KUSURI NO AOKI HOLDINGS CO.,LTD.

The sale of pharmaceuticals and related products requires permits, registrations, and notifications from each prefecture, and also requires compliance with related laws such as the Food Sanitation Act. Future amendments to relevant laws and regulations may constrain store opening plans and merchandising policies. The Group has established an organizational response framework based on its risk management regulations.

Dispensing sales consist of drug revenue and dispensing technical fee revenue based on the Health Insurance Act. If, upon a reduction in the drug pricing standard, purchase prices cannot be reduced to a comparable degree through price negotiations with pharmaceutical wholesalers, profitability may be squeezed. In addition, a reduction in dispensing fee points would have a direct impact on business performance.

Under the Pharmaceuticals and Medical Devices Act, the placement of pharmacists and registered sales clerks is mandatory for pharmaceutical sales and dispensing operations, making the securing of qualified personnel a core issue underlying store opening policy. The Group is engaged in active recruitment activities and the training of registered sales clerks, but if sufficient personnel cannot be secured, this may impede new store opening plans.

The establishment of the registered sales clerk system through the 2009 revision of the former Pharmaceutical Affairs Act, and the 2014 liberalization of internet sales, have lowered the barriers to entry for pharmaceutical sales by companies in other industries. If sales regulations are further relaxed in the future, promoting liberalization of sales at general retailers, the competitive environment may intensify further and affect business performance.

New store openings and floor space expansions exceeding 1,000 square meters require review by prefectures and other authorities under the "Large-Scale Retail Store Location Act," necessitating coordination with local residents and municipalities. Depending on the progress of such reviews, delays or changes to new store opening or expansion plans may occur, potentially affecting overall store opening policy.

As of May 20, 2025, the Group operates 1,004 drugstores (including 664 with attached dispensing pharmacies), 6 specialized dispensing pharmacies, and 26 supermarkets across 27 prefectures, and continues to expand store openings into the Tohoku, Kanto, Tokai, Kansai, Shikoku, and other regions. In new trading areas, the Group may not enjoy cost advantages such as in advertising expenses until dominant market positions are established, and business performance may be affected by difficulty in securing properties or competition with other companies in opening stores.

The separation of prescribing and dispensing system is promoted as national policy, but the separation rate in the three Hokuriku prefectures where the Group operates dispensing pharmacies is below the national average. If the progress of the separation rate falls short of expectations going forward, this may affect the growth of the dispensing business.

The Group holds large volumes of personal information, including customer information through its membership card system and medication history information at dispensing pharmacies. While internal regulations have been established to prevent leakage, in the event that a leak does occur, business performance could be materially affected through loss of public trust, damages litigation, and administrative sanctions under the Act on the Protection of Personal Information.

The Group has implemented measures such as improving pharmacists' skills and knowledge, enhancing dispensing room environments, strengthening final inspection and mutual checking systems prior to dispensing medication, and enrolling all dispensing pharmacies in pharmacist liability insurance. However, if litigation arising from a dispensing error occurs in the future, business performance may be affected through loss of public trust and payment of substantial damages.

In the event of a large-scale natural disaster such as an earthquake or typhoon, business performance may be affected by physical damage to store facilities, disruption of the logistics network, failure of information systems, and harm to employees. The Group strives to build a framework to minimize damage through the preparation of disaster manuals and employee training, but there is a risk that responding to an unexpectedly large-scale disaster could prove difficult.