Consolidated Balance Sheet
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2017

Millions of Yen
2016
2017

ASSETS
CURRENT ASSETS:
Cash and deposits (Notes 9, 20 and 21)
Notes and accounts receivable (Note 21)
Short-term investments (Notes 5 and 21)
Land and buildings for sale
Inventories
Deferred tax assets (Note 16)
Other
Allowance for doubtful accounts
Total current assets¥

PROPERTY, PLANT AND EQUIPMENT (Note 6):
Buildings and structures, net (Notes 7, 9, 15 and 18)
Machinery, equipment and vehicles, net (Notes 7, 9 and 18)
Land (Notes 7, 8, 9 and 15)
Construction in progress
Other, net (Note 9)
Total property, plant and equipment, net
INTANGIBLE ASSETSINVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5, 9 and 21)
Long-term loans receivable
Deferred tax assets (Note 16)
Assets for retirement benefits (Note 12)
Other
Allowance for doubtful accounts
Total investments and other assets
TOTAL ASSETS (Note 25)¥

See accompanying notes to consolidated financial statements.

2

18,372
25,76070
99,541
1,878
2,670
9,970
(609)
157,655¥

25,072
23,702
2,188
100,742
1,976
2,533
12,565(270)
168,510

Thousands of
U.S. Dollars(Note 1)
2017$

163,763
229,618624
887,256
16,74623,80588,871(5,435)
1,405,251

198,409
16,575
222,847
10,6238,464
456,920

198,994
13,466
213,8106,076
8,898
441,247

1,768,512
147,747
1,986,341
94,68875,4484,072,738

8,044

8,245

71,702

38,229
682
7,209
266
10,843(219)
57,011
679,631

39,959
388
2,208
21
9,811
(59)
52,329670,333

340,761
6,085
64,264
2,371
96,649(1,959)508,173
6,057,865¥$

Consolidated Balance Sheet (continued)
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
31 March 2017

Millions of Yen
2016
2017

LIABILITIES AND NET ASSETSCURRENT LIABILITIES:
Notes and accounts payable (Notes 9 and 21)
Short-term loans (Notes 9, 10 and 21)
Short-term bonds (Notes 10 and 21)
Current portion of bonds (Notes 10 and 21)
Income taxes payable (Note 16)
Deferred tax liabilities (Note 16)
Advances received
Allowance for employees' bonuses
Provision for unutilised gift tickets
Other (Notes 9 and 24)
Total current liabilities¥

NONCURRENT LIABILITIES:
Bonds (Notes 10 and 21)
Long-term loans (Notes 9, 10, 21 and 22)
Long-term payables - other
Deferred tax liabilities (Note 16)
Deferred tax liabilities for land revaluation (Notes 8 and 16)
Accrued retirement benefits for directors and audit and supervisory board
members
Liability for retirement benefits (Note 12)
Other (Note 24)
Total noncurrent liabilities
Total liabilities

11,24865,363
－
45
5,990
－
6,979
2,630
508
43,450136,217¥

10,77568,7805,000
10,245
5,619
1
8,011
2,667
407
40,829152,337

Thousands of
U.S. Dollars(Note 1)
2017$

100,266
582,612－409
53,392－62,21323,451
4,529
387,291
1,214,165

90,191
158,938
685
11,23633,16880,257
161,430
654
7,944
31,087803,916
1,416,692
6,111
100,159
295,643

437

447

3,898

20,011
25,289339,959
476,176

18,93325,448326,204
478,542

178,371
225,415
3,030,209
4,244,375

51,466

51,466

458,743

28,782
98,392

28,794
79,103

256,551
877,013(21,580)(17,199)(192,356)

157,060

142,165

1,399,952

11,26635,584(2)(3,338)43,50927
2,857
203,455
679,631

12,221
37,557－(2,815)46,962－
2,662
191,790
670,333

100,425
317,177(21)(29,759)
387,821248
25,467
1,813,490
6,057,865

COMMITMENTS AND CONTINGENT LIABILITIES (Note 23)
NET ASSETS (Note 13) :Common stock:
Authorised, 1,595,886,000 shares as at 31 March 2017 and 2016;
Issued, 565,913,515 shares as at 31 March 2017 and 2016
Capital surplus
Retained earnings
Treasury stock, at cost, 29,912,535 shares as at 31 March 2017,and 24,193,867 shares as at 31 March 2016
Total shareholders' equity
Accumulated other comprehensive income:Net unrealised holding gain on securities (Note 5)
Revaluation reserve for land (Note 8)
Foreign currency translation adjustments
Retirement benefit liability adjustment (Note 12)
Total accumulated other comprehensive income, net
Stock acquisition rights
Non-controlling interests
Total net assets
TOTAL LIABILITIES AND NET ASSETS
See accompanying notes to consolidated financial statements.

3

¥

¥

$

Consolidated Statement of Income
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2017

OPERATING REVENUES (Notes 7 and 25)
OPERATING EXPENSES:
Transportation, other service expenses and cost of sales (Note 14)
Selling, general and administrative expenses (Notes 7 and 13)
Total operating expenses
Operating income (Note 25)¥

OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Loss on impairment of property, plant and equipment (Notes 7, 15 and 25)
Shares of (loss) profit of affiliates, net
Gain on contribution received for construction
Subsidies
Compensation income
Gain on sales of investment securities, net (Note 5)
Loss on sales or disposal of property, plant and equipment, net(Note 7)
Loss on deduction of contributions received for construction fromacquisition costs of property, plant and equipment
Special retirement expenses (Note 12)
Gain on bargain purchase
Loss on step acquisitions
Other, net
Other (expenses) income, net
PROFIT BEFORE INCOME TAXESINCOME TAXES (Note 16):
Current
Deferred
Total income taxes
PROFITPROFIT ATTRIBUTABLE TO:
Non-controlling interests
Owners of parent (Note 19)¥

See accompanying notes to consolidated financial statements.

4

Millions of Yen
2016
2017
¥ 300,188
302,917

Thousands of
U.S. Dollars(Note 1)2017$
2,700,039

232,252
38,320270,573
32,343240,069
28,594
268,663
31,5242,070,171
341,572
2,411,743
288,295

850(2,802)(1,359)
(16)
292
1,417
602
2,776

790
(3,581)
(61)
21
842
1,680
－
348

7,584
(24,979)(12,120)
(145)
2,605
12,6385,366
24,746

(996)

(511)

(8,878)(911)(1,475)(8,128)

(85)
－
－
(407)
(641)

－
4,709
(2,119)
(99)
544

(765)
－
－
(3,636)(5,713)31,702

32,069282,581

10,255(1,401)
8,853
22,848

9,094
274
9,369
22,69991,411(12,492)
78,919203,662212
22,636¥313
22,385$

1,895
201,767

Consolidated Statement of Comprehensive Income
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2017

PROFIT
OTHER COMPREHENSIVE INCOME (Note 17):
Net unrealised holding loss on securities
Revaluation reserve for land
Retirement benefit liability adjustment
Share of other comprehensive loss of affiliates accounted forusing the equity method
Total other comprehensive loss
COMPREHENSIVE INCOME
COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of parent
Non-controlling interests
See accompanying notes to consolidated financial statements.

5

¥

¥
¥

Millions of Yen
2016
2017
22,69922,848¥

Thousands of
U.S. Dollars(Note 1)2017
$ 203,662(941)(2,087)(522)(2,981)
1,625
(934)

(8,390)(18,611)(4,660)

(2)

－

(21)

(3,554)
19,29419,068225¥¥(2,289)20,40920,111298$$(31,684)
171,978
169,965
2,013

Consolidated Statement of Changes in Net Assets
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2017
Millions of Yen

BALANCE at 1 APRIL 2015
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stock
Change in treasury shares of parent
arising from transactions with
non-controlling interests
Reversal of revaluation reserve for land
Net changes in items other thanshareholders' equity
BALANCE at 1 APRIL 2016
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stock
Change in treasury shares of parent
arising from transactions with
non-controlling interests
Reversal of revaluation reserve for land
Net changes in items other thanshareholders' equity
BALANCE at 31 MARCH 2017

CommonStock¥51,466－

CapitalSurplus¥28,819－Retained
Earnings¥
60,525(3,372)－－

22,385

－
－

－
0

－
－

－

(25)

－

－

－

(435)

Total
Accumulated
Other
Comprehensive
Income, Net¥
48,801－Stockacquisitionrights¥－－

Noncontrolling
Interests
¥
2,398
－

Total Shareholders'Equity¥139,314(3,372)

Net Unrealised
Holding Gain on
Securities¥
15,187－

Revaluation
Reserve forLand¥
35,496－－22,385

－

－

－

－

－

－

－

22,385(15,703)
0(15,703)
1

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(15,703)
1

－

(25)

－

－

－

－

－

－

－

(25)

－

(435)

－

－

－

－

－

－

－

(435)

Treasury
Stock¥(1,497)－¥Total
Net Assets
190,513(3,372)

－

－

－

－

－

(2,965)

2,060

－

(934)

(1,839)－264(1,574)51,466－

28,794－

79,103(3,233)(17,199)－

142,165(3,233)

12,221－

37,557－－－(2,815)－46,962
－

－
－

2,662
－

191,790(3,233)－－

22,636－

22,636

－

－

－

－

－

－

－

22,636

－
－

－
0

－
－

(4,381)
0(4,381)
0

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(4,381)
0

－

(12)

－

－

(12)

－

－

－

－

－

－

－

(12)

－

－

(114)

－

(114)

－

－

－

－

－

－

－

(114)

－
¥

Retirement
BenefitLiability
Adjustment¥(1,881)－

Foreigncurrencytranslation
adjustments¥－－

51,466－¥28,782－¥

98,392－¥(21,580)

(954)

－
¥

157,060¥

11,266(1,973)¥35,584

(2)
¥

(2)

(522)
¥

(3,338)(3,453)¥43,509

27
¥

27

194
¥

2,857

(3,230)¥203,455

Thousands of U.S. Dollars (Note 1)

BALANCE at 1 APRIL 2016
Cash dividends
Profit attributable to owners of parent
for the period
Purchase of treasury stock
Disposal of treasury stock
Change in treasury shares of parent
arising from transactions with
non-controlling interests
Reversal of revaluation reserve for land
Net changes in items other thanshareholders' equity
BALANCE at 31 MARCH 2017

Stockacquisitionrights$－－

Noncontrolling
Interests$
23,735－Total
Net Assets$
1,709,519(28,819)－

201,767

－

－

－

－

－

－

－

201,767－－(39,051)
5(39,051)
5

－
－

－
－

－
－

－
－

－
－

－
－

－
－

(39,051)
5

(110)

－

－

(110)

－

－

－

－

－

－

－

(110)

－

(1,023)－(1,023)

－

－

－

－

－

－

－

(1,023)

－

－

－
－

－
0

－
－

－
$

Total
Accumulated
Other
Comprehensive
Income, Net$
418,600－

201,767

Retained
Earnings$ 705,088(28,819)－

Retirement
BenefitLiability
Adjustment$ (25,099)－

Total Shareholders'Equity$ 1,267,184(28,819)

CapitalSurplus$ 256,661－

458,743

Foreigncurrencytranslation
adjustments$－－

TreasuryStock$ (153,310)－

CommonStock$ 458,743－$

Revaluation
Reserve forLand$ 334,765－

Net Unrealised
Holding Gain on
Securities$ 108,934－

256,551

$

－

－

－

877,013$ (192,356)$ 1,399,952(8,508)$See accompanying notes to consolidated financial statements.

6

100,425(17,588)$317,177

(21)
$

(21)

(4,660)$(29,759)(30,778)$

387,821

248
$

248

1,732
$

25,467(28,797)$

1,813,490

Consolidated Statement of Cash Flows
Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Year Ended 31 March 2017
Thousands of
U.S. Dollars(Note 1)
2017

Millions of Yen
2016
2017
OPERATING ACTIVITIES:Profit before income taxes
Adjustments for:
Depreciation and amortisation
Loss on impairment of property, plant and equipment
Gain on bargain purchase
Loss on step acquisitions
Loss on sales or disposal of property, plant and equipment, net
Loss on deduction of contributions received for construction fromacquisition costs of property, plant and equipment
Gain on contribution received for construction
Gain on sales of investment securities, net
Share of loss (profit) of affiliates
Interest and dividend income
Interest expense
Special retirement expenses
Increase (decrease) in allowance for doubtful accounts(Decrease) increase in allowance for employees' bonuses
Increase (decrease) in liability for retirement benefits
Increase in assets for retirement benefits(Increase) decrease in trade receivables
Decrease in inventories
Increase (decrease) in trade payables
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Sepecial retirement payments
Net cash provided by operating activities¥

INVESTING ACTIVITIES:
Increase in time deposits, net
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Proceeds from contribution received for construction
Purchase of investment securities
Proceeds from sales of investment securities
Increase in loans receivable
Other, net
Net cash used in investing activities
FINANCING ACTIVITIES:
Decrease in short-term loans, net(Decrease) increase in short-term bonds, net
Proceeds from long-term loans
Repayments of long-term loans
Proceeds from issuance of bonds
Redemption of bonds
Repayments of long-term payables - otherCash dividends paid
Dividends paid to non-controlling interests
Purchase of treasury stock
Other, net
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents resulting from mergers withunconsolidated subsidiaries
CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 20)
See accompanying notes to consolidated financial statements.

7¥

31,702¥

32,069$282,581

18,460
1,359
－
－
750

17,94961(4,709)2,119
643

164,546
12,120
－
－
6,692

911

1,475

8,128

(292)
(2,776)
16
(850)
2,802
85
499
(36)
95
(254)
(2,409)
1,260
194
(714)
50,805852(2,855)(10,147)(85)
38,569

(842)
(348)
(21)
(790)
3,581
－
(3)
23
(369)
(296)
6,817
342
(753)
(9,969)46,977837(3,604)(7,874)－36,334(2,605)(24,746)
145(7,584)
24,979
765
4,450
(327)
848
(2,270)(21,478)
11,232
1,737(6,365)452,851
7,600(25,449)(90,449)(765)
343,786(0)(34,079)466
496(1,630)5,357(1,023)814(29,597)(0)(28,696)930
1,315(2,111)
349
(17)
481
(27,750)(0)(303,763)
4,155
4,428
(14,529)47,750(9,123)
7,263(263,817)(7,995)(5,000)31,867(29,781)
9,936(10,245)－(3,235)(26)(4,381)(1,159)(20,020)(11,048)
29,372(10,701)
5,000
75,672(75,099)
29,938(10,251)(15)(3,372)(25)(15,703)(1,208)(5,768)2,816
26,552(71,266)(44,567)
284,049(265,452)
88,568(91,326)－(28,840)(232)(39,051)(10,331)(178,450)(98,481)
261,814－4－

18,324¥29,372$

163,332

Keihan Holdings Co., Ltd. and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended 31 March 2017

1.

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

The accompanying consolidated financial statements of Keihan Holdings Co., Ltd. (the “Company”) andits consolidated subsidiaries (collectively, the “Group”) have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act 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 the application and disclosure requirements of International
Financial Reporting Standards.
Japanese yen figures less than one million yen are rounded down to the nearest million yen and U.S. dollar
figures less than one thousand dollars are rounded down to the nearest thousand dollars, except for per
share data. As a result, the totals shown in the accompanying consolidated financial statements in Japanese
yen and U.S. dollars do not necessarily agree with the sums of the individual amounts.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, the notes to the accompanying consolidated financial
statements include information which is not required under Japanese GAAP but is presented herein as
additional information.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current
year’s presentation. Such reclassification had no effect on consolidated profit or net assets.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts
are included solely for the convenience of readers outside Japan and have been made at the rate of ¥112.19
to $1, the approximate rate of exchange at 31 March 2017. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation - The accompanying consolidated financial statements include the accounts of theCompany and the significant companies which it controls directly or indirectly. Companies overwhich the Company exercises significant influence in terms of their operating and financial policies
have been included in the accompanying consolidated financial statements on an equity basis.
For the purpose of consolidation, all significant intercompany balances and transactions have been
eliminated in consolidation.
Certain subsidiaries are excluded from the scope of consolidation because the effect of their total
assets, net sales, net profit or loss, and retained earnings (each amount of net profit or loss andretained earnings in proportion to the interest held by the Group) on the accompanying consolidated
financial statements is not significant individually or in the aggregate.
Investments in two affiliates are accounted for by the equity method for the year ended 31 March
2017.

8

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)a.

Consolidation (continued)
Investments in unconsolidated subsidiaries are not accounted for by the equity method but stated atcost, because the effect of their net profit or loss and retained earnings (each amount in proportion to
the interest held by the Group) on the accompanying consolidated financial statements is not
significant individually or in the aggregate.
The fiscal year end of the consolidated subsidiaries is 31 March, which is same as that of theCompany.

b.

Securities - Securities are classified into two categories: held-to-maturity debt securities or othersecurities. Held-to-maturity securities are stated at amortised cost, and amortisation for each period
through to the maturity date is determined on a straight-line basis. Marketable securities as othersecurities are stated at fair value determined primarily by the average market price for one monthprior to the year-end. Unrealised gains and losses on these securities are reported, net of applicable
income taxes, as “Net unrealised holding gain (loss) on securities” in a separate component of net
assets through the consolidated statement of comprehensive income. The cost of securities sold isdetermined primarily by the moving-average method. Non-marketable securities as other securities
are stated at cost determined primarily by the moving-average method.

c.

Inventories - Inventories are stated at lower of cost or net selling value, determined by the following
methods.
Merchandise: Primarily by retail cost method
Land and buildings for sale: Specific identification method
Supplies: Primarily by moving-average methodd.

Property, Plant and Equipment (excluding Leased Assets) - Property, plant and equipment
excluding leased assets are stated at cost. Depreciation is determined primarily by the decliningbalance method. However, certain assets are depreciated using the straight-line method over theestimated useful lives of the respective assets.

e.

Intangible Assets (excluding Leased Assets) - Intangible assets excluding leased assets areamortised using the straight-line method. Software for internal use is amortised over its estimateduseful life of 5 years.

f.

Leased Assets - Leased assets under finance lease transactions which do not transfer ownership tothe lessee are capitalised and depreciated over the respective lease terms to a nil residual value by
the straight-line method. Finance lease transactions commencing on or before 31 March 2008 otherthan those in which the ownership of the leased assets is transferred to the lessee are accounted for in
the same manner as operating leases.

g.

Goodwill - Goodwill is amortised using the straight-line method over its estimated useful life.
Insignificant amounts of goodwill are charged to expense as incurred.

h.

Allowance for Doubtful Accounts - Allowance for doubtful accounts is provided at an amountcalculated based on the Company’s historical experience of bad debts on ordinary receivables andloan receivables plus an additional estimate of probable specific bad debts from customers
experiencing financial difficulties.

9

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)i.

Allowance for Employees’ Bonuses - Allowance for employees’ bonuses is provided at an estimatedamount of bonuses to be paid to employees.

j.

Provision for Unutilised Gift Tickets
Unutilised gift tickets are credited to income after a certain period has passed from their respective
dates of issuance. Provision for unutilised gift tickets is provided at a reasonably estimated amountof future utilisation.

k.

Employees’ Retirement Benefits(1) Attribution method of retirement benefits over the service period
The assets and liability for retirement benefits are provided based on the amount of the projected
benefit obligation after deducting plan assets at fair value at the end of the year.
The retirement benefit obligation is attributed to each period by the straight-line method.
(2) Accounting for actuarial gains and losses and prior service costs
Prior service costs are amortised as incurred by the straight-line method over a period of primarily
15 years, which is within the estimated average remaining years of service of the eligible employees.
Actuarial gains and losses are amortised from the year following the year in which the gain or loss isrecognised, by the straight-line method over a period of primarily 15 years, which is within theestimated average remaining years of service of the eligible employees.

l.

Retirement Benefits for Directors and Audit and Supervisory Board Members - Certain
consolidated subsidiaries provide liability for retirement benefits for directors and audit andsupervisory board members based on the amount required at the balance sheet date in accordancewith the internal policies of such consolidated subsidiaries.
(Additional Information)
Since certain consolidated subsidiaries decided to abolish the retirement benefits for their directors
and audit and supervisory board members at the Board of Directors’ meeting held in June 2016,accrued retirement benefits for directors and audit and supervisory board members have not been
additionally recorded after the abolishment.

m. Income Taxes - Income taxes are calculated based on taxable income and charged to income on an
accrual basis. Certain temporary differences exist between taxable income and profit reported forfinancial reporting purposes which enter into the determination of taxable income in a different
period.
n.

Significant Hedge Accounting - The Company and three consolidated subsidiaries adopt hedge
accounting. Under Japanese GAAP, interest rate swaps which meet certain conditions are accounted
for as if the interest rates of the swaps had originally been applied of the underlying debt (the“special accounting treatment”).
(1) Method of accounting
For interest rate swap contracts that meet certain conditions, the special accounting treatment isapplied.
(2) Hedging instruments
Interest rate swaps(3) Hedged items
10Interest on loans

11

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)n.

Hedge Accounting (continued)(4) Hedging policy
Interest rate swaps are used to mitigate the fluctuation risk of interest rates on loans, and the hedged
items are identified by individual contracts.
(5) Assessment of hedge effectivenessHedge effectiveness is not assessed as the notional principal, contractual terms (interest rates anddates of receipt and payment of interest), and maturities of the interest rate swap transactions arealmost same as those of the respective hedged items, and thus, these transactions meet the criteria for
application of the special accounting treatment.

o.

Contributions for Construction - Three consolidated subsidiaries receive contributions forconstruction as part of construction cost from local authorities and others at railway track business.
Contribution received are deducted directly from the acquisition costs of the related assets at thetime of completion of construction of the railway business.
Gain on contributions received for construction is included in other income (expenses) and theamount directly deducted from the acquisition costs of the assets is recorded as loss on deduction ofcontributions received for construction from the acquisition costs of property, plant and equipment inother income (expenses) in the consolidated statement of income.

p.

Cash and Cash Equivalents - For the purpose of the consolidated statement of cash flows, cash andcash equivalents are composed of cash on hand, bank deposits available for withdrawal on demand,
deposits and short-term investments which are readily convertible to cash and subject to little risk ofany change in their value, and which were purchased with an original maturity of three months or
less.

q.

Consumption Taxes - Consumption taxes, in general, are not included in income and expenses but
recorded at the net amount on the consolidated balance sheet.

3.

ACCOUNTING CHANGE

Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016
Effective from the fiscal year ended 31 March 2017, the Group adopted “Practical Solution on a Change inDepreciation Method Due to Tax Reform 2016” (Accounting Standards Board of Japan (“ASBJ”) Practical
Issues Task Force (“PITF”) No.32 issued on 17 June 2016) in accordance with the revision of the
Corporation Tax Act of Japan. Accordingly, the Group changed the depreciation method for facilities
attached to buildings and for other structures acquired on or after 1 April 2016 from the declining-balancemethod to the straight-line method.
The effect on the consolidated financial statements for the year ended and as of 31 March 2017 wasimmaterial.

4.

ADDITIONAL INFORMATION

Application of Revised Implementation Guidance on Recoverability of Deferred Tax Assets

12Effective from the fiscal year ended 31 March 2017, the Group adopted “Revised Implementation
Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No.26, issued on 28 March 2016).

13

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES(1) Held-to-maturity securities
The following table summarises the carrying value and fair value of held-to-maturity securities as at
31 March 2017 and 2016.
Millions of Yen
2017
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

¥

¥

57
1,401
200
1,659

Fair value

¥

¥

57
1,477
202
1,738

Difference

¥

¥

0
76
2
79

Millions of Yen
2016
Carrying
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

¥

¥

172
1,401
300
1,873

Fair value

¥

¥

172
1,496
304
1,973

Difference

¥

¥

0
94
4
99

Thousands of U.S. Dollars
2017
Carrying
Fair value
Difference
value
Securities with fair value exceeding
carrying value:
National and municipal bonds
Corporate bonds
Other
Total

$

$

514
12,491
1,782
14,788

14

$

$

516
13,173
1,807
15,497

$

$

2
681
24
708

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(2) Marketable securities classified as other securities
The following table summarises the carrying value and acquisition cost of marketable securities
classified as other securities as at 31 March 2017 and 2016.

Carrying
value
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

¥

¥

21,8001,534
23,33418303
322
23,656

Carrying
value
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

¥

¥

24,6732,080
26,75376307
383
27,137

15

Millions of Yen
2017
Acquisition
cost

¥

¥

6,219
1,209
7,429

18
303
322
7,751

Difference¥¥

Millions of Yen
2016
Acquisition
cost

¥

¥

8,413
1,509
9,923

88
307
396
10,32015,581324
15,905(0)–(0)
15,905Difference¥¥

16,259570
16,829(12)–(12)
16,816

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(2) Marketable securities classified as other securities (continued)
Thousands of U.S. Dollars
2017
Carrying
Acquisition
value
cost
Difference
Securities with carrying value
exceeding acquisition cost:
Equity securities
Other
Sub total
Securities with carrying value notexceeding acquisition cost:
Equity securities
Debt securities
Sub total
Total

$

$

194,316
13,673207,989

164
2,707
2,872
210,862$$

55,434
10,784
66,218

166
2,707
2,873
69,092$$

138,8812,889
141,770(1)–(1)
141,769

Unlisted equity securities with a carrying value of ¥3,965 million ($35,343 thousand) and ¥4,546
million as at 31 March 2017 and 2016, respectively, are not included in the above tables because
there is no market price and the fair value is not readily determinable.
(3) The following table summarises other securities sold for the years ended 31 March 2017 and 2016.
Gain on sales are included in gain on sales of investment securities, net in the consolidated statementof income.

Equity securities
Other

Millions of Yen
2017
Proceeds
Gain on sale Loss on sale
4,981 ¥
2,700 ¥
–
¥
¥
375 ¥
75 ¥
–

Equity securities

Millions of Yen
2016
Proceeds
Gain on sale Loss on sale
¥
0 ¥
0 ¥
–

Equity securities
Other

Thousands of U.S. Dollars
2017
Proceeds
Gain on sale Loss on sale
44,403 $24,075 $–$$3,346 $
671 $
–

16

5.

SHORT-TERM INVESTMENTS AND INVESTMENT SECURITIES (continued)(4) Investments in unconsolidated subsidiaries and affiliates
Investments in unconsolidated subsidiaries and affiliates as at 31 March 2017 and 2016 consisted of
the following:
Millions of Yen
2016
2017
Investments in unconsolidated
subsidiaries and affiliates

6.

¥

9,019

¥

8,590

Thousands of
U.S. Dollars
2017$

80,391PROPERTY, PLANT AND EQUIPMENT

Accumulated depreciation included in property, plant and equipment as at 31 March 2017 and 2016
amounted to ¥435,109 million ($3,878,326 thousand) and ¥426,606 million, respectively.
Accumulated contributions deducted from the acquisition costs of property, plant and equipment as at 31
March 2017 and 2016 amounted to ¥180,769 million ($1,611,281 thousand) and ¥180,593 million,
respectively.

7.

RENTAL PROPERTIESThe Company and certain consolidated subsidiaries own rental properties including office buildings andcommercial facilities in Osaka and other areas in Japan.
For the year ended 31 March 2017, rental income, net of related expenses, relevant to these properties
amounted to ¥9,727 million ($86,705 thousand) and net gain on sales of these properties amounted to ¥17
million ($153 thousand). Furthermore, loss on impairment of these real estate properties was recognised in
the amount of ¥3 million ($27 thousand).
For the year ended 31 March 2016, rental income, net of related expenses, relevant to these properties
amounted to ¥9,508 million and net gain on sales of these properties amounted to ¥41 million.
Income is included in operating revenues and expenses are mainly included in operating expenses in the
consolidated statements of income. Net gain on sales and net loss on impairment of these properties areincluded in other income (expense) in the consolidated statement of income.
Increases/(decreases) in the carrying value during the years ended 31 March 2017 and 2016, and the fairvalue of the rental properties as at 31 March 2017 and 2016 are as follows:

17

7.

RENTAL PROPERTIES (continued)

1 April 2016
155,245

Millions of Yen
2017
Carrying value
Increase/(Decrease)
31 March 2017
¥
7,406
¥
162,652

Fair value
31 March 2017¥221,758

1 April 2015¥
142,930

Millions of Yen
2016
Carrying value
Increase/(Decrease)
31 March 2016¥
12,315¥
155,245

Fair value
31 March 2016¥
206,366

1 April 2016$
1,383,744

Thousands of U.S. Dollars
2017
Carrying value
Increase/(Decrease)
31 March 2017$
66,021$
1,449,795

Fair value
31 March 2017$
1,976,634¥

Notes: 1. Carrying value recognised in the consolidated balance sheet represents the acquisition cost lessaccumulated depreciation and accumulated losses on impairment.
2. The main components of net changes in the carrying value during the years ended 31 March 2017and 2016 are the increase due to the acquisition of office buildings of ¥8,361 million ($74,529
thousand) and the increase due to consolidation of a new subsidiary of ¥6,960 million andconstruction of logistics facilities of ¥4,428 million.
3. Fair values of the major rental properties as at each year end are estimated in accordance with theappraisal standards for valuing real estate properties. Fair values of the other rental properties are
estimated internally by the Group based on certain assessments and property indices that areconsidered to reflect applicable market value.

8.

REVALUATION OF LAND

In accordance with the “Act on Revaluation of Land” (Act No. 34 promulgated on 31 March 1998) and the“Act for Partial Revision of the Act on Revaluation of Land” (Act No. 19 promulgated on 31 March 2001),
the Company and two consolidated subsidiaries revaluate its land held for business. The resulting
revaluation difference, net of applicable tax effect on revaluation gains has been stated as “revaluation
reserve for land” in net assets. The applicable tax effect has been stated as “deferred tax liabilities for land
revaluation” in liabilities.
Details of the revaluation are as follows:
Method of revaluation
Fair values are determined based on the appraisal value publicly announced for tax assessment
purposes with certain reasonable adjustments in accordance with Article 2-3 and 2-5 of the“Ordinance for Enforcement of the Act on Revaluation of Land” (Cabinet Ordinance No. 119
promulgated on 31 March 1998)
Date of revaluation
31 March 2002

18

9.

PLEDGED ASSETS

Assets pledged as collateral and the corresponding liabilities as at 31 March 2017 are summarised asfollows:
Thousands of
U.S. Dollars
2017
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2017
The Group’s
Railwayfoundation
Total
mortgage
Assets pledged as collateral:
Cash and deposits
Buildings and structures
Machinery, equipment andvehiclesLand
Other property, plant andequipment
Investment securities
Total

¥

1
66,183¥(–)(62,937)$$(–)(560,991)

13,15354,557(13,153)(53,564)

117,238
486,293(117,238)(477,446)

711
800¥ 135,406

(711)
(–)
¥ (130,367)

6,345
7,130
$ 1,206,940(6,345)(–)$ (1,162,022)

Thousands of
U.S. Dollars
2017
The Group’s
Railwayfoundation
Total
mortgage

Millions of Yen
2017
The Group’s
Railwayfoundation
Total
mortgage
Corresponding liabilities:
Accounts payables
Long-term loans(including current portionof long-term loans)
Total

8589,923¥35¥

49,40249,438¥(–)¥(48,014)(48,014)$318

440,346$ 440,664$(–)(427,971)$ (427,971)

Figures in parentheses in the above table represent the amounts of assets pledged as the Group’s railway
foundation mortgage and the corresponding liabilities.

1910. SHORT-TERM LOANS, BONDS AND LONG-TERM LOANS
The average interest rates applicable to the short-term bank loans, which are calculated as the weightedaverage rates to the year end balances, were 0.536% and 0.626% for the years ended 31 March 2017 and2016, respectively. The Company had issued short-term bonds of ¥5,000 million as at 31 March 2016.
Long-term debt as at 31 March 2017 and 2016 is summarised as follows:
Bonds

Euro-yen zero coupon unsecured
convertible bonds with stockacquisition rights in yen, due 30
March 2021¥
Unsecured Keihan Holdings bonds,
payable in yen at rates ranging from0.725% to 1.89%, due from 2017
through 2026
Unsecured Keifuku Electric Railroad
bonds, payable in yen at rates of
0.206%, due from 2017 through2020
Less current portion
Bonds, less current portion¥

Millions of Yen
2016
2017

Thousands of
U.S. Dollars
2017

20,079$¥20,099178,981

70,00070,000623,941157(45)
90,191

403(10,245)
80,257 $

1,403
(409)
803,916¥

The aggregate annual maturities of bonds subsequent to 31 March 2017 are summarised as follows:Year ending 31 March,
2018
2019
2020
2021
2022
2023 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
45
¥
$
409
10,04589,543
10,04589,54320,019178,444
10,00089,13440,079357,250
90,237¥$804,326

Euro-yen zero coupon unsecured convertible bonds in the nominal amount of ¥20,000 million with stockacquisition rights issued on 30 March 2016 are convertible at ¥1,063 ($9.47) per share in the period from
13 April 2016 to 16 March 2021 subject to adjustment in certain circumstances.

2010. SHORT-TERM LOANS, BONDS AND LONG-TERM LOANS (continued)
Loans

Millions of Yen
2016
2017
Loans from banks and other financial
institutions, due serially from 2018
to 2037 at weighted-average rates
ranging from 0.808% to 1.143%
Less current portionLong-term loans, less current portion¥¥

181,827(22,888)
158,938¥¥

Thousands of
U.S. Dollars
2017

179,740 $ 1,620,707(18,309)(204,015)
161,430 $ 1,416,692

The aggregate annual maturities of long-term loans subsequent to 31 March 2017 are summarised asfollows:
Year ending 31 March,
2018
2019
2020
2021
2022
2023 and thereafter
Total

Thousands ofMillions of Yen U.S. Dollars
22,888$204,015¥
38,668344,674
48,129428,995
8,220
73,2703,858
34,39060,062535,362¥ 181,827$ 1,620,707

11. OVERDRAFT AND LOAN COMMITMENTS
The Company and seventeen consolidated subsidiaries entered into overdraft and loan commitment
agreements with 22 banks for efficient funding of working capital as at 31 March 2017.
The unused portions of the credit line under these agreements as at 31 March 2017 are as follows:

Total overdraft limits and loan
commitments
Loan executions
Unused credit line

Millions of Yen
2017

Thousands of
U.S. Dollars
2017

¥

$

¥

742,887(344,295)$ 398,591

83,344(38,626)
44,71821

12. RETIREMENT BENEFITSThe Company and its consolidated subsidiaries provide several defined benefit plans, such as defined
benefit corporate pension plans, retirement lump-sum benefit plans and smaller enterprise retirement
allowance mutual aid plans, and defined contribution pension plans. Certain consolidated subsidiaries
maintains a retirement benefit trust.
(1) The changes in the defined benefit obligation for the years ended 31 March 2017 and 2016 (except
for the retirement benefit obligation calculated by the simplified method presented in (3) below) are
as follows:

Balance at the beginning of year
Service costs
Interest cost
Actuarial loss
Retirement benefits paid
Other
Balance at the end of year¥¥

Millions of Yen
2016
2017
32,64332,578 ¥
1,292
1,377
273
86
640
2,069
(2,504)(1,425)233(241)
32,57834,444 ¥Thousands of
U.S. Dollars
2017$ 290,387
12,280768
18,447(12,709)(2,150)$ 307,023(2) The changes in plan assets for the years ended 31 March 2017 and 2016 (except for plan assets
calculated by the simplified method presented in (3) below) are as follows:

Balance at the beginning of year
Expected return on plan assets
Actuarial (loss) gainContributions by the Group
Retirement benefits paid
Other
Balance at the end of year¥¥

Millions of Yen
2016
2017
16,932
16,173 ¥388
342(1,374)
600
1,273
881
(1,295)
(897)
249
(259)
16,173
16,841 ¥22

Thousands of
U.S. Dollars
2017$ 144,164
3,054
5,355
7,857
(8,002)(2,315)$ 150,114

12. RETIREMENT BENEFITS (continued)(3) The changes in the assets and liabilities for retirement benefits calculated by the simplified method
for the years ended 31 March 2017 and 2016 are as follows:

Balance at the beginning of year
Retirement benefit expenses
Retirement benefits paid
Contributions to pension plans
Increase due to consolidation of a new
subsidiary
Other
Balance at the end of year¥¥

Thousands ofMillions of Yen
U.S. Dollars
2016
2017
2017
2,489 $
2,507 ¥
22,350
218
204
1,827
(202)
(267)
(2,379)
(72)
(48)
(430)
–
(255)
2,141

¥

76
(2)
2,507 $–
(2,277)
19,089Under the simplified method, the retirement benefit obligation is calculated at the amount payable atthe year-end if all eligible employees terminated their services voluntarily.
(4) Reconciliation of the ending balances of the retirement benefit obligation and plan assets and asset
and liability for retirement benefits recorded in the consolidated balance sheet as at 31 March 2017and 2016 are as follows:

Funded retirement benefit obligation
Plan assets at fair value¥

Unfunded retirement benefit obligation
Net of asset and liability for retirement
benefits in the consolidated balance sheet
Liability for retirement benefit
Asset for retirement benefits
Net liability for retirement benefits in the
consolidated balance sheet¥

Thousands ofMillions of Yen
U.S. Dollars
2016
2017
2017
15,852 $ 143,767
16,129 ¥(16,554)(17,221)(153,506)(701)(1,092)(9,738)
19,613
20,837
185,738
18,912
18,933(21)

19,74520,011(266)
19,745¥

18,912

175,999
178,371(2,371)$

175,999

Note: The above table includes the retirement benefit obligation calculated by the simplified
method.

23

12. RETIREMENT BENEFITS (continued)(5) The components of retirement benefit expenses for the years ended 31 March 2017 and 2016 are as
follows:

Service costs
Interest cost
Expected return on plan assets
Amortisation of actuarial loss
Amortisation of prior service costs
Retirement benefit expenses
calculated by the simplified method
Other
Retirement benefit expenses fordefined benefit plans¥

Millions of Yen
2016
2017
1,377 ¥
1,292
86
273
(342)
(388)
749
962
(273)
(249)
204

¥

1,802

Thousands of
U.S. Dollars
2017$12,280768(3,054)
6,678(2,434)

218
38
¥

2,147

1,827

$

16,065In addition to the above table, special retirement benefit of ¥85 million ($765 thousand) wererecorded as other expenses in the consolidated statement of income.
(6) The components of retirement benefit liability adjustment (before tax effects) in othercomprehensive income for the years ended 31 March 2017 and 2016 are as follows:

Prior service costs
Actuarial loss
Total

¥
¥

Millions of Yen
2016
2017
249
273 ¥
1,052
719
1,302
992 ¥

Thousands of
U.S. Dollars
2017
$
2,434
6,413
$
8,847

(7) The components of retirement benefit liability adjustment (before tax effects) in accumulated othercomprehensive income as at 31 March 2017 and 2016 are as follows:

Unrecognised prior service costs
Unrecognised actuarial gain
Total

¥
¥

Millions of Yen
2016
2017
(2,582)(2,309) ¥
6,662
7,382
4,080
5,072 ¥

24

Thousands of
U.S. Dollars
2017$ (20,584)
65,801$45,217

12. RETIREMENT BENEFITS (continued)(8) Plan assets
a. The components of plan assets by major category as at 31 March 2017 and 2016 are as follows:
2017
43%
36
13
2
6
100%

Debt securities
Equity securities
Insurance company general accounts
Cash and deposits
Other
Total

2016
43%
32
14
5
6
100%

Note: 20% and 20% of the total plan assets were in the retirement benefit trust as at 31 March2017 and 2016, respectively.
b. Method of determining long-term expected rate of return on plan assets
The long-term expected rate of return on plan assets is determined as a result of consideration ofboth the portfolio allocation at present and in the future, and long-term expected rate of returnfrom multiple plan assets at present and in the future.
(9) Assumptions used in accounting for the defined benefit plans for the years ended 31 March 2017 and2016 are set forth as follows:

Discount rates
Long-term expected rates of return onplan assets

2017
0.0-0.7%

2016
0.1-0.9%

2.5-3.0%

1.0-4.0%(10) Defined contribution plans for the years ended 31 March 2017 and 2016
The total contributions to be paid by the Company and its consolidated subsidiaries to defined
contribution plans were ¥562 million ($5,017 thousand) and ¥554 million for the years ended 31
March 2017 and 2016, respectively.

2513. SHAREHOLDERS’ EQUITYThe Companies Act of Japan (the “Act”) provides that an amount equal to 10% of the amount to be
disbursed as distributions of capital surplus (other than the capital reserve) and retained earnings (otherthan the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sumof the capital reserve and the legal reserve equals 25% of the capital stock account. Such distributions canbe made at any time by resolution of the shareholders, or by the Board of Directors if certain conditions aremet.
Under the Act, upon the issuance of new shares of common stock, the entire amount of the proceeds isrequired to be accounted for as common stock, although a company may, by resolution of the Board of
Directors, account for an amount not exceeding one-half of the proceeds of new shares as additional paidin capital included in capital surplus.
Under the Act, the distribution of retained earnings with respect to a given financial period is made byresolution of the shareholders at a general meeting held subsequent to the close of the financial period. The
distribution of retained earnings with respect to the interim financial period is made by resolution of theBoard of Directors. The accounts for the period do not reflect such distributions.
Stock options
The Company has stock option plans. Stock option expenses, included in selling, general andadministrative expenses, charged to profit or loss for the year ended 31 March, 2017 amounted to ¥27
million ($248 thousand).
The stock option plan of the Company as of 31 March 2017 is summarised as follows:

Individuals covered by
the plan
Class and number of
options granted
Grant date
Vesting conditions
Vesting period forservices received
Exercisable period

The 2016 Plan
5 Directors (excluding outside directors)
8 Executive officers
Common stock 40,000 shares
4 July 2016
None
No vesting period for services received has been
stipulated.
From 5 July 2016 to 4 July 2046

Size and movement of stock options are summarised as follows:
The 2016 plan
Number of stock options not yet vested:
Outstanding at 31 March 2016
GrantedForfeited
VestedOutstanding at 31 March 2017
Number of stock options already vested:
Outstanding at 31 March 2016
VestedExercised
Forfeited
Outstanding at 31 March 2017–
40,000–40,000––40,000––40,00026

27

13. SHAREHOLDERS’ EQUITY (continued)
The fair value of stock options for the stock option plan of the Company during the year ended 31 March2017 is summarised as follows:
Yen
U.S. dollars
The 2016 plan The 2016 plan
¥ 1
$ 0
–
–
697
6

Exercise price
Average stock price at the exercise date
Fair value as of the grant date

The number of existing stock options as of 31 March 2017 represents the corresponding number of shares.
The valuation method for estimating fair value was the Black-Scholes model. The major assumptions used
are as follows:
Major assumptions

Note

The 2016 plan

Expected volatility
Expected holding period
Expected dividend

(a)
(b)
(c)

22.496%
2.8 years¥6 per share($0 per share)

Risk-free rate(d)(0.334%)(a) Expected volatility was computed by the weekly historical volatility of the Company’s stock during
the period from 16 September 2013 to 4 July 2016.
(b) Expected holding period was computed by estimating the expected tenure of new stock option holders
and weighted average unit of stock options granted to each new stock option holder.
(c) Expected dividend was calculated based on the actual amounts paid for the year ended 31 March 2016.
(d) Risk-free rate was computed by the average of the compound interest of long-term interest-bearing
government bonds with redemption dates within the before and after three months based on the date
which the expected holding period elapse from the grant date the stock acquisition rights.
The number of vested stock options is estimated to be the same as the number of granted stock options as
they vested on the grant date.

28

13. SHAREHOLDERS’ EQUITY (continued)
Common stock and treasury stock(1) Movements in issued shares of common stock and treasury stock during the years ended 31 March2017 and 2016 are as follows:

Issued shares:
Common stock
Treasury stock (Notes 1 and 2)

1 April 2016

Number of shares
2017
Increase
Decrease

565,913,515
24,193,867–
5,719,503–
835

31 March 2017565,913,515
29,912,535

Notes: 1. The increase in the number of shares of treasury stock of 5,678,000 shares was due topurchase of treasury stock under resolution of the Board of Directors and of 41,503
shares was due to repurchases of fractional shares of less than one voting unit.
2. The decrease in the number of shares of treasury stock of 835 shares was due to sales offractional shares of less than one voting unit.

1 April 2015
Issued shares:
Common stock
Treasury stock (Notes 1 and 2)

565,913,515
3,822,672

Number of shares
2016
Increase
Decrease–
20,373,309

–
2,114

31 March 2016
565,913,515
24,193,867

Notes: 1. The increase in the number of shares of treasury stock of 20,303,000 shares was due topurchase of treasury stock under resolution of the Board of Directors and of 70,309
shares was due to repurchases of fractional shares of less than one voting unit.
2. The decrease in the number of shares of treasury stock of 2,114 shares was due to sales offractional shares of less than one voting unit.

29

13. SHAREHOLDERS’ EQUITY (continued)(2) Information regarding dividend payments during the years ended 31 March 2017 and 2016 is asfollows:
For the year ended 31 March 2017a. Dividend payment:
2017
Resolutions
General shareholders’meeting held on
17 June 2016
Board meeting heldon 31 October 2016

Type ofsharesDividends paid

Dividend
per share

Record dates

Effective
dates

Commonstock¥1,625 million($14,485 thousand)¥3.0($0.02)31 March
2016

20 June2016

Commonstock¥1,608 million($14,333 thousand)¥3.0($0.02)30 September
2016

1 December
2016

b. Dividend payment with an effective date in the following fiscal year:
2017
Resolution
General shareholders’meeting held on
20 June 2017

Type ofsharesDividends paid

Source of Dividend
dividend per share

Recorddate

Effective
date

Commonstock¥1,608 million($14,332 thousand)

Retainedearnings¥3.0($0.02)31 March
2017

21 June2017

Dividends paid

Dividend
per share

Record dates

Effective
dates

Commonstock¥1,686 million¥3.0

31 March
2015

18 June2015

Commonstock¥1,686 million¥3.0

30 September
2015

1 December
2015

For the year ended 31 March 2016a. Dividend payment:
2016
Resolutions
General shareholders’meeting held on
17 June 2015
Board meeting heldon 29 October 2015

Type ofsharesb. Dividend payment with an effective date in the following fiscal year:
2016
Resolution
General shareholders’meeting held on
17 June 2016

Type ofsharesCommonstock

Dividends paid
¥1,625 million

30

Source of Dividend
dividend per share

Recorddate

Effective
date

Retainedearnings

31 March
2016

20 June2016¥3.0

14. COST OF SALES
Cost of sales included loss on devaluation of inventories of ¥222 million ($1,982 thousand) and ¥746
million for the years ended 31 March 2017 and 2016, respectively.

15. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are assessed for impairment either on an individual asset basis such as
property or store, or on a group basis such as business segment, which is determined based on the
managerial accounting segment.
The Group recognised loss on impairment of property, plant and equipment in the amounts of ¥1,359
million ($12,120 thousand) and ¥61 million for the years ended 31 March 2017 and 2016, respectively.
The details are summarised as follows:
For the year ended 31 March 2017
2017
Usage

Location

Marine businessassetsOtsu, Shiga andotherIdle assets

Hirakata, Osaka

Rentalproperties

Sakyo-ku, Kyoto

Hotel facilities

Sakyo-ku, Kyoto

Commercial
storesRitto, Shiga andotherClassification
Buildings and structures
Machinery, equipment andvehiclesLand
Lease assets
Other
Sub-total
Buildings and structures
Land
Sub-total
Buildings and structures
Land
Other
Sub-total
Buildings and structures
Machinery, equipment andvehiclesOther
Sub-total
Buildings and structures
Machinery, equipment andvehiclesOther
Sub-total
Total

31

Millions of Yen¥
305

Thousands of
U.S. Dollars$ 2,725

66

588

83
362
98
916
8
239
247
3
127
1
132
29

746
3,234
873
8,169
73
2,131
2,205
27
1,139
12
1,180
267

1

13

2
33
14

18
298
129

0

1

15
29
¥ 1,359135
266$ 12,120

15. LOSS ON IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT (continued)
For the year ended 31 March 2016
2016
Usage
Idle assets

LocationTsuzukigun, Kyoto

Hotel facilities

Sakyo-ku, Kyoto

Commercial
storesNishi-ku, Nagoya

ClassificationLand
Sub-total
Buildings and structures
Other
Sub-total
Buildings and structures
Other
Sub-total
Total

Millions of Yen
¥
30
30
8
15
23
6
0
6
¥
61

For assets, such as marine business assets, rental properties, hotel facilities, and commercial stores as adecline in profitability was expected to continue, or for idle assets when a decline in market value wasobserved, the Group wrote down the carrying value of the asset to the recoverable amount and loss on
impairment of property, plant and equipment was recorded as other expense for the year ended 31 March2017.
For assets, such as idle assets, rental properties, hotel facilities and commercial stores as a decline inmarket value was observed, a decline in profitability was expected to continue, or a decision to sell or
dismantlement was made, respectively, the Group wrote down the carrying value of the asset to therecoverable amount and loss on impairment of property, plant and equipment was recorded as otherexpense for the year ended 2016.
The recoverable amounts of marine business assets were determined using net realisable value basically
based on the valuation used for property tax purposes for the year ended 31 March 2017.
The recoverable amounts of idle assets were determined using net realisable value basically based on thevaluation used for property tax purposes, and the appraisal value assessed by an external appraiser for theyears ended 31 March 2017 and 2016, respectively.
The recoverable amounts of rental properties were determined using net realisable value basically based on
the appraisal value assessed by an external appraiser for the year ended 31 March 2017.
The recoverable amounts of hotel facilities were determined using net realisable value basically based on
the appraisal value assessed by an external appraiser for the years ended 31 March 2017 and 2016.
The recoverable amounts of commercial stores were determined using value in use. Commercial stores
were written down to the nominal value as future cash flow was negative for the year ended 31 March
2017and as future cash flow was not expected due to a decision to withdraw from the business for the year
ended 31 March 2016.

32

16. INCOME TAXES
Income taxes applicable to the Company and its domestic subsidiaries comprise corporation tax,
inhabitants’ taxes and enterprise taxes which, in the aggregate, resulted in normal statutory tax rates ofapproximately 30.8% and 33.0% for the years ended 31 March 2017 and 2016.
The tax effects of significant temporary differences and tax loss carry forwards which resulted in net
deferred tax assets and liabilities at 31 March 2017 and 2016 are as follows:
Thousands of
U.S. Dollars
2017

Millions of Yen
2016
2017
Deferred tax assets:
Liability for retirement benefits
Difference arising from company
split
Loss on impairment of property,
plant and equipment
Loss on devaluation of land,buildings and structures for saleTax loss carry forwards
Unrealised gain
Allowance for employees’ bonuses
Loss on devaluation of securities
OthersSub-total
Valuation allowance
Total deferred tax assets
Offset by deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities:
Difference on valuation of assets ofconsolidated subsidiaries
Net unrealised holding gain on
securities
Gain on securities contributed to
employee retirement benefit trust
Reserve for deduction in costs ofproperty, plant and equipment
OthersTotal deferred tax liabilities
Offset by deferred tax assets
Net deferred tax liabilities¥¥

10,267

8,984$

91,515

4,238–

37,783

1,746

1,338

15,568

¥

1,420
1,246
1,074
887
683
3,130
24,694(9,900)14,794(4,913)
9,880

¥

1,445
1,297
1,125
866
972
3,124
19,154(6,852)
12,302(7,560)4,741 $

12,660
11,108
9,575
7,910
6,094
27,900220,116(88,247)
131,869(43,799)
88,070¥(8,172)¥(8,085)(72,847)¥$(4,531)(4,515)(40,394)(2,774)(2,461)(24,733)

(167)
(503)
(16,150)
4,913(11,236)

(187)
(256)
(15,506)
7,560(7,946)(1,496)(4,486)(143,959)
43,799(100,159)

33

¥

$

16. INCOME TAXES (continued)
A reconciliation between the statutory tax rates and the effective tax rates reflected in the accompanying
consolidated statement of income for the years ended 31 March 2017 and 2016 is as follows:

Statutory tax rates
Effect of:Permanent non-deductible expenses
Permanent non-taxable income
Per capita portion of inhabitants’ tax
Effect of change in corporate tax rates
Valuation allowance
Amortisation of goodwill
Gain on bargain purchase
Loss on step acquisitions
Others
Effective tax rates

2017
30.8%

2016
33.0%

0.3
(0.2)
0.4
–
(3.6)
0.3
–
–
(0.1)
27.9

0.6
(0.2)
0.4
(0.1)
(2.3)
0.3
(4.9)
2.2
0.2
29.2

17. OTHER COMPREHENSIVE INCOME
Reclassification adjustments and related income tax effects on components of other comprehensive loss forthe years ended 31 March 2017 and 2016 are as follows:
Thousands of
U.S. Dollars
2017

Millions of Yen
2016
2017
Net unrealised holding loss on securities:
Amount arising during the year
Reclassification adjustments for gain
included in profit
Before tax effectTax effect
Total
Revaluation reserve for land:
Amount arising during the year
Reclassification adjustments for gain
included in profit
Before tax effectTax effect
Total
Retirement benefit liability adjustment:
Amount arising during the year
Reclassification adjustments for loss
included in profit
Before tax effectTax effect
Total
Share of comprehensive loss of affiliates
accounted for using equity method
Amount arising during the year
Other comprehensive loss, net

¥

¥

1,684

¥

(4,683)$15,016(2,609)
(925)
(16)
(941)

(0)
(4,683)
1,702(2,981)(23,261)(8,245)(145)(8,390)

–

–

–

–
–
(2,087)(2,087)

–
–
1,625
1,625

–
–
(18,611)(18,611)(1,468)(2,015)(13,091)

476
(992)
469
(522)

712
(1,302)
368
(934)

4,244
(8,847)
4,187(4,660)–(2,289)(21)(31,684)(2)(3,554)34¥$

18. LEASES(1) Finance Leases (as Lessee)
Leased assets under finance lease transactions which do not transfer ownership to the lessee mainly
consist of machinery, equipment and vehicles, such as buses used for the transportation business.
As described in Note 2 “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (f) Leased
Assets,” leased assets under finance lease transactions which do not transfer ownership to the lessee
are capitalised and depreciated over the respective lease terms to a nil residual value by the straightline method.
Finance lease transactions commencing on or before 31 March 2008 other than those in which theownership of the leased assets is transferred to the lessee are accounted for in the same manner as
operating leases. The details of these finance lease transactions are omitted because the amounts are
immaterial.
(2) Operating Leases
Future minimum lease payments under non-cancelable operating leases as at 31 March 2017 and2016 are as follows:
Millions of Yen
2016
2017
Future minimum lease payments:
Due within one year
Due after one year
Total

¥
¥

1,480
4,262
5,742

35

¥
¥

1,480
5,742
7,222

Thousands of
U.S. Dollars
2017
$
$

13,19537,99051,185

19. AMOUNTS PER SHARE
Yen
Net assets
Profit attributable to owners of parent:
Basic
Diluted¥2017374.20

¥
¥

42.20
42.20

¥
¥

2016
349.13
39.95–

U.S. Dollars
2017
$
3.33
$
$

0.37
0.37

Diluted profit attributable to owners of parent per share for the years ended 31 March 2016 is not presented
since there were no potentially dilutive securities.
The financial data used in the computation of basic and diluted profit attributable to owners of parent for
the years ended 31 March 2017 and 2016 in the table above is summarised as follows:

Profit attributable to owners of parent¥

Millions of Yen
2016
2017
¥ 22,385
22,636

Thousands of
U.S. Dollars
2017$ 201,767

Thousands of shares
Weighted-average number of sharesof common stock outstanding
Increase in shares of common stock

2017

2016

536,36729

560,357–

Potential shares which do not have dilutive effect for the years ended 31 March 2017 and 2016 are euroyen zero coupon convertible bonds with stock acquisition rights (2,000 units) in yen, due 30 March 2021 in
the aggregate amount of ¥20,000 million ($178,269 thousand).

36

20. CASH AND CASH EQUIVALENTS
The balances of cash and deposits reflected in the accompanying consolidated balance sheet as at 31 March2017 and 2016 are reconciled with cash and cash equivalents presented in the accompanying consolidated
statement of cash flows for the years then ended as follows:

Cash and deposits¥
Time deposits with a maturity of morethan three months
Deposits included in other of current
assetsCash and cash equivalents¥

Millions of Yen
2016
2017
25,072
18,372 ¥Thousands of
U.S. Dollars
2017$ 163,763

(48)

(431)

(48)
–
18,324¥

4,349
29,372$–
163,332

The Company acquired all shares in Osaka Merchandise Mart Corporation (currently, Keihan Tatemono
Co., Ltd.) which became a newly consolidated subsidiary. Major components of assets and liabilities of
the newly consolidated subsidiary due to acquisition of shares during the year ended 31 March 2016 are as
follows:

Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities

Millions of yen¥
2,676
75,422021
9,054
11,731
528
1,921
¥
2,450

21. FINANCIAL INSTRUMENTS(1) Overview
a. Group policy for financial instruments
The Group restricts its investment activities of surplus cash to short-term deposits and others. In
terms of financing activities, the Group mainly raises funds by loans from banks and otherfinancial institutions and the issuance of bonds. Derivative transactions are utilised, not for
speculative purposes, but to avoid the risks described below.
b. Nature of financial instruments, their related risk and risk management for financial instruments
Trade receivables, such as notes and accounts receivable, are exposed to the credit risk ofcustomers. The Group mitigates the credit risk mainly by managing due dates and outstandingbalances by individual customers.
Short-term investments and investment securities mainly consist of held-to-maturity debt
securities and equity securities issued by companies with which the Group has business
relationships. Since these securities are exposed to the risk of market price fluctuations, theGroup regularly monitors the fair value of the securities and financial conditions of the issuers.

37

21. FINANCIAL INSTRUMENTS (continued)(1) Overview (continued)
b. Nature of financial instruments, their related risk and risk management for financial instruments(continued)
Trade payables, such as notes and accounts payable, are mostly due in one year or less.
Proceeds from short-term loans are mainly used for working capital, and proceeds from bonds
and long-term loans are mainly used for capital investments. Among them, those to which
variable interest rates apply are exposed to the risk of interest rate fluctuations. However, forcertain long-term loans, the derivative transactions (such as interest rate swaps) by individual
contracts are used as hedging instruments to hedge the risk of fluctuations of interest rates andstabilise interest payments.
Hedge effectiveness is not assessed as the interest rate swaps meet the criteria for application of
the special accounting treatment.
Derivative transactions are executed and managed by the treasury department of the Company
and three consolidated subsidiaries which utilise derivative instruments upon the approval of thedecision-making authority. In addition, the counterparties of the derivative transactions arelimited to highly-rated financial institutions in order to mitigate credit risk.
In addition, trade payables and loans are exposed to liquidity risk. However, the Group manages
liquidity risk mainly by preparing monthly cash flow management plans.
c. Supplementary explanation on fair value of financial instruments and related matters
The fair value of financial instruments is based on quoted market prices, if available. If a quoted
market price is not available, fair value is reasonably estimated. Since various assumptions andfactors are reflected in estimating the fair value, different assumptions and factors could result indifferent fair value. In addition, the notional amounts of derivatives in Note 22 “DERIVATIVEFINANCIAL INSTRUMENTS” are not necessarily indicative of the actual market risk involvedin the derivative transactions.

38

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters
Carrying value, fair value and the difference between them are as follows:
Millions of Yen
2017(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets(4) Notes and accounts payable(5) Short-term loans(6) Bonds (including current portion)(7) Long-term loans (including current
portion)Total liabilities(8) Derivative transactions

Carrying
value¥
18,372
25,760Fair value¥
18,372
25,760Difference
¥
–
–

1,659
23,65669,4491,738
23,656
69,528

79
–
79

¥

¥

¥

11,24842,474
90,237

11,24842,474
92,958

–
–
2,721

¥

181,827
325,788¥

186,602333,284

¥

4,775
7,496

¥

–

¥

–

¥

–

¥

Difference––

Millions of Yen
2016(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets

Carrying
value¥
25,072
23,702¥

1,873
27,137
77,785¥¥

10,77550,4705,000
90,503

Fair value
25,072
23,702

1,973
27,13777,884¥(4) Notes and accounts payable(5) Short-term loans(6) Short-term bonds(7) Bonds (including current portion)(8) Long-term loans (including current
portion)Total liabilities¥

179,740
336,489¥

184,420
345,323

¥

4,679
8,833

(9) Derivative transactions

¥

–

¥

–

¥

–

39

10,77550,4705,000
94,657

99
–
99
–
–
–
4,154

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)(1) Cash and deposits(2) Notes and accounts receivable(3) Short-term investments andinvestment securities:
Held-to-maturity debt securities
Other securities
Total assets

Thousands of U.S. Dollars
2017
Carrying
value
Fair value
Difference–$ 163,763 $ 163,763 $
229,618
229,618–$

14,788210,862
619,033$

15,497
210,862
619,741

$

708
–
708

(4) Notes and accounts payable(5) Short-term loans(6) Bonds (including current portion)(7) Long-term loans (including current
portion)Total liabilities

100,266
378,596804,326

100,266
378,596
828,580––
24,254

1,620,707$ 2,903,896

1,663,272$ 2,970,716$

42,56566,819(8) Derivative transactions

$

$

$

–

–

–

Notes:
1. Method to determine the estimated fair value of financial instruments and other matters related
to securities and derivative transactions(1) Cash and deposits and (2) Notes and accounts receivable
As these items are settled in a short period of time, their carrying value approximates fairvalue.
(3) Short-term investments and investment securities
The fair value of equity securities is estimated based on the market price on stock exchanges,
and the fair value of debt securities is estimated based on the market price on stock
exchanges or the quoted price from the counterparty financial institutions.
(4) Notes and accounts payable and (5) Short-term loans
As these items are settled in a short period of time, their carrying value approximates the fairvalue.
(6) Bonds
The fair value of bonds issued by the Group is estimated mainly based on the quoted market
price.

40

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)
Notes: (continued)(7) Long-term loans
As long-term loans with variable interest rates reflect market interest rates in a short period oftime, the carrying value approximates the fair value. The fair value of long-term loans with
fixed interest rates is estimated based on the present value of the total amounts of principal
and interest payments discounted at an interest rate to be applied if similar new loans are
made. In terms of long-term loans hedged by interest rate swaps accounted for by the special
accounting treatment (see Note 22 “DERIVATIVE FINANCIAL INSTRUMENTS”), the fairvalue is estimated based on the present value of the total amounts of principal and interest
payments which are accounted for by the special accounting treatment discounted by theinterest rates to be applied assuming that new loans under similar conditions to the existingloans are made.
(8) Derivative transactions
See Note 22 “DERIVATIVE FINANCIAL INSTRUMENTS.”
2. Financial instruments for which it is extremely difficult to determine the fair value as at 31 March2017 and 2016 are summarised as follows:

Category
Unlisted stocks¥

Millions of Yen
2016
2017
¥
4,546
3,965

Thousands of
U.S. Dollars
2017$
35,343

Because a quoted market price is not available and the future cash flows cannot be reasonably
estimated for these instruments, it is extremely difficult to determine their fair value. Therefore,
the above financial instruments are not included in the tables above.
3. Investments in unconsolidated subsidiaries and affiliates are not included in the table above.

41

21. FINANCIAL INSTRUMENTS (continued)(2) Fair value of financial instruments and related matters (continued)
Notes: (continued)
4. The redemption schedules for cash and deposits, notes and accounts receivable and short-term
investments and investment securities with maturities as at 31 March 2017 are as follows:

Due in1 yearor less¥
16,84325,760Cash and deposits
Notes and accounts receivable
Short-term investments and investment
securities:
Held-to-maturity debt securities
National and municipal bonds
Other securities with maturities
Corporate bonds
Total

Millions of Yen
2017
Due after
Due after
1 year
5 years
throughthrough
5 years
10 years
¥
– ¥
–
–
–

–

¥

3
42,607Due in1 yearor less$ 150,131
229,618

Cash and deposits
Notes and accounts receivable
Short-term investments and investment
securities:
Held-to-maturity debt securities
National and municipal bonds
Other securities with maturities
Corporate bonds
Total

$

1,157

¥

–
1,157

Due after
10 years
¥
–
–

300

¥

–
300

200

¥

Thousands of U.S. Dollars
2017
Due after
Due after
1 year
5 years
Due after
throughthrough
5 years
10 years
10 years
$
– $
– $
–
–
–
–

–

10,318

2,674

1,782

33
379,783–
10,318

–
2,674

2,674
4,456

$

$

$

5. The redemption schedules for short-term loans, bonds and long-term loans as at 31 March 2017
Refer to Note 10. SHORT-TERM LOANS, BONDS AND LONG-TERM LOANS.

42

300
500

22. DERIVATIVE FINANCIAL INSTRUMENTS
The notional amounts and the estimated fair value of the derivative positions outstanding qualifying forhedge accounting as at 31 March 2017 and 2016 are as follows:
Millions of Yen
2017
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans¥ 3,052¥ 2,482(Note)

Millions of Yen
2016
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans¥ 3,472¥ 3,052(Note)

Thousands of U.S. Dollars
2017
Contractual valueHedge
accounting
methodSpecialaccounting
treatment ofinterest rate
swaps

Transaction typeInterest rate swap
Receive-floating/pay-fixed

Major hedged
items

Notional
amountDue after
1 yearFair value

Long-termloans$ 27,203$ 22,213(Note)

Note: Because interest rate swaps are accounted for as if the interest rates applied to the swaps had beenoriginally applied to the long-term loans, their fair value was included in long-term loans.

4323. CONTINGENT LIABILITIESThe Company provides guarantees for the borrowings of the following companies, which are other thanconsolidated subsidiaries, as at 31 March 2017 as follows:

Nakanoshima Rapid Railway Co., Ltd.
Bunkazai Service Co., Ltd.
Hachikenya Co., Ltd.
Total

Millions of Yen
2017¥
23,957115
5¥24,077

Thousands of U.S.
Dollars
2017$
213,5421,025
49$214,616

24. ASSET RETIREMENT OBLIGATIONS(1) General information about asset retirement obligations
Asset retirement obligations included in the “Other” of current and noncurrent liabilities are mainly
legal obligations for the removal of asbestos under the Ordinance on Prevention of Asbestos Hazards
and the restoration under certain real estate lease agreements.
(2) Basis of measurement for asset retirement obligations
Asset retirement obligations are calculated individually based on individual estimates of the usage
period depending on the situation of each asset retirement obligation, and the discount rates ofJapanese government bonds at the time of application of the relevant accounting standards or at thetime of acquisition of the assets.
(3) Changes in the balance of asset retirement obligations for the years ended 31 March 2017 and 2016
are as follows:
Millions of yen
2016
2017
¥
384
¥
357

Balance at the beginning of year
Increase due to consolidation of a new
subsidiary
Increase due to acquisition of property,
plant and equipment
Adjustment with passing of time
Increase due to changes in estimate (Note)
Decrease due to settlement
Other
Balance at the end of year¥

Thousands of
U.S. Dollars
2017$ 3,188

–

34

–

142
4
–
(7)
–
497

–
4
3
(8)
(61)
357

1,273
37
–
(66)
–
4,431

¥

$

Note: The amount of asset retirement obligations before change increased by ¥3 million for the year
ended 31 March 2016, due to a change in the estimated costs to be incurred at the time ofretirement of certain assets.

44

25. SEGMENT INFORMATION(1) Outline of reportable segments
The Group’s reportable segments are divisions of the Group for which separate financial information
is available, and whose operating results are regularly reviewed by the Board of Directors of theCompany in order to allocate management resources and assess performance of operations.
The Group is engaged in transportation and various other businesses and has five business segments:“Transportation,” “Real Estate,” “Retail Distribution,” “Leisure and Service” and “Others.”“Transportation” involves mainly railway and bus services. “Real Estate” mainly involves sales orleasing of real estate, wholesale of construction materials, and surveying and designing of real estate.
“Retail Distribution” involves mainly operations of department stores, other stores, and malls.
“Leisure and Service” involves mainly hotel and sightseeing cruise businesses. “Others” involves
credit card business.
(2) Calculation method used for operating revenues, income or loss, assets, and other items of eachreportable segment
The accounting policies of the reportable segments are substantially the same as those described in
Note 2 “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.”
The segment income or loss is based on the operating income of each reportable segment.
Inter-segment operating revenues or transfers are determined based on market prices.

45

25. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2017 and 2016
Millions of Yen
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

Others¥

92,202¥ 1,125

13,214

446

Total

¥

94,404¥

94,014

Segment income
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets

¥

9,976
246,368¥

14,491
344,032

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers

¥

2,202

80,800¥ 98,046

Total

Adjustments Consolidated(Note 1)
(Note 2)¥302,915¥¥

30,741

60

666

16,590(16,590)¥ 98,493¥

30,801¥ 1,792¥

319,505

¥

¥

4,755
33,826¥¥

31,935662,133

2,636
30,648

74
7,255

1

¥

302,917¥ (16,588)¥

302,917¥¥

32,343
679,631408
17,498–

10,722

4,732

1,276

1,101

30

17,864

209

18,074

17,69016,553

2,341

1,877

34

38,498675

39,173

Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment income” represented elimination of inter-segment
transactions and profit or loss of the Company not allocated to each reportablesegment.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and the Company assets not allocated to each reportable segment. The
Company assets amounted to ¥34,957 million ($311,591 thousand) and principallyconsist of the Company’s surplus funds (cash and deposits), long-term investment
assets (investment securities).
(3) “Adjustments” to “Increase in property, plant and equipment, and intangible assets”
represented the Company assets not allocated to each reportable segment.
2. Segment profit was adjusted to operating income in the consolidated statement of income.

46

25. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2017 and 2016 (continued)
Millions of Yen
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

Others¥

92,195¥ 1,077

12,383

384

Total

¥

93,562¥

89,033

Segment income (loss)
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets¥

10,193
266,694¥

13,882
303,245

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers

¥

1,367

76,649¥ 98,490

Total

Adjustments Consolidated(Note 1)
(Note 2)¥300,188¥

14,852(14,852)¥

315,040(12) ¥
7,006

31,490640,481¥

31,77537678¥ 98,875¥

31,813¥ 1,755

¥

¥

4,599
34,871¥

2,826
28,664–¥300,188¥ (14,852)¥

300,188¥¥

31,524670,333

34
29,851–

10,788

4,333

1,284

1,145

17

17,571–

17,571

12,74913,392

1,609

3,924

120

31,796(398)

31,398Notes: 1. Details of adjustments are as follows:(1) “Adjustments” to “Segment income (loss)” represented elimination of inter-segment
transactions.
(2) “Adjustments” to “Segment assets” represented elimination of inter-segment
transactions and corporate assets. Corporate assets amounted to ¥43,502 million andprincipally consist of the Company’s surplus funds (cash and deposits), long-term
investment assets (investment securities) and deferred tax assets.
(3) “Adjustments” to “Increase in property, plant and equipment, and intangible assets”
represented elimination of inter-segment transactions.
2. Segment profit (loss) was adjusted to operating income in the consolidated statement ofincome.

47

25. SEGMENT INFORMATION (continued)(3) Information about operating revenues, income or loss, assets and other items by reportable segment
for the years ended 31 March 2017 and 2016 (continued)
Thousands of U.S. Dollars
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service

OthersTotal$

821,838$ 10,030$ 2,700,023

19,630117,783

3,976

541

5,943

147,876(147,876)

–

Total

$

841,469$ 837,992$ 877,912$ 274,550$ 15,974$ 2,847,899$ (147,860)$ 2,700,039

Segment income
Segment assets
Other items:
Depreciation andamortisation
Increase in property,
plant and equipment,
and intangible assets$

88,9262,195,997$ 129,173
3,066,519$ 23,502
273,186

$

$

$

$

$

95,57442,183

11,382

9,821

274

159,236

1,870

161,106

157,685

147,544

20,873

16,739308

343,151

6,021

349,173

Operating revenues:
External customers
Inter-segment
operating revenues
or transfers$ 720,208$ 873,935$ 274,009

42,389301,513660
64,675

284,651
5,901,892

Adjustments Consolidated(Note 1)
(Note 2)
$

15

3,644
155,973$ 2,700,039

288,295
6,057,865(4) Related informationa. Information by product and service
Information by product and service was omitted because it was the same as that of reportablesegment information.
b. Geographical information
Operating revenues
As revenue located in Japan accounted for more than 90% of revenue recognised in the
consolidated statement of income for the years ended 31 March 2017 and 2016, information onrevenue by geographical segment was omitted.
Property, plant and equipment
As the balance of property, plant and equipment located in Japan accounted for more than 90%of the balance of property, plant and equipment recognised in the consolidated balance sheet as
at 31 March 2017 and 2016, information on property, plant and equipment by geographicalsegment was omitted.
c. Information by major customer
As operating revenues to any single external customer do not exceed 10% of operating revenues
in the consolidated statement of income, information by major customer was omitted.

48

25. SEGMENT INFORMATION (continued)(5) Information about loss on impairment of property, plant and equipment by reportable segment
Millions of Yen
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

¥

132

¥

–

¥

–

¥

1,266

Others
¥

–

Total
¥

1,398

Adjustments Consolidated
¥

(38)

¥

1,359

Millions of Yen
2016
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

¥

37

¥

–

¥

–

¥

23

Others
¥

–

Total
¥

61

Adjustments Consolidated
¥

–

¥

61

Thousands of U.S. Dollars
2017
Reportable Segments
RetailLeisure andTransportation Real Estate Distribution
Service
Impairment losses

$

1,180

$

–

$

–

$ 11,287

Others$–Total$ 12,467

Adjustments Consolidated
$

(347)

$

12,120(6) Information on amortisation of goodwill and remaining unamortised balance by reportable segment
Information on amortisation of goodwill and remaining unamortised balance by reportable segment
as at 31 March 2017 and 2016 and for the years then ended was omitted because the amounts wereimmaterial.
(7) Information on negative goodwill by reportable segment
Relating to the segment “Real Estate,” the Company acquired additional shares of Osaka
Merchandise Mart Corporation, making it a consolidated subsidiary. As a result, the Company
recognised gain on bargain purchase of ¥4,709 million and loss on step acquisitions of ¥2,119
million for the year ended 31 March 2016.

49

26. RELATED PARTY TRANSACTIONSTransactions of the Company with related parties as at and for the years ended 31 March 2017 and 2016
are as follows:
Company’s unconsolidated subsidiaries and affiliates
2017
Category
Affiliates

Company
nameNakanoshima Rapid
RailwayCo., Ltd.

Location
Chuo-ku,
Osaka

Capital¥26,135
million($232,959
thousand)Business
Railway
operations

Percentage
of votingrights(Direct
votingrights)RelationshipReservationofguarantees
on loans

Transaction
Guarantees(Note 1)

Transaction
amount¥23,957
million($213,542
thousand)Account–

Year-endbalance–

Account–

Year-endbalance–33.50%
Holding
concurrent
position of
directors

2016
Category
Affiliates

Company
nameNakanoshima Rapid
RailwayCo., Ltd.

Location
Chuo-ku,
Osaka

Capital¥26,135
millionBusiness
Railway
operations

Percentage
of votingrights(Direct
votingrights)RelationshipReservationofguarantees
on loans

Transaction
Guarantees(Note 1)

Transaction
amount¥25,210
million33.50%
Holding
concurrent
position of
directors

Note: 1. Guarantees are provided for the loans of the affiliate obtained from the Development Bank ofJapan and other banks in the amounts of ¥23,957 million ($213,542 thousand) and ¥25,210
million for the years ended 31 March 2017 and 2016, respectively.

27. BUSINESS COMBINATION
Transaction under common control(i) Company split
1)

Outline of transaction(a) Businesses to be divested
The Company’s railway business, amusement park business and real estate sales business.
(b) Date of business combination
1 April 2016(c) Legal form of business combination
Company split, in which the Company is the splitting company and Keihan Electric Railway
Co., Ltd. and Keihan Dentetsu Real Estate Co., Ltd. are the succeeding companies in thisabsorption-type split.
(d) Name of companies after business combination
Keihan Holdings Co., Ltd., Keihan Electric Railway Co., Ltd. and Keihan Dentetsu Real EstateCo., Ltd.

50

27. BUSINESS COMBINATION (continued)(i) Company split (continued)
1)

Outline of transaction (continued)
Other items
The Company shifted to a holding company structure for sustainable growth and improving
corporate value by addressing issues such as further strengthening the competitiveness of eachbusiness, expanding the Company’s group business, creating new business by utilizing alliances withdifferent industries and M&A, and improving the value of areas along the railway line in view of themid- and long-term.

2)

Outline of accounting treatment
The Company split was accounted as a transaction under common control in accordance with the“Accounting Standard for Business Combinations” and the “Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures”.

(ii) Merger
1)Outline of transaction(a) Name and business of combined company
a. Acquiring company (the Company’s consolidated subsidiary)
Name of acquiring company Kyoto Tower Co., Ltd.
Business description
Hotel businessb. Acquired company (the Company’s consolidated subsidiary)
Name of acquired company
BIWAKO HOTEL CO., Ltd., Kyoto Century Hotel Co.,Ltd.
Business description
Hotel business(b) Date of business combination
1 October 2016(c) Legal form of business combination
Absorption-type merger in which Kyoto Tower Co., Ltd. is the surviving company and
BIWAKO HOTEL CO., Ltd. and Kyoto Century Hotel Co., Ltd. are the absorbed companies.
(d) Name of company after business combination
Keihan Hotels & Resorts Co.,Ltd.
(e) Other items regarding outline of transaction
The purposes of this transaction are to strengthen the management foundation and brand power
as a hotel management company and realise improvement of operations by consolidation offunctions and human resources.

2)

Outline of accounting procedure adopted
The Company split was accounted as a transaction under common control in accordance with the“Accounting Standard for Business Combinations” and the “Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures”.

5128. SUBSEQUENT EVENTS(i) Change in the number of shares per share unit and the share consolidation
The Company resolved to change to the number of shares per share unit and put forward the proposal on ashare consolidation at the 95th Ordinary General Meeting of Shareholders on 20 June 2017 at the Board of
Directors’ meeting held on 28 April 2017. The proposal on the share consolidation was subsequently
approved at that general shareholders’ meeting.
1)

Purpose of the change in the number of shares per share unit and the share consolidation
For the greater convenience of investors, Japanese stock exchanges are promoting a plan toconsolidate trading units for common shares of domestic companies to 100 shares per unit based on“Action Plan for Consolidating Trading Units.” In light of the intent of this action plan, the Company
has decided to change the number of shares per share unit as a trading unit for the Company’s sharesfrom the present 1,000 shares to 100 shares.
Along with the change in the share unit, the Company decided to consolidate five shares into one
share to adjust the investment units of the Company’s shares to appropriate levels while taking thesecurity exchanges preferred investment unit level and medium- to long-term share price trends into
consideration.

2)

Details of change in the number of shares per share unit
As of 1 October 2017, the number of shares per share unit will be changed from the current 1,000
shares to 100 shares.

3)

Share consolidation
Details of share consolidation(a) Type of shares to be consolidated
Common stock(b) Method and ratio of share consolidation
With respect to the shares owned by the shareholders recorded in the shareholder register as of 30
September 2017 (substantially 29 September 2017), five shares will be consolidated into one
share as of 1 October 2017.
(c) Decrease in number of shares due to share consolidation
Total number of outstanding shares before share consolidation (As of 31 March 2017)565,913,515 shares
Decrease in number of shares due to share consolidation
452,730,812 shares
Total number of outstanding shares after share consolidation
113,182,703 shares
The decrease in the number of shares due to the share consolidation and the total number ofoutstanding shares after the share consolidation are theoretical numbers calculated by multiplying
the total number of outstanding shares before the share consolidation by the share consolidation
ratio.

52

28. SUBSEQUENT EVENTS (continued)(i) Change in the number of shares per share unit and the share consolidation (continued)
4)

Impact of this change on per share information
Per share information calculated as if the share consolidation had been implemented at the beginningof the fiscal year ended March 31, 2016, for the years ended 31 March, 2017 and 2016 is as follows:
2017

2016
(Yen)

Net assets
Profit attributable to owners of the parent:
Basic
Diluted¥ 1,870.99¥ 1,745.63

211.01211.00199.75–2017(U.S. dollars)$ 16.67
1.88
1.88

Diluted profit attributable to owners of the parent per share for the year ended 31 March, 2016 is notpresented since there were no potentially dilutive shares.
(ii) Transfer of subsidiary’s shares
At the Board of Directors’ meeting held on 28 February 2017, the Company resolved to transfer all of theshares of Keihan Life Support Co., Ltd., which is a consolidated subsidiary of the Company, to The Kansai
Electric Power Co., Inc. and KANDEN Security of Society, Inc. and concluded a share transfer agreement
on 11 April 2017 and transferred these shares on 26 April 2017.
1)

Reason for business transfer
The Group shifted to a holding company structure on 1 April 2016 and set up the creation ofsightseeingspots, revitalisation of areas along the Keihan railway lines and contents creation as its
main strategies, and it has been promoting “implementation of cross-sectional strategies of groupbusinesses”, ”creation of new business models” and “effective allocation of management resources.”
Under such circumstances, in order to respond to changes in society promptly and to improve theGroup’s business quality, comprehensively considering the effective allocation of management
resources and synergies among the Group, the Company concluded that transferring the nursing carebusiness to the Kansai Electric Power Group, which is attempting further advancement of thebusiness, is the best way for improving value of areas along railway lines in the future.

2)

Name of transferee
The Kansai Electric Power Co., Inc.
KANDEN Security of Society, Inc.

3)

Date of business transfer
26 April 2017

4)

Name of the subsidiary, business description and relationship with the Company(a) Name(b) Business description(c) Relationship with the Company

Keihan Life Support Co., Ltd.
Home-visit nursing care business, day care nursing business,and senior citizen facility business
The Group leases the subsidiary’s head office, day service
facility, and land and buildings of senior citizen facilities.
53

28.

SUBSEQUENT EVENTS (continued)(ii) Transfer of subsidiary’s shares (continued)5) Number of shares transferred, transfer price, gain or loss on business transfer and share holding after
transfer
(a)
(b)
(c)
(d)

Number of shares transferred
Transfer priceGain on business transfer
Shareholding after transfer

4,000 shares¥2,929 million ($26,113 thousand)¥3,164 million ($28,206 thousand)–%(iii) Acquisition of subsidiary
At the Board of Directors’ meeting held on 29 May 2017, the Company resolved to acquire the shares ofZero Corporation Co., Ltd. (“Zero Corporation”) to make it a consolidated subsidiary and concluded ashare purchase agreement on the same date.
1)

Reason for share acquisition
Zero Corporation has developed a ready-built housing and order-made building business and others
business mainly in Kyoto and has received support from many customers since it was established in
1982. It is a leading real estate company in the Kinki region with strengths in development know-how
of “Machinaka ready-built business,” especially in the built-up areas.
The Keihan Group had been working on urban development of so-called large-scale new towns
mainly “Kuzuha Rose Town” and “Keihan East Rose Town”. However, the Company decided towelcome Zero Corporation as a member of the Keihan Group so that the Company can propose
various other forms of town creation in addition to the large-scale development in the Keihan Groupby expanding to areas along the Keihan Railway lines utilizing the know-how of Zero Corporation
related to already developed areas.

2)

Name of parent of acquired company
Zero Holdings, Inc.

3)

Name of acquired company, business description and scale(a) Name of acquired company
Zero Corporation Co., Ltd.
(b) Business description
Ready-built housing business, order-made building
business and others(c) Common stock¥80 million ($713 thousand)4)

Date of share acquisition
3 July 2017 (planned)

5)

Number of shares to be acquired, acquisition price and shareholding ratio after acquisition(a) Number of shares to be acquired
1,600 shares(b) Acquisition price¥751 million ($6,694 thousand) (planned)(c) Shareholding ratio after acquisition 100%6) Method of fundraising and method of payment
Cash consideration using internal funding

54