Initiatives based on recommendations on measures to prevent recurrence

We sincerely apologize again to all stakeholders, including our customers, business partners, shareholders and investors, for any inconvenience and concern caused due to the matter in which two people, a former officer of AIN HOLDINGS INC. (the “Company”) and a former officer of a subsidiary of the Company, were arrested on August 31, 2023 while employed at the companies, and subsequently indicted and convicted in the first instance (the “Matter”).
Based on cause analysis and recommendations for measures to prevent recurrence in the investigation report submitted on May 9, 2024 from the investigation team composed exclusively of external experts, we have formulated concrete measures to prevent recurrence and future initiatives regarding the Matter. On May 10, we opened a special page on our website to disclose the “state of initiatives under measures for the prevention of recurrence” taken up to that date, as well as the “initiatives planned for the fiscal year ending April 2025” and “for the strengthening of initiatives.”
The disclosed initiatives have been implemented in the first half of the fiscal year ending April 2025, and the Compliance Committee and the Board of Directors have discussed measures to further strengthen compliance and formulated the AIN Group Compliance Promotion Action Plan.

1. Deliberation of candidates for new appointments to the Board of Directors so that it has a skills matrix able to demonstrate each skill to the full, including legal and compliance
   Director candidates were selected to ensure that the skill matrix effectively encompasses all skills, starting with the selection of Ms. Watahiki, a former chief judge of high court and current attorney, as a candidate for Director and Ms. Sano, an attorney, as a candidate for corporate auditor, from the viewpoint of strengthening skills in legal and compliance. The candidates for new officers were submitted as a company proposal to the 55th Ordinary General Meeting of Shareholders, and the proposal was approved.
   
   
2. Preparation of internal regulations regarding matters such as fair competition, prohibition of acts that may impede the fairness of auctions, bidding, etc.　
   We have established a plan to implement the following procedures in the second half of the fiscal year.
   [Procedure: Identify internal regulations, policies, and manuals, etc. related to compliance and risk management about sales activities ▶ Check for missing internal regulations, etc. ▶ Based on the results of such checks, establish or revise internal regulations, etc. and improve the workflow]
   
   
3.  Establishment of workflow in business (clarification of whereabouts of responsibility)
   The Board of Directors resolved to revise the Administrative Authority Regulations and other rules to clarify responsibilities.
   
   
4. Enhancement of the internal audit system
   The scope of internal audits has been clarified to encompass all management activities relating to governance processes, risk management, and  control. In addition, the Board of Directors passed a resolution on the internal audit implementation plan for the fiscal year ending April 2025 based on internal regulations that have been revised to strengthen the involvement of the Board of Directors. The plan includes a policy to strengthen audits of bases which have jurisdiction over operations such as our head office and branch offices, with advice from external experts, and we have started to work on initiatives in line with the plan.
   
   
5. Enhancement of the Anti-Bribery and Anti-Corruption Policy by providing a manual and FAQ on the concept of civil servant and quasi-civil servant with concrete examples, etc.
   We have established a plan to implement the following procedures in the second half of the fiscal year.
   [Procedure: Examine the current Anti-Bribery and Anti-Corruption Policy and identify and organize items to be incorporated into the policy and its sub-documents ▶ Revise the policy and develop sub-documents (add FAQs to pocket manuals for sales staff, etc.)]
   
   
6. Effectiveness of risk management by administrative departments based on regulations on compliance and risk management, etc.
   As an initiative by the administrative departments to enhance the effectiveness of risk management, the Risk Management Committee has started to examine and evaluate new risks based on changes in social conditions and the environment, and to develop and evaluate plans to address major risks.
   
   
7. Building of opportunities for the management team to exchange opinions and information with outside officers and external experts
   We invited external experts as lecturers to hold a compliance training seminar for officers, and after the seminar, the President and Representative Director and the officer in charge exchanged opinions with the lecturers. We have also established regular opportunities for internal officers and outside officers to exchange opinions and information after each monthly meeting of the Board of Directors.
   
   
8. Notifications and training for officers and employees in all positions (officer and employee education with external experts invited as lecturers, e-learning, training and study meetings, circulation of related materials, questionnaires)
   At the Group’s nationwide pharmacy manager conference and the budget meeting, the officer in charge explained the key points of the investigation report. In addition to the training for officers described in item 7 above, we invited external lecturers to hold a compliance training for sales-related staff, and have decided to launch an e-learning program within the fiscal year for all Group officers and employees.

• We will ensure the promotion of effective measures for the prevention of recurrence through the participation of outside officers in the continuous planning of initiatives for the prevention of recurrence.
• Top management will take the lead in formulating and executing continuous plans with  accurate understanding of the current situation and issues.

The Compliance Committee re-examined the state of implementation during the first half of the fiscal year ending April 2025, and repeatedly discussed ongoing plans, including additional initiatives. The current Board of Directors, including newly appointed outside officers, deliberated the details of the plans, and formulated the AIN Group Compliance Promotion Action Plan at the November meeting of the Board of Directors, which will be put into practice on an ongoing, one-year basis from December.

The AIN Group takes a broad and proactive view of compliance, not only in terms of compliance with laws, regulations, and internal rules but also as an “appropriate response to demands of society” on companies, including the practice of corporate ethics. We believe that if each officer and employee engages in compliance practices in this broader sense, it will lead to earning society’s trust and enable us to continue to realize our Group statement of “improving the health and happiness of our customers.”

The AIN Group has established the AIN Group’s Code of Conduct, which is shared by all officers and employees of the AIN Group, in order to incorporate compliance practices into concrete actions and maintain a sound corporate culture. The code explicitly sets out 14 items, including being mindful of conducting corporate activities in good faith and with ethics, always considering the perspectives of customers and patients while prioritizing meeting their expectations, and correctly understanding and complying with laws, regulations, and rules related to our business operations.
This Compliance Promotion Action Plan is formulated based on the AIN Group’s Code of Conduct with the aim of contributing to the sustainable growth of the AIN Group by widely disclosing specific actions and initiatives and reporting on their progress each fiscal year, maintaining their effectiveness, and constantly making regular checks and improvements.

December 1, 2024 - November 30, 2025

1. Dissemination of information by management and managers to firmly maintain our sound corporate culture 
   
   • Dissemination of messages from the top management that are focused on promoting compliance
   • Dissemination of information by management and managers other than top management (devise methods to encourage each employee to take ownership)
2. Establishment of a PDCA cycle that incorporates the perspectives of outside officers
   
   • Establishment of a governance process in which the Compliance Committee prepares proposals with advice from external experts and the Board of Directors scrutinizes the proposals
3. Enhancement of internal regulations, manuals, FAQs, etc.
   
   • Implement 2 and 5 of the initiatives planned for the fiscal year ending April 2025 (disclosed on May 10) in accordance with procedures
4. Enhancement of familiarization and training for officers and employees
   
   • Regularly hold training in the form of lectures, e-learning, and other means by appropriately stratifying officers and employees, including officers, sales-related staff, and all officers and employees
5. Making risk management more effective
   
   • Position and implement matters related to compliance in the Risk Management Committee’s initiatives as priority measures in the Action Plan
6. Appropriate operation of the whistleblowing system
   
   • Familiarize employees with the whistleblowing system, provide training to those involved in operation of the system, respond appropriately to individual incidences of whistleblowing, and regularly report to the Board of Directors
7. Strengthening of the internal audit function
   
   • Execute audits in accordance with the internal audit implementation plan for the fiscal year ending April 2025, including the development of internal audit processes for administrative departments

The “persons in charge of compliance with laws and regulations, etc.”  (AIN Holdings division managers, department managers and the representative directors of affiliated companies), who are designated in the AIN Group’s Whistleblowing Regulations  as the persons in charge of implementing corrective measures relating to whistleblowing cases, will also be tasked with promoting the implementation of each measure in the Action Plan, according to their respective areas of responsibility.
The Compliance Committee will monitor the progress of the Action Plan as necessary and report to the Board of Directors, along with improvement proposals formulated with advice from external experts, and the Board of Directors will decide on the next action plan and continue its promotion.