. Dispensing fee revisions in April 2020
confirmed a continued shift in the reimbursement system from dispensing focused on
products to dispensing focused on services. The AIN Group has been preparing forthat shift for some time, so the negative impact of the revisions is likely to be modest
and we expect a positive impact from early fiscal 2021. In another development, we

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.

entered into a business alliance with Shidax Corporation in February 2020. As partof the agreement, Shidax i Corporation, which mainly runs retail shops in hospitals,
joined the AIN Group on March 31, 2020. Managing retail shops is a new challenge
for us, but Shidax i has a strong track record in store operations in hospitals and otherlocations, so we anticipate synergies with our dispensing pharmacy business.

AIN HOLDINGS ANNUAL REPORT 2020

1

MESSAGE FROM THE PRESIDENT

In the cosmetic and drug store business, sales declined sharply from early 2020 due

for onsite pharmacies over the medium and long term. That and other trends means

to the voluntary closure of retail facilities and other factors. However, fiscal 2020 was athat the expected major structural realignment in the dispensing pharmacy sector isgood year for the business, with 15 new stores opened, including ainz & tulpe HAKATA

becoming clearer. Given that outlook, we will continue to pursue M&A deals with an

MARUI, our first location in Kyushu, and an improvement in the gross margin toemphasis on investment efficiency and open more dispensing pharmacies, particularlyroughly 40%. Makeup and cosmetic brand DAZZSHOP, well-known for its eye makeup

large-scale sites, to grow the Group’s top line.

products, also joined the AIN Group. The acquisition will make it easier for us to launch

Recruiting and retaining human resources in a planned way is key to support

popular products and will help drive expansion in the cosmetic and drug store business.

sustained growth in value. Despite the lack of qualified pharmacists in Japan, we hired
560 newly graduated pharmacists during fiscal 2020, surpassing our start-of-yeartarget of 400. We aim to hire roughly the same number in fiscal 2021. With dispensing
pharmacies now expected to play a broader role in communities and provide specialist

Dispensing pharmacy business:
Opening more sites and raising pharmacist quality

services, we are improving training programs and support systems for our pharmacists
and increasing opportunities for them to learn about advanced healthcare. These
programs are reviewed and improved every year.

As the leading player in the dispensing pharmacy sector, the AIN Group aims to convert

One area we need to address going forward is online medical examinations, which

all its locations into primary care pharmacies that align with the government’s vision for

took a step closer to reality due to the COVID-19 outbreak. Even before the outbreak,patient-focused dispensing pharmacies.

the AIN Group had started providing online guidance for pharmaceutical use in one

Changes to guidelines in 2016 allowed the opening of dispensing pharmacies onof the government’s National Strategic Special Zones. We will now step up efforts to

hospital premises. These onsite pharmacies also fit with the government’s vision andprepare for full-scale rollout of the system while also ensuring patients have the option

are well-placed to keep up with advances in healthcare, making them the ultimate

to continue using AIN dispensing pharmacies.

primary care pharmacy. The AIN Group has a strong reputation in the sector thanks to

Separately, the AIN Group is putting considerable effort into branding throughour extensive dispensing pharmacy capabilities and healthy financial position, so we

TV advertising and other channels. By raising the visibility of the AIN Group andregularly receive requests from university hospitals and other medical institutions to

its dispensing pharmacies, we aim to create an even closer connection with all ourpartner with them in the opening of onsite pharmacies. We anticipate a growing needstakeholders, including hospitals and people studying to be pharmacists.

AIN Group’ history in one minuit

Growth strategy

1993
Started dispensing
pharmacy business

Full-scalelaunch2002
Became the leading
dispensing pharmacy
company by sales

2016
Dispensing pharmacy
network reached1,000 sites

Expanding and enhancing
quality of the business

2020
OpenedAIN Pharmacy at
Dokkyo Medical
University Hospital(Onsite pharmacy)

2 AIN HOLDINGS ANNUAL REPORT 2020

Top-line growth

Scale

x
Quality

Cosmetic and Drug Store Business= Growth driver
1998
Sold clinical testing business

1980
Starteddrug store
business

Sustainability

Strengthen
pharmacy capabilities

Start-up phase
1969
Startedoutsourced clinicaltesting business

Dispensing Pharmacy Business= Stable earnings baseFull-scalelaunch2015
First real move into
new retail formats

Enhance distinct
identity
2020
Launchedainz & tulpe app
and WEBSTORE

Personnel
training andoptimalpositioning
Reinforce
management base
(Governance,risk management,compliance)

Originalx
Establish brand(expand network)

Brand

AIN HOLDINGS ANNUAL REPORT 2020

3

MESSAGE FROM THE PRESIDENT

in May 2020. Led by the new Sustainability Management Department established on
May 1, 2020, we are also currently consulting with experts in order to select areas ofmateriality and formulate an action plan during the fiscal year ending April 30, 2021.
In social issues, we have been actively offering opportunities for women to develop
their careers for some time, partly because women make up a high proportion ofqualified pharmacists. Our dispensing pharmacy business also plays a key role in oursociety. However, the COVID-19 outbreak is forcing us to rethink how we can better
contribute to the society in other ways.
In environmental issues, we have been discussing for some time how the Group canhave a positive impact on the environment. In March 2020, we launched a trial at some of
the Group’s dispensing pharmacies to build a new pharmaceutical distribution model thatwill help contribute to a healthier and more sustainable society. Dispensing pharmacies
and drug wholesalers operate in the same healthcare sector, but they are different typesof business. By overcoming that barrier through closer cooperation, we aim to cut CO2

Cosmetic and drug store business:
Strengthening our online business and physical storesemissions related to pharmaceutical transportation by 95% and ensure steady progress
in work-style reform by improving the efficiency of inventory management. We think
the goals of our trial are achievable thanks to the expertise we have accumulated from

Amid a growing number of requests from department stores and commercial facilities,

our pharmacy-led project, which was launched in 2012 and is designed to improve

we expect to open roughly the same number of ainz & tulpe stores in fiscal 2021 as inefficiency and services

fiscal 2020.

seven dispensing pharmacies in Saitama Prefecture, but we plan to roll it out across the

To drive further growth, we launched an official smartphone app in October
2019 and an ainz & tulpe webstore in April 2020, followed by the start of full-scale» See pages 18-19 for more details . We launched the latest trial at

network in the future. The goals are ambitious, but we hope the main theme of creatinga sustainable society will trigger a turning point in the healthcare sector as a whole.

operations in May. We plan to upgrade the online site with new functionality such as

In governance issues, we have made a number of improvements in recent years,

connectivity with the official app, in addition to benefits such as competitive pricing,including the creation of a new nomination and remuneration committee in May 2019.

loyalty points and other privileges for customers. The success of the webstore will

However, there is still room for improvement and we will continue to focus on this area

also depend on improvements to physical stores. We are extending the ainz & tulpe

going forward.

chain to all major cities in Japan, but no two stores will be the same. That is because
merchandise lineups and store operations are tailored to the characteristics of local
markets and customers, as well as store size, while adhering to a common chain
development strategy. That flexible approach is ainz & tulpe’s strength. The cosmetic

Realizing our vision for long-term growthand drug store business has increased the gross margin and expanded the merchandise
lineup. Ainz & tulpe stores now sell a range of original brands such as LIPS and HIPSThe AIN Group is strengthening its business base to support the next phase of growth.

(cosmetics), PLIFT (skincare) and cocodesica (beauty supplies), as well as the AYURA andOur Digital Promotion Division, which is responsible for IT strategy, has currently aroundDAZZSHOP brands acquired from other companies. Our strategy of providing value to

40 staff, but we plan to roughly double headcount in the near future to help us extend

consumers without resorting to discount pricing has won praise in the industry, leading

the use of IT to all corners of our business.

to collaborations with cosmetics makers in product development. We aim to stick withWe are also working on our long-term vision for the Group, taking into accountour approach to set ainz & tulpe even further apart from other retailers in the market.

expected risks and opportunities. When all the initiatives currently being implemented
start to bear fruit, we are set to see a major transformation in the Group’s businessmodel. I hope we can count on the continued support and trust of investors and all
our stakeholders for many years to come as we work to realize our vision for long-

ESG: The basis for sustained value creation
Growing interest in environmental, social and governance (ESG) issues is encouraging us toterm growth.
July 31, 2020

think more deeply about how to create corporate value. Recognizing that the AIN Group
has to address ESG issues in order to create value on a sustained basis, we are steppingup efforts in ESG, led by a new Sustainability Management Department established

4 AIN HOLDINGS ANNUAL REPORT 2020

Kiichi Otani
President and Representative Director

AIN HOLDINGS ANNUAL REPORT 2020

5

AIN GROUP’S VALUE CREATIONAIN Group Businesses
In this section, we look at the operating environment, market position and other aspects of theGroup’s two core businesses to provide a more in-depth understanding of the AIN Group’s strategy.

Dispensing pharmacy business – operating environment and characteristics

Dispensing pharmacy business – market position and performance

Japan’s dispensing pharmacy market is mature but still very fragmented. Barriers to entry are high due to anumber of risks, including demands on pharmacies to play an even greater role in healthcare provision, regularrevisions to drug prices and dispensing fees, and a shortage of qualified pharmacists. The sector is also on theverge of a major realignment spurred by deregulation and other factors.
A fragmented market
Japan’s dispensing pharmacy sector is fragmented, with the top five companies accounting for only around 13.2% of the market,
including the Group’s leading share of about 3.5%. As small and mid-size operators struggle to address the pharmacist shortage andregulatory changes, we expect the pace of M&A activity and business closures to accelerate in the sector. Mergers between leading
firms are also a possibility. However, the Group’s ability to adapt to change means there is significant scope to increase market share.

AIN Group’s dispensing pharmacy business is the dominant in Japan, with the leading position by sales, operating
income, market capitalization and other metrics. Responding to calls from the government for pharmacies
and pharmacists to play a wider role in healthcare, the business has also taken the lead in terms of pharmacist
numbers and quality, giving it the resources to expand its pharmacy network as part of the Group’s growthstrategy. » See pages 10-13, 18-19
Market distribution of dispensing pharmacies in Japan—Comparison of net sales and operating margin among major
companies operating dispensing pharmacies in Japan

Net sales/Operating income

7.0(¥ million)
300,000

6.0

250,000(%)

Dispensing pharmacy market value (left scale)Non-hospital dispensing ratio（right scale)

Ratio of elderly people（right scale)(%)(¥ trillion)
12

100

74.0%

10

80

56.0%

8

7.74
60

4.75

6

28.1%

2
0

40

20.8%

11.5%
11.0%
0.47

1996

2000

2005

1996-2005: annualized growth of 13.7%

2015

2018

2020 (April to

2007-2018: annualized growth of 3.4%0March year)

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

Cosmetic and drug store business – operating environment and characteristics

Urbanization trends in Japan—Ratio of Japanese population living in three major metropolitan
areas and Tokyo area
56.7

60

28.4

53.9

26.0

3.0

MEDICAL SYSTEM NETWORK

1.0

50,000100,000

150,000

50

60

51.8

46.1

48.2

200,000

250,000

300,000

29.1

14.7

2014

43.3

23.0

14.7

2015

2016

2017

2018

Beauty products (cosmetics and other bueaty products)
Drugs and sanitary products
Foods and health foods

2019

Daily necessities

20

1970

1980

1990

2000

Three major metropolitan areas(Tokyo area, Nagoya area, Osaka area)

2010

17,859

17/4

18/4

19/4

20/4

Operating income

Our stores operated under the ainz & tulpe brand are different to conventional drug store and department store
formats. Based on the concept of creating stores where female customers would be happy to browse for an hour,
beauty products such as cosmetics and related beauty supplies account for more than 80% of the merchandise
lineup in ainz & tulpe stores. The stores are also designed to stand out in the market by tailoring their lineups to
local market characteristics and customers. » See pages 14-17
Comparison of ainz & tulpe and general drug stores:
product mix

Net sales/Operating income

ainz & tulpe *1(¥ million)
300,000

General drug stores *2

2.8% 2.1%

28.4

30

16/4

Net sales

Notes:
1.	Net sales and operating margin are compiled by AIN HOLDINGS
based on each company’s summary of financial statements for FY 3/20
(AIN HOLDINGS: FY 4/20).
2. Size of circle is proportional to market capitalization as of July 31, 2020.

250,000

10.1%
26.0%

14.7%

27.6%

32.5

27.6

20

0

0

350,000

40
40

18,65850,000Net sales (¥ million)

31.7

27.8

18,639100,000

NIHON CHOUZAI

2.0

2020

2030 2040 2050
Estimate
Other area
Tokyo area

85.0%
Beauty products
Foods and health foods

31.7%
Drugs and sanitary products
Daily necessities*1 Data is for the fiscal year ended April 2020
*2 Source: Monthly Report on the Current Survey of Commerce (May 2020),
Ministry of Economy, Trade and Industry(¥ million)
3,000

24,117
20,88425,21024,701

21,3832,000

200,000

608

150,000

903

1,000

157

100,000

Operating income

80

21,995
20,295

(%)

(%)
100

263,750

Cosmetic and drug store business – market position and performance

Japan’s drug stores have increased the share of food products, everyday items, cosmetics and other products intheir merchandise lineups, focusing on a high-volume, discount pricing retail model. At the same time, the quality
gap between drug stores has narrowed and growth has slowed.
However, amid ongoing urbanization in Japan, a growing number of people in age brackets with strong
spending habits are moving into urban markets.
Breakdown of general drug store sales by product category

221,801

245,003150,0000

2010

211,009

238,645

200,000

AIN HOLDINGS

Qol

4.0

20

1.44

1989 1990

5.0

Net sales

4

Operating margin

Growth market

0
50,0000

Net sales

-694
16/4

-959
17/4

18/4

19/4

20/4

Operating income

Source: Interim report from the Chairman of the Committee on the “Long-Term Outlook
for National Land,” Ministry of Land, Infrastructure, Transport & Tourism

6 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

7

AIN GROUP’S VALUE CREATION

Value Creation Process
The AIN Group aims to be a company that people welcome to their communities.
We are contributing to economic growth and the creation of an affluent society by developing andproviding competitive products and services, harnessing the competitive advantages and high-quality
management resources we have built up since the earliest days of the Company. We are also reinforcing theGroup’s business base to ensure sustained growth, regardless of the conditions in our operating environment.
Led by the new Sustainability Management Department established on May 1, 2020, we are also currently
consulting with experts in order to select areas of materiality and formulate an action plan during the fiscal
year ending April 30, 2021.

Value creation initiatives

Input

Outcomes
Aim to be a company that people
Dispensing Pharmacy Business

HUMAN CAPITALGroup employees.................................................... 13,158
Pharmacists............................................................ 5,273

Changes in business environment/ social issues

NETWORK

Dispensing pharmacies.............................................. 1,088
Cosmetic & drug stores.................................................. 63

for the AIN Group» Ssee page 25 for Risk management•Dispensing pharmacy business
Prescription volume............................. 22,947 thousands
Average prescription price................................. ¥11,304
Generic drug dispensing ratio ............................... 82.7%
Number of pharmacies   that provide home-based dispensing............ over 95%•Cosmetic and drug store business
Number of items handled ...... approximately 52,000 SKU
Poind card holders ......... approximately 6,000 thousands

Strengthen
pharmacy capabilities

Qualityx

Contribute toa sustainable society

Cosmetic and Drug Store Business
Trust from society
Enhance distinct
identity

Original

Establish brand(expand network)

Brand

Human resourcesthat create new value

OutputGeneric drug wholesale subsidiary (WSS)
Number of distribution centers ........................................ 4

Net sales...................................... ¥292,615 million

FINANCIAL CAPITAL

Shareholders’ equity .................................. ¥111,151 million
Shareholders’ equity ratio ........................................ 57.3%
Credit rating.........................A (Japan Credit Rating Agency)

Operating income.......................... ¥16,068 million

Sustainability
Personnel
training andoptimalpositioning

Competitive advantages

Foresight

8 AIN HOLDINGS ANNUAL REPORT 2020

Contributeto healthy,
comfortable lives

Continuously increase
corporate value

DISTRIBUTION BASE

Frontline
capabilities

welcome to their communities.

Scale

Top-line growth

EXPERTISE, TECHNOLOGIES, PRODUCTS

Opportunities and risks

Our vision

Growth Strategy

Management capital

Reinforce
management base
(Governance,risk management,compliance)

Profit attributable to ownersof parent....................................... ¥9,179 million
Number of new graduates hired
Pharmacists................................................ 560
ainz & tulpe and others.............................. 392

Strongfinancial baseAIN HOLDINGS ANNUAL REPORT 2020

9

AIN GROUP’S VALUE CREATIONRole of onsite dispensing pharmacies (the ultimate primary care pharmacy)
Local medical
institutions

Hospital• Sharing informationsuch as medication data,
patient background• Information sharing• Coordinated healthcare provision between
the hospital and the onsite pharmacy

AIN Pharmacy at Tachikawa Hospital

PHARMACY

Dispensing pharmacy
on hospital sites• Full service lineup, including advanced
pharmaceutical management, primarycare pharmacy services• Service provision points (platform)

AIN Pharmacy at Dokkyo Medical University Hospital

Improve the quality of local healthcare

10 AIN HOLDINGS ANNUAL REPORT 2020

Number of pharmacies and EV/EBITDA multiples(stores)
250

1,088 pharmacies

Hokkaido 101

Koshinetsu 108
Hokuriku 25

Tohoku 169

Chugoku/
Shikoku 91

Kanto 344
Tokai 82

(As of End-Fiscal 2020)

5.37

27

200
150

32

100
50
0

5.50

(100)

AIN Pharmacy at
Nippon Medical School
Chibahokusoh Hospital

Message from the Director

Masato Sakai

Director,
Division Manager ofStore Development

Prioritizing the development of pharmacies
that are appealing and highly profitable
The AIN Group was a relatively late entrant to the dispensing
pharmacy market. However, under the leadership of thepresident, we have steadily expanded our network in tandemwith growth in non-hospital dispensing services, while
maintaining clear criteria for pharmacy openings and keeping
close watch on the Group’s financial position. As the shift tonon-hospital dispensing slowed, we were one of the first in
the industry to start using M&A to further increase the Group’s
market share. That approach took AIN to the leading position in
the dispensing pharmacy sector in 2003, and we have remained
there ever since.
In 2016, regulations were relaxed to allow dispensing

16/4

3.71
23

110
(15)

3.96

(times)
6.0

4.88

25
11
(24)

17/4

5.0
4.0
3.0

182

(50)

Kinki 126
Kyushu/Okinawa 42

Number of pharmacies

Instead, we view onsite pharmacies as a major opportunity
to increase market share.
One hurdle to opening onsite pharmacies is the strict
criteria that they have to meet. Hospitals want companies
with a sustainable business model backed by a soundfinancial position, as onsite pharmacies have to stay
open throughout the year and need to be staffed bylarge numbers of pharmacists who understand advanced
healthcare practice. A successful track record of opening
onsite pharmacies is also an advantage. Not many
companies are capable of consistently meeting thosecriteria, but AIN HOLDINGS ticks all those boxes, which is
helping us steadily win contracts for onsite pharmacies. In
fiscal 2020, we opened onsite dispensing pharmacies in
11 locations, including Dokkyo Medical University Hospital(Tochigi Prefecture, April 2020), Nippon Medical School
Chibahokusoh Hospital (Chiba Prefecture, April 2020),
Tokushima University Hospital (Tokushima Prefecture,
April 2020), and Yamaguchi-ken Saiseikai Shimonoseki
General Hospital (Yamaguchi Prefecture, April 2020). In
fiscal 2021, we will open onsite pharmacies at Okayama
University Hospital (Okayama Prefecture, May 2020),
Osaka Prefecture Saiseikai Tondabayashi Hospital (Osaka
Prefecture, November 2020), Ehime University Hospital(Ehime Prefecture, February 2021), and Kumamoto
Prefecture North Hospital (Kumamoto Prefecture, March
2021), as well as other locations. Going forward, we plan
to open onsite pharmacies at a pace of 20 per year.
Over the last three years, we have closed roughly 190
dispensing pharmacies. To continue fulfilling the mission
envisioned for dispensing pharmacies and to support more
efficient healthcare service provision, we will shift to larger
locations and overhaul our pharmacy portfolio. M&A
deals will also remain as an important part of our strategy.
We will continue to actively pursue M&A deals with acontinued focus on investment efficiency, using both M&A
and openings of large dispensing pharmacies to grow theGroup’s top line.

AIN Group’s dispensing pharmacy network

(73)
18/4

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

134

(54)
19/4

14
6
(64)

2.0
1.0
0

EV/EBITDA multiples

J

Transforming the pharmacy portfolio
and growing the top line

apan’s dispensing pharmacy market has some uniquecharacteristics. The role of pharmacies and theirearnings structure differ to pharmacies in the US
and other countries » See page 28-29 . Until recently,
our strategy has been to channel management resources
into dispensing pharmacies located near hospitals. That
approach reflected the realities of Japan’s operating
environment and healthcare system, which made dispensing
pharmacies located near hospitals the best option forpatients and our business.
However, the dispensing pharmacy market has been
undergoing some dynamic structural changes in recent
years. The lifting of a ban that prevented dispensing
pharmacies from opening on hospital sites is one of thosechanges. Onsite pharmacies align with the government’s
vision for patient-focused dispensing pharmacies in termsof patient convenience, but they are also well-placed tokeep up with advances in healthcare.
Hospitals are keen to attract pharmacies to their sites.
Rental income is one factor, but there are also advantages
for hospitals in forging closer links with pharmacies, which
reduces the risk of dispensing errors and other issues anddeepens cooperation in areas such as advanced healthcare
service provision. Because of these reasons, a growing
number of hospitals, particularly university hospitals, areseeking dispensing pharmacies to locate on their premises.
There are also merits for dispensing pharmacy companies.
Onsite pharmacies give them the opportunity to leveragecompetitive advantages such as the specialist skills of theirpharmacists, and profits per pharmacy are higher due toincreased prescription volumes and more prescriptions withhigh unit prices. Advantages for patients include greater
convenience and higher quality services » See page 29 .
However, one possible issue is that new onsite
pharmacies could lead to a dramatic drop in the numberof prescriptions filled by existing pharmacies located near
hospitals, but the risk to our business is limited, because
as a relatively late entrant to the market, the AIN Grouphas only six pharmacies located near university hospitals.

Local residents• Public courses andhealth consultations

AIN Pharmacy at Tokushima University Hospital

Dispensing Pharmacy Business> ScaleHealthcare service
workers• Informal gatherings
to encouragecommunication
between medical staff
and healthcare service
workers

20/4
EV/EBITDA

pharmacies to open on the premises of medical institutions.
In addition to improving convenience for patients and lifting
the profitability of medical institutions, we saw the reforms as
an opportunity to increase the capabilities and earnings of ourdispensing pharmacies, prompting us to launch a number of
initiatives focused on the new onsite format.
Many medical institutions select onsite pharmacy operators
through a public bidding process, so the capabilities ofoperators are an important factor in deciding which company
is chosen. A large number of medical institutions are currently
looking for companies to run onsite dispensing pharmacies,
with over 100 public tenders already conducted in the last four
years (based on our research).
In 60% of those cases, medical institutions have selected theAIN Group. Many of the onsite pharmacies we have opened
have shown that they are good at attracting customers and arehighly profitable.
With medical institutions accelerating efforts to attract
pharmacy operators, we plan to use our proven earnings model
to target and win contracts.
Our aim is to continue growing the top line by steppingup efforts to secure new business, mainly from large medical
institutions.

AIN HOLDINGS ANNUAL REPORT 202011

AIN GROUP’S VALUE CREATION

The growing roles of dispensing pharmacies
New roles
Healthcare support•Provide preventive healthcare and healthcare support

Pharmaceutical management• Respond to needs for advanced pharmaceutical management

Primary care pharmacists and pharmacies
Unified and continuous management of drug usage• Continuous check of drug indications and adverse reactions• Prevention of over-prescription, double medication anddrug interactions

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

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

Conventional role

12 AIN HOLDINGS ANNUAL REPORT 2020

have also seen improvements in the way pharmacists think
and act in frontline situations, which has enhanced ourability to adapt to changes in the operating environment,
including revisions to dispensing fees.
Dispensing pharmacy profits fluctuate due to regularrevisions to drug prices and dispensing fees. By increasing
the number of primary care pharmacists and focusing on
patient-oriented services such as advanced pharmaceuticalmanagement, we have raised the quality of our services togenerate profits. We are also seeing steady growth in homebased dispensing and generic drug dispensing. Growthin generic drug dispensing typically leads to a decline insales in value terms, putting pressure on pharmacy profits.
However, we use our generic drug wholesaling subsidiary
WHOLESALE STARS Co., Ltd. (WSS) to negotiate prices andprocure directly from generic drug manufacturers. We
already have purchased more generic drugs than any othercompany in Japan, but we are further strengthening ourbuying power by narrowing down suppliers to just a few
firms, helping to boost profitability. This approach is oneof our competitive advantages, as it helps to support theprovision of high-quality services and maintain profit levels.
The AIN Group is also implementing measures that
support government efforts to create advanced healthcare
services, such as online drug guidance services and digitalprescriptions, as well as actively participating in joint
research with partners in the academic sector.
Going forward, we will continue to explore thepossibilities of future dispensing pharmacies to support
advances in healthcare and communities with aging
populations. We also aim to strengthen earnings capabilities
by investing in IT to rebuild the Group’s business baseto support growth and by improving the quality of ourdispensing pharmacies.

Home-based dispensing (monthly cases)(%)(points)

85

30

82.2

82.4

80.1
80

77.4
74.4

75

70.3
70

65

22.2
19.2

18.9

25

20.3
20

18.2
15.8

14.7
Apr.
16

77.2

Apr.
17

15

（No. of cases）

10
supportMar. Healthcare
Apr.
Apr.
Apr.
Mar.
healthcare
18 •Provide
18 preventive
20
20 and healthcare support
19

Share of generic drugs to total prescriptions*1
Average generic drug reimbursement points*2

15,000

64.4

91.2

92.5

100

16,876
14,533 15,371

80

90.4

92.3

11,94060

8,952

10,000

31.0
5,000

(%)

93.3

20,000

6,628

40

3,690

20

Pharmaceuticalmanagement
Apr.
Apr.
Apr.
Apr.
Apr.
Apr.
Apr.
advanced
14• Respond
15 to needs
16 for 17
18pharmaceutica
19
20
management
No. of home-based dispensing cases
Ratio of pharmacies providing home-based dispensing
0

Ratio of pharmacies providing
home-based dispensing

he gover nment wants the sector to create
more primary care pharmacies that can support
local healthcare service provision, which means
dispensing pharmacies and pharmacists need toplay an even greater role. To fulfill their primary care role,dispensing pharmacies have to offer higher quality services,such as promoting generic drugs, managing left overprescription medicines, managing patient health, working
with local healthcare service providers, providing 24-hour
dispensing services and supporting home-based healthcare
service, in addition to their traditional role of drug
dispensing. In order to deliver these services, pharmacists
need to improve their specialist skills and their ability tocommunicate with patients and medical institutions.
We have consistently raised the standards of ourpharmacies and pharmacists since the start of our dispensing
pharmacy business, recognizing the importance ofpharmacies in local healthcare infrastructure. We aim toconvert all our dispensing pharmacies to the primary careformat, which offers an excellent opportunity to leverage
our competitive advantages, such as the high level of
specialization achieved by the AIN Group over the years.
It will also help us meet the rigorous criteria for opening
onsite pharmacies.
To improve the quality of dispensing pharmacies, we
provide a range of internal and external training programs,
which are upgraded every year, to enhance the specialist
skills of our pharmacists. We also continue to implement
our pharmacy-led project to raise standards. The project
was launched to improve the efficiency of dispensing
pharmacy operations using feedback from pharmacists ateach location, resulting in a range of improvements beingrolled out across the Group. Efficiency gains have led toa drop in inventories and more time for pharmacists tocommunicate with patients and medical institutions. We

Generic drug dispensing (monthly cases)
Average generic drug reimbursement points

T

Raising quality and providing value
in tandem with profit growth

Share of generic drugs to total prescriptions> Quality

Dispensing drugs

No. of home-based dispensing cases

Dispensing Pharmacy Business0

Primary care pharmacists and pharmacies

Data source: *1: All pharmacies
Data source: Pharmacies available to be compiled at each month*2: Three main Group companies (AIN
PHARMACIEZ,
Pharmacy, DAICHIKU)
Unifiedand Asahi
continuous
management of drug usage
24-hour support & home-based healthcare

New roles• Continuous checks of drug effects and side effects• Prevention of over-prescription, double
medication and drug interactions• Support for patients throughout the day,all year round Home-based healthcare

Cooperation with medical institutions• Patient counselling and provision of drug information• Checks with doctors about possible prescriptionerrors,• Recommendations for health checkups
suggestions
Message from the Managing
Directorabout prescription drugs
In2012,
the AIN Group launched a pharmacy-led project• Feedback to doctors about side effects and drug usage

Convention
al roleMiya Oishi
Managing Director,
In charge of Dispensing Pharmacy
Operating Management

Cultivating pharmacists who can think and takedynamic action themselves
We have opened a string of new pharmacies on the premisesof medical institutions since regulations were relaxed in October
2016. Pharmacists who work at our onsite pharmacies haveto be more closely involved in pharmacy management and beable to think and act independently to become even better
pharmacists. Hospitals and local communities are looking todispensing pharmacies to play a bigger role as a platform that
adresses advances in healthcare, cooperate with hospitals, andprovide support for patients before they enter a hospital andafter they are discharged.

to review practices in its dispensing pharmacies. The goal of
the project is to explore the best approaches for each location
without sticking to received ideas in manuals and other
Dispensing drugs
sources. Specifically, we encourage every member of staff tothink and act dynamically themselves and pursue constantimprovements in order to realize efficient operations and deliver
the best-possible services. A clear outcome of the project isthat efficiency gains have led to improvements in profitability,
but the cycle of thinking and acting independently has also
accelerated the growth and development of our pharmacists,
helping to cultivate human resources who are keen to take on
new challenges whatever conditions they face.
In April 2020, 560 newly graduated pharmacists joined theAIN Group, a new record. Going forward, we will continue
to use the pharmacy-led project to nurture pharmacists who
can understand and deploy the various new functions of
onsite pharmacies and other formats to ensure the AIN Group
provides services to people everywhere as a key part of Japan’s
healthcare infrastructure.

AIN HOLDINGS ANNUAL REPORT 2020

13

AIN GROUP’S VALUE CREATIONLIPS and HIPS line upAYURA Ginzaainz & tulpe LINKS UMEDA

AINZ & TULPE WEBSTOREDAZZSHOP line upAYURA line up

Cosmetic and Drug Store Business> OriginalT

Establishing new retail formats
with a differentiation strategy

he cosmetic and drug store business is the AINGroup’s other core business. Drug stores havebeen part of the Group since the Company
was established, but the retail sector has seen anarrowing gap in quality and a steep drop in profit margins
in recent years. To avoid these issues and stand out in themarket, we started rolling out unique retail formats under
the ainz & tulpe brand in fiscal 2016. The formats aredesigned to avoid competition with other types of retailers.
Our ainz & tulpe formats are based on the concept ofcreating stores where female customers would be happy tobrowse for an hour. They are different to conventional drug
stores and department stores, and their unique approachis helping to drive change in the retail sector as a whole.
We are still making a few adjustments, but our ainz & tulpe
brand is close to completion.
Our first real move into new retail formats was inJuly 2015, when we opened ainz & tulpe SHINJUKUHIGASHIGUCHI (Shinjuku, Tokyo; retail space: 1,290m2).
The large flagship store significantly raised the visibility of
the ainz & tulpe brand among young women. The store
is also earning praise as a trendsetter, partly due to its
dominant position based on sales volume.
The first part of our differentiation strategy for the newformats is to target women aged from their late-20s totheir 40s, as they tend to be curious about the latest trends
and have strong spending habits.
The second part is merchandise. Conventional drugs
stores tend to be discounters focused on food and a broad
range of products. In contrast, beauty products such as
cosmetics and accessories account for more than 80% of
the merchandise lineup in our new formats. Our ainz &tulpe stores are particularly strong in cosmetics, offering awide choice of products from natural cosmetics and original
brands such as LIPS and HIPS to premium cosmetic brands.

14 AIN HOLDINGS ANNUAL REPORT 2020

They also sell a large range of beauty-related necessities
such as accessories and our original beauty supply brandcocodesica. Manufacturers have welcomed our emphasis
on providing value rather than selling products at low
prices, and with their support, we are expanding ourlineup of exclusive ainz & tulpe versions of national brandproducts. Going forward, we plan to step up developmentof our own products and tie-in products as part of thedifferentiation strategy.
M&A deals are another approach we are using tostrengthen our formats. We acquired the AYURA cosmetics
brand from Shiseido in 2015 and the makeup and cosmetics
brand DAZZSHOP in 2019. DAZZSHOP is well-known for its
range of eye makeup products and colored contact lenses.
The third element of our differentiation strategy is thestore operations. One of the features of our cosmetic &drug store business is the ability to rapidly launch new
products, thanks to the considerable discretion given toeach store. Stores are allowed to update merchandise
lineups and retail areas on a weekly basis to keep
customers interested. Approaches that are successful at
individual stores are immediately rolled out to other storesin the ainz & tulpe chain, with priority given to strongselling items. That helps to drive growth in sales volumes
and support high profit margins. Another strength isthat stores can adjust sales layouts to suit their location,customer base and retail floor area.
These types of initiatives are helping to attract young
female shoppers, with customers visiting our stores morethan once a month on average. That high rate of patronage
means we are receiving a large number of tenancy
requests from fashion retail malls and department stores.
The cosmetic & drug store business is now well-placed toextend the ainz & tulpe chain throughout Japan.

Differences between ainz & tulpe and other retail formats
ainz & tulpe

Drug stores

Department stores

Customer base

Young women

Families, overseas visitors

High-income earners, including overseas visitors

Merchandise

Beauty products account for over 80%
of lineup

Daily necessities and food account for
more than 80% of lineup

Brand products only

Pricing

NormalDiscount

Premium

Sales areas• Customers can try beauty products in store• Stores that keep customers interested andcoming back• Small retail areas, cluttered displays• Brands sold through own boutique stores,
reducing accessibility for shoppers

Positive growth cycle in cosmetic and drug store businessStore opening strategy
Open stores in major urban areas and prime locations(Inside or near stations)Target young female shoppers
Improve profitability

Specialize in cosmetics and ther beauty products

Strong appeal foryoung female shoppers

Create retail spaces tailored to customers and local area
Reinforce brandAttract repeat customers

Requests to open our storesin commercial facilities

Management division
Communicates basic
policy on productlaunches, etc.

StoresResearch into
latest trends
Characteristics
of local area
and customers

Merchandiser
meetings

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

Create stores wherefemale customers liketo stay and browse

Successful
approaches fromother stores

AIN HOLDINGS ANNUAL REPORT 2020

15

AIN GROUP’S VALUE CREATION
ainz & tulpe BEAUTY FACTORY YOKOHAMA HAMMERHEAD

ainz & tulpe’s new store opening in fiscal 2020

15

Total

Pole Town 2 (September 5, 2019)

storesASAKUSA ROX (June 21, 2019)OMIYA ARCHE (October 25, 2019)

SENDAI PARCO 2 (April 10, 2020)

bono SAGAMIONO (May 30, 2019)KASHIWA Modi (September 13, 2019)

SAKAE Central Park
(October 11, 2019)

Cosmetic and Drug Store Business> BrandT

PERIE Kaihimmakuhari (October 30, 2019)
Ginza INZ (November 8, 2019)

Strengthening our brands
and expanding the store chain

he cosmetic and drug store business missed its
targets for fiscal 2020 due to temporary store
closures and other steps taken to prevent the
spread of COVID-19, which emerged in Japan inearly 2020.
However, excluding that impact, performance at existing
stores was broadly firm and newly opened stores became
profitable more quickly. The power of the ainz & tulpe
brand has increased significantly and our business model is
now capable of reliably generating profits.
We have accelerated our withdrawal from suburban
locations, and since 2015 we have opened a string of large
flagship ainz & tulpe stores in convenient locations in themetropolitan area, including Shinjuku and Ginza in central
Tokyo. In addition to the Tokyo metropolitan area, we are
stepping up store openings in major regional cities in the
Kansai area and Kyushu, with the business now enteringa phase of full-scale expansion. In fiscal 2020 we opened
15 stores in major cities and closed six locations withconventional drug store formats, taking the total number ofstores to 63.
Our ainz & tulpe stores attract a younger demographic
and even compact stores of less than 300m 2 are
successful despite the lack of retail space. Those factors
are highly prized by property developers, which wanttenant stores that can be easily adapted to different
types of locations. Also, no two ainz & tulpe stores are
the same, thanks to flexible store designs tailored to each

16 AIN HOLDINGS ANNUAL REPORT 2020

PERIE Chiba (July 25, 2019)

Daimaru Shimonoseki (March 20, 2020)

location » See page 17 . One example of that approach is theainz & tulpe BEAUTY FACTORY YOKOHAMA HAMMERHEAD(Kanagawa Prefecture). Located in a mixed-use retailcomplex targeted at cruise ship passengers, the store has
a floor area of 310m2 and an adjoining café. In contrast,
the ainz & tulpe PERIE Kaihimmakuhari (Chiba Prefecture),
which is located in a station, has a floor area of 282m2 anda merchandise lineup focused on cosmetics. Going forward,
we will continue to actively open new stores in a different
locations, including retail complexes in major regional
cities and department stores, while also refurbishingexisting stores, to provide products and services with highadded-value.
In October 2019 we started offering an official
smartphone app version of the ainz & tulpe point card. In
the six months since launch, registrations have reachedroughly 500,000. We also launched a new webstore in May
2020. We plan to use innovative approaches to make thesite enjoyable for use and link it with physical stores to help
develop the customer base and attract new customers. We
continue to develop our IT and logistics strategy to boost
efficiency and profitability.
We will also continue to follow our strategy ofdeveloping unique retail areas to avoid competition withconventional retailers and cosmetics makers. Our goal is tofurther strengthen earnings in the cosmetic & drug store
business to make it the Group’s growth driver over the
medium- and long-term.

HAKATA MARUI (March 20, 2020)

LINKS UMEDA(November 16, 2019)

Message From
the Executive Officer
Kaori Ishikawa
Executive Officer,
Division Manager of Cosmetic andDrug Store Operating Management

Actively opening stores in major urban markets
and continuing to reinforce our original brands
Fiscal 2020 was an extremely tough year for the business. In
2019 we had to deal with the impact of revisions to China’s
e-commerce law, poor summer weather and the hike toconsumption tax in Japan. In late February 2020, the COVID-19
outbreak also started to affect our operations, including severe
restrictions on the entry of foreign tourists and the move ofdomestic consumers.
Against that backdrop, we continued to actively open ainz &tulpe stores in major urban markets. In Yokohama we opened

BEAUTY FACTORYYOKOHAMA HAMMERHEAD(October 31, 2019)

KAWASAKI ZERO GATE
(August 8, 2019)the ainz & tulpe BEAUTY FACTORY Yokohama Hammerhead, a
new store concept, in October 2019. In March 2020, we moved
into major department store chains with the new ainz & tulpe
Daimaru Shimonoseki, and in the same month we opened our
first store in Kyushu, the ainz & tulpe HAKATA MARUI. In total,
15 new stores were opened during the fiscal 2020.
DAZZSHOP, a makeup and cosmetics brand focused on eye
makeup, became part of the AIN Group in November 2019.
The acquisition is part of our efforts to steadily expand thelineup of original brands in ainz & tulpe stores.
We are also reinforcing customer service. In October 2019
we released the official ainz & tulpe smartphone app, followedby the launch of the ainz & tulpe webstore in May 2020. Bothsteps are geared at driving further growth by attracting andretaining customers.
Coexisting with COVID-19 is likely to be the new normal forsome time. We will continue to enhance store concepts andoriginal brands and maximize their ability to attract and retain
customers as we work to create stores that attract more fans to
the ainz & tulpe brand.

AIN HOLDINGS ANNUAL REPORT 2020

17

AIN GROUP’S VALUE CREATION

Number of graduates hired

Key outcomes from pharmacy-led projects(persons)
1,200

Pharmacy-led project

1,000
800

Responsive todispensing
fee revisions
Higher quality
pharmacies andpharmacists

550

600

Inventory
optimization

Issues clarified

560

400

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

392

200

500

0
16/4
17/4
18/4
19/4
20/4
21/4
(plan)
Pharmacists
New hires for cosmetic and drug store business, for general positions,and for medical staffs.

Personnel Strategy

The Basis for Sustained Value Creation

Training programs for pharmacists
Join company

Basic trainingPersonnel are the key management resource forincreasing corporate value and driving growth on asustained basis. Since it was established, the Company
has consistently put priority on regular recruitment
campaigns and employee training.
The dispensing pharmacy sector faces an increasingly
severe shortage of pharmacists and demands to raise theskill levels of pharmacists. Dispensing pharmacies andcompanies that struggle to recruit enough pharmacists andimprove their skills are likely to fall by the wayside.
The AIN Group is no exception. More than ever, we needto secure pharmacists of a high caliber to provide value tosociety and support business expansion. Our approach torecruitment is highly regarded by students and universities,
thanks to our hiring track record and high-quality training
systems. We also give pharmacists plenty of opportunities
to fully demonstrate their skills, due to the large numberof complex prescriptions filled at our pharmacies. That
reputation has helped us perform well in pharmacist
recruitment. According to a ranking of the most popular
companies to work for in 2021 by Mynavi, a recruitment
website aimed at new graduates, we were ranked third
in the chemical and pharmaceutical category (first in thedispensing pharmacy category), and first in the Hokkaido
region in a category based on head office location.
However, we need to increase headcount further tosupport continued business expansion, including our moveinto onsite pharmacies, which will require large teams ofhighly skilled pharmacists. Competition for pharmacists
is also likely to become tougher across the sector. To
address those challenges, we are stepping up recruitment
activities to draw attention to the AIN Group’s competitive
advantages, including our ability to keep up with the shift
to advanced healthcare provision. The president of AIN
HOLDINGS and other senior executives are now also closely
involved in the Group’s recruitment efforts.
Meanwhile, we are actively recruiting personnel in the

18 AIN HOLDINGS ANNUAL REPORT 2020

cosmetic & drug store business to support our aggressive
store expansion program. Each advertised position attracts
many applicants, who are drawn to our unique stores andour strategy of standing out in the retail market. That gives
us the pick of the best, highly motivated people.
After joining the dispensing pharmacy business,
pharmacists have access to a range of training programs
tailored to their career stage. For example, we have put
in place systems to help them enhance their skills overthe long term, such as follow-up training after joining thecompany (which has been extended from three years toten), support to acquire specialist qualifications as a cancer
care pharmacist, and opportunities to participate in practicaltraining on advanced healthcare at university hospitals.
We also run a number of unique initiatives to improvethe motivation and skills of our pharmacists. One initiative
is our pharmacy-led project, launched back in autumn
2012, which encourages pharmacists to draw on theirown frontline experience to further improve efficiency,
profitability and service provision at our dispensing
pharmacies. The pharmacy-led project has reduced
patient waiting times and contributed to profits by
reducing inventories and overtime hours. It has also been
extended to the cosmetic & drug store business and head
office departments, leading to efficiency gains and an
improvement in service quality. The project has clarified
issues faced by dispensing pharmacies and delivered clear
improvements, helping to change thinking among frontline
personnel and boost motivation, leading to a lower level ofstaff turnover.
We will also continue to upgrade personnel systems,
including raising pay and offering better employee welfare
benefits, to further increase motivation and improveflexibility in the workplace. Going forward, we will continue
to improve the quality of human resources and theGroup’s ability to adapt to change in order to satisfy the
expectations of investors and all our other stakeholders.

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8Year 9Year 10

New employee training
Employeeetiquette
training

Pharmacist
training

OJT
Follow-up training
Learning support content
OJT instructor training

Leadership training

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

Specialist training

Advanced pharmaceutical management study group
Hospital pharmacist training
Overseas training

Message from the Director

Rieko Kimei
Director,
In charge of Personnel Department

Continuing to reform personnel systems andcreate better working environment
To continue growing as a company, we have to attract andretain talented people and provide working environment
where all employees can grow and develop. We are taking a
number of steps to achieve these goals.
1. Implementing work style reforms
In fiscal 2020, we introduced a flexible working hours
system that allows employees to choose between a 32hour week or a 40-hour week plus additional hours asneeded. The new system is designed to improve worklife balance for employees by giving them more time for
personal development or to pursue their own interests,

as well as for child care and nursing care. We also plan toexpand home working for head office staff.
2. Improving training systems
To ensure customers continue to choose AIN pharmacies,
we will train up pharmacists to give them the specialist
knowledge that patients need, such as specialist cancer careadvice. Also, to improve patient and customer satisfaction,
we will run training programs for staff in other positions
to increase their skill levels and technical expertise.
3. Recruitment activities that draw on the strengths of thewhole GroupWe are putting considerable effort into hiring talented
university students who want to make a contribution in
the healthcare field. One way we are doing that is bycreating opportunities for the president and other senior
executives to speak directly to students to give them adeeper understanding about the AIN Group.
We view the ongoing changes in the operating
environment and in customer values as opportunities. We
will respond flexibly to these changes while also taking
on new challenges to ensure patients and customers
continue to choose the AIN Group for their needs.

AIN HOLDINGS ANNUAL REPORT 2020

19

BASIS OF SUSTAINED VALUE CREATION

Addressing ESG Issues
AIN HOLDINGS intends to create value by addressing social issues through its two core businesses –the dispensing pharmacy business, which plays a key role in society, and the cosmetic & drug store
business, which helps people lead fulfilling lives with health and beauty.
We are implementing a range of environmental, social and governance (ESG) initiatives. In this section,
we introduce some of the initiatives, which are backed by our business activities and corporate strengths.

E

Environment

Trial with Medipal to build a new pharmaceutical distribution model
Climate change caused by global warming is now a recognized problem worldwide.
Japan also faces many domestic challenges that directly impact people’s lifestyles andhealth, such as a growing number of people living to 100 years and a shrinking andageing population, which is reducing the working-age demographic and putting pressure
on social welfare spending. Against that backdrop, companies like AIN HOLDINGS needto think about and act in line with the SDGs as part of their business activities.
To address some of these environmental and social issues, the Group teamed up witha pharmaceutical wholesaler in March 2020 to launch a trial aiming at establishing amore environmentally friendly pharmaceutical distribution model.
The trial aims to sharply cut CO2 emissions from delivery vehicles by sharing data suchas demand forecasts and optimum inventory levels for individual pharmacies, maximizing
shipment efficiency at logistics centers, and reducing the number of deliveries in linewith conditions at each pharmacy. Another goal is to make product delivery and quality
checks more efficient to lift employee productivity at both the AIN Group and thewholesaler, creating more time for pharmacists to focus on their main jobs.
Going forward, we aim to build a new distribution model that creates an efficientbusiness platform to support environmental improvements and sustained growth.

Helping to reduce environmental impact· Reducing CO2 emissions at pharmacies and stores· Head office measures to reduce CO2 emissions
g Shift to hybrid vehicles for sales teams, procure and sell eco-friendly products· Reducing environmental impact at outsourced manufacturing companies· Introducing shopping bags with low environmental impact

SocialEnvironment· Raising awareness of environmental issues through pharmacies and stores· Building a pharmaceutical distribution model with reduced environmental impact g » See case study 1

S» Case study 1

Addressing social issues· Promoting diversity· Empowering female employees· Creating better working environments· Pursuing pharmacy-led project· Providing endowments for university courses» Case study 2

SocialImplementing work style reforms
Japan is promoting work style reforms in response to increasingly diverse ways ofworking, such as the need to balance work with child care and nursing care commitments.
The AIN Group is also making changes to create better working environments that
motivate employees. As part of that, we started implementing reforms to personnel
systems in May 2019, including an increase in base pay. In May 2020 we introduced
a new system that allows employees to choose their scheduled working hours, giving
them the option to work fewer hours to care for children or look after elderly relatives.
To help employees achieve an optimum work-life balance, we will promote wider use ofhome working, while also encouraging them to use paid holidays and reduce overtime.

· Conducting joint research· Helping employees balance work and childcaring commitments (work-life balance)· Reforming work practices (introducing home working and flexible working hours) g » See case study 2

GGovernance» Case study 3· Evaluating the effectiveness of the Board of Directors

Nomination and remuneration committee established· Adjusting the remuneration system for executives· Introduced the nomination and remuneration committee· Creating a more diverse Board of Directors· Strengthening risk management (including measures to reduce dispensing errors)· Reinforcing compliance· Improving governance at pharmacies and stores

20 AIN HOLDINGS ANNUAL REPORT 2020

GovernanceReinforcing corporate governanceg » See case study 3

As a Group with a dispensing pharmacy business and a cosmetic and drug store business, which are both intrinsically linked topeople’s health, the Company has to ensure robust and transparent business activities anchored by compliance.
At a meeting on April 22, 2019, the Board of Directors passed a resolution to establish a nomination and remunerationcommittee as a voluntary advisory body reporting to the Board. The committee, which was set up to strengthen corporate
governance by increasing the oversight functions of the Board of Directors, discusses the appointment and remuneration ofrepresentative directors, directors, corporate auditors and executive officers, drawing on insights and advice from outside
officers and using an objective and transparent process to appoint executives and determine pay.

AIN HOLDINGS ANNUAL REPORT 2020

21

BASIS OF SUSTAINED VALUE CREATION

Corporate Governance
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
and implement ongoing initiatives toward enhancement of corporate governance.

BASIC POLICY FOR CORPORATE GOVERNANCE

SYSTEMS AND DUTIES OF BOARD OF DIRECTORSAND BOARD OF CORPORATE AUDITORS

Dispensing pharmacies and drug and cosmetic store chains are
the key business areas being developed by AIN Group. Both ofthese businesses are characterized by a responsibility towards
people’s health, and as such, we recognize the indispensabilityof 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.

Systems
The Board of Directors, the Company’s main decision-making
body, is comprised of 12 directors, including four outside
directors. Meetings are held 11 times each year to ensure thefunctioning of shared oversight by directors. Outside directors
participate in management by providing advice for key
decisions from multiple perspectives.
The Company has adopted the Company with Board of
Corporate Auditors governance structure, which it regards as
an effective audit framework for management supervision. The
Board of Corporate Auditors is comprised of three corporate
auditors, including two outside corporate auditors.

Outline of corporate governanceCorporate governance structure
Chairman of the Board
Number of directors
Number of corporate auditors
Board of Directors meetings*

Corporate Auditor System
Kiichi Otani
12 (including 4 outside directors)
3 (including 2 outside corporate auditors)
Number of meetings: 11
Examples of resolutions: Annual budget, issues related to new businesses, store openings
Outside Director attendance at Board of Directors meetings* 90.5%
Outside Corporate Auditor attendance
100%
at Board of Directors meeting*Board of Corporate Auditor meetings*
Number of meetings: 12
Examples of resolutions: Audit policy, audit plans and business division audits
Key meetings attended by corporate auditors
Board of Directors meetings, Board of Corporate Auditor meetings, Management meetings
Independent director appointment
Outside directors Ko Mori, Yasuyuki Hamada, Noriko Endo and Junro Ito and outside
corporate auditor Osamu Muramatsu have all been designated as independent officers inaccordance with the provisions of the Tokyo Stock Exchange.
Accounting auditor
ERNST & YOUNG SHINNIHON LLC

Corporate governance structure
General Meeting of Shareholders
Appointment / Dismissal

Appointment/ Dismissal

Board of Directors
Outside Directors
Appointment

Suggestion

Appointment

Appointment / Dismissal
Nomination and Remuneration
Committees

Board ofManaging Directors

Appointment / Dismissal

Board ofCorporate Auditors

Accounting Auditors

Audit

Audit

Representative
Directors

Cooperation

ReportingBusiness execution

Executive Officers

Compliance
Committee

Management
Meeting

ReportingInternal Audit Office

Reporting
Audit
Store Development
Division

Dispensing Pharmacy
Operating Management
Division

Cosmetic and Drug StoreOperating Management
Division

Guidance

Digital Promotion
Division

Operational Support
Division

ReportingGroup Companies

22 AIN HOLDINGS ANNUAL REPORT 2020

Outside directors
Name

Reasons for selection

Ko MoriHe 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 andby monitoring business execution, drawing on his
extensive knowledge and experience as the manager
of a major trading company. He 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.

Independent

Yasuyuki
HamadaIndependent

Noriko Endo
Independent

Junro Ito
Independent

Outside Directors and Outside Corporate Auditors*Data is for the fiscal year ended April 2020.

Appointment

The Nomination and Remuneration Committee, of whichmore than half the members are independent outside directors
or corporate auditors, discusses and makes recommendations
to enhance fairness, transparency and objectivity in procedures
for appointing and dismissing directors and determining
remuneration for executives. Committee members are selectedby the Board of Directors.
The Head of the Internal Audit Office is in charge of theCompany’s internal control system and internal audits. With aposition corresponding to that of a director, the head of theoffice liaises with the Board of Corporate Auditors, and where
necessary, attends meetings of the Board of Directors to submit
reports related to internal audits and the internal control
system, ensuring that accountability to shareholders, investors
and other stakeholders is effectively maintained.
In addition, the Company has adopted an Executive Officer
system to separate management decision-making and oversightfrom business execution, with the aim of invigorating the Boardof Directors and improving the flexibility of business execution.
The Management Meeting, which meets every week
and is attended by all senior managers from the General
Manager grade and higher, is tasked with monitoring business
operations. Directors and standing corporate auditors also
attend the meetings, which are used to discuss businessexecution in each division and maintain reciprocal control
between business segments.
The Company has established a number of other bodies
to reinforce corporate governance. To minimize potential risks
related to dispensing errors, a key risk factor in dispensing
pharmacy business operations, the Internal Audit Office ensurescomprehensive compliance with basic pharmacy regulations,while the Safety Policy Office conducts analysis and implements
measures to prevent drug dispensing errors. The Compliance
Committee, which is comprised of all directors and corporate
auditors as well as legal advisors, works to widely promote andembed systems that ensure compliance with business ethics,
laws and regulations.

Audit

The Board of Directors is comprised of twelve members,
including four outside directors. Two of the Company’s three
corporate auditors are outside corporate auditors. There areno conflicts of interest between the Company and its outside
directors and outside corporate auditors.
The outside directors and outside corporate auditors havea number of functions and roles in the Group’s corporate
governance. Drawing on their specialist knowledge andexperience, they contribute to the Group’s business strategy,
discussions on board resolutions, and internal control, mainly
by monitoring business execution and providing input at
meetings of the Board of Directors from a neutral, independentand objective standpoint.
The Company currently has no specific standards in place,but the basic policy for recruiting outside directors and outside
corporate auditors is to ensure they can fulfill the above roles
effectively.

Evaluating the Effectiveness of the Board of Directors
To improve the effectiveness of the Board of the Directors, theboard asks directors and corporate auditors to participate in anannual self-appraisal survey that assesses board performancein 17 categories on a scale of one to five. In the fiscal 2019
survey, inside directors, outside directors and corporate auditors

He 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 andby monitoring business execution. Although he has
no experience of business management, he is able
to draw on his specialist knowledge and experience
as an academic, particularly in the field of economics
and finance. He has been an emeritus professor at
Hokkaido University, which has received donations
from the Company in the past. 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 his research activities.
She 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 monitoring business activities, drawing on her
extensive knowledge and experience from positionsin the editing department of an economics magazine
and a public research institution, as well as knowledge
gained from market research in Japan and overseas.
She previously worked for the Company in an advisory
capacity, but the level of mutual dependence between
she and the Company is low, as her contract wascompleted at the end of May 2018. She is judged tohave no conflicts of interest with ordinary shareholders
and has been designated as an independent officer.
He 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 monitoring business execution, drawing on
his extensive knowledge of environmental, social andcorporate governance (ESG) issues and his experience
leading group companies as the director of a major
retailer. The Company has a leasing contract with the
major retailer, but the level of mutual dependence
is judged to be low as the value of the contract isnegligible.
He is judged to have no conflicts of interest withordinary shareholders and has been designated as anindependent officer.

Outside corporate auditors
Name

Reasons for selection

Akira
IbayashiHe was appointed as an outside corporate auditor tocontribute to improvements in sound and efficientbusiness management, drawing on his specialist
knowledge from working at financial institutions andhis experience in business management.

Independent

Osamu
Muramatsu
Independent

He was appointed as an outside corporate auditor tocontribute to improvements in sound and efficientbusiness management, drawing on his specialist
knowledge from working at a major securities firm,
experience in business management and track record
as an outside auditor for the Group.

AIN HOLDINGS ANNUAL REPORT 2020

23

BASIS OF SUSTAINED VALUE CREATION

Risk Management
gave the board above-average marks in all categories. The
results show that the Company’s Board of Directors is generally
fulfilling its duties in an effective manner. However, the survey
highlighted the need to further improve explanations aboutrisk information, growth strategy and other topics.

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

REMUNERATION FOR DIRECTORS ANDCORPORATE AUDITORS
Director
remuneration=

Basic monthly
remuneration+

BonusesRemuneration is composed of basic monthly remuneration andbonuses and is linked to earnings performance to support a
remuneration system that reflects individual responsibilities andperformance. Bonuses are determined based on consolidated
operating income for each fiscal year, taking into account a
broad set of criteria, including dividends, the balance with
employee remuneration, trends at other companies in theindustry and bonuses paid in previous years.
To enhance fair ness, transparency and objectivity
in procedures related to determining remuneration for
directors, the Company has established the Nomination
and Remuneration Committee, of which more than half themembers are independent outside directors or corporate
auditors. As an advisory body, the committee determines
the types and scope of remuneration in line with the above
policies, while remuneration amounts for each individual areleft to the discretion of the President with the approval of theBoard of Directors.
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.
24 AIN HOLDINGS ANNUAL REPORT 2020

The amount of remuneration for directors and corporate
auditors for the year ended April 2020 is as follows:
Item

Total
remuneration(¥ million)

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

Remuneration by type(¥ million)
Basic
Bonus
remuneration

Numberof eligible
individuals

175

147

28

6

7

7

0

1

Outside directors

18

18

-

3

Outside corporate
auditors

12

12

-

2

BUSINESS AND OTHER RISKS
The following factors may affect the Group’s operating results and financial
position. Statements in the text referring to the future reflect the judgmentof the Group at the end of the fiscal year under review.

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

Total value on balance
sheet (¥ million)

Unlisted

14846

Other than unlisted

9539

DIALOGUE WITH STAKEHOLDERS
shareholders and investors. The main IR activities in fiscal 2020
were as follows.
For institutional investors

Results briefings

Number of events

1

Phone and video conference calls

139

Meetings with analysts and investors

80

Store tours for investors

7

For individual investors

Results briefings

We have formulated Risk Management Regulations and Risk
Management Guidelines that establish the risk management
framework for the whole AIN Group.
The Risk Management Section in the Administrative Department
is in charge of risk matters and is responsible for issues andmeasures related to the implementation of risk management
across the Group. The Internal Audit Office conducts field audits tocheck whether risk management rules are being strictly observed
and to assess the effectiveness of risk management systems.
In addition, to ensure the AIN Group continues to operate
during times of crisis, we formulate a business continuity plan
(BCP) for the Group and actively disseminates the plan to all senior
executives and employees.

Number of events

1

1. Laws and regulations
a. Regulations under the Law for Ensuring the Quality, Efficacy, andSafety of Pharmaceuticals and Medical Devices
We operate the dispensing pharmacy business under various permits,
licenses, registrations and notifications including those set forth by theLaw for Ensuring the Quality, Efficacy, and Safety of Pharmaceuticals andMedical Devices (the Pharmaceutical and Medical Device Law), the Health
Insurance Law, and the Pharmacists Law, under the supervision of the
Ministry of Health, Labour and Welfare, and of prefectural health andwelfare departments.
The drugstore business in our cosmetic and drug store business also
involves drug sales, which are similarly regulated under the Pharmaceuticaland Medical Device Law.
b. Easing of drug sales regulations
In sales of over-the-counter (OTC) drugs, the Pharmaceutical and Medical
Device Law classifies drugs into different categories based on risk. Only
qualified pharmacists are permitted to sell drugs requiring guidance andcategory 1 drugs, while registered sellers, as well as pharmacists, arepermitted to sell category 2 and category 3 drugs.
In addition, the “Law for Partial Revision of the Pharmaceutical Affairs
Law” (enacted June 12, 2014) ended restrictions on the sale of OTC drugs
online. Factors such as the entry into the market of companies from otherindustries as a result of a continuing trend in the future to deregulate drug
sales may affect the Group’s performance.
2. Dispensing pharmacy business
The Group’s dispensing pharmacy business operates a chain of dispensing
pharmacies.
As the dispensing pharmacy business accounted for 90.1% of net
sales in the fiscal year under review, we plan to continue the multi-store
operation mainly based on dispensing pharmacies.
Accordingly, the Group’s operating results may be affected by the successor failure of the store opening policies including M&A and by trends instore openings by competitors in the same industry.
Furthermore, sales of dispensing pharmacies significantly depend on
the medical institutions that write prescriptions. Therefore, uncertainties
such as the issuance of non-hospital prescriptions by the medical
institutions or suspension/discontinuation of operations thereof may
affect the Group’s performance. In addition, due to seasonal outbreaks ofinfluenza and other conditions, the number of prescriptions filled may beaffected by seasonal trends.
3. Industry trends
The revenues in our dispensing pharmacy business come from pharmacy
operations involving the dispensing and supplying of drugs based onprescriptions. The drug prices and dispensing fees are set by the Ministry of
Health, Labour and Welfare. As a way to contract medical expenses, both
medical treatment fees and drug prices are being revised incrementally. In
the future as well, changes in profit structure resulting from factors such asrevisions 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 apharmacist on site; the Pharmacists Law stipulates that the dispensing ofdrugs must be handled by a pharmacist.
The Group continues to have a policy of expansion by aggressively

opening new stores, but if it becomes difficult to secure qualified
pharmacists, this could affect our store openings and the Group’s
performance.
5. Risks of loss of trust in the Company
a. Dispensing operation
In our dispensing pharmacy business, pharmacists dispense and supply
prescription drugs that affect the human body. This business carries therisk that medical accidents might be caused through dispensing errors.
The Group recognizes that any medical accidents could have a severely
damaging effect on society’s confidence in the Group, and we place thehighest priority on measures to avoid the risk from all aspects.
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 cosmetic and drug store business obtained from the ainz &tulpe Point Card and ainz & tulpe official smartphone app.
The Group takes all possible steps to protect personal data throughpersonal information protection systems and the rigorous enforcementof rules on the handling of such information. Also, key subsidiary AIN
PHARMACIEZ INC. has acquired Privacy Mark accreditation in thehealthcare, medical and social service fields. However, we believe it ispossible that any accidental or illegal leakage of personal data may not
only affect the Group’s performance but also lead to a loss of society’s
confidence in the Group.
6. Risk in business strategy
The Group has promoted the expansion of the business scale of dispensing
pharmacies through actively promoting new store openings and M&A.
Our basic policies regarding M&A strategy require us to carefully examine
target companies and determine the amount to be paid for acquisitions
thereof in order to stably secure a profitability level that exceeds theamortization of goodwill to be incurred. If matters do not go as planned,
however, we may incur losses on valuation of shares in subsidiaries andimpairment losses on goodwill, which may have an adverse impact on theGroup’s operating results and financial position.
7. Interest rate risks
In the Group’s promotion of business expansion based on actively
promoting new store openings and M&A, costs for ordinary store openings
are covered by internal funds within the range of operating cash flow,
while in large-scale M&A, costs are sometimes financed 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 ofthe end of the fiscal year under review, cash on hand and in banks totaled¥46,321 million, compared with a total balance of short- and long-term
debt of ¥6,074 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, the Group’s financial position and operating results
including interest payable may be affected.
8. Impact of consumption tax
Under Japan’s Consumption Tax Act, dispensing sales in the dispensing
pharmacy business related to social insurance medical examinations are
exempt from consumption tax. However, the business is required to pay
consumption tax on pharmaceutical and other products that it procures.
As a result, consumption tax borne by the Group is booked under cost of
sales in the dispensing pharmacy business. In the past, when consumption
tax was introduced and dispensing fees were revised, the government
took into account the higher rate of consumption tax when it set drug
prices. However, future revisions to the rate of consumption tax may not
be reflected in drug prices, which could have an impact on the Group’s
operating results.
9. Risk information related to the COVID-19 outbreakIn the event of a wide outbreak of COVID-19, the duration of prescriptionsin the dispensing pharmacy business is likely to increase due to factors suchas restrictions on medical consultations to prevent the spread of infection.
As a result, the business is likely to see a rise in the average unit price perprescription, but a decline in the number of prescriptions.
The cosmetic & drug store business is likely to be affected by a drop in
customer footfall due to factors such as calls for people to stay at home,
temporary store closures and shorter opening hours, and a contraction in
inbound tourist demand. As such, the Group’s operating results could be
affected by the spread of COVID-19.
AIN HOLDINGS ANNUAL REPORT 2020

25

BASIS OF SUSTAINED VALUE CREATION(As of July 30, 2020)

Board of Directors and Corporate Auditors*Figures in brackets show the number of AIN HOLDINGS shares held as of April 30, 2020.

BOARD OF DIRECTORSCORPORATE AUDITORS

Kiichi Otani

Miya Oishi

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

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

July 1980
November 1981
July 1983
May 1985
May 1988

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

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

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

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

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

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

Ko Mori
April 1971
April 2002
April 2004
June 2006
June 2007
July 2012

August 2009
July 2014
July 2016
July 2018

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

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

July 1997
May 2003
July 2012

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

Corporate Auditor Outside(- shares)

April 1997

May 2004

October 1985

Akira Ibayashi

Director
In charge of Personnel Department(6,000 shares)

May 2003

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

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

Director Outside(2,000 shares)
April 1991

Joined The Daiei, Inc.
Joined Daiichi Medical Testing
Laboratories Co., Ltd. (now AINHOLDINGS INC.)
General Manager of Cosmetic and DrugStore Business, Merchandising Business
General Manager of Personnel
Department
Executive Officer
Director (current post)
President and Representative Director of
AYURA LABORATORIES INC. (current post)
In charge of Personnel Department(current post)

Independent

Yasuyuki Hamada

Rieko Kimei

April 1986
December 1995

Koichi Kawamura

Director Outside(- shares)

April 2003
April 2010
April 2014
December 2014
July 2015

Independent

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

Noriko Endo
Director Outside(- shares)

Independent

June 1994
April 2004

Joined DIAMOND, Inc.
Head and Director of Tokyo Office, Kyushu
University
April 2006
Deputy Editor of Diamond Weekly,
DIAMOND, Inc.
September 2013 Visiting Researcher at Policy Alternatives
Research Institute, University of Tokyo(current post)
April 2015
Project Professor, Graduate School of Mediaand Governance, Keio University(current post)
July 2018
Outside Director of the Company(current post)
June 2019
Outside Director of Hankyu Hanshin
Holdings, Inc. (current post)
Outside Director of VLC HOLDINGS CO., LTD.
(current post)
April 2020
Specially appointed professor of Keio
University Research Institute (current post)

April 1963
June 2001
June 2003
July 2012

Independent

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

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

Independent

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

Toshihide Mizushima
Representative Senior Managing Director
In charge of Operating Management,
Operational Support and Information Technology(27,600 shares)
April 1982
April 1986
July 2000
February 2001
May 2003
May 2012
November 2015
July 2018
May 2020

26 AIN HOLDINGS ANNUAL REPORT 2020

Joined SSP Co., Ltd.
Joined Otani Corporation (now AINHOLDINGS INC.)
Director
Division Manager of Cosmetic and DrugStore Business
Managing Director
Senior Managing Director
Representative Senior Managing Director(current post)
In charge of Operating Management,
Operational Support and Information
Technology
In charge of Operating Management,
Operational Support and Digital Promotion(current post)

Masato Sakai

Junro Ito

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

Director Outside(- shares)

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

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

Independent

August 1990
May 2009

Joined Seven-Eleven Japan Co., Ltd.
Director of Seven and i Holdings Co., Ltd.
(current post)
Executive Officer, Senior Officer, Corporate
Development Division,
Seven and i Holdings Co., Ltd.
April 2011
Senior Officer, CSR Management Division,
Seven and i Holdings Co., Ltd.
May 2016
Given responsibility for all Group companiesof Seven and i Holdings Co., Ltd.
July 2016
Senior Officer, Affiliate Company Division
Seven and i Holdings Co., Ltd.
December 2016 Managing Executive Officer, General
Manager, Corporate Development Division,
Seven and i Holdings Co., Ltd.
March 2018
Director, Ito-Yokado Co., Ltd. (current post)
July 2019
Outside Director of the Company(current post)
AIN HOLDINGS ANNUAL REPORT 2020

27

BASIC INFORMATION/DATA

CHARACTERISTICS OF DISPENSING PHARMACIES IN JAPANIn this section, we look at the characteristics of Japan’s dispensing pharmacy market, which hasdeveloped differently to the US and other overseas markets.

A FRAGMENTED MARKET
Japan’s dispensing pharmacy sector isfragmented, with the top five companies
accounting for only around 10% of the market,
including the Group’s leading share of about
3%. Approximately 30% of pharmacies inJapan are run by individuals. As the shortageof pharmacists becomes more acute and small
operators struggle to keep up with regulatorychanges, we expect the pace of M&A activity
and business closures to accelerate in the
sector. However, the Group’s ability to respondto those changes means there is significant
scope to increase market share.

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

(Fiscal 2020)

6.4％
500 or more pharmacies
9.8％
50-499 pharmacies
18.2％
10-49 pharmacies

Top 5 major companies*
12.7%

Top 50major companies
32.0%
Others
68.0%

63.8％
9 or fewer pharmacies*Top 5 major companies:	
AIN HOLDINGS INC., NIHON CHOUZAI Co., Ltd.,KRAFT Inc., WELCIA HOLDINGS CO., LTD.
Qol HOLDINGS Co., Ltd.,
Source: AIN HOLDINGS estimates, based on datafrom DRUG Magazine (July 1, 2020) andFY2019 dispensing fee statistics released by
the Ministry of Health, Labour and Welfare.

Small and medium size
pharmacies accountfor more than 60%of the market

Notes:1. 	The above figure dose not include1.7% of no response.
2. 	AIN HOLDINGS estimates based on data from a random
survey conducted by the Ministry of Health, Labour andWelfare in August 2016 (1,000 dispensing pharmacies
surveyed, 46.7% response rate).
Source: Report on Creating Dispensing Pharmacies forPatients, Ministry of Health, Labour and Welfare, March
31, 2017

DISPENSING PHARMACY EARNINGS MODEL
The government is revising dispensing feesin a way that only pharmacies capable ofproviding these services will be able togenerate profits.

Factors that affect dispensing pharmacy profitability

US

Medical insurance (patient cost)

Universal healthcare (10-30%)

Private health insurance (depends on contract terms)

Freedom to select hospitals / pharmacies

No restrictions

Affiliated service providers

Non-hospital dispensing pharmacies

75.8% (As of March 2019)100%

Drug prescriptions

Refills ×

Refills

Drug prices

Set by the government (Revised regularly)

Mail order ×

Dispensing pharmacy earning model• Low cost, high volume ................
• High cost, low volume ................

Sales from drugs

Drug procurement

Total store sales*1

Japan has four main types of dispensing
pharmacy: pharmacies located near hospitals,
pharmacies on hospital sites, pharmacies
not located near hospitals, and drug storeswith dispensing pharmacy functions. People
are free to choose any type of dispensing
pharmacy to fill their prescription, regardlessof their health insurance status. However,dispensing pharmacies located close tohospitals are the most popular in Japanesecities, which are less dependent on cars,
meaning they are more convenient forpatients, particularly those who have to
visit hospital regularly, such as the elderly
and patients with chronic illnesses. Many
pharmacies near hospitals or on hospital sites
also satisfy the government’s conditions forprimary care dispensing pharmacies, making
them the most popular with patients.

Onsite pharmacies

Drug price marginStore operation costs+ Store labor costs• Decrease .....................................

Dispensing fee revisions (criteria
for additional reimbursement points)• Looser ........................................
• Tighter ........................................
Hiring and training pharmacists• Higher quality (secure premiums) .
• Lower quality ..............................

28 AIN HOLDINGS ANNUAL REPORT 2020

Intelligent fees

Technical fees(includes premiums forgeneric drug dispensing)

Gross profit

and pharmacies)• Increase ......................................

Dispensing fees*2

Scale (number of prescriptions

SG&A expenses• Deterioration:higher personnel costs ................

Hospital
Pharmacy
Entry/exit

For patients

Closest to hospital, making them very convenient

Well stocked
Operating income

Increase earnings
Government
policies

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

Entry/exit

Public road

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

After

The following cases are still not permitted:
HospitalpremisesHospital

Hospital

Pharmacy

Pharmacy

Entry/exit

Entry/exit Entry/exit

Entry/exit

Entry/exit

Public road

Public road

Located inside
the same building

Connected bya private road or passage

MERITS OF ONSITE PHARMACIESConvenient
Head office costs• Consolidation and streamlining ....
• Uncontrolled increase ..................

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

BeforePublic road

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

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

Purchasing cost of drugs

Market price

ISPENSING PHARMACIES BY TYPE

Entry/exit
Drug price revisions• Case by case ............................

Mail order

Pharmacyneed to provide higher quality services, suchas the management of left over medicines,
cooperation with healthcare providers andsupport for patient health management.

Japan

Hospital

Dispensing pharmacies are being asked toplay a greater role in healthcare provision in
response to Japan’s super-aging society andrising healthcare expenses. Pharmacies now

DIFFERENCES BETWEEN JAPAN AND THE US

Drugs usually in stock

Safe and reassuring
Access to high-quality healthcare services, such asadvanced healthcare and lower risk of prescription
errorsFor pharmacies
High sales per pharmacy
High sales per pharmacy due to large volume ofprescriptions and complex prescriptions
Optimized inventories
Detailed understanding of prescription trends
at adjacent hospital enables efficient inventory
management
Opportunity to leverage and improvespecialist capabilities
More opportunities to leverage and improvespecialist skills of pharmacists, such as prepare
complex prescriptions, provide home-based
dispensing and deal with advanced healthcare
treatments

For hospitals
Profitable
Receive rental income from onsite pharmacies

Higher-quality healthcare services
Higher quality of local healthcare services
through advanced healthcare and support for
hospitalization
Lower risks

Close links with adjacent dispensing pharmacies
help hospitals rapidly identify drug treatment sideeffects and minimize risk of prescription errors

AIN HOLDINGS ANNUAL REPORT 2020

29

BASIC INFORMATION/DATA

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

2011/4

2012/42013/4

2014/4

2015/4

2016/42017/42018/4

2019/4125,495
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
11,2093,259

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

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

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

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

21,445
21,49265,898
14,101,164
4,341
397
49

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

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

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

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

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

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

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

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

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

110,915
111,003
193,451
35,427,484
13,1581,088
63114.04760.4020.0

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

250.71
1,895.63
50.0

310.082,729.44
50.0

254.872,931.48
55.0

259.113,130.77
55.0

2,920

3,115

4,290

4,765

4,495

4,245

5,340

7,720

7,300

8,840

6,030

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

5.9
3.2
5.4
14.0
38.4

7.3
3.9
6.2
13.5
52.7

5.8
3.3
4.8
9.0
54.9

5.5
3.1
4.8
8.5
57.3

ESG DATAFY2017FY2018FY2019FY2020

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

https://www.ainj.co.jp/csr/protection.html
-

9,830
9,608
18,234
1,387

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

11,318
11,22422,073
1,269

9,774
2,001
7,773
4,518
-

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

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

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

481
307
6.8%
7.4%
-

431
279
8.1%
7.3%
-

534
257
7.6%
7.6%
91.7%

952
560
6.7%
6.0%
62.2%

*Data for key operating subsidiary AIN PHARMACIEZ INC.

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

2020/4FY2017

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

FY2018FY2019FY2020

12
6
2
3
1
25.0

12
6
2
3
1
25.0

12
97.8%
100.0%

11
90.5%
100.0%

3
2

3
2

12
100.0%

11
100.0%

208
175
7
15
11

213
175
7
18
12

Government

Social30 AIN HOLDINGS ANNUAL REPORT 2020(¥ million)

2010/4https://www.ainj.co.jp/csr/maintenance.html
79.2%
74.9%
80.5%
76.1%
31.7%
30.9%
31.2%
31.7%
16.7%
18.2%
21.6%
16.0%
29.4%
31.3%
29.2%
33.3%

Composition of Board of Directors
Number of directors
912Inside directors (male)4
6
Inside directors (female)2
2
Outside directors (male)3
3
Outside directors (female)01
Ratio of female directors (%)
22.2
25.0
Board of Directors Meetings		
Number of meeting
12
12
Average attendance for outside directors
97.2%
97.8%
Average attendance for outside corporate auditors
100.0%
91.7%
Composition of Board of Corporate Auditors				Corporate auditors
3
3
Outside corporate auditors2
2
Board of Corporate Auditor Meetings
Number of meetings
12
12
Average attendance for outside corporate auditors
100.0%
91.7%
Executive Remuneration
Director and corporate auditor remuneration
210
210
Inside directors (¥millon)
183
181
Inside corporate auditors (¥millon)
77Outside directors (¥millon)
910Outside corporate auditors (¥millon)
1011

https://www.ainj.co.jp/csr/maintenance.html
292
361
342
400
417
420
503
584
420
501
686
725
34.3
4,450
6.8

34.9
4,440
5.9

35.3
4,550
6.1

34.8
4,610
5.8

AIN HOLDINGS ANNUAL REPORT 2020

31

BASIC INFORMATION/DATA

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSBUSINESS 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
and dispensing fees* are stipulated by the Ministry of Health,Labour and Welfare.
The Japanese government is progressively revising drug
prices and dispensing fees as part of its policy to curb national
medical expenses. Earnings at dispensing pharmacies are thetotal of dispensing fees and sales of drugs, so earnings areaffected by these revisions.
The dispensing fee revisions in April 2020 included
adjustments that normalize a greater emphasis on appropriately
evaluating the primary care functions of dispensing pharmacies
in each community, as well as revisions aimed at spurringa structural shift from dispensing focused on products todispensing focused on services.
The gap in performance between companies in the
sector is likely to widen due to developments in the operating
environment amid deregulation and changes to systems
such as dispensing fee reimbursements. However, the Group
regards these changes in the operating environment as aperfect opportunity to push ahead with its strategy of further
increasing profitability.
*	Dispensing fees comprise intelligent fees and technical fees for pharmacists

BUSINESS OVERVIEW FOR THE FISCAL YEARUNDER REVIEW
During the fiscal year ended April 30, 2020, the Japanese
economy recovered at a moderate pace, supported by
improving corporate earnings and employment conditions.
However, the economy weakened considerably due to a rapid
deterioration caused by the COVID-19 outbreak.
In this economic environment, the Group worked to
expand its business and increase earnings. Specifically, theGroup opened new dispensing pharmacies and used M&A toexpand the business. It also developed its cosmetic and drug
store business.
For the fiscal year under review, net sales rose 6.2% year
on year to ¥292,615 million, operating income increased
0.0% to ¥16,068 million, ordinary income increased 1.1% to¥16,822 million and profit attributable to owners of parent
increased 1.7% year on year to ¥9,179 million.
As of the end of the fiscal year, the number of stores in theGroup totaled 1,151, a net decrease of 35 stores from the endof the previous fiscal year.

BUSINESS RESULTS BY SEGMENT
Dispensing Pharmacy BusinessTo ensure our pharmacists and dispensing pharmacies fulfill
their primary care role, the Group continues to build links withlocal medical service providers, strengthen pharmaceutical

32 AIN HOLDINGS ANNUAL REPORT 2020

management and guidance based on the integrated andcontinuous management of drug information using patient
medication notebooks and other means, and promote wider
use of generic drugs.
Also, in accordance with a government announcementfrom the Ministry of Health, Labour and Welfare (MHLW) on
10 April allowing patients to receive medical examinations
and other health services via the internet or telephone for alimited period during the COVID-19 outbreak, the Group madepreparations to accept prescriptions at all pharmacies in linewith the special measures and started providing guidance forpharmaceutical use via telephone and other channels as part ofmeasures to prevent the spread of infection.
In business development, the Group is pushing ahead
with further business expansion and measures to improve theefficiency of pharmacy operations, including actively opening
large pharmacies and tightening the criteria for M&A deals, aswell as adjusting its pharmacy opening strategy to withdraw
from small-scale pharmacies.
For the fiscal year under review, the dispensing pharmacy
business reported higher sales and profits, with sales rising
7.7% year on year to ¥263,750 million and segment income
increasing 13.7% to ¥20,850 million.
During the fiscal year, the Group opened a total of 20
dispensing pharmacies, including those acquired throughM&A deals, and closed 22 dispensing pharmacies and sold 42
as part of an overhaul of pharmacy operations, resulting in a
total of 1,088.
Cosmetic and Drug Store Business
The cosmetic and drug store business continued to face achallenging market environment due to factors such as apullback in demand after the hike to consumption tax and theimpact of the COVID-19 outbreak.
Against that backdrop, the Group continued to open ainz &tulpe cosmetic and drug stores in the major urban area, as well
as strategically develop sales areas at each store, based on theconcept of creating stores where customers would be happy
to browse for an hour. The Group also released the official
ainz & tulpe app on October 1, 2019, creating an app versionof its point card to improve convenience and service levels forcustomers.
However, as part of measures to prevent the spread of
COVID-19, the Group temporarily closed or shorted opening
hours at many stores, leading to a steep drop in sales from late
February.
As a result, for the fiscal year under review, the cosmetic
and drug store business reported lower sales and profits, withsales declining 2.0% year on year to ¥24,701 million andsegment income falling 73.0% to ¥262 million.
During the same period, the Group opened 15 ainz &tulpe stores: ainz & tulpe bono SAGAMIONO (Sagamihara,
Kanagawa Prefecture), ainz & tulpe ASAKUSA ROX (Taito Ward,
Tokyo), ainz & tulpe PERIE Chiba (Chiba, Chiba Prefecture) ,ainz & tulpe KAWASAKI ZERO GATE (Kawasaki, Kanagawa
Prefecture), ainz & tulpe Pole Town 2 (Sapporo, Hokkaido),
ainz & tulpe KASHIWA Modi (Kashiwa, Chiba Prefecture), ainz
& tulpe SAKAE Central Park (Nagoya, Aichi Prefecture), ainz &tulpe OMIYA ARCHE (Saitama, Saitama Prefecture), ainz & tulpe

PERIE Kaihimmakuhari (Chiba, Chiba Prefecture), ainz & tulpe
BEAUTY FACTORY YOKOHAMA HAMMERHEAD (Yokohama,
Kanagawa Prefecture), ainz & tulpe GINZA INZ (Chuo Ward,
Tokyo), ainz & tulpe LINKS UMEDA (Osaka, Osaka), ainz & tulpe
HAKATA MARUI (Fukuoka, Fukuoka Prefecture), ainz & tulpe
Daimaru Shimonoseki (Shimonoseki, Yamaguchi Prefecutre),ainz & tulpe SENDAI PARCO 2 (Sendai, Miyagi Prefecture) andclosed six stores, resulting in a total of 63 cosmetic and drug
stores at the end of the fiscal year.
Other Businesses
Net sales from other businesses decreased 22.6% year on yearto ¥4,163 million and segment loss was ¥342 million comparedwith the loss of ¥165 million a year earlier.

FINANCIAL POSITION
The balance of total assets at the end of the fiscal year
increased by ¥4,429 million from the end of the previous
fiscal year to ¥193,451 million. That mainly reflected increases
for merchandise and for deposits and guarantees, which
outweighed declines for cash on hand and in banks and for
goodwill.
Current assets at the end of the fiscal year under review
totaled ¥87,802 million, an increase of ¥2,356 million from¥85,446 million at the end of the previous fiscal year, mainlyreflecting increases for merchandise and other accounts
receivable.
Fixed assets at the end of the fiscal year under review
totaled ¥105,632 million, an increase of ¥2,117 million from¥103,515 million at the end of the previous fiscal year, primarily
due to a rise in investments and other assets.
The balance of current liabilities at the end of the fiscal year
under review was ¥74,700 million, an increase of ¥956 million
from ¥73,744 million at the end of the previous fiscal year,
while the balance of long-term liabilities was ¥7,747 million,
down ¥3,608 million from ¥11,355 million a year earlier.
As a result, the balance of total liabilities was ¥82,447
million, down ¥2,652 million from ¥85,099 million at the endof the previous fiscal year.
The balance of net assets at the end of the fiscal year underreview was ¥111,003 million, a rise of ¥7,081 million from¥103,922 million at the end of the previous fiscal year. As aresult, the shareholders’ equity ratio increased 2.4 percentage
points to 57.3%, compared with 54.9% at the end of theprevious fiscal year. ROA was unchanged at 4.8% and ROE
declined 0.5 of a percentage point to 8.5%.

BASIC POLICIES FOR PROFIT DISTRIBUTION
The Company considers the return of profits to shareholders as
an important management issue. Our basic policy is to repay
our investors proportionate to the profit we make, and tomaintain these payments at stable levels.
Internal reserves are held to strengthen the corporate
structure and in preparation for new store openings and future
development of the business. We will make effective use of

these funds to generate profits to be returned to shareholders
in the future.
The Company’s basic policy is to pay dividends from retained
earnings once per year at the end of the fiscal year.
For the fiscal year under review, the Company paid a fullyear dividend of ¥55 per share, unchanged from the previous
fiscal year.
In view of our profit forecasts, plans for investment andother factors, we intend to pay a full-year dividend fromretained earnings of ¥55 per share in the fiscal year ending
April 30, 2021.

CASH FLOWSIn the fiscal year under review, cash and cash equivalents(“cash”) decreased ¥1,564 million year on year to ¥45,931
million. This reflected operating cash flow generated by thedispensing pharmacy business and the cosmetic & drug store
business, which was mainly used to actively invest in new store
openings and M&A. Some cash was also held in reserve toprovide 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 ¥17,747 million,
compared with net cash provided of ¥14,788 million in theprevious fiscal year.
The main items that were positive for cash flow wereincome before income taxes of ¥15,930 million, as well
as depreciation and amortization of ¥4,087 million andamortization of goodwill of ¥4,357 million related to businessexpansion through new store openings and M&A. The main
item negative for cash flow was income taxes paid of ¥6,174
million.
Cash Flows from Investing Activities
Net cash used in investing activities was ¥11,474 million,
compared with net cash used of ¥19,985 million in theprevious fiscal year.
This mainly reflected payments of ¥1,442 million forpurchases of shares in subsidiaries due to changes in the scopeof consolidation related to shares acquired in 4 companies
through M&A deals, ¥4,913 million for purchases of property,
plant and equipment related to the opening of new cosmetic
and drug stores and dispensing pharmacies, and ¥4,710 million
for payments of leasehold and guarantee deposits.
Cash Flows from Financing Activities
Net cash used in financing activities was ¥7,837 million,
compared with net cash provided of ¥10,681 million in theprevious fiscal year.
The main cash outflows were net repayment of ¥5,513
million from short-term and long-term debt repayment andproceeds, and ¥1,948 million for cash dividends paid.

AIN HOLDINGS ANNUAL REPORT 2020

33

BASIC INFORMATION/DATAAIN HOLDINGS INC.
AIN HOLDINGS INC.
CONSOLIDATED BALANCE SHEETCONSOLIDATED BALANCE SHEETAS OF APRIL 30, 2020

ASSETSASSETSAS OF APRIL 30, 2020

Millions of yen
2020
2019

Thousands ofThousands of
U.S. dollars
U.S. dollars(Note 1(1))
Millions of yen(Note 1(1))
2020
2020
2019
LIABILITIES AND
2020
NET ASSETS LIABILITIES AND NET ASSETS

Current assets:
Current assets:
Cash on hand and in banks (Notes
Cash
2 and
on 4)
hand
¥ and
46,321in banks (Notes¥ 48,091
2 and 4) $¥Notes and accounts receivable (Note
Notes4)and accounts
13,653
receivable (Note12,771
4)
Other accounts receivable
Other accounts receivable
8,997
8,438
Inventories (Note 3)Inventories (Note15,321
3)
12,898
Short-term loans
Short-term loans 208
236
Other current assets
Other current assets
3,299
3,012
Allowance for doubtful accounts Allowance for doubtful(1)accounts(2)
Total current assets
Total current assets
87,80285,44646,321
432,219
13,653
127,395
8,997
83,95015,321
142,959
1,940
208
3,299
30,782(1)(9)
87,802819,277

Property, plant and equipment: Property, plant and equipment:
Buildings and structures, net
Buildings and structures,
16,609 net
16,352LandLand
10,960
10,394
Construction in progress
Construction in progress
143
283
Other property, plant and equipment,
Othernetproperty, plant
3,161
and equipment,
3,155
net
Total property, plant and equipment
Total property,30,874
plant and equipment
30,186

16,609154,978
10,960102,267
1,334
143
3,161
29,49530,874
288,084

Investments and other assets: Investments and other assets:
Investment securities (Notes 4 andInvestment
5)
securities
2,295(Notes 4 and1,795
5)Deferred tax assets (Note 10) Deferred tax assets
4,211(Note 10)
4,284
Net defined benefit asset (Note 9)Net defined benefit 111
asset (Note 9) 15
Long-term loans
Long-term loans 554
1,351
Deposits and guarantees
Deposits and guarantees
19,144
15,133
Goodwill
Goodwill
42,12345,249Other intangible fixed assets
Other intangible fixed
2,792
assets2,327
Other investments and other assets
Other investments5,168
and other assets
4,853
Allowance for doubtful accounts Allowance for doubtful(1,644)accounts (1,683)
Total investments and other assets
Total investments
74,757and other assets
73,3282,295
21,414
4,211
39,292
1,035
111
5,169
554
19,144
178,632
42,123393,048
2,792
26,052
5,168
48,222(1,644)(15,340)
74,757
697,555

Deferred Assets:
Share issuance cost
Total deferred assets
Total assets

Deferred Assets:
Share issuance cost 15
Total deferred assets
15
Total assets¥ 193,451

See accompanying notes.

See accompanying notes.

34 AIN HOLDINGS ANNUAL REPORT 2020

59
59
¥ 189,021

15
139
15
139
$¥ 1,805,085
193,451

Millions of yen
2020
2019

Current liabilities:
Current liabilities:¥ 48,091
Accounts payable$ 432,219(Note 4)
Accounts payable (Note 4)¥ 47,187
12,771
Short-term debt127,395(Notes 4 and 7) Short-term debt (Notes 4 and 7)
3,642
8,438
Accrued income83,950
taxes
Accrued income taxes
3,356
12,898Deposits received
142,959
Deposits received
13,094
Allowance236
for bonuses
1,940 to employees
Allowance for bonuses to employees
2,338
3,012
Allowance for bonuses
30,782 to directors
Allowance for bonuses to directors
16
Reserve(2)
for reward obligations(9)
Reserve for reward obligations
463
85,446
Other current liabilities
819,277
Other current liabilities
4,600
Total current liabilities
Total current liabilities
74,70016,352Long-term liabilities:
154,978
Long-term liabilities:
10,394Long-term debt102,267(Notes 4 and 7) Long-term debt (Notes 4 and 7)
Lease
283 obligations1,334
Lease obligations
3,155
Net defined benefit
29,495liability (Note Net9) defined benefit liability (Note 9)30,186
Other long-term288,084
liabilities
Other long-term liabilities
Total long-term liabilities
Total long-term liabilities

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

¥ 44,794
5,571
3,261
12,737
2,139
17
450
4,772
73,744

5,985
401
2,977
1,989
11,355

1,795
Net
Assets: (Note 21,414
11)
Net Assets: (Note 11)
4,284
Shareholders’ equity
39,292
Shareholders’ equity
Common15
stock (Note
1,035
13)
Common stock (Note 13)
21,894
21,894
1,351
Authorized - 44,000,000
5,169
shares inAuthorized2020 and -2019
44,000,000 shares in 2020 and 201915,133Issued - 35,428,212
178,632 shares in 2020
Issuedand -201935,428,212 shares in 2020 and 201945,249
Capital surplus 393,048
Capital surplus
20,50020,5002,327
Retained earnings
26,052Retained earnings
68,75861,526
4,853
Treasury stock (72848,222shares in 2020
Treasuryand 2019)
stock (728 shares in 2020 and 2019)(2)(2)(1,683)
Total shareholders’(15,340)
equityTotal shareholders’ equity
111,151
103,920
73,328
Accumulated other697,555
comprehensive
Accumulated
income: other comprehensive income:Unrealized holding losses on securities
Unrealized holding losses on securities(77)(6)
Remeasurements of defined benefit
Remeasurements
plans
of defined benefit plans (159)(59)
Total accumulated other comprehensive
Total accumulated
loss
other comprehensive(236)
loss
(65)
Non-controlling
59
interests
139
Non-controlling interests
88
67
Total
59 net assets 139
Total net assets
111,003103,922¥ 189,021
Total liabilities$ 1,805,085
and net assets Total liabilities and net assets¥ 193,451¥ 189,021

Thousands of
U.S. dollars(Note 1(1))
Millions of yen
2020
2020
2019

Thousands of
U.S. dollars(Note 1(1))
2020

$¥

$

440,300
47,187
3,642
33,983
3,356
31,314
13,094
122,179
2,338
21,815
16
149
4,320
463
4,600
42,92274,700697,023¥ 44,794
5,571
3,261
12,737
2,139
17
450
4,772
73,744440,300
33,98331,314
122,179
21,815149
4,320
42,922
697,023

2,432
22,692
1,436
154
3,124
29,1492,035
18,988
7,747
72,287

5,985
401
2,977
1,989
11,355

22,692
1,436
29,14918,98872,287204,292
21,894

21,894204,292

20,500191,284
68,758641,578(2)(18)
1,037,146
111,151

20,50061,526(2)
103,920

191,284
641,578(18)
1,037,146

(718)
(77)
(1,483)(159)(2,202)
(236)
88
821
1,035,765
111,003$¥ 1,805,085
193,451

(6)
(59)
(65)
67
103,922¥ 189,021(718)(1,483)(2,202)821
1,035,765$ 1,805,085

AIN HOLDINGS ANNUAL REPORT 2020

35

BASIC INFORMATION/DATAAIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF INCOME

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETSYEAR ENDED APRIL 30, 2020

YEAR ENDED APRIL 30, 2020

Net sales (Note 14)
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
Other income (expense):
Interest and dividend income
Real estate rental revenue
Consignment income
Technical advisory fee
Subsidies for employment adjustment
Gain on transfer of business
Refund of premium for cancelled insurance
Gain on sales of investments in capitalGain on contribution of securities to retirement benefit trust
Interest expenses
Losses on sales of accounts receivables
Rent expenses on real estates
Losses on disposal and sales of fixed assets
Impairment losses on fixed assets
Loss on valuation of investment securities
Loss on temporary closing of stores
Other, net¥

Millions of yen
2020
2019
292,615¥ 275,596
245,753
230,233
46,86145,36330,79329,295
16,06816,067
92
368
184
64
138
496
78

109
274
158
68
312
23
550

-

223
(63)
(67)
(134)
(916)
(263)
(218)
(97)
(24)
(138)
15,930

Profit before income taxes
Income taxes (Note 10):
Current
DeferredThousands of
U.S. dollars(Note 1(1))
2020$ 2,730,381
2,293,113
437,258
287,328
149,930
858
3,433
1,716
597
1,287
4,628
727

-

(125)
(71)
(95)
(695)
(766)
(179)
(9)
(442)
15,624

Thousands ofsharesMillions of yen
Shareholders' equity

Number ofshares ofcommon stock

Balance at April 30, 2018
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, 2019
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2020

35,42835,42835,428-

Common stock¥

21,894

21,894¥

21,894-¥

ProfitProfit attributable to non-controlling interests
Profit attributable to owners of parent

¥

¥

6,794
(230)
6,564
9,060
30
9,029

¥

20,500-¥¥54,2689,029(1,771)
7,257
61,526
9,179(1,948)7,231
68,758

Total
shareholders’equityTreasury stock

¥

(1)
(0)
(0)
(2)
(2)

¥

¥

¥

96,662
9,029(1,771)(0)
7,257
103,920
9,179(1,948)7,231
111,151

Millions of yen

-

2,080
(587)
(625)
(1,250)(8,547)(2,454)(2,034)(905)(223)(1,287)
148,642$

20,50020,500

Balance at April 30, 2018
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, 2019
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2020¥¥

Accumulated other comprehensive income (loss)
Unrealized
Total accumulated
Remeasurements
holding gains
otherof defined(losses) oncomprehensive
benefit planssecurities
income (loss)

84

(91)
(91)
(6)
(71)
(71)
(77)

¥

¥

62,032755
62,78885,854
195
85,648

(50)
(8)
(8)
(59)
(99)
(99)
(159)

¥

¥

34

(99)
(99)
(65)
(170)
(170)
(236)

Non-controllinginterests

¥

36

30
30
67

21
21
88

¥

-

Total net assets¥¥

96,733
9,029(1,771)
(0)
(68)
7,188
103,922
9,179(1,948)(149)
7,081
111,003

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

Common stock

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

Retainedearnings

Capital surplus

Balance at April 30, 2019
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2020$

204,292$

204,292-

Retainedearnings

Capital surplus$

191,284$

191,284-$$

574,097
85,648(18,176)
67,472641,578

Total
shareholders’equityTreasury stock

$

(18)
(18)

$

$

$

969,674
85,648(18,176)
67,472
1,037,146

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

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED APRIL 30, 2020

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

Millions of yen
2020
2019
9,201
¥
9,060

Thousands of
U.S. dollars(Note 1(1))
2020$
85,854

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

(91)
(8)
(99)
8,960

(662)
(923)
(1,586)
84,258

9,008

8,929

84,053

21

30

195

Balance at April 30, 2019
Profit attributable to owners of parent
Cash dividends paid
Acquisition of treasury stock
Net change in items other than those in shareholders’ equity
Net changes during the year
Balance at April 30, 2020

See accompanying notes.

$$

Accumulated other comprehensive income (loss)
Unrealized
Total accumulated
Remeasurements
holding gains
otherof defined(losses) oncomprehensive
benefit planssecurities
income (loss)

(55)
(662)
(662)
(718)

$

$

(550)
(923)
(923)
(1,483)

$

$

(606)
(1,586)(1,586)(2,202)

Non-controllinginterests

$

625

$

195
195
821

-

Total net assets$$

969,693
85,648(18,176)(1,390)66,072
1,035,765

See accompanying notes.
36 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

37

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

AIN HOLDINGS INC.
CONSOLIDATED STATEMENT OF CASH FLOWSYEAR ENDED APRIL 30, 2020

Cash flows from operating activities:
Profit before income taxes
Depreciation and amortization
Amortization of goodwill
Loss on sales of shares of subsidiaries and associates
Impairment losses on fixed assets
Gain on sales of investments in capital
Decrease in allowance for doubtful accounts
Increase in net defined benefit liability
Gain on transfer of business
Gain on contribution of securities to retirement benefit trust
Increase in allowance for bonuses to employees
Interest and dividend income
Interest expenses
Gains on investments in partnerships
Gains on donations of non-current assets
Loss on valuation of investment securities
Losses on disposal and sales of fixed assets(Increase) decrease in accounts receivable
Increase in inventories(Increase) decrease in other assets
Increase 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

YEARS ENDED APRIL 30, 2020 AND 2019

Millions of yen
2020
2019

(2)
256
(419)
(223)
183
(92)
63
(10)
(48)
218
880
(429)
(1,939)(1,237)
(530)
1,793
757
23,89392(64)(6,174)
17,747¥ 15,624
3,903
4,183
149
766
(550)
(155)
186
(312)
152
(109)
125
(17)
(48)
179
656
843
(2,054)
335
(407)
1,685
(990)
24,146109(125)(9,341)
14,788$ 148,642
38,13540,655317
2,454

Cash flows from investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for purchases of investment securities
Purchases of subsidiaries' shares resulting in obtaining controls
Payments for loans receivable
Proceeds from collections of loans receivable
Proceeds from collections of investments in capital
Payments for purchase of intangible fixed assets
Proceeds from sales of intangible assets
Payments of leasehold and guarantee deposits
Proceeds from refund of leasehold and guarantee deposits
Increase in other investments
Proceeds from withdrawal of time deposits
Payments into time deposits
Other, net
Net cash used in investing activities(4,913)
1,014(874)(1,442)(189)939
1(1,465)188(4,710)
662
(924)
314
(109)
35
(11,474)(3,761)783(28)(13,246)
(118)
626
850
(1,228)15(4,469)
808
(820)
616
(47)
33
(19,985)(45,843)9,461(8,155)(13,455)(1,763)8,761
9(13,669)
1,754(43,948)
6,177(8,621)
2,929(1,017)326(107,063)

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
Cash dividends paid
Other, net
Net cash used in financing activities

(15)
100
(5,598)(375)(1,948)(7,837)(1,599)0(6,771)(539)(1,771)(0)(10,681)(139)
933(52,234)(3,499)(18,176)(73,126)

Net decrease in cash and cash equivalents(1,564)
Cash and cash equivalents at beginning of year
47,495
Increase in cash and cash equivalents resulting from merger with unconsolidated subsidiaries
Cash and cash equivalents at end of the year (Note 2)¥ 45,931(15,878)
63,233140¥ 47,495(14,593)443,174$ 428,580

See accompanying notes.

38 AIN HOLDINGS ANNUAL REPORT 2020

¥ 15,930
4,087
4,357
34
263

Thousands of
U.S. dollars(Note 1(1))
2020

(18)
2,388
(3,909)(2,080)
1,707
(858)
587
(93)
(447)
2,034
8,211
(4,002)(18,092)(11,542)(4,945)
16,7307,063
222,944858(597)(57,609)
165,596

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, 2020, which was ¥107.17 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 54 and 68
subsidiaries as of April 30, 2020 and 2019, respectively. All significant intercompany accounts andtransactions have been eliminated in consolidation. All companies are required to consolidate all
significant investees, which are controlled through ownership of majority voting rights or existence of
certain conditions.
The investments in affiliates are stated at their underlying equity value. All companies are required toaccount for investments in affiliates (20% to 50% owned and certain others that are 15% to 20%
owned) by the equity method, in principle.
Of consolidated subsidiaries, AIN PHARMACIE Z INC., MEDIWEL Corp. and AYURA LABORATORIES
INC. close its accounts on April 30. The account closing date for five consolidated subsidiaries in thedispensing pharmacy business is the end of January. The account closing dates for five consolidated
subsidiaries in the dispensing pharmacy business are the end of February. The account closing date ofother consolidated subsidiaries is the end of March. Financial statements as of these respective 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 andthe 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").

AIN HOLDINGS ANNUAL REPORT 2020

39

BASIC INFORMATION/DATA

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.

(9) Allowance for doubtful accounts
The Company and its consolidated subsidiaries provide an allowance for doubtful accounts forprobable collection losses by applying the actual rate of bad debt losses experienced in a pastreference period for normal receivables and by individual assessment of collectability for doubtfulreceivables.

(5) Inventories(10) Bonuses to employees

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.

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.

(6) Depreciation and amortization(11) Bonuses to directors

Depreciation of property, plant and equipment other than leased assets is computed by the
declining-balance method at rates based on the useful lives, except that the straight-line method isapplied to buildings acquired on or after April 1, 1998 and to facilities attached to buildings andstructures acquired on or after April 1, 2016. The useful lives of major property, plant and equipment
are summarized as follows:

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.

Buildings and structures: 10 to 50 years

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

The straight-line method is applied over a three-year period for assets with an acquisition price of¥100,000 or more and less than ¥200,000.
Amortization of soft ware other than leased assets used by the Company and its consolidated
subsidiaries is computed by the straight-line method over the useful lives, five years. Amortization of
long-term prepaid expenses is computed by the straight-line method. Amortization of goodwill iscomputed by the straight-line method over a period (5 to 20 years).
Leased assets capitalized under finance leases are depreciated over the lease terms of the respective
assets with no residual value.
(7) Impairment of fixed assets
Fixed assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. When amounts of undiscounted future cash flows of fixed
assets are less than the carrying amounts, the fixed assets are determined to be impaired. Then, anamount by which the carrying amount exceeds the recoverable amount is recognized as an impairment
loss.
The Company and its consolidated subsidiaries identify group of assets by store as the smallest
identifiable group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows from other assets or groups of assets. With respect to non-performing
assets, real estate is regarded as an independent asset group.
The recoverable amount of the asset group is measured by the respective net selling prices or thevalue in use. The land is assessed based on the appraisal value by an independent real estateappraiser. The fair value of assets other than the land is the disposal value from which costs of disposal
are deducted. Its value in use is calculated by discounting the future cash flows at a discount rate of
1.9% and 1.5% for the year ended April 30, 2020 and 2019, respectively.
(8) Deferred charges
Amortization of share issuance cost is computed by the straight-line method over three years.

(12) Reserve for reward obligations(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.

40 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

41

BASIC INFORMATION/DATA

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.
(17) Unapplied accounting standards
Revenue Recognition
Accounting Standard for Revenue Recognition (Accounting Standards Board of Japan (“ASBJ”)
Statement No. 29 revised March 31, 2020)
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No. 30
revised March 31, 2020)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ GuidanceNo. 19 revised on March 31, 2020)
The Accounting Standard and the Implementation Guidance provide comprehensive principles forrevenue recognition. An entity applies the following five steps to recognize revenue.
1. Identify the contracts with a customer
2. Identify the separate performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue when or as the performance obligation is satisfied
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard and the
Implementation Guidance from the beginning of the fiscal year ending April 30, 2022.
Effects of adoption of the Accounting Standard and the Implementation Guidance are currently
evaluated.
Fair Value Measurement
Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30 issued on July 4, 2019)
Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No.
31 issued on July 4, 2019)
Accounting Standard for Measurement of Inventories (ASBJ Statement No. 9 revised on July 4, 2019)
Accounting Standard for Financial Instruments (ASBJ Statement No. 10 revised on July 4, 2019)
Implementation Guidance on Disclosures about Fair Value of Financial Instruments (ASBJ GuidanceNo. 19 revised on March 31, 2020)

31, 2020)
This accounting standard has been released to provide guidance on disclosure of information thatdeepens the understanding of users of the financial statements about estimates that embody a risk of asignificant impact on the financial statements of the following accounting period.
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard from the endof the fiscal year ending April 30, 2021.
Accounting Policy Disclosures, Accounting Changes and Error Corrections
Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections(ASBJ Statement No.24 revised March 31, 2020)
This accounting standard has been released to provide an outline of the applicable accounting
principles and procedures in cases where directly relevant accounting standards are not available.
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard from the endof the fiscal year ending April 30, 2021.
(18) Additional information
Accounting estimates used for impairment losses on fixed assets and the recoverability of deferred tax
assets are based on information available at the time of preparation of the consolidated financial
statements. The Company and its consolidated subsidiaries concluded these accounting estimateshave no significant effects on its consolidated financial statements for the fiscal year ending April 30,
2020.
Accounting estimates have been formulated based on the assumption that because of COVID-19
outbreak, the number of prescriptions will be declined due to an increase in longer-term prescriptions in
the dispensing pharmacy business, weak consumer mind for purchase will be continued due to “stayhome” request from governments until July, 2020 in the cosmetic and drug store business, and inboundtourist demand will not recover during the fiscal year ending April 30, 2021. We still have many
uncertainties regarding the impact of the spread of COVID-19 outbreak, which might affect theCompany’s and its consolidated subsidiaries’ operating results and financial position for the fiscal year
ending April 30, 2021.
In response to requests from national and local governments, the Company and its consolidated
subsidiaries have temporarily closed or shortened the opening hours of many cosmetic and drug storesto prevent the spread of COV ID-19. Fixed expenses, such as personnel expenses, depreciation, rent
and others, incurred by stores during the closures have been booked as “Losses on temporary closingof stores” under “Other income (expense).”The ASBJ has developed an “Accounting Standard for Fair Value Measurement” and “Implementation
Guidance on Accounting Standard for Fair Value Measurement” (hereinafter collectively, the “Fair
Value Measurement Standard”), which provide guidance for fair value measurement in order toimprove comparability with internationally recognized accounting standards. The Fair Value
Measurement Standard is applied with respect to the fair value of the following items;• Financial instruments defined in “Accounting Standard for Financial Instruments”• Inventories held for trading purposes defined in “Accounting Standard for Measurement of
Inventories”“Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised
requiring disclosure of financial instruments broken down by level in the fair value hierarchy.
The Company and its consolidated subsidiaries intend to adopt the Accounting Standard and the
Implementation Guidance from the beginning of the fiscal year ending April 30, 2022.
Effects of adoption of the Accounting Standard and the Implementation Guidance are currently
evaluated.
Disclosure of Accounting Estimates
Accounting Standard for Disclosure of Accounting Estimates (ASBJ Statement No. 31 issued on March

42 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

43

BASIC INFORMATION/DATA

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, 2020 and 2019 are as follows:

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

Thousands of
U.S. dollars
2020$
432,219

Millions of yen
2020
2019
¥ 46,321¥ 48,091¥(390)
45,931(595)
47,495¥$(3,639)428,580(2) The following table summarizes assets acquired and liabilities assumed through the acquisition ofshares of the companies, acquisition cost and net disbursement:(i) Acquisition of shares of four companies, including two companies in the dispensing pharmacy
business, for the year ended April 30, 2020
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies, 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
2020
¥
1,397
397
1,351
(1,451)(29)
1,664

Thousands of
U.S. dollars
2020$
13,035
3,704
12,606(13,539)(270)
15,526(222)(2,071)

¥

1,442

$

13,455(ii) Acquisition of shares of 12 companies in the dispensing pharmacy business for the year endedApril 30, 2019
The following is the summary of assets acquired and liabilities assumed through the acquisitionof shares of the companies, 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
2019
¥
9,799
3,553
11,568(7,127)(1,760)16,033(2,786)¥

13,246

3. Inventories
Inventories at April 30, 2020 and 2019 consisted of the following:
Millions of yen

44 AIN HOLDINGS ANNUAL REPORT 2020

Thousands of
U.S. dollars

Merchandise
Supplies

2020
15,035286¥ 15,321¥2019
12,673225¥ 12,898
¥

$
$

2020
140,291
2,668
142,959

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 cosmetic and drug stores and through M&A activities. Operating cash flows
provide the majority of the funds the Company and its consolidated subsidiaries require to fund its
shop openings. The Company and its consolidated subsidiaries secure additional funding as
needed for M&A activities through bank borrowings and issuance of new shares and invests inhighly liquid financial assets.
(b) Details of financial instruments used and the exposures to risk and how they arise
Notes and accounts receivable, which relate to trade receivables, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and theSocial Insurance Medical Care Fee Payment Fund. In addition, most of other accounts receivable
are collected in a short period. Therefore, these do not entail any risk.
Investment securities, which are principally equity securities held for the purpose of maintaining
operating relationships with other companies, involve the risk of market price fluctuations.
Lease deposits and guarantee deposits are primarily deposits placed with the owners ofproperties that the Company leases for the operation of dispensing pharmacies and cosmetic anddrug stores. Such deposits involve lessor credit risk.
Accounts payable, which relate to purchases, are payable within three months.
With respect to borrowings, the Company raises funds primarily as working capital or in relation tocapital expenditures. Redemption periods on such debts are typically 14 years from the accountclosing date, at the longest.
(c) Policies and systems for risk management
Management of credit risk (the risk that a business partner will default on its business transactions)
As the Company’s notes and accounts receivable, which relate to sales, are mostly composed ofprescription dispensing fees receivable from National Health Insurance associations and the Social
Insurance Medical Care Fee Payment Fund, and most of other accounts receivable are alsocollected in a short period, no particular risk management is employed.
Securities held to maturity are based on the Company’s Marketable Securities Investment
Standards. Such investments are based on careful decisions, following internal screenings ofinvestees and investment amounts. Furthermore, such investments are monitored regularly,
determining the investee’s financial status throughout the investment period to quickly determine
and minimize potential repayment difficulties.
The Company manages default risk on lease deposits and guarantee deposits through the credit
control upon making contract periods and regular credit screening.
Management of mark et risk (the risk of exchange and interest rate fluctuations)
The Company and its consolidated subsidiaries raise funds mainly through long-term debt. With
regard to investment securities, the Company and its consolidated subsidiaries regularly check thefinancial conditions of the issuers of unlisted securities. The Company and its consolidated
subsidiaries review on an ongoing basis the status of their holdings of listed securities, taking into
consideration market conditions and their relationships with the issuing companies.
Management of liquidity risk associated with fund procurement (the risk of being unable to execute
payments when due)
To manage liquidity risk, the Company and its consolidated subsidiaries create cash flow plans
based on annual capital expenditures forecasts. These plans are updated each month, based onrevised operating performance and forecast figures. To ensure the Company’s ability to respond

AIN HOLDINGS ANNUAL REPORT 2020

45

BASIC INFORMATION/DATA

flexibly 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, 2020 and 2019 are summarized in the following table:
AssetsThousands ofMillions of yen
U.S. dollars
2020
2019
2020
Carrying value
Cash on hand and in banks¥ 46,321¥ 48,091$
432,219
Notes and accounts receivable
13,653
12,771
127,395
Other accounts receivable
8,997
8,438
83,950Investment securities
978
1,074
9,125
Deposits and guarantees
19,09015,079178,128
Total
89,04185,454
830,838
Fair value
Cash on hand and in banks
46,321
48,091
432,219
Notes and accounts receivable
13,653
12,771
127,395
Other accounts receivable
8,997
8,438
83,950Investment securities
976
1,080
9,107
Deposits and guarantees
18,956
15,047
176,877
Total
88,90685,429829,579
Difference
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
(1)
6
(9)
Deposits and guarantees
(133)
(31)
(1,241)
Total
¥
(135)
¥
(25)
$
(1,259)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
2020
2019

Thousands of
U.S. dollars
2020

47,187$¥44,794(b) Investment securities
The fair values of equity securities are determined by their prices on stock exchanges. The fairvalues of bonds are determined by the prices indicated by the counterparty financial institutions, or
the Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period, and these amounts are discounted to their present value
using appropriate rates of interest.
(c) Deposits and guarantees
The Company determines credit risk from the standpoint of credit management, according to
repayment amount and contract period. These amounts are discounted to their present value using
appropriate rates of interest.
Liabilities:(a) Accounts payable, short-term debt and deposits received
As these instruments are settled in the short term, their carrying value approximates fair value. The
fair value of current portion of long-term debt included in short-term debt is determined bydiscounting the total amount of principal and interest by the assumed interest rate on new
borrowings of the same type.
(b) Long-term debt
The fair value of long-term debt is determined by discounting the total amount of principal andinterest by the assumed interest rate on new borrowings of the same type.
Financial instruments for which fair value is not readily determinable:
The fair values of unlisted equity securities with carrying amounts of ¥1,317 million ($12,288 thousand)and ¥720 million as of April 30, 2020 and 2019, respectively, are not readily determinable.

440,300

3,642
13,0942,432
66,356

5,571
12,737
5,985
69,08933,983
122,179
22,692
619,165

47,18744,794440,300

3,644
13,0942,434
66,3605,570
12,737
5,974
69,07734,002
122,179
22,711
619,203

-

-

-

1
1
3

(0)
(11)
(11)

9
9
27

¥

As these instruments are settled in the short term, their carrying value approximates fair value.

$

Method of calculating the fair value of financial instruments and matters related to available-for-salesecurities:
Assets:(a) Cash on hand and in banks, notes and accounts receivable, and other accounts receivable

46 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

47

BASIC INFORMATION/DATA

5. Securities

The redemption schedule for monetary claims and securities with maturity dates as of April 30,
2020 and 2019 are summarized as follows:(1) The following tables summarize acquisition costs, carrying values and differences of securities withavailable fair values as of April 30, 2020 and 2019:

Millions of yen
Due inone yearor less
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
Debt securities
Deposits received
Total

¥

¥

Other securities:
Due after
ten years

45,670 ¥13,653
8,997

- ¥
-

- ¥
-

-

140
2,320
70,780 ¥30
4,522
4,552 ¥

3,346
3,346 ¥

8,954
8,954

Due inone yearor less
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
Debt securities
Deposits received
Total

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

Thousands of
U.S. dollars
2020
Due after
Due after
one yearfive years
throughthroughfive years
ten years

Due after
ten years$ 426,145 $
127,395
83,950

- $
-

- $
-

-

1,306
21,647$ 660,446 $279
42,19442,474 $31,221
31,221 $

83,54983,549Millions of yen
Due inone yearor less
Cash on hand and in banks
Notes and accounts receivable
Other accounts receivable
Investment securities
Debt securities
Deposits received
Total

48 AIN HOLDINGS ANNUAL REPORT 2020

¥

¥

2019
Due after
Due after
one yearfive years
throughthroughfive years
ten years

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
2020
2019
¥

¥

11
-

¥

147
-

Thousands of
U.S. dollars
2020
$

102
-

0
11

1
149

0
102

22
-

355
-

205
-

0
23

1
357

0
214

11
-

207
-

102
-

0
12

0
207

0
111

¥

$

Due after
ten years

47,289 ¥
12,771
8,438

- ¥
-

- ¥
-

-

155
2,433
71,086 ¥

4,235
4,235 ¥

2,557
2,557 ¥

5,907
5,907

AIN HOLDINGS ANNUAL REPORT 2020

49

BASIC INFORMATION/DATA

6. Leases
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
2020

Millions of yen
2020
2019
¥

721
170

¥

692
155

$

6,727
1,586

¥

170
15
1,076

70
15
934

1,586
139
10,040

600
170
170

476
155

5,598
1,586

13
954

70
14
717

1,586
121
8,901

(121)
-

(216)
-

(1,129)
-

(1)
(122)

(0)
(216)

(9)
(1,138)¥$(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, 2020 and 2019:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Total sales ofother securities sold
¥
39
¥
21
$
363
Related gains
7
Related losses
8(3) The following table summarizes impairment losses on other securities in the years ended April 30,
2020 and 2019:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020

50 AIN HOLDINGS ANNUAL REPORT 2020

Due within one year
Due after one year
Total

¥

2,214
17,842
20,056¥¥

1,957
14,18016,138¥$20,658
166,483
187,141$

7. Short-term debt and long-term debt

Stocks of non-consolidated subsidiaries and affiliates were ¥224 million ($2,090 thousand) and ¥50
million at April 30, 2020 and 2019, respectively.

Other securities with fair value
Other securities without fair value

Remaining lease expenses for non-cancellable operating lease transactions are as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020

¥

218
-

¥

177
2

$

2,034
-

Short-term debt and long-term debt at April 30, 2020 and 2019 consisted of the following:Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Short-term bank loans with aweighted-average interest rate of
0.3%
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 (2021-2033) with aweighted-average interest rate of
0.3%
Lease obligation (2021-2023) with aweighted-average interest rate of
1.0%
Total

¥

¥

15

¥

20

$

139

3,626

5,550

33,834

193

318

1,800

2,432

5,985

22,692

154
6,422

¥

401
12,277$

1,436
59,923

The aggregate annual maturities of long-term debt at April 30, 2020 and 2019 are as follows:
Thousands ofMillions of yen
U.S. dollars
Year ending April 30,
2020
2020
2021
¥
3,626
$
33,8342022
1,590
14,836
2023
529
4,936
2024
47
438
2025
147
1,371
2026
and thereafter
115
1,073

Year ending April 30,
2020
2021
2022
2023
2024
2025
and thereafter

Millions of yen
2019
¥
5,550
3,671
1,597
535
53
129

AIN HOLDINGS ANNUAL REPORT 2020

51

BASIC INFORMATION/DATA(3) For the years ended April 30, 2020 and 2019, the Company recognized impairment losses for thefollowing assets groups:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Description of assets
Land
¥
¥
39
$
Buildings and structures
202
451
1,884
Goodwill
13
185
121
Other
47
90
438
Total
¥
263
¥
766
$
2,454

The aggregate annual maturities of lease obligations at April 30, 2020 are as follows:
Thousands ofYear ending April 30,
Millions of yen
U.S. dollars
2021
¥
193
$
1,800
2022
133
1,241
2023
15
139
2024
5
46
2025
-

8. Sales, disposal and impairment of fixed assets(1) Gains and losses on sales of fixed assets for the years ended April 30, 2020 and 2019 are as
follows:
Gains on sales of fixed assets:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Buildings and structures
Land
Other property, plant andequipment
Other intangible fixed assets
Total

¥

¥

Losses on sales of fixed assets:

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

0
9
2
24
36

¥

28
3
5
0
38

¥

¥

76
34

¥

$

60
190

$

18
223
335

709
317

3
2

5
8
11

27
18

3
0
120

0
277

27
0
1,119

¥

$

(2) Losses on disposal of fixed assets for the years ended April 30, 2020 and 2019 are as follows:
Millions of yen
2020
2019
Buildings and structures
Other property, plant andequipment
Goodwill
Other intangible fixed assets
Deposits and guarantees
Other investments and otherassetsConstruction in progress
Disposal cost
Total

52 AIN HOLDINGS ANNUAL REPORT 2020

¥

¥

118

¥

167

Thousands of
U.S. dollars
2020
$

1,101

28
160
18
116

12
102
79
18

261
1,492
167
1,082

18
305
30
796

22
15
417

167
2,845
279
7,427

¥

$

Defined-benefit pension plan
(1) Reconciliation of the beginning and the ending balance of retirement benefit obligation (excluding
the amount of the simplified method)

083

Thousands of
U.S. dollars
2020

Millions of yen
2020
2019
¥

$

9. Retirement benefits

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

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

Balance as of May 1, 2018
Service costs
Interest cost on retirement benefit obligation
Actuarial losses incurred
Pension and severance payments
Other
Balance as of April 30, 2019

Millions of yen
2019
¥
2,786
395
11
98
(164)
208
¥
3,336

Thousands of
U.S. dollars
2020$
31,128
4,264
83
1,567
(1,492)
149$
35,718(2) Reconciliation of the beginning and the ending balance of plan assets (excluding the amount of thesimplified method)

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

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

Thousands of
U.S. dollars
2020$
10,002
74
(102)
4,544
(485)
$
14,033AIN HOLDINGS ANNUAL REPORT 2020

53

BASIC INFORMATION/DATA(5) Retirement benefit expenses for the years ended April 30, 2020 and 2019 comprised the following:

Millions of yen
2019
¥
859
6
70
103
(44)
76
¥
1,072

Balance as of May 1, 2018
Expected return on plan assets
Actuarial gains incurredBusiness owner’s contribution
Pension and severance payments
Other
Balance as of April 30, 2019(3) Reconciliation of the beginning and the ending balance of liabilities of the simplified method
Millions of yen
2020
¥
697
144
(7)
(137)

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

3
(12)
688

¥

Thousands of
U.S. dollars
2020
$
6,503
1,343
(65)
(1,278)
27
(111)
6,419

$

Millions of yen
2019
¥
689
192
(8)
(208)

Balance as of May 1, 2018
Retirement benefit expenses
Business owner’s contribution
Pension and severance payments
Increases due to a newly consolidated
subsidiary
Other
Balance as of April 30, 2019

Funded retirement benefit obligation
Plan assets
Subtotal
Unfunded retirement benefit obligation
Net of liability and asset reported on the
consolidated balance sheet
Net defined benefit liability
Net defined benefit asset
Net of liability and asset reported on the
consolidated balance sheet

3,013
3,124
(111)
¥

3,013

2,962

144
630

¥

192
607

83
(74)
251
1,343
5,878

$

(a) Current

Prior service costs
Actuarial losses
Total

Millions of yen
2020
2019
¥
¥
(13)
(152)
0
¥
(152)
¥
(13)

Thousands of
U.S. dollars
2020$(1,418)$(1,418)Millions of yen
2020
2019
239
87
¥
239
¥
87

Thousands of
U.S. dollars
2020
2,230
$
2,230

(7) Plan assets

Thousands of
U.S. dollars
2020$
16,683(14,696)
1,987
26,117

2,962
2,977
(15)
¥

¥

11
(6)
28
(13)

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

Unrecognized actuarial gains
Total(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
Millions of yen
2020
2019
¥
1,788
¥
1,376
(1,575)(1,140)
213
235
2,799
2,726

9
(8)
27
-

(b) Accumulated

157
(124)
697

¥

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

Thousands of
U.S. dollars
2020
$
4,264

Millions of yen
2020
2019
¥
457
¥
395

28,114
29,149(1,035)$

28,114(a) Percentages for major categories within total plan assets are as follows:
Bonds
StocksGeneral accountSeparate account
Other
Total

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

2019
22%
11%
46%
16%
5%
100%

Retirement benefit trust for a lump-sum benefit plan occupied 23% of total plan assets as of April 30,
2020.
(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, 2020 and 2019are principally as follows:
2020
2019
Weighted average discount rate
Weighted average expected rate of
return on plan assets
Expected rates of salary increase

54 AIN HOLDINGS ANNUAL REPORT 2020

0.53%

0.48%

0.75%
1.00%-3.68%

0.75%
1.00%-3.68%

AIN HOLDINGS ANNUAL REPORT 2020

55

BASIC INFORMATION/DATA

10. Income taxes
The aggregate statutory income tax rates used for calculation of deferred income tax assets andliabilities for the years ended April 30, 2020 and 2019 were 30.4%.
(1) The following table summarizes the significant differences between the statutory tax rate and theeffective tax rates for consolidated financial statement purposes for the years ended April 30, 2020
and 2019:
Statutory tax rate
Non-deductible expenses
Per capita inhabitant tax
Amortization of goodwill
Valuation allowance
Tax credits on tax system to expand
incomeDifferent tax rates applied toconsolidated subsidiaries
Other
Effective tax rates

2020
30.4%
0.7
0.5
8.2
(0.3)

2019
30.4%
1.8
0.6
8.0
(3.8)

(2.5)

(0.0)

5.1
0.2
42.2%

4.3
0.7
42.0%

(2) Significant components of deferred tax assets and liabilities as of April 30, 2020 and 2019 are as
follows:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Deferred tax assets:
Impairment losses
¥
387
¥
407
$
3,611
Excess of depreciation
671
734
6,261
Excess of allowance for bonuses
793
726
7,399
Excess of reserve for rewards obligation
158
153
1,474
Net defined benefit liabilities
1,064
1,028
9,928
Goodwill on transfer of business
425
479
3,965
Asset retirement obligations
363
352
3,387
Income taxes payable
349
309
3,256
Accrued expense
352
311
3,284
Net operating loss carryforwards
845
871
7,884
Allowance for doubtful accounts
560
524
5,225
Other
533
255
4,973
Sub-total deferred tax assets
6,506
6,156
60,707
Valuation allowance on net operating loss
carryforwards
(795)
(801)
(7,418)Valuation allowance on deductible temporary
differences(1,019)(846)(9,508)Sub-total Valuation allowance(1,814)(1,648)(16,926)
Total deferred tax assets
4,691
4,508
43,771
Deferred tax liabilities:
Capitalized removal costs
(188)
(188)
(1,754)
Net unrealized holding gains on securities
(6)
(4)
(55)
Other accounts receivable
(367)
(248)
(3,424)
Other
(75)
(92)
(699)
Total deferred tax liabilities
(638)
(533)
(5,953)Net deferred tax assets
¥
4,053
¥
3,974
$
37,818(3) The amounts of net operating loss carryforwards and its deferred tax assets by expiration date as ofApril 30, 2020 and 2019 are summarized as follows:
Millions of yen
2020
Due
Due
Due
Due
after
after
after
Due in
after
Due
two
three
four
one
one year
after
years
years
years
Total
year
throughfivethroughthrough throughor less
two
years
three
four
five
years
years
years
years
Net operating loss
carryforwards (a)Valuation allowance
Deferred tax assets

¥

-

$

¥

22

¥

9

¥

48

¥

748

¥

845

(17)

(22)

(9)

(48)

(698)

(795)

-

-

-

-

-

50

50

-

Due inone
year
or less17-

Due inone
year
or less

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

¥

Due
after
one
year
throughtwoyears

Thousands of U.S. dollars
2020
Due
Due
Due after
after
after
two
three
four
years
years
years
throughthrough through
three
four
five
years
years
years

$

$

158
(158)
-

Due
after
one yearthrough
two
years

205
(205)
-

$

83
(83)
-

$

447
(447)
-

Millions of yen
2019
Due
Due
Due
after
after
after
two
three
four
years
years
years
throughthrough through
three
four
five
years
years
years

Due
after
five
years

$

6,979
(6,513)
466

Due
after
five
years

Total

$

7,884
(7,418)466

Total

Net operating loss
¥
0 ¥
10
¥
17
¥
24
¥
19
¥
799 ¥
871
carryforwards (a)Valuation allowance
(0)
(10)
(17)
(24)
(19)
(729)
(801)
Deferred tax assets
6969(a) The amount is determined by multiplying the corresponding net operating loss carryforwards by
the effective statutory tax rate.

11. Net assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of Directors,
designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital,
which is included in capital surplus.
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

56 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

57

BASIC INFORMATION/DATA

14. Segment information

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 with18 and 19 banks as of April 30, 2020 and 2019,respectively, to finance working capital requirements. The outstanding balances of such overdrafts asof April 30, 2020 and 2019 are as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Total overdraft available¥ 22,350¥ 23,400$
208,547
Amount utilized
14
20
130
Outstanding balance¥ 22,336¥ 23,379$
208,416

13. Amounts per share
Net assets per share at April 30, 2020 and 2019 and basic and diluted earnings per share for the years
then ended are as follows:
Yen
U.S. dollars
2020
2019
2020
Net assets per share¥ 3,130.77¥ 2,931.48$
29.21
Basic earnings per share
259.11254.87
2.41
Diluted earnings per share
Cash dividends per share attributable to the year
55
55
0.51
Cash dividends per share represent the cash dividends declared as applicable to the respective years,
including dividends to be paid after the end of the year and not accrued in the accompanying
consolidated financial statements. Total dividends paid were ¥1,948 million ($18,176 thousand) and¥1,948 million for the years ended April 2020 and 2019, respectively.
The basis for calculation of basic earnings per share is as follows:

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

58 AIN HOLDINGS ANNUAL REPORT 2020

Millions of yen
2020
2019
¥
9,179
¥
9,029
9,179
35,427,484

9,029
35,427,497

Thousands o
U.S. dollars
2020$
85,64885,648(1) Overview of reporting segments
Reporting segments of the Company and its consolidated subsidiaries are composed of thoseindividual business units for which separate financial information is available, from which the boardof directors makes decisions regarding the allocation of management resources and for which
operating performance can be evaluated, allowing the reporting segments to be analyzed
periodically.
The Company and its consolidated subsidiaries divide their operations into two main businesses,
the Dispensing Pharmacy Business and the Cosmetic and Drug Store Business, and the Other
Business. The Dispensing Pharmacy Business primarily includes the dispensing pharmacy
business, sale of generic drugs, staff dispatching and introduction services and consulting business.
The Cosmetic and Drug Store Business primarily consists of the management of cosmetic and drug
stores. The Other Business primarily involves real estate rental business. The Company and its
consolidated subsidiaries plan and execute strategies for each business.
Consequently, the business operations of the Company and its consolidated subsidiaries areclassified into the three following reporting segments: Dispensing Pharmacy, Cosmetic and DrugStore and Other.
(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, 2020 and 2019 are summarized as follows:
Millions of yen
2020
Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assetsDispensing

Cosmetic andpharmacy

Drug store¥

263,750
263,750¥

24,701
24,701¥

173,748

¥

¥

2,676

¥

20,850

Other

Total

¥

4,163
114
4,277

12,771

¥

391

¥

262

Adjustments¥

292,615
114
292,729(3,948)

16,822

11,869¥198,389¥(4,938) ¥193,451

279

¥

3,347

¥

199

3,547

(342)

¥

Consolidated

20,771

- ¥
(114)
(114)

¥

292,615
292,615

4,336
91

3
172

18
-

4,357
263

-

4,357
263

3,688

1,488

311

5,488

337

5,825

AIN HOLDINGS ANNUAL REPORT 2020

59

BASIC INFORMATION/DATA

Amortization of goodwill and unamortized balances by reporting segment as of and for the years endedApril 30, 2020 and 2019 are summarized as follows:

Thousands of U.S. dollars
2020
Sales
Sales to third parties
Intersegment sales
Total sales
Segment income(loss)
Segment assets
Other
Depreciation andamortization
Amortization of
goodwill
Impairment losses
Increase of tangible
and intangible
assetsDispensing

Cosmetic andpharmacy

Drug store$ 2,461,043-$

230,484
-

Other

$

Total

38,844
1,063$ 2,730,381
1,063
2,731,445

2,461,043

230,484

39,908

194,550$ 1,621,237

2,444
119,165(3,191)
193,813110,749 $ 1,851,161$

24,969

$

$

3,648

$

$

2,603

$

31,230Adjustments$- $ 2,730,381(1,063)(1,063)$$2,730,381

1,856

$

33,096

27
1,604

167
-

40,6552,454-

40,6552,454

34,412

13,884

2,901

51,2083,144

54,352Millions of yen
2019
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
assets60 AIN HOLDINGS ANNUAL REPORT 2020¥

Cosmetic andpharmacy

Drug store

245,003
245,003¥

25,21025,210

Other

¥

Total

5,382
126
5,508

¥

275,596126
275,722

Adjustments¥

Consolidated

- ¥
(126)
(126)

275,596
275,596¥

18,331
170,170¥

972
11,255¥(165)
9,471 ¥

19,138
190,897¥(2,500)(1,875) ¥16,637
189,021

¥

2,538

¥

315

¥

305

3,159

¥

218

3,378

¥

Amortization of goodwill
Unamortized balances of goodwill

¥

¥

4,165
431

334

18
-

4,183
766

-

4,183
766

3,137

1,709

238

5,085

363

5,449

Dispensing

Cosmetic andpharmacy

Drug store

4,336
40,699

¥

Other

3
60

¥

Adjustments

18
1,363

¥

Consolidated

-

¥

4,357
42,123Thousands of U.S. dollars
2020(36,838)
156,965(46,076) $ 1,805,085

40,459849

Dispensing

Millions of yen
2020

Consolidated

Amortization of goodwill
Unamortized balances of goodwill$

Dispensing

Cosmetic andpharmacy

Drug store

40,459379,761

$

Other

27
559

$

Adjustments

167
12,718$

Consolidated-$

40,655393,048

Millions of yen
2019
Amortization of goodwill
Unamortized balances of goodwill¥

Dispensing

Cosmetic andpharmacy

Drug store

4,165
45,127

¥

Other

-

¥

Adjustments

18
122

¥

Consolidated

-

¥

4,183
45,24915. Comprehensive income
Each component of other comprehensive loss for the years ended April 30, 2020 and 2019 was thefollowing:

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

Millions of yen
2020
2019
¥

¥

(92)

¥

(129)

(4)
(97)
26
(71)

1
(127)
36
(91)

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

(27)
14
(13)
4
(8)
(99)

¥

Thousands of
U.S. dollars
2020
$

(858)
(37)
(905)
242
(662)

$

(1,679)251(1,418)485(923)(1,586)AIN HOLDINGS ANNUAL REPORT 2020

61

BASIC INFORMATION/DATA

16. Quarterly Information(1) Quarterly net sales for the year ended April 30, 2020 are as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2020
Three months ended July 31, 2019¥72,461$
676,131
Six months ended October 31, 2019
145,851
1,360,931
Nine months ended January 31, 2020
220,085
2,053,606
Twelve months ended April 30, 2020
292,615
2,730,381(2) Quarterly income before income taxes and non-controlling interests for the year ended April 30,
2020 is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2020
Three months ended July 31, 2019
¥
4,092
$
38,182Six months ended October 31, 2019
8,439
78,744
Nine months ended January 31, 2020
12,664
118,167
Twelve months ended April 30, 2020
15,930148,642(3) Quarterly profit attributable to owners of parent for the year ended April 30, 2020 is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2020
Three months ended July 31, 2019
¥
2,240
$
20,901
Six months ended October 31, 2019
4,622
43,127
Nine months ended January 31, 2020
7,110
66,343
Twelve months ended April 30, 2020
9,179
85,648(4) Quarterly earnings per share for the year ended April 30, 2020 is as follows:
Yen
U.S. dollars
2020
2020
Three months ended July 31, 2019
¥
63.24
$
0.590
Six months ended October 31, 2019130.471.210
Nine months ended January 31, 2020
200.71
1.870
Twelve months ended April 30, 2020
259.11
2.410(5) Quarterly earnings per share for each accounting period of the year ended April 30, 2020 is asfollows:
Yen
U.S. dollars
2020
2020
Three months ended July 31, 2019
¥
63.24
$
0.590
Three months ended October 31, 2019
67.24
0.620
Three months ended January 31, 2020
70.24
0.650
Three months ended April 30, 2020
58.40
0.540
The quarterly information is outside the scope of audit procedures.

62 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

63

BASIC INFORMATION/DATA

64 AIN HOLDINGS ANNUAL REPORT 2020

AIN HOLDINGS ANNUAL REPORT 2020

65

INVESTOR INFORMATIONCORPORATE 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¥21,894 million

Fiscal Year
May 1 to April 30 of the following year

Number of Employees
Consolidated: 13,158
Non-consolidated: 184

Ordinary General Meeting of
Shareholders
July

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

Date of Record
April 30
(The Company will announce otherdates as and when required.)(Fiscal 2020)(Fiscal 2020)

Number of Shares Outstanding
35,428,212 shares(including treasury stock)
Number of Shareholders
7,238

Major Shareholders		

(As of April 30, 2020)

Shareholders

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

Kiichi Otani

3,238

9.14

Seven & i Holdings Co., Ltd.

2,750

7.76

North Pacific Bank, Ltd.

1,758

4.96

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

1,594

4.50

The Hokkaido Bank, Ltd.

1,472

4.15

Japan Trustee Services Bank, Ltd. (Trust account)

1,232

3.48

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

1,175

3.32

THE BANK OF NEW YORK MELLON 140044

633

1.79

THE BANK OF NEW YORK MELLON 140041

630

1.78

The Norinchukin Bank

600

1.69

Notes: 1. Shareholding ratios are calculated excluding 728 treasury shares.
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.

66 AIN HOLDINGS ANNUAL REPORT 2020