Hankyu Hanshin Holdings
Annual Report 2010

Hankyu

Towards a
Brighter Future

1910 O pening of Mino-Arima Electric Railway(Takarazuka and Mino-o lines)
First sales of line-side residential subdivisions
1914 F irst performance by Takarazuka Girls’ Revue(now Takarazuka Revue)
1920 O perations begin on Kobe and Itami lines

1924
Opening of Takarazuka Grand Theatre

Hankyu Hanshin Holdings Group—Yesterday, Today and Tomorrow—

1926 Opening of Takarazuka Hotel

1929
Opening of Umeda Hankyu Building(first department store directly connected toa terminal station in the Orient)1943 M erger with Keihan
Electric Railway Co., Ltd.;
company name changed
to Keihanshin Railway
1944
Co., Ltd.
Completion of works means that Shin Keihan Line
(now Kyoto, Senri and Arashiyama lines)
is linked to Umeda Station
1947
Spin-off of department store and related businesses, launch of operations ofHankyu Department Stores, Inc. (now H2O Retailing Corporation)
1948
Launch of airline agency business
1949
Establishment of and transfer of some businesses
to Keihan Electric Railway Co., Ltd.

Hanshin
1905 Opening of Hanshin Electric Railway (linking Kobe and Osaka)
1924 Opening of Koshien Stadium (later renamed Hanshin Koshien Stadium)1935 E stablishment of Osaka Tigers professional baseball team(later renamed Hanshin Tigers professional baseball team)
Koshien Stadium just after its opening

1948 Launch of airline agency business
1940
Opening of Hanshin Mart
(underground, in front of Osaka Station)

1951 H anshin Mart expanded and renamed
Hanshin Department Store©Hanshin Tigers

Dai Hanshin Bldg. at completion

Opening of HERBIS ENT(9th November 2004)

Opening of HERBIS OSAKA(19th March 1997)

Advert for opening of Hankyu line
Hankyu Umeda Station on opening day(10th March 1910)
Hankyu’s first residential
development project(Ikeda Muromachi)©Takarazuka Revue Company

Completion of Umeda Hankyu Bldg.,
opening of department store(28th March 1929)

First performance (Donburako) by Takarazuka Girls’ Revue(1st April 1914)
Completion of extension
to Hankyu Koku Bldg.
(10th August 1951)

Hotel new Hankyu Osaka(August 1964)

1964 Opening of Hotel new Hankyu Osaka
1969 Opening of Hankyu Sanban Gai Shopping Centre
Opening of Japan’s first platform
convenience store (asnas),at Juso Station (20th April 1995)

1973 N ame changed to Hankyu Corporation
Completion of Umeda Station relocation and expansion project
1995 O pening of Japan’s first platform convenience store(Juso Station)
2001 Dai-ichi Hotel Co., Ltd. becomes a wholly owned subsidiary
1963 Completion of Dai Hanshin Bldg. in Osaka

1967
Opening of Hotel Hanshin

2005 S hift to pure holding company structure,launch of Hankyu Holdings, Inc.

1997
Opening of HERBIS OSAKA

2004
Opening of HERBIS ENT

Nov. 2008
Opening of Hankyu
Nishinomiya Gardens

Sep. 2009
Opening of Department
Store (Phase I) at new
Umeda Hankyu Bldg.

May 2010
Opening of OfficeTower at new Umeda
Hankyu Bldg.

Mar. 2009
Mar. 2010
Oct. 2006
Management integration Opening of Hanshin Completion of renovation of
Namba
Line
HanshinKoshien Stadiumof Hankyu Holdings andHanshin Electric Railway

Hankyu Hanshin

Nov. 2008

Mar. 2009

Mar. 2010

May 2010
Hankyu Hanshin Holdings1Dedicated to Serving Our Customers
In all our businesses—urban transportation, real estate, entertainment and communications,travel and international transportation, hotels, and retailing—we always work with the customer.
How can we raise satisfaction levels still higher?
By listening to the customer.

Serenity

Always by the Customer’s Side
Laying lines and building communities.
Bringing smiles to customers’ faces by delivering quality entertainment.
From the day of our establishment, our Group has continually innovated new services.
We plan to keep right on doing that into the future.

2

Annual Report 2010©Hanshin Tigers

Well-Being©Takarazuka Revue Company

3Inspiration

4

Creating New Ways to
Inspire and Satisfy
Group Management Philosophy

MissionWhat we are trying to achieve
Serenity and well-being,inspiration and dreams—
by delivering these to our customers,
we will create satisfaction andmake a positive contribution to society

DreamsValuesWhat is important to us
Customers Come First
Everything we do is for the customer.
That’s where it all starts.

Integrity
Build trust by always acting with integrity.

Foresight & Creativity
With our progressive spirit and flexible thinking,we can create a new sense of value.

Respect for People
Each of our employees is an invaluable resource.

Hankyu Hanshin Holdings

5Message from the Management
First, we would like to begin by expressing our utmost appreciation

our current Medium-Term Management Plan, which ends in fiscal

to all our shareholders for their continued support and cooperation.

2013. If this situation does not improve, we will have to factor in

The operating environment remained challenging during fis-longer-term trends (in fiscal 2014 and beyond) in the next revisioncal 2010, ended 31st March 2010. Despite signs of a recovery in someof estimates in the Medium-Term Management Plan, to clarify the

economic indicators, capital expenditure declined and the employ-

future directions the Group must take.

ment and income environments deteriorated amid weak corporate

However, our fundamental strategy remains unchanged:

earnings. The Kansai region, our operating base, saw Japan’s first

attracting people to areas along our railway lines by working acrosscase of H1N1 flu in May 2009, and the subsequent outbreak had

the Group to offer high-quality, appealing services and entertain-a large negative impact on the revenues of the Hankyu Hanshin

ment that boost the appeal of our facilities. In this annual report, we

Holdings Group.

look back at the more than 100 years of history since the company

In this challenging environment, we twice announced

was founded—a period when we have worked to develop liv-

downward revisions to our earnings forecasts in fiscal 2010, first inable communities based on our core railway business—and explain

July, then again in October. However, by implementing cost reduc-again our corporate philosophy in order to deepen understanding

tions and other measures, operating income and ordinary income

about our ability to build value along our railway lines, which is theboth exceeded our initial forecasts, albeit only slightly, and oursource of our competitiveness.

profits ranked amongst the highest of major private railway groups.

We expect the new Umeda Hankyu Building, the most impor-

Nevertheless, net income for the year under review declined 47.5%

tant growth factor in our current Medium-Term Management Plan,

year on year to ¥10,793 million, owing to the booking of extraordi-

to begin fully contributing to earnings from fiscal 2012. By achiev-

nary loss for the lump sum amortisation of goodwill related to sharesing sound profit growth, we aim to enhance enterprise value in aof an equity-method affiliate.

sustained manner and meet the expectations of shareholders and

In November 2009, the government declared for the first timein three and a half years that the economy was in a moderate deflationary phase, and with the supply-demand gap negative by a wide
margin, we expect the operating environment to remain challenging. Accordingly, based on our current outlook, we unfortunately
think it will prove difficult to attain all the numerical targets* in

Kazuo Sumi
President
and Representative Director

6

Annual Report 2010

other investors. We hope we can count on your continued supportand understanding in these endeavours.
* Numerical targets for fiscal year ended March 2013(consolidated basis)
Operating income: ¥100 billion;
EBITDA: ¥160 billion or greater;
Effects of integration: EBITDA of ¥5 billion or greater;
Interest-bearing debt/EBITDA ratio: around 7 times;
Total interest-bearing debt: ¥1,130 billion or less;
D/E ratio: less than two-fold; ROE: 6.0% or greater.

Shinya Sakai
Representative Director

Contents

10

Major Group Facilities

12

Consolidated Financial Highlights

14 Interview with the President
14

Business Environment and Assessment of Financial Results

16

Progress in Medium-Term Management Plan

17

Medium-Term Management Plan Revision18

Performance Outlook for
the Fiscal Year Ending March 201120

Business Portfolio Strategy

18

Progress in Rebuilding of
Umeda Hankyu Building

20

How “Community-Building”
should Function

19

Medium-Term Directions

21

Shareholder Returns Policy

The Evolution of the Umeda District—Now and in the Future

12~13, 14~15, 26~27, 31,
36, 40, 44, 47, 50, 65~68
l Business Environment

14~15, 28~29, 33~35, 38,
42~43, 46, 49l Medium-Term Management Planand Growth Strategies

16~21, 22~25, 31, 36, 40,
44, 47, 50
l Message from Heads of Businessesl Shareholder Returns

21

Forward-looking Statements

Definition“Fiscal 2010” refers to the fiscal year ended 31st March
2010. Other fiscal years are referred to in a corresponding manner in this Annual Report.
Figures are basically rounded off, but sums expressedin units of ¥100 million are rounded to the nearest¥100 million.

28
33
38
42
46
49

At a glance
Urban Transportation
Real EstateEntertainment andCommunications
Travel andInternational Transportation
HotelsRetailing©Hanshin Tigers

52 Management Organisation
52
56
57
58
59
60

Corporate GovernanceInternal Control System
Measures to Prevent Takeovers
Directors and Corporate Auditors
Message from the Standing Corporate Auditor
Corporate Social Responsibility—Social Contribution & Environmental Protection Activities

64 Financial Section
65

Consolidated Six-Year Summary 74 Consolidated Statements of Income

66

Consolidated Financial Review

75 Consolidated Statements of Changes in Net Assets

69

Business Risks

76 Consolidated Statements of Cash Flows

72

Consolidated Balance Sheets

77 Notes to the Consolidated Financial Statements

101

Major Group Companies

102 Investor Information
Hankyu Hanshin Holdings

Financial Section

The reader is advised that this report contains
forward-looking statements regarding the futureplans, strategies, and earnings performance of Hankyu
Hanshin Holdings, Inc., which are not statements ofhistorical fact but constitute estimates or projections
based on facts known to the Company’s management as of the time of writing. Actual results may
therefore differ substantially from such statements.

26

Management Organisation

32, 37, 41, 45, 48, 51

26 Core Businesses: Overview and Outlook

Core Businesses: Overview and Outlookl Business Performance

Special Feature

22 Special Feature:l Group Overview

C2~5, 8~11, 26~27,
101~102

Interview with the President

Search Index

Our Business

Our BusinessAnnual Report 2010

8

7

Our BusinessSupporting, Brightening and Enriching Daily Living
Centred on the Kansai district of Japan, the holding company Hankyu
Hanshin Holdings Group operates six core businesses—Urban

Kansai’s Area:
About 7% of Japan
Kansai’s Population:
About 16% of Japan

Transportation, Real Estate, Entertainment and Communications,
Travel and International Transportation, Hotels, and Retailing.
The Group’s business is founded on railway operations,which have as their mission the provision of safe, comfortable,
high-speed and high-capacity transportation services in the

Kansai Area*

Kansai district comprising Osaka, Kobe and Kyoto. By connect-

Tokyo

ing these cities, and, within each of them, linking downtown
areas with the suburbs, we have greatly increased inter-regional
mobility and enhanced the lifestyles of local people. In areas
Kobe

served by our stations, we also provide services that were not

Kyoto* For detailed map ofour main business area,
please see Page 10.

Osakaavailable before, in fields such as housing and commercial
facilities, and through attractions such as the Hanshin Tigers
professional baseball team and the Takarazuka Revue. In thisway, we are enriching people’s lifestyles and are contributing to

Kansai’s GDP Compared with Selected Countries

the community-building process in areas served by our stations.

($ billion)

United States

By developing these areas, we generate benefits of synergy byJapan

increasing passenger volumes on our railways and building up

Germany

other businesses.

China

While leveraging the know-how and brand recognition we

United Kingdom

have built up in community-building over the more than 100

Korea

years since our founding, we will unite as a Group to provide theNetherlands
Kansai Area

best possible services and grow our business by increasing value

Turkeyalong Group railway lines.

Switzerland

950
755
713
482
414

13,794
4,346
3,259 Kansai Area: Osaka, Kyoto, Hyogo, Shiga, Nara andWakayama prefectures
3,249 Sources: IMF/World Economic and Financial Surveys 2007
Cabinet Office, Government of Japan,
2,756“Prefectural Accounts FY2007”

Overall, Kansai is on a parwith the Netherlands

Our Revenue Structure:
Earnings Drivers are the Urban Transportation and15,000
Real Estate Businesses
The Urban Transportation and Real Estate businesses are theComposition 12,000
Ratio (Fiscal Year ended March 2010)

main drivers of Group earnings, together accounting for approximately 50% of revenues from operations and 90% of operating
income.
In the Urban Transportation segment, railways account3,000 from Operations: ¥ 653.3 billion
Consolidated Revenues

0

20

45.6%
40

3,000

6,000
60

9,000

80

100（％）* Revenues from operations refer to such revenues generated
from external customers, while operating income represents
amounts prior to consolidation adjustments.

8

Annual Report 2010

12,000Retailing -0.4%

Hotels -2.5%

スイス

0

トルコ

Our Entertainment and Communications business contrib-

関西

韓国

13.4%

Travel and International Transportation
0.4% Other 0.7%

Consolidated Operating Income: ¥ 70.1 billion

utes about 10% of operating income, on a stable basis. This is the

オランダ

イギリス

42.8%

中国

ドイツ

14.4% 9.6% 9.2% 9.4% 5.0%

日本0

the Real Estate business. This ensures stable cash flow in bothbusiness that gives the Group much of its distinct identity.

23.0%
アメリカ

29.4%

for most earnings, and the same is true of leasing operations insegments.

Travel and International Transportation
HotelsRetailing
Other

Urban Transportation
Real Estate
6,000Entertainment and Communications

15,000Our Business

Sources of Competitiveness for the GroupHigh potential of areas served by our stations

Interview with the President

1.

The Umeda area of Osaka, the strategic cornerstone of Group operations, is one of the most
famous shopping and entertainment districts of Japan, served by JR Osaka Station and the
Umeda stations of the Hankyu and Hanshin lines and the Osaka Municipal Subway. It is at
the heart of the Kansai economy (For more information, please see Page 22). In this area,
the Group operates railway terminals serving both the Hankyu and Hanshin networks, andalso runs key commercial facility, office building and hotel businesses (For more information,please see Page 10, Major Group Facilities, and Page 22, Special Feature).
The Group’s railway network also links Umeda (Osaka) with Kobe and Kyoto and othertowns forming the economic hubs of the Kansai district. Areas served by our stations haverelatively high population density in the Kansai district.

Ability to create value along areas served by our stations
Survey of Preferred Residential Areas (Kansai Region)

Areas along Hankyu and Hanshin lines topped the rankings overall
Rank

Place

Location

1

AshiyaAshiya, Hyogo

Rank

Place

Location

11 Takarazuka

Takarazuka, Hyogo

2 Nishinomiya Nishinomiya, Hyogo

12

Kurakuen

Nishinomiya, Hyogo

3

13

Takatsuki

Takatsuki, Osaka

Syukugawa Nishinomiya, Hyogo

4

Kobe

Kobe, Hyogo

14

Ibaraki

Ibaraki, Osaka

5

Okamoto

Kobe, Hyogo

14

Toyonaka

Toyonaka, Osaka

Kyoto

Kyoto, Kyoto

16 Sumiyoshi

Kobe, Hyogo

7

Umeda

Osaka, Osaka

17

Rokko

Kobe, Hyogo

8

MikageKobe, Hyogo

18

Suita

Suita, Osaka

9

Sannomiya

Kobe, Hyogo

19

Mino-oMino-o, Osaka

Toyonaka, Osaka

19

Osaka

Osaka, Osaka

10 Senri-chuo

Source: Survey by Sumitomo Realty & Development and 7 other major realestate firms (28th September 2009)

Ownership of content with strong brand value©Hanshin Tigers

Hanshin Koshien Stadium©Takarazuka Revue Company

Hankyu Hanshin Holdings

Financial Section

The Group delivers inspiration and dreams through the Hanshin Tigers professional
baseball team/Hanshin Koshien Stadium and the Takarazuka Revue, both of which
unique assets are popular and enthusiastically supported not only in Kansai but
throughout Japan.
These two powerful attractions are assets that none of our rivals have. They
create economic ripple effects by increasing passenger numbers in the areas served
by our stations when there is a show or a game on, and by enabling multiple use ofcontent. This contributes greatly to increased brand recognition for us.
(For more details on the Hanshin Tigers, Hanshin Koshien Stadium, and Takarazuka
Revue, please see Page 39-40)

Management Organisation

6

Core Businesses: Overview and Outlook

The Group creates new demand in the areas served by our stations by
developing and managing high-class housing and commercial/amusement facilities, and attracting schools and colleges to these areas. By
playing a clear role in establishing and developing local cultural institutions, we are working with local people to develop local communities.
The services that we deliver to our customers change over time.
However, our focus is on the longer term. While valuing the relationships of trust that we build up with people living in areas served byour stations, we remain committed to an unchanged basic policy ofcommunity-building aimed at raising the residential appeal of theoverall area.
Currently, the areas served by our stations are among the more
popular in Kansai. It is a strength of the Group that we can create
value along our lines, through the real estate development and otherbusinesses.

3.

Special Feature

2.

9Our Business

Major Group Facilities (as of 31st March 2010)
Major Group Properties

N

Umeda Hankyu Bldg. (under rebuilding)Hankyu Terminal Bldg.
Hankyu Sanban Gai Shopping Centre
Shin Hankyu Bldg.
Kita Hankyu Bldg.
Hankyu Nishinomiya Gardens
Kotocross Hankyu Kawaramachi
Itami Hankyu Station Bldg. (Itami Reita)
AKIBA TOLIM*2
Senri Asahi Hankyu Bldg.
Kobe Hankyu Bldg.
Miyazu Hankyu Bldg. (Mipple)*3
Katsura Higashi Hankyu Bldg.
Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)
Umeda Hanshin Daini Bldg. (HERBIS ENT)
Dai Hanshin Bldg. (Hanshin Department Store)
Noda Hanshin Bldg.
Fukushima Hanshin Bldg.
Motomachi Hanshin Bldg.
Sannomiya Hanshin Bldg.
EBISTA Nishinomiya(Commercial facility under elevated railway tracks)

1920
1972
1969
1962
1971
2008
2007
1998
2008
1992
1936
1997
1993
1997
2004
1963
1992
1987
1987
1933

55,43725,55339,24030,653
11,444
107,782
2,979
9,327
10,294
11,559
7,901
20,021
2,787
75,56152,54598,79341,086
21,764
7,865
13,672

2003

10,359Hankyu Chayamachi Bldg. (Chayamachi Applause)
Navio Hankyu (HEP NAVIO)
Hankyu Five Bldg. (HEP FIVE)
Umeda Center Bldg.
Hankyu Grand Bldg.
Hankyu Kawaramachi Bldg.
Hankyu Senri Chuo Bldg.

yukoshin K
Hoku way LineRail
Shin-Kobe

10

Sannomiya

17

Hyogo Pref.
Nosé Electric
Railway Linei

To Himej

ne

Kyoto

Mino-o Linemino-oMino-oKawanishi-noseguchi

Kita-senri
Osaka
International
AirportTakarazuka

Imazu Line

8

KoyoenKobe Line
Syukugawa

19
Imazu

Ishibashi Senrichuo

Kita-Osaka Kyuko
Railway Line

Itami

Itami Line

9 26

Senri Line

Takarazuka Line

6 Hankyu

Esaka

Nishinomiyakitaguchi

Shin-Osaka

Nishinomiya
Gardens Tsukaguchi

Hankyu Railway Network

Imazu

HanshinKoshien Stadium

Mukogawa

Daimotsu

Juso

Amagasaki

Mukogawadanchi-mae

Umeda

15

Main Line

16

Mukogawa Line

Osaka Bay

Hanshin Namba Line

Osaka-Namba

Nara Pref.

Kobe Line

Awaji

Tenjimbashisujirokuchome

Nishidai

i
ay L
Railw

11

Kyoto Line

Shinkaichi Motomachi

ric
Elect
Sanyo

KatsuraArashiyama Line

Osaka Pref.

Subway Sakaisuji Line

Minatogawa

18

Kawaramachi

Myokenguchi

Nissei-chuo

Koyo Line

Kobe Rapid Transit Railway Line

25 7

Arashiyama

Kyoto Pref.

*1 Area for lease does not include areas for public use.
*2 Location: Chiyoda Ward, Tokyo.
*3 Location: Miyazu City, Kyoto.

Takarazuka
Grand Theatre

Tanigami

50,40015,374
12,4989,680
31,732
38,237
11,713

1992
1980
1998
1987
1977
1970
1980

en

1
2
3
4
5
6
7
8
—
9
10
—
11
12
13
14
15
16
17
18
19

20
21
22
23
24
25
26

ns

Area for Lease (m2)*1

ka

Completedin

Property Name

Sh

No.

143.6km
46.9km(Kobe Line, Imazu Line and Koyo Line)1 2 3 4 5

Takarazuka Line12 13 14 20 21(Takarazuka Line, Mino-o Line)

28.5km22 23 24

Kyoto LineFor more informationon the Umeda area,
please see Page 11.

65.4kmKobe Rapid Transit Railway Line 2.8km

Kintetsu Nara Line

Hanshin Electric Railway Network 48.9km(Kyoto Line, Senri Line and Arashiyama Line)

To Kintetsu-Nara
To Kintetsu-Nara

Hanshin Line

43.9km(Main Line, Hanshin Namba Line and Mukogawa Line)

Kobe Rapid Transit Railway Line 5.0km

10 Annual Report 2010

Features of Our Facilities■ Hankyu Railway Network

Umeda Area in Detail
Hankyu Corporation is one of Japan’s 16 leading private railway operators,
operating the Kobe, Takarazuka, and Kyoto lines as well as a number ofbranch lines. Offering interurban services linking Osaka, Kobe and Kyoto,
three of Japan’s leading cities, the network has the highest transportation
efficiency level among private railway operators in the Kansai district. In
March 2010, we began operations at Settsu-shi Station on the Kyoto Line— the first railway station in Japan with zero net CO2 emissions.

Hankyu Chayamachi Bldg.
Hotel Hankyu
International(Chayamachi
Applause)

Owned solely by the Group
Joint ownership

Hotel Hankyu
International

Owned by Hankyu REIT Inc.
Master lease (underground)
Kitano Hankyu
Bldg.

C

Block

Hankyu Sanban Gai

JRoperators. In March 2009, it began operations of the Hanshin Namba Line,enabling the first single-line link between Namba and Kobe. By sharing
lines with Kintetsu Line (Kintetsu Corporation), we have also completed
a wide-area railway network linking Kobe, Osaka and Nara. In future, we
expect further revenue growth on the Hanshin Electric Railway Lines, theonly through-route serving the Kobe and both the two major railway terminals in Osaka, Umeda and Namba.

* Sum of tier 1 operator and tier 2 operator.

ak
Os

tat
aS

in
nsh n
HatatioS

Umeda Hanshin
Daini Bldg.
(HERBIS ENT)

■ Hankyu Nishinomiya Gardens
Hankyu Nishinomiya Gardens, which opened in November 2008
at the former site of Hankyu Nishinomiya Stadium adjacent toNishinomiya-Kitaguchi Station on the Kobe Line (Hankyu), is thelargest shopping centre in western Japan. It comprises 268 stores,
centred on the Hankyu Department Store, a cinema complex (TOHOCINEMAS Nishinomiya OS), and a large general merchandising store.
As befits its name, Hankyu Nishinomiya Gardens has a public garden
built into its roof, and some of the outer walling has been greened, while the interior relies on naturallighting from an open ceiling space, creating a feeling of greenery and spaciousness.

■ Hanshin Koshien
Stadium■T akarazuka⇒Please see Page 39.

⇒Please see Page 39.

Grand Theatre

da

e
Um

Umeda Hankyu Bldg.
(Hankyu Department Store)(under rebuilding)

Dai Hanshin Bldg.
(Hanshin Department Store)
Shin Hankyu Bldg.

Diamor Osaka(underground mall)

Umeda Hanshin
Daiichi Bldg.
(HERBIS OSAKA)

n

tatio

aS

shim

u
Fuk

The Ritz-Carlton, Osaka

Hotel Hanshin* HEP FIVE is jointly owned with Hankyu REIT Inc.
* Hotel Hanshin is operated by Hankyu Hanshin Hotels

17.6 million¥65.9 billion

HigashiHankyu Five Bldg. Hankyu(HEP FIVE)
Bldg.
HankyuGrand Navio Hankyu(HEP NAVIO)
Bldg.

ion

■ Hanshin Electric Railway Network Hanshin Electric Railway Co., Ltd. is one of Japan’s 16 leading private railway

Number of visitors in the first year of operation (Nov. 2008-Nov. 2009)
Sales in the first year of operation (Nov. 2008-Nov. 2009)

Hankyu Terminal Bldg.

A

Block
Phase 1Development Area(about 7ha)

48.9km51
193,620 thousand

Umeda
Centre Bldg.

Hankyu Umeda Station

Hotel new Hankyu
Osaka
Osaka Station
Station
North
North District
District(about(about 24ha)
24ha)* Sum of tier 1 operator and tier 2 operator.

Total length of lines operated
Number of stations
Annual number of passengers carried

Nishi Hankyu Bldg.

Block

143.6km88
605,963 thousand

NU_
chayamachi

Kita Hankyu Bldg.

B

Total length of lines operated
Number of stations
Annual number of passengers carried

Eastern Chayamachi
District(As of the end of March 2010)■H
 ERBIS OSAKA/HERBIS ENT(Osaka-West Umeda
area development)

The main tenant at HERBIS OSAKA,
which opened in 1997, is The RitzCarlton, Osaka. At HERBIS ENT, (openedin 2004), the key tenant is the renowned
Osaka Shiki Theatre. With commercial
facilities that have attracted a numberof overseas luxury brands, and “intelligent offices” in a multifunctional tower,
the HERBIS OSAKA and HERBIS ENT skyscraper complex forms a gateway fitting
for the international city of Osaka.

■U meda Hankyu

Building⇒Please see Page 25.

Hankyu Hanshin Holdings

11Consolidated Financial Highlights

Hankyu Holdings (upper figure)
Hanshin Electric Railway (lower figure)
2005/3

2006/3¥476,623
299,01158,76821,06588,70038,20036,042
11,84926,0784,983
27,48820,71829,974
17,139¥486,154
313,242
64,841
25,28894,50043,10043,216
14,17525,326
6,404
52,09010,90029,611
17,827¥67,650
26,461
24,175(23,978)(75,473)(5,304)¥80,22935,489(43,199)(21,533)(61,960)(20,514)¥1,670,911
519,691
277,393111,286
988,111240,782¥1,609,116
532,700
360,221
166,197
889,615
200,986¥ 28.11
14.32
27.70
13.09
299.48324.61
3.00
6.00¥ 25.36
16.38
25.22
15.57
343.45395.39
5.00
5.00

12.3
7.0
3.5
4.0
9.9
4.5
11.1
6.3
16.6
21.4
3.6
2.2

13.3
8.1
4.0
4.8
7.9
4.6
9.4
4.7
22.4
31.2
2.5
1.2

Hankyu Hanshin Holdings(Millions of yen)
2007/3*2
2008/3

2009/3

2010/3(Thousands of U.S. dollars)*1
2010/3¥752,300¥683,715¥653,287$7,024,591

90,724

77,82370,126754,043[146,500]

145,200

135,300

133,200

1,432,505

65,30526,09834,06433,899364,505

36,619[40,507]627

20,55010,793116,054

53,795

134,307

109,688

132,386

1,423,505

43,88851,57754,79860,418649,656¥ 78,981¥ 74,902¥108,597¥146,955$1,580,161(199,578)(100,058)(115,047)(132,737)(1,427,280)

132,289

36,718

7,014(24,200)(260,215)¥2,366,694¥2,348,476¥2,307,332¥2,337,331$25,132,591

522,286

476,639

473,878

480,633

5,168,097

1,209,382

1,271,100

1,275,620

1,282,583

13,791,215¥ 31.84¥   0.50¥ 16.28¥   8.55

$0.09

—

0.41

16.18

8.51

0.09

405.35369.25366.96371.70

4.00

5.00

5.00

5.00

5.00

0.05

11.7

12.1

11.4

10.7

—

4.4

3.8

3.3

3.0

—

8.4

0.1

4.4

2.3

—

8.3*7

8.8

9.4

9.6

—

21.7

19.9

20.1

20.1

—

2.4

2.7

2.8

2.7

—

Result of Operations:
Revenues from operations
Operating income
EBITDA*3
Income before income taxes andminority interests
Net income
Capital expenditure
Depreciation and amortisation¥743,376[813,613]
87,003[94,800]

Cash Flows:
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Financial Position:
Total assets
Total net assets
Interest-bearing debt
Per Share Data (yen and U.S. dollars):
Net income—Basic
Net income—Diluted
Net assets
Dividend
Ratios:Operating income margin (%)
ROA (%)*4
ROE (%)*5
Interest-bearing debt/EBITDA (times)
Equity ratio (%)
Debt/equity (D/E) ratio (times)*6*1 The U.S. dollar amounts have been translated, for convenience only, at ¥93 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2010.
*2 From the second quarter of the fiscal year ended 31st March 2007, consolidated results of Hanshin Electric Railway Co., Ltd. are included as a result of management
integration, in the scope of consolidation of the Group.
Figures in [ ] were calculated assuming the management integration had entered effect from the beginning of the term.
3* EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin
EBITDA figures are rounded to the nearest ¥100 million.
*4 ROA = operating income/total assets (average of period-start and period-end totals)*5 ROE = net income/equity (average of period-start and period-end totals)*6 D/E ratio = interest-bearing debt/equity*7 EBITDA is calculated assuming management integration at the beginning of the term.

12 Annual Report 2010

(Millions of yen)

Revenues from operations declined ¥30,427 million (4.5%)
year-on-year to ¥653,287 million. All core businesses except
for Entertainment and Communications were badly hit by the
economic slowdown and the impact of H1N1 flu on businessactivity.

2009/377,823+907

Urban Transportation–938

Operating income

Real Estate

Operating income fell ¥7,696 million (9.9%) year-on-yearto ¥70,126 million, due mainly to the impact of reduced
revenues from operations combined with an increase indepreciation and amortisation costs, which outweighed theeffects of cost-cutting in our core businesses.

Traveland International Transportation
HotelsInterview with the President

Entertainment and Communications–3,186–1,175–2,046–994

Retailing

Other –52

Net income
Net income declined by ¥9,757 million (47.5%) year-on-yearto ¥10,793 million, due in part to a one-time amortisation of
goodwill following recognition of an affiliate under the equity method, leading to an extraordinary loss.

Eliminations or Corporate –211

70,126

2010/3(¥ billion)(¥ billion)

(%)

800

100

15

40

35

80

12

32

28

60

9

24

21

40

6

16

14

20

3

8

7

0

0

600

■■■ Net Income*Net Income per Share(¥ billion)

(¥)

400

200

05/3

06/3

07/3

08/3

09/3

0

10/3

06/3

07/3

08/3

09/3

10/3

■■■ Equity
ROE

05/3

06/3

07/3

08/3

09/3

10/3

0

■■■ Total Assets
ROA(Times)

15

2,500

(%)

5

600

(¥ billion)

1,500

1,200

4

480

12

2,000

4

900

3

360

9

1,500

3

600

2

240

6

1,000

2

300

1

120

3

500

1

0

0

0

0

0

■
■

05/3

06/3

07/3

08/3

09/3

10/3

Hankyu Hanshin Holdings
Hankyu Holdings ■ Hanshin Electric Railway(¥ billion)

(%)

05/3

06/3

07/3

08/3

09/3

10/3

5

05/3

06/3

07/3

08/3

09/3

10/3

0

Financial Section(¥ billion)

Management Organisation■■■ Interest-Bearing Debt
Debt/Equity Ratio

05/3

Core Businesses: Overview and Outlook■■■ Operating Income*Operating Income Margin

Special Feature■■■ Revenues from Operations*0

Our Business

Operating Income by Segment, Year-on-Year Comparison

Revenues from operations* In the years ended March, 2005 and 2006, consolidated figures for Hankyu Holdings, Inc. and Hanshin Electric
Railway Co., Ltd. are simple additions.
From the second quarter of the year ended March, 2007, calculations for Hanshin Electric Railway Co., Ltd.
(consolidated basis) are included in Group consolidated figures.
Figures with dotted lines assume that the management integration had occurred at the beginning of the term.
Hankyu Hanshin Holdings

13
17

Interview with the President

By making large-scale projects
fully operational and strengthening thecompetitiveness of each core business,
we will aim for sound profit growth andenhanced enterprise value.
President

Kazuo Sumi

Business Environment and Assessment of Financial Results
Can you provide an overview of the business environment
and Company performance in the fiscal year ended March 2010?
Both operating income and net income deteriorated, dragged down by the ongoing economic malaise and spectre of H1N1 flu. However, the large-scale development projects completed under the current Medium-Term Management
Plan are yielding excellent results despite the slump in consumer spending, bycapitalising on the Group’s fundamental strength.
In fiscal 2010, the Japanese economy continued to experience harsh times, dragged down by*1 It is difficult to calculate the monetary effect of H1N1 flu precisely.
However, when Japan’s first ever
H1N1 flu outbreak was confirmedin the Kansai region from May
through June 2009, there was amarked decline in the numberof passengers carried comparedwith before the outbreak, andthe travel business was plaguedby cancellations. Therefore, weestimate that the impact of
reduced revenue amounted toat least ¥2.4 billion in the firstquarter alone.

14 Annual Report 2010

ongoing global economic malaise. The deterioration of the employment and income environment
severely impacted the Group, which mainly operates domestic demand-associated businesses.
This, combined with the fact that people refrained from going out due to the H1N1 flu epidemic*1,
pushed down revenues and income in all of our core businesses except for Entertainment andCommunications.
Furthermore, in the first quarter, the market price of equity method affiliate shares held in the
Company tumbled more than 30% compared with book value. In the nonconsolidated statements
of income, this valuation loss was booked as an extraordinary loss (losses on revaluation of investment securities) at cost or market (whichever is lower). In our consolidated statements of income,based on accounting standards, it was recorded as an extraordinary loss (lump sum amortisation

of goodwill equivalent amount under the equity method), because it was necessary to book lumpequity method. As tax effect accounting was not applied, the tax burden increased from the previous
term, causing net income to decline significantly.
On the other hand, in the current Medium-Term Management Plan (fiscal 2008-2013), the folalready been completed. All of these projects are currently yielding excellent results.
Hankyu Nishinomiya Gardens (operations commenced on 26th November 2008):
Sales during the first year of operations (November 2008-November 2009) stood at ¥65.9 billion,
exceeding expected levels (¥60 billion) by more than 10%. I think that our customers have reallyembraced the concept of a space where they can come and relax, which we have provided byInterview with the President

lowing large-scale development projects which were designated for generating future growth have

Our Businesssum amortisation of goodwill equivalent amount under the equity method for an affiliate under theestablishing an approximately 9,000m2 rooftop garden terrace, for example. In the second year,
Hankyu Nishinomiya Gardens performed strongly both in terms of sales and the number of visitors,
despite the correction after the novelty boost from the opening of the facility. In particular, the salesof one of our core tenants, Nishinomiya Hankyu Department Store, exceeded those of the previous

Hanshin Namba Line (operations commenced on 20th March 2009):
In fiscal 2010, the first year of full operations, the boost to revenues from the opening of the Hanshin*2 The boost to revenues from

Namba Line*2 was approximately ¥3.45 billion, exceeding the initially assumed level of ¥3 billion bymore than 10%. With each and every railway operator in the Kansai region experiencing reduced
year-on-year revenues due to the effects of the economic malaise and H1N1 flu, Hanshin Electric
Railway managed to increase revenues above expected levels. I believe that this is the result of therecognition of the significance of the line, which forms part of an expansive network linking Kobe,
Namba (Osaka) and Nara.
Hanshin Koshien Stadium (renovation of the stadium was completed in March 2010)
Through renovation works at Hanshin Koshien Stadium, we have enhanced the comfort and safetyof our customers while respecting the 85-year history and traditions of Japan’s hallowed Mecca

Core Businesses: Overview and Outlook

the opening of the Hanshin
Namba Line is not a year-on-year
calculation. Rather, it is basedon a comparison with estimatedrevenues from all Hanshin Electric
Railway lines excluding theHanshin Namba Line.

Special Feature

year, when it benefited as a result of the commencement of operations.

of baseball. We have improved the spectator environment by increasing the space in front of andbehind seats, expanding food, drink and merchandising outlets, and adding new advertising andthose of the previous term by ¥2 billion.
In view of the depressed state of consumer sentiment, which the government even sees as evidenceof mild deflation, the fact that these projects are performing strongly is proof that we have managed
to capitalise on the fundamental strength of the Group, which has provided its customers with high-Management Organisation

media facilities, leading to higher earnings. Revenues from sports operations in fiscal 2010 exceeded

quality services for many years.

(¥ billion)

2009/3

2010/3

YoY

Revenues from operations

683.7

653.3

-30.4 (-4.5%)

Operating income

77.8

70.1

-7.7 (-9.9%)

Net income

20.6

10.8

-9.8 (-47.5%)

Hankyu Hanshin Holdings

Financial Section

Consolidated Performance Trends

15Interview with the President

Progress in Medium-Term Management Plan
Looking back on the first three years of the Medium-Term Management Plan
(fiscal 2008-2010), please describe how the plan has progressed.
The first three years of the plan were designated for “Investment in Development
for Further Growth.” Therefore, the priority has been to focus our efforts on capital investment for future growth, business realignment and operational collaboration, to capitalise on the benefits of integration.
Management integration provided an impetus for formulating the 2007 Medium-Term Management
Plan, a six-year management plan from fiscal 2008 until fiscal 2013. Ever since the plan was announced in
March 2007, the whole Group has been working as one to achieve its objectives.
When this plan was formulated, interest-bearing debt had reached exorbitant levels under theformer Hankyu Holdings Group, and the cost of the management integration was covered by borrowings. Therefore, efforts to scale back interest-bearing debt and improve our financial standing were majorGroup management issues.
On the other hand, during the first three years of the Medium-Term Management Plan, large-scale
projects that will lead to future Group expansion were underway. These include investment projects that
we expect to generate high returns through better use of existing and as yet untapped land resources(rebuilding of Umeda Hankyu Building and Hankyu Nishinomiya Gardens), as well as social infrastructure
investment projects such as the Hanshin Namba Line and Hanshin Koshien Stadium, which are expected*1 Capital investments and depreciation and amortisation(three-year totals)
(¥ billion)

Fiscal years

2008-2010 2011-2013(Est.)

to grow in the medium term. I believe that prioritising these investments in the medium term will lead tothe enhancement of our enterprise value. Therefore, the three years until fiscal 2010, the first half of theplan, were earmarked for “Investment in Development for Further Growth.” We have been sowing theseeds for future expansion*1.

Capitalinvestments

376.4

222.0

At the same time, the businesses of the Hotels segment and Travel and International Transportation

Depreciation andamortisation

166.8

181.0

segment have been realigned and business operations coordinated in a number of areas in an effort to* In line with a change of accounting
standards for leases, finance leases areincluded in capital expenditure plans forfiscal 2009 and beyond.
* Capital investments for fiscal 2008-2010
include repurchases of securitised
property (at maturity) during the threeyear period.

Interest-Bearing Debt
and EBITDA Trends(Consolidated)

capitalise on the benefits of integration.
Unfavourable business conditions have persisted since autumn 2008, largely due to the deteriorationof business activity and the real estate market. Increased depreciation and amortisation expenses, which
go hand-in-hand with capital investment, have compounded the situation. Consequently, consolidated

Interest-Bearing Debt (¥ billion)
1,700Interest-bearing debt

16 Annual Report 2010

8.8

8.3

1,356.0 Projected interest-bearing debt at

135.3

1,282.6

1,275.6

1,209.4

Investment in Development for Further Growth

2008/3*3
Result2009/3Result

8

6

124.0

Although interesting-bearing debt is expected to decline
due to increased EBITDA and the sale of assets, it is set todeteriorate further from the previous plan (¥1,180 billion)

2007/3 *2 *3
Result142.0

1,290.0

1,100
1,000

8.7

133.2

Sale of assets etc.
1,271.1

1,200

10Although EBITDA is expected to increase as
we leverage the effects of large-sale projects,
it is set to deteriorate further from theprevious plan (¥154 billion)

the time of the integration decision

1,300

As EBITDA declines, the peak number of times
occurs one year later than the previous plan

9.6

9.4

143.2

141.5
1,400

Interest-Bearing Debt/EBITDA (times)
12

Interest-bearing debt/EBITDA

10.4

1,600
1,500

*2 Fiscal 2007 consolidated performance has been calculated basedon the assumption that the former
Hankyu Holdings, Inc. and Hanshin
Electric Railway Co., Ltd. were
integrated at the beginning of the
fiscal year.
*3 Prepared based on performance
excluding the department store
business (The Hanshin Department
Stores Group, now a subsidiary of
H2O Retailing Corporation following
a share exchange), which was in thescope of the consolidation until thefirst half year of fiscal 2008.

EBITDA

1,230.0

4

2

Realisation of the Benefits of Large-Scale Investments

2010/3Result2011/3
Estimate

2012/3
Estimate

2013/3
Estimate0operating income is declining. However, as I mentioned earlier, the Group’s large-scale development

Building, which opened in
September 2009, performed
strongly (please see Page 18)

and the rebuilding of Umeda Hankyu Building*4) are all performing strongly. Furthermore, the businessrealignment which was expected to take place in short and medium-term phases is also doing well, andwe are capitalising on the integration synergy outcomes which will exceed initial targets.

In the Medium-Term Management Plan, estimates have again been revised down.
Please describe the background to these changes and the points which have beenrevised.

Each year, the Group revises the estimates in the Medium-Term Management Plan in light of progress andchanges in the business environment. On this occasion, the following two points are key.

Special Feature

Estimates for fiscal 2013, which had been revised the previous year, were again
revised downward, in response to the sudden and dramatic deterioration in theeconomic situation. Profitability in the Group’s core businesses, railways andreal estate leasing, is declining. Therefore, we do not expect to be able to meet
Medium-Term Management Plan goals by fiscal 2013.

Interview with the President

Medium-Term Management Plan Revision

Our Businessprojects (Hankyu Nishinomiya Gardens, Hanshin Namba Line, renovation of Hanshin Koshien Stadium*4 Department Store Phase 1

Firstly, operating income is expected to fall during the plan period. The economic recovery of therailway and real estate leasing segments, which represent the Group’s core profits, are generally being
impacted by the deterioration of the business climate later than other businesses. We expect these harshbusiness conditions to continue for all of our businesses for some time yet, and so we are concentrating
as much as possible on additional profit-boosting and cost-cutting strategies. Nevertheless, Groupwide
consolidated operating income, which was downwardly revised previously, is now unlikely to meet eventhis new estimates.
The second point is the fact that the pace of reduction in interest-bearing debt is expected to slow
even more than previously estimated. In view of these conditions, we are striving to reduce interest-

Core Businesses: Overview and Outlook

Kansai region, which is the heart of the Group’s business activities, has been slow paced, while even the

bearing debt by closely monitoring the value and timing of investments. However, EBITDA is projected
to be dragged down by the deterioration of the business environment, and it has been difficult to sell off
bearing debt has slowed. Therefore, at the end of fiscal 2013, total consolidated interest-bearing debt is
expected to surpass levels estimated previously.
Therefore, we regret to announce that we are unlikely to achieve the following targets (consolidated)
set for fiscal 2013: operating income of ¥100 billion, EBITDA of ¥160 billion or greater, interest-bearing debtof ¥1,130 billion or less, and an interest-bearing debt/EBITDA ratio of around 7 times.

Management Organisation

assets as initially intended due to the slump in land prices. As a result, the pace of reduction in interest-

If this situation does not improve, we will have to factor in longer-term trends (in fiscal 2014 andbeyond) in the next revision of estimates in the Medium-Term Management Plan, to clarify the future

Outlook for Consolidated
Performance* Until the first half of fiscal 2008, thedepartment store business (The
Hanshin Department Stores Group)
was included.

Revenues from operations
Operating income
Ordinary income
Net income

2008/3*Result2009/3Result2010/3Result2011/3
Estimate(¥ billion)
2013/3
Estimate

752.3
90.7
74.9
0.6

683.7
77.8
57.4
20.6

653.3
70.1
50.4
10.8

651.0
61.0
40.0
20.0

710.0
80.0
60.0
30.0
Hankyu Hanshin Holdings

Financial Section

direction the Group must take.

17

Interview with the President

Performance Outlook for the Fiscal Year Ending March 2011
How do you see the outlook for Company performance during the fiscal year ending
March 2011?
In the Travel and International Transportation and the Hotels segments, a recovery from the H1N1 flu scare of the previous term is expected. However, in the
Urban Transportation and Real Estate segments, special factors are expected topush down revenues from operations and operating income. On the other hand,the special factors that affected net income in the previous term are expected todisappear. Therefore, a significant recovery is expected in net income.
The following factors have been incorporated into full-year performance projections.
Revenues from operations in the Travel and International Transportation and the Hotels segments are expected to rise on the back of the recovery from the H1N1 flu scare, which broke out inMay 2009. Nevertheless, in our Real Estate segment condominium business, the sales target has been
downwardly revised in accordance with earlier market conditions. Therefore, revenues are expected
to fall due to the fact that the number of condominiums sold (number of deliveries) in fiscal 2011 is
expected to decline temporarily, and the rebuilding of the department store section of the Umeda
Hankyu Building entered Phase II in September 2009, reducing the space available for rent.
Operating income is expected to decline. This is due to revenue-decreasing factors andalso special factors, which include the following: 1) sales expenses for condominiums which are
to be delivered after fiscal 2012 will be incurred in advance, 2) taxes and increased depreciation
and amortisation expenses will accompany the completion of the Umeda Hankyu Building Phase I
Department Store Building and the Office Tower, and 3) in the Urban Transportation segment, the* As the Yodogawa Hokugan line
works were consigned to theGroup by national and municipal
governments, we received contributions for these works and thesewere recorded as extraordinary
income in the same year. For thisreason, the impact on net income
was limited.

Yodogawa Hokugan line work* by Hankyu Corporation and other works will cause property andequipment disposal expenses to increase.
However, if the impact of these special factors is excluded, we predict that we will be able tosecure similar operating income to the previous fiscal term.
On the other hand, as we expect to complete the lump sum amortisation of goodwill equivalent amount under the equity method, extraordinary loss will decrease and net income is likely toincrease significantly compared to the previous term.

Progress in Rebuilding of Umeda Hankyu Building
With regard to the rebuilding of Umeda Hankyu Building, the Department Store
Phase I Building commenced operations in September 2009 and construction of the
Office Tower was completed in April 2010 (operations commenced in May 2010).
How are things progressing with the Department Store Phase I Building and theleasing of the Office Tower?
Ever since the Department Store Phase I Building commenced operations on
3rd September, it has performed strongly. Owing to the lacklustre performanceof the rental office market, we are currently experiencing difficult conditions
in finding office tower tenants; however, we are working diligently to increase
occupancy.

18 Annual Report 2010

Of the projects under the Medium-Term Management Plan, the one which is expected to make theproject is progressing well. The Department Store Phase I Building, which opened in September
2009, is performing strongly despite the slump in consumer spending brought on by the economic
recession.
* Please see Page 33 for more detailsof average vacancy rates

riencing difficult conditions* due to the lacklustre performance of the rental office market; however,
we are working diligently to increase occupancy. Umeda Hankyu Building is situated in a highly
convenient location right next to the Umeda station terminal. This is a highly competitive building,boasting a standard floor area of 2,800m2 per floor, a high level of security, freely adaptable facilities
and well-known, reliable tenants who have decided to call it home due to its local landmark status.
The property is sets a benchmark for office rents in the Umeda area, enhancing tenants’ recognition

Interview with the President

In terms of leasing the Office Tower, which commenced operations in May 2010, we are expe-

Our Businessgreatest future profit contribution is the rebuilding of the Umeda Hankyu Building. Fortunately, thisand reputation. Therefore, our strategies are to increase occupancy gradually, while keeping a close
For more details on
the Umeda Hankyu
Building project

eye on economic conditions, the leasing situation and trends at competing properties (rather than

Page 25

next three years or thereabouts. Given the lack of clarity in the market outlook, our rent forecasts in
the Medium-Term Management Plan reflect a rather conservative approach, and we believe that thekey to achieving the goals in the plan will be whether or not occupancy rates develop as expected.

You mentioned that in the next revision of the Medium-Term Management Plan, you
would like to point out future directions for the Hankyu Hanshin Holdings Group.
What specific policies and ideas do you have?
In the plan that will begin in fiscal 2014, I would like to see the Group pursuingsustainable growth and improved financial standing in a well-balanced manner.

Core Businesses: Overview and Outlook

Medium-Term Directions

Special FeatureSpecial Featuresimply reducing the rent as a means of increasing occupancy) and to build up occupancy over the

As the formulation of the next Medium-Term Management Plan is a job for the future, it is not posand improved financial standing in a well-balanced manner as its policy.
In the second half of the Medium-Term Management Plan, from fiscal 2011-2013, we havedecided to push ahead with reduction of interest-bearing debt by finding ways to squeeze more
profit out of large-scale projects and further expand them. As I have stated earlier, given the deterioration in our operating environment, and the poor prospects for speeding up the pace of debt
*1 Phase II works (Department*2 Hankyu Nishinomiya Gardens:
Opened on 26th November 2008
Hanshin Namba Line:
Began operations on 20th March2009
Hanshin Koshien Stadium:
Renovation completed in March2010
Umeda Hankyu Building:Completion of Office Tower on
1st April 2010; Grand opening
scheduled for spring 2012

reduction, I recognise that cutting the balance of interest-bearing debt is a management priority.
However, after the launch of the next Medium-Term Management Plan in fiscal 2014 (beginning April 2013), we can expect steady earnings growth from higher occupancy rates at the OfficeTower at Umeda Hankyu Building and from the grand opening*1 of the completed project. Based on
current performance, we may expect a steady earnings contribution from large-scale projects thatare already operational, such as Hankyu Nishinomiya Gardens, Hanshin Namba Line, and the Hanshin
Koshien Stadium renovation. At the same time, our operating income will be lifted as depreciation

Financial Section

Store Phase II) will be completed
in spring of 2012, for the grandopening of an all-new Umeda
Hankyu Building

Management Organisation

sible to go into details at this stage. However, I would like the Group to pursue sustainable growth

expenses connected with these projects gradually fade away*2.
In the years after fiscal 2014, I believe we can improve our financial standing on the strength of
earnings from the above projects, and, in terms of long-term enhancement of value in the areas served

Hankyu Hanshin Holdings

19Interview with the President

by our stations, for example by making depreciation expenses one of our benchmarks for investment,
I believe we can position ourselves to invest steadily for sustainable growth.

Business Portfolio Strategy
Please describe your views on the future business portfolio strategy of the Hankyu
Hanshin Holdings Group.
In our quest to increase value in areas served by our stations and strengthen the
Hankyu-Hanshin brand, in each of our core businesses, we are not only committed to being the leader in each industry, or being unique, but also to unlocking
Group synergies across different businesses. At this point in time, we intend toretain our current six-core business structure.
The Group is striving to enhance value in areas served by our stations by organically linking andexpanding the real estate and entertainment and communications businesses, and so on, withthe railway business at the centre. Ever since the management integration in October 2006, wehave been implementing initiatives aimed at increasing value in areas served by our stations andstrengthening the Hankyu-Hanshin brand, while simultaneously strengthening our foundations byrealigning our businesses, increasing the efficiency of our internal divisions and withdrawing from
unprofitable businesses. The basic strategy behind these initiatives is to strengthen the competitiveness of each business and enhance profit levels, thoroughly pursue and capitalise on integration
synergy outcomes and improve our financial standing and enhance returns on assets. Success inthese areas, I believe, will mean that we have all but completed the framework that will guide thebusiness realignment that should take place in the medium term.
In the future, our policy is to leverage the Group’s comprehensive capabilities by further boosting the competitiveness of its core businesses. We will achieve this objective by working as one tocapitalise on the synergistic effects across the different businesses of the Group, and winning newclients by exploiting the Hanshin Tigers/Hanshin Koshien Stadium and Takarazuka Revue brands.
Therefore, at this point in time, we intend to retain our current six-core business structure.

How “Community-Building” should Function
Please describe your ideas on how “community-building” should function.
I think that the goal should be to build communities under the concept of “compact cities”—environmentally-friendly communities where urban functions areconcentrated in certain areas so that local residents can find all they need in their
daily lives close at hand.
For over 100 years, the companies under the Hankyu Hanshin Holdings Group have operated theirbusinesses and built up relationships of trust in the areas served by the Hankyu and Hanshin lines,
while establishing symbiotic relationships between their communities. To fulfil our role as a memberof the local community in the future, we will strive to create an enjoyable living environment in theirlocal communities.

20 Annual Report 2010

The whole fabric of suburbs and cities has changed to respond to the increased use of autoinner-city land prices, and consequently, car-dependent lifestyles have become the norm. However,
if urban functions continue to be dispersed in this way, CO2 emissions will increase.
I think that we should be aiming to build communities that are functional, resident-friendly
that presuppose the use of cars, in order to build communities that leave few carbon footprints.
This should be done by concentrating government, commercial, cultural, medical and educational
facilities around train stations within certain areas, so that people can find all they need in their daily
lives close at hand.
Community-building such as this not only reduces our carbon footprints, but also counters
the impact of a rapidly aging society. The Group is pioneering the installation of barrier-free facilities

Interview with the President

and environmentally friendly based on the “compact cities” concept, rather than on urban models

Our Businessmobiles. At the same time, commercial facilities have spread out into suburban areas due to soaring

in each station, train and bus in the areas served by the Hankyu and Hanshin lines. Our aim is todevelop facilities that are more than mere embarkation/disembarkation points, but which can serve
as interchange points for customers in transit.

Special Feature

Shareholder Returns Policy

Under our basic policy of stable dividends, we aim to pay out a minimum annual
dividend of ¥5 per share. We will review our shareholder returns policies, including our dividend policy, when we are confident of more firmly underpinned earnings stability and improved financial standing, after the full-fledged operational
launch of the rebuilt Umeda Hankyu Building and other large-scale projects.
By fiscal 2013, which is the final year of our current Medium-Term Management Plan, major projects
now under construction will have reached full operational status. Therefore, funds including profits
being generated from these projects as well as cash flows from core businesses such as Urban

Core Businesses: Overview and Outlook

Finally, please tell us more about Company policies regarding returns to shareholders.

Transportation and Real Estate will be used in reducing interest-bearing debt for the improvement
annual dividend of ¥5 per share while we strive to improve our financial strength and managementfoundation. For fiscal 2010, we declared an annual dividend of ¥5 per share as in the previous fiscal
term, which is the same dividend level that we plan for fiscal 2011.
We will take another look at our subsequent dividend and shareholder returns policy, when
we are confident of more firmly underpinned earnings stability and improved financial standing,
after the full-fledged operational launch of the rebuilt Umeda Hankyu Building and other large-scale

Management Organisationof our financial soundness. We are pursuing a basic policy of stable dividends that sets a minimum

projects. From here on, in accordance with the Management Plan, by enhancing profit levels andfurther enhancing the Group’s corporate value and supporting our share price.

Hankyu Hanshin Holdings

Financial Section

reducing interest-bearing debt, we will focus on fulfilling the expectations of our shareholders by21

Special Feature:

The Evolution of
the Umeda District—Now and in the Future

Umeda Station was first opened over a century ago, in 1906. Over the years since then the forerunner companies of the Hankyu Hanshin Holdings Group have met the needs of the times
through a large number of urban development projects centred on Osaka’s Umeda district.
Umeda has grown from being the No.1 shopping and entertainment district in Western Japanto the country’s gateway to Asia and the rest of the world. Umeda is still changing, and as itchanges, it is becoming a focus of interest for people all over Japan. In this special feature, wewould like to introduce the evolution of the Umeda District—Now and in the Future.

The Hankyu Hanshin Holdings Group and the Development of Umeda
Umeda is a district in Osaka’s Kita-ku, centred on Osaka Station, which is thelargest railway terminal in western Japan, directly linking the three major
cities of Osaka, Kyoto, and Kobe. The station is a terminal for trains operated
by Hankyu Corporation, Hanshin Electric Railway, and JR West. Osaka Station
was opened in 1874 as the main railway station in Osaka of JR West (under theformer Japanese National Railways (JNR)). In 1906 Hanshin Electric Railway
opened a station in Umeda, immediately adjacent to Osaka Station, and in1910 the forerunner of Hankyu Corporation (Mino-Arima Electric Railway)
followed suit. At around this time, the City of Osaka was developing a traffic
network running north-south, with Umeda at its northern end, connecting
the city’s main entertainment and shopping districts. As a result, Umeda—
popularly known as Kita (North)—enjoyed tremendous growth.
Hankyu was quick to exploit the crowd-pulling possibilities of a railway
terminal. In 1929 the company opened a department store directly connected to Umeda Station, the first such store in the Orient.
In August 1951 the Hankyu Group completed construction of the
Hankyu Koku Building (located in Kakuda-cho, Kita-ku; currently the site of the
HEP NAVIO), which was said to be the most modern building in Japan at thetime. Then, January 1962 saw the completion of the Shin Hankyu Building at
1-chome, Umeda in Kita-ku. The construction of these two buildings sparked
a boom in the construction of large buildings in Umeda and surrounding
areas, including commercial facilities (including department stores), officebuildings, hotels, cinemas and theatres. This raised the profile of the Umeda
district alongside Osaka’s traditional shopping and entertainment district ofNamba, which is popularly known as Minami (South).
Another trigger of the subsequent development boom in Umeda was
the work that took place during the 1960s to relocate and expand Hankyu
Umeda Station. The sixties saw tremendous growth in the residential areasthat had grown up alongside the railway lines, and rail passenger demand
increased at a rapid pace. The old Umeda Station was unable to cope withthis growth in demand, and Hankyu Corporation decided to move the1 HERBIS OSAKA
2 HERBIS ENT
3 Shin Hankyu Bldg.
4 Dai Hanshin Bldg. andHanshin Umeda Station
5 JR Osaka Station
6 Umeda Hankyu Bldg.

1

7 Hankyu Grand Bldg.
8 Hotel new Hankyu Osaka
9 HEP NAVIO [Joint ownership]
10 Osaka Station North District

The Umeda area in around 1962

station’s location from south of the elevated tracks operated by JNR to northof the tracks, simultaneously expanding the station’s capacity. According to
the Umeda Station relocation-and-expansion plan selected by Hankyu, the
new station would not simply serve as a terminal for the railway lines, but theplan would also be designated as the Umeda area redevelopment project
to create a commercial centre and hub for city-centre amenities. It took thecompany 12 years from initial conception to completion of the project, at
a massive total cost of ¥36.5 billion, or over eight times the company’s
capital (¥4.48 billion) when the project was first proposed. The new Umeda
Station—which the company hailed as “the Face of Umeda”—was finally
unveiled in November 1973. In 1969, ahead of the completion of the newstation, a large-scale underground shopping centre—the Hankyu Sanban Gai
Shopping Centre—was opened below the site of the station. As befits Osaka’s
nickname of “The City of Water” (because of its many rivers and canals), theHankyu Sanban Gai Shopping Centre was constructed with an artificial river
running through it (2.8 metres wide and 90 metres long). This was a world
first, drawing considerable attention throughout Japan, and it soon took its
place as one of Umeda’s famous attractions.
Prior to the completion of the new Umeda Station, only the part of

13 HEP FIVE [Joint ownership with Hankyu REIT Inc.]
14 Higashi Hankyu Bldg.
15 Hankyu Umeda Station and19 Eastern Chayamachi

16 Kita Hankyu Bldg.
17 Kitano Hankyu Bldg. [owned by Hankyu REIT Inc.]
18 NU chayamachi [owned by Hankyu REIT Inc.]

21 Umeda Centre Bldg.

Hankyu Sanban Gai Shopping Centre

Phase 1 Development Area Project
11 Hankyu Terminal Bldg.
12 Nishi Hankyu Bldg.

2(Chayamachi Applause)[Joint ownership]

6

1

5

4
3

20

10

7
8

11

12

16
15

9

13
14

22 Annual Report 2010

District Development

20 Hankyu Chayamachi Bldg.

17
18
19

21

Excellent transport accessHighest Concentration of Commercial Facilities in Japan

Umeda serves as an important hub giving direct access to all major cities in the Kansai region, and, via Kansai International Airport, to the principal cities of Asia.

With all the ongoing and planned projects, Umeda is on the way to being the No. 1
urban centre in Japan for commercial facilities, with the highest land values among
Kansai commercial districts.

Number of Passengers of Major Stations(Thousands/day)

2,000
1,500

1st in West Japan
4th in whole country
1,738

1,219

0

Shinjuku: JR East, Keio, Odakyu, Bureauof Transportation Tokyo Metropolitan
Government, Tokyo Metro, Seibu

586

383

Shibuya: Tokyu, JR East, Tokyo Metro, Keio
Ikebukuro:	JR East, Tobu, Seibu, Tokyo Metro
Tokyo: JR East, Tokyo Metro

Umeda Namba Shinjuku Shibuya Ikebukuro Tokyo
KansaiTokyo Area

Source: U rban Transportation Report 2007
Edition (Institution for Transport
Policy Studies)

Ease of Access to Umeda

Umeda
Shinsaibashi/Namba
Abeno
Kobe
Kyoto

■

(31km)

KansaiInternational
Airport

Kyoto(68km)

39 min.
(53km)

Umeda Area
Gakken Toshi

41 min. (38km)

51 min.

(43km)

Otsu

WakayamaNara

42 min.
(49km)

60 min.
(45km)*Excl. time taken
to change trains

Source: Compiled on the basis of information provided on the City of Osaka’s website aimed
at attracting business enterprises and institutes of higher education to the city,
at: http://www.osaka-saisei.jp/

631
399
241
351
313

379
Shinjuku
238
ShibuyaGinza/Nihonbashi 492
Ikebukuro
325(Thousand m2)
Incl. current plans

394
238
510
325

Land Prices in Osaka Commercial Districts

12,00029 min.

424
377
151
351
229

Now

Source: O fficial announcement of land price by Ministry of Land, Infrastructure,
Transport and Tourism.

10,000
8,050

8,000

6,430

6,000
4,000

5,040
(CY) 2006

2007

2008

2009

Umeda (7-10, Kakuda-cho, Kita-ku, Osaka)
Shinsaibashi (1-4-5, Shinsaibashi, Chuo-ku, Osaka)
Namba (3-6-11, Namba, Chuo-ku, Osaka)

2010

Financial Section

Seoul
BeijingShanghaiHong Kong
Singapore

Kobe

Incl. current plans

Source: Excerpted from “Proposals for a grand design for Umeda: Creating an environment-friendly
city center that encourages alliances and partnerships” (Kansai Economic Federation,
published July 2008). Floor space figures were calculated by the Federation as a total for
department stores and other major retailers, based on Comprehensive List of Large-Scale
Retailers in Japan in 2008 (Toyo Keizai, Inc.) and Comprehensive List of Commercial Facility
Construction Plans for 2008 (Sangyo Times, Inc.)(¥ thousand/m2)

21 min.

Now

Management Organisation

500

Namba: Kintetsu, Nankai, Osaka Municipal
Transportation Bureau

1,439 1,311

1,000

 omparison of Store Floor Space among Japan’s
CFamous Shopping Districts

Umeda: Osaka Municipal Transportation(Osaka) Bureau, JR West, Hankyu, Hanshin

Core Businesses: Overview and Outlook

Umeda’s greatest assets are its excellent accessibility via public transportation, its concentration of a large number of Japan’s largest commercial facilities,
and its large number of office buildings. The completion of the many development projects now ongoing will enhance these assets still further, and we canlook forward to the area’s growth as an international hub that will play a leading role in the rejuvenation of the Kansai region.

Special Feature

Umeda’s Role, Now and in the FutureInterview with the President

From 1992 the Hanshin Group commenced an urban redevelopment project in the western Umeda area (to the west of the Osaka Station)
employing the Group’s entire resources. In this project, the Hanshin Group
aimed to create a modern urban area that would be on a par with anywherein the world and would meet the needs of the coming new century. The firstphase of the project saw the completion of the HERBIS OSAKA (a commercial
complex opened in March 1997), whose principal tenant was the hotel
the Ritz-Carlton, Osaka, while the second phase consisted of HERBIS ENT (acommercial complex opened in November 2004), whose principal tenant is
the Osaka Shiki Theatre, which is dedicated to performances by Shiki Theatre
Company. In addition to these key tenants, both commercial complexes
comprise a wide variety of retail facilities as well as offices boasting high-tech,“intelligent design” features. Both buildings feature interior finishings of thevery highest quality, while tenants of the commercial facilities include many
world-famous luxury brand retailers. Through this development project, theHanshin Group succeeded in transforming Umeda into an attractive townthat truly deserves the appellation “the Gateway to Osaka.”
Hankyu Hanshin Holdings Group, created by the October 2006
management integration of Hankyu Holdings, Inc. and Hanshin Electric
Railway Co., Ltd., have made a significant contribution to the development
and revitalisation of Umeda. As a result, the Group’s holdings include many
commercial facilities and office buildings in the area surrounding the Hankyu
and Hanshin Umeda stations, which is the heart of Umeda (please see mapof Umeda and its environs on Page 11, and an aerial photo of the area on
Page 22). These properties constitute an important element in the Group’sbusiness base. From here onward, as an integrated organisation, we plan toleverage the expertise we have built up over many years to tackle the further
development of Umeda.

Our BusinessUmeda to the south of the JNR elevated tracks attracted large numbersof visitors. After the end of World War
II, the area north of the elevated tracks
consisted of a clutter of old houses
and decrepit buildings which escaped
war damage. This area was known as
Opening of Hankyu Sanban Gai“behind the station,” and generally
Shopping Centre
fitted the dingy image conjured up bythat phrase. The construction of the
new Umeda Station and the Hankyu Sanban Gai Shopping Centre swept thisunfashionable image from people’s minds, injecting a much-needed dose ofvitality into the whole Umeda district.
Meanwhile, the Hanshin Group built a new terminus building,
Umeda Hanshin building (1-chome Umeda, in Kita-ku, currently part of the
Dai-Hanshin Building) at Umeda Station. In this building, Hanshin Mart, theforerunner of Hanshin Department Store, began operations.
Later, after multiple refurbishments the Umeda Hanshin building
became the current Dai-Hanshin Building in 1963. The Hanshin Department
Store likewise underwent multiple expansions of floor space, until reaching its current dimensions. (As a part of Group restructuring, The Hanshin
Department Store, Ltd. was folded into the H2O Retailing Group, an equity
affiliate.)
In addition to the Dai-Hanshin Building, renovations were also completed at the Shin Hanshin building in 1953 and the Nishi Hanshin building
in 1967 (both in 2-chome, Umeda in Kita-ku, currently occupied by HERBIS
ENT). In this way, the business infrastructure of Hanshin in the Umeda area
was laid.

Umeda’s High Status as a Business District
With its superior business environment, the area continues to command the highest
rents in the Kansai area (please see Page 33 for more detail on average rents).

Hankyu Hanshin Holdings

23Special Feature:

The Evolution of the Umeda District—Now and in the Future

Umeda makes progress in redevelopment thanks to designation as “urban district for
application of emergency revitalisation measures”
Umeda has been designated as an “urban district for application of
emergency revitalisation measures,” under the Urban Renaissance Special
Measures Law, which went into force on 1st June 2002. Urban redevelopment projects in such areas that have been approved by the authorities
benefit from more relaxed regulations on such matters as floor-area ratios
and building heights, as well as special tax treatment.
Therefore, in Umeda, a number of large-scale private-sector
development projects have been planned, started and in some cases
already completed, most notably the Umeda Hankyu Building Rebuilding
Project and the Osaka Station North District Phase 1 Development Area
Project, both being undertaken by the Hankyu Hanshin Holdings Group.
In addition, on 18th June 2010 the Japanese Cabinet approved a new
growth strategy and established the “Comprehensive System of Special
International Strategy Districts,” which includes comprehensive provisions
for special support measures, including relaxation of regulations andsupport from the taxation, fiscal and monetary aspects. In Osaka City, thegovernment has positioned Umeda (the area around Osaka Station) asa “Knowledge Capital” zone, and has proposed to the Japanese Cabinet
adoption of a range of policies using the special district system, with thegoal nurturing it into an “Asian innovation centre.”Through collaboration between the public and private sectors,
Umeda will become a major urban centre boasting advanced urban
amenities and a concentration of talented individuals. It will not only playa leading role in the economy of the Kansai region, but will also becomea significant presence in Japan as a whole.

Large-Scale Projects Currently Underway in Umeda Area
Hankyu Chayamachi Bldg.
(Chayamachi Applause)
Hotel Hankyu
International

Osaka Station North District
Phase 1 Development Area Project

Kitano Hankyu
Bldg.

Scheduled for completion in March 2013

Kita Hankyu Bldg.
Nishi Hankyu Bldg.

Osaka Station
North District<about 24ha>

Hankyu Sanban Gai

JR

ak
Os

Osaka Station West District Development(Rebuilding of Osaka Central Post Office)Originally scheduled for completion in 2012; under revision

Hankyu Terminal Bldg.
HigashiHankyuHEP FIVE Bldg.
HankyuGrand HEP NAVIO
Bldg.

ion

(store opening by Isetan Mitsukoshi)(Floor space expansion at Daimaru)
Grand Opening in spring 2011

tat
aS

da

me

U
hin
ns n
HatatioS

HERBIS OSAKA
n

tatio

Fu

h
kus

Hotel Hanshin

The Ritz-Carlton, Osaka

Dai Hanshin Bldg.
(Hanshin Department Store)
Shin Hankyu Bldg.

Rebuilding of Fukoku
Mutual Life Insurance Bldg.

HERBIS ENT
Diamor Osaka

S
ima

Umeda
Centre Bldg.

Hankyu Umeda Station

Hotel new Hankyu

Osaka Station Development ProjectNorth Gate Bldg. development
Extension of Acty Osaka

Eastern
Chayamachi
District
NU–
chayamachi

Scheduled for completion October 2010

Rebuilding of Umeda Hankyu Bldg.
(to be Japan’s largest department store)
Grand Opening held in spring 2012

(As of the end of July 2010)

Enhancing the appeal of the entire Umeda area
We aim to refine the role of Umeda as a commercial district centred on department stores and introduce
new roles (tourism and promotion of innovation) to generate greater diversity. To achieve this, we believe
it will be important to us to treat Umeda as a wide area.
Up to now, the district of Umeda has been expanded by the development projects of the three railway
companies Hankyu, Hanshin, and JR West, each expanding out from its own terminal station. As a result,
there has been an undoubted lack of public spaces, and access from one part of the district to another has
not been very easy for shoppers. Through this revitalisation of the city-centre roles of the Umeda area, we
believe it is necessary to create in our development projects spaces where there are few obstructions tomovement, so that people can just enjoy strolling around for its own sake, without any particular destination. For example, because different parts of the Umeda Hankyu Building were constructed at different
times, there are a number of floor-level differences at entrances to and exits from the underground shopping complexes that connect the building with public transport or with other commercial facilities nearby.
We aim to take advantage of the rebuilding work to eliminate these obstacles and make all undergroundentrances barrier-free, thereby facilitating smooth pedestrian flow and improving overall accessibility.
Furthermore, in our community-building endeavours, we believe it is essential to address not only
the nuts-and-bolts aspects of creating public spaces, but also step up the intangible measures needed toencourage flows of people, such as finding ways of drawing in people who have different objectives, andproviding information, events, and other attractions for people just visiting. For this reason, we believe weneed to proactively undertake “area management activities,” to draw together all the small contributions
from individual residents and community activists. With our initiatives pump-priming neighbourhood
development, the Group is committed to creating new value in Umeda in alliance with local governments,
universities, residents and businesses.

24 Annual Report 2010

Ryuichi Morotomi
Director(Deputy General Manager
of Real Estate Business
Headquarters and Manager
of Real Estate Development
Department)
Hankyu Corporation

The Group’s Ongoing Large-Scale Projects in the Umeda Area

Rebuilding of Umeda Hankyu Building (Page 22, aerial photo 6 )Interview with the President

Phase I Section of Department Store Opened in September 2009;
the Office Tower opened in May 2010
Steady progress is being made on the rebuilding work on the Umeda
Hankyu Building, which contains the Umeda Main Store of Hankyu
Department Stores that boasts the largest sales in Western Japan. On 3rd
September 2009 Phase I of the department store was opened, and the
Umeda Hankyu Building Office Tower was completed on 1st April 2010
and opened on 6th May.
The rebuilding work is divided into north and south sections andinto two phases. With the completion of the Phase I of the department
store and the Office Tower, Phase I (south-side) construction has been
completed. Work continues on Phase II (north-side) construction aheadof the scheduled Grand Opening in the spring of 2012.

The ideal location for a new landmark building

Special Feature

The Group’s Future Growth Drivers

Core Businesses: Overview and Outlook

The rebuilding work will increase the sales floor space of the Hankyu
Department Store, and the construction of the new Office Tower will
greatly expand the amount of rental floor space. The Group can thus lookforward to a considerable increase in rental income in the medium term.
The provisions of the Urban Renaissance Special Measures Law relating
to the relaxation of regulations on floor-area ratios have been applied to
the Office Tower rebuilding work, giving it a net increase in rental area
compared with before the rebuilding. This will have a significant positive
impact on the Group’s revenues, and will become a major growth driverin the future. The building’s location is one of the best even within the
Umeda area, which boasts Western Japan’s biggest railway terminal, andit features eco-friendly design and offers a pleasant working environment.
We intend to leverage the building’s strong competitiveness to raiseoccupancy rates.

In the Sky Lobby on the 15th floor, which is open to the general public, you can enjoy
wonderful views. It also functions as a “second lobby area” for the Office Tower, where
office workers can find facilities like stores and coffee shops.
Management Organisation

Osaka Station North District Phase 1 Development Area Project (Page 22, aerial photo 10 )Construction Started in March 2010

A
B
C

Financial Section

This is a large-scale project to develop the Phase 1 Development Area
Project (7 hectares) in the Osaka Station North District (“Umeda North
Yard”; 24 hectares), on the north side of Osaka Station, and is being undertaken by a consortium of 12 companies including Hankyu Corporation.
Construction began on 31st March 2010, with completion scheduled forMarch 2013.
The Phase 1 Development Area is divided into Blocks A, B, and C andincludes the construction of offices, commercial facilities, hotels, service
apartment, and condominiums to create a “Knowledge Capital” zone thatwill incorporate all the essential elements of a city-centre area. The aim of
the project is to realise a neighbourhood truly worthy of being the newgateway to Osaka.

Our Business

A number of projects are ongoing in Umeda. The Group is in charge of two of them, both large-scale. Below,
we provide up-to-date information on these projects.

Project Conceptual Diagram

Hankyu Hanshin Holdings

25Core Businesses: Overview and Outlook

At a glance

Revenues from Operations

Urban Transportation

P. 28% of Revenues
from Operations

Revenues from Operations¥195.1 billion(¥ billion)

189.6

190.9

194.9

195.2

195.1

06/3

07/3

08/3

09/3

10/3

188.8

179.7

171.7

169.2

06/3

07/3

08/3

09/3

10/3

90.2

95.3

100.6

103.7

88.8

06/3

07/3

08/3

09/3

10/3

93.8

93.9

94.4
65.8

62.9

10/3

(YoY -0.1%)

29.4%
Real Estate

P. 33% of Revenues
from Operations

Operating Income Margin

16.2%

Revenues from Operations¥169.2 billion

167.3(YoY -1.4%)

23.0%Entertainment and Communications 

P. 38% of Revenues
from Operations

Operating Income Margin

17.5%

Revenues from Operations¥103.7 billion(YoY +3.1%)©Takarazuka Revue Company

Travel and International Transportation

P. 42

14.4%
% of Revenues
from Operations

Operating Income Margin

9.0%

Revenues from Operations¥62.9 billion(YoY -4.5%)

9.6%
HotelsP. 46% of Revenues
from Operations

Operating Income Margin

0.4%

Revenues from Operations¥61.0 billion

06/3

07/3

08/3

09/3

70.3

69.4

69.2

66.5

06/3

07/3

08/3

09/3

10/3

188.7

185.8

67.6

62.8

09/3

10/3

61.0

(YoY -8.2%)

9.2%
RetailingP. 49% of Revenues
from Operations

Operating Income Margin—

Revenues from Operations¥62.8 billion

120.8(YoY -7.1%)

9.4%

Operating Income Margin

—

06/3

07/3

08/3

Notes: 1. Segment results are on a financial accounting basis (including intersegment revenues from operations and transactions).
2. Figures for segment revenues from operations as a percentage of Group totals are calculated on the basis of sales to external customers (as of 31st March 2010).
3. Revenues from operations in other businesses accounted for 5.0%.

26 Annual Report 2010

* In the year ended March 2006, consolidated figures for Hankyu Holdings, Inc. and Hanshin Electric Railway Co., Ltd. are
simple additions. For the year ended March 2007, it is assumed the management integration had entered effect fromthe beginning of the term. Up to first half of the year ended March, 2008, Retailing business sales include those of thedepartment store business (the former Hanshin Department Store group).

Operating Income*

(¥ billion)
33.2

32.5

31.6

06/3

07/3

08/3

09/3

10/3

38.5

39.5

31.9

06/3

07/3

32.8

08/3

09/3

29.6

10/3

8.5

8.4

07/3

08/3

09/3

9.3

10/3

4.4
3.2

2.7

1.5
0.3
06/3

08/3

1.4

1.3

0.6

09/3

10/3

0.3

–1.7
07/3

6.0

5.8

08/3

09/3

This segment group comprises retail outlets operated mainly within the premises of stations along our lines (the “Ekinaka”), the Book 1st. bookstore chain, the asnas convenience
store chain, the COLOR FiELD cosmetics and accessories chains, the DOUBLEDAY furnitureand daily accessories chain and other sale-of-goods outlets. In addition to its extensive
presence along the Hankyu and Hanshin lines, we have also opened Book 1st., COLORFiELD and DOUBLEDAY stores beyond areas along our lines, drawing on our long experience in developing businesses to strengthen our competitive edge in our market.

0.7
07/3

08/3

09/3

The Hankyu-Hanshin-Daiichi Hotel Group operates 44 hotels, consisting of 19 that are
directly managed and 25 belonging to chains operated by franchise. It is one of Japan’s
most eminent hotel chains, with 8,461 guest rooms, as of 31st July 2010. The segment
offers a wide range of hotel formats, from general-purpose “city hotels” to new style hotels(with very limited function facilities), and is particularly strong as a hotel operator withmany directly-managed hotels in the Tokyo and Kansai areas, Japan’s two major markets.
In addition to chain operations, it also manages The Ritz-Carlton, Osaka, an international
luxury brand with which it has formed an alliance.

10/3

2.7

06/3

An intermediary holding company, Hankyu Hanshin Express Holdings, now operates theTravel and International Transportation segment, after its two component businesses werereorganised in April 2010 and October 2009 respectively. The restructuring was aimed
at building a platform for further strengthening competitiveness. In the travel business,
Hankyu Travel International offers an original product range featuring the comprehensive
and varied Trapics core brand and the Hanshin Travel Friend Tour line of package tours,with a focus on European destinations. Additionally, Hankyu Hanshin Business Travel
offers high-quality business travel services. In international transportation, quality logistics
services are provided through Hankyu Hanshin Express.

Financial Section

06/3

This segment offers a wide variety of live entertainment, centred on the sports business—
the nationally popular Hanshin Tigers professional baseball team and their home groundand high-school baseball mecca, Hanshin Koshien Stadium—and the stage revue business, based on the hugely popular, globally renowned and original Takarazuka Revue.
Other businesses include our advertising business, which uses advertising spaces on
railways and other public transport; our cable TV business serving areas along Hanshinlines; and publishing (magazines and books). With this rich and broad media portfolio, theEntertainment and Communications segment aims to deliver inspiration and dreams tocustomers all over Japan.

Management Organisation

07/3

Consisting of real estate leasing, selling and management businesses, the Real Estate segment derives its revenue base from property leasing and management (commercial facilities and offices) and its condominium business. It boasts a varied and attractive businessportfolio including commercial facilities such as Hankyu Nishinomiya Gardens, Hankyu
Sanban Gai and HERBIS OSAKA/ENT, and the highly regarded Geo condominium brandin the Kyoto-Osaka-Kobe area. It is also involved in attractive, large-scale developmentsthat are revitalising areas served by our stations. Examples include the Umeda Hankyu
Building. With the opening of the department store (Phase I) in September 2009 and the
Office Tower in May 2010, this complex has become a new landmark in Umeda, and canbe expected to further contribute to the revitalisation of the Umeda area.

Core Businesses: Overview and Outlook

06/3

8.5

Total length of lines operated: Hankyu Corporation: 143.6km
Hanshin Electric Railway: 48.9km (Including tier 2 railway operator)

Special Feature

11.2

Centred on Hankyu Corporation and Hanshin Electric Railway, this segment operates
railway, bus and taxi services forming an extensive transportation network throughout
the Kansai district. With the opening in March 2009 of the Hanshin Namba Line, we havecreated a wide-area railway network linking Kobe, Osaka and Nara, while serving Osaka’s
two major northern and southern terminals, Umeda and Namba. This line plays a key rolein further revitalising areas served by our stations. With ongoing grade separation (track
elevation) projects and works to make facilities barrier-free, this segment is committed toproviding safe, convenient and appealing transit services in the Kyoto-Osaka-Kobe area.

Interview with the President

34.4

Our Business

34.8

Nature of Business

–0.3
10/3

Hankyu Hanshin Holdings

27

Urban Transportation
Major Businesses

Railway operations:H ankyu Corporation, Hanshin Electric Railway,
Nosé Electric Railway, Kita-Osaka Kyuko Railway,
Hokushin Kyuko Railway, Kobe Rapid Transit Railway
Bus operations:H ankyu Bus, Hanshin Bus, Hankyu Kanko Bus,
Osaka Airport Transport, Hankyu Denen Bus
Taxi operations:Hankyu Taxi, Hanshin Taxi
Hanshin Electric Railway

Basic Information and Business Environment
Population trends in areas served by our
stations and initiatives to upgrade thetransport network

displays have been installed, and major stations now have ticket gatesIn recent years, the population of the Kansai area has been in decline,

Station, including wicket and concourse improvements and installa-

with a glass-walled information counter. In this way we are committed
to creating safe, secure and comfortable stations. Hanshin Electric
Railway has also carried out extensive improvements to Sannomiya

with a low birth-rate and a rising proportion of elderly people.
However, areas served by our stations are popular and populations
here have maintained growth momentum since the trough of 1996,
the year after the Great Hanshin-Awaji earthquake (please see Figure 1).
Furthermore, Umeda, the main hub of the Hankyu and Hanshin
network, contains one of the largest concentration of retail premises
in Japan. Including lines operated by other companies, approximately
2.4 million people use Umeda (Osaka) Station each day, making it thebusiest station in western Japan. It also has the fourth-largest service
catchment area* of any station in Japan, after the three Tokyo termi1

nals of Shinjuku, Shibuya and Ikebukuro*2.
However, amid Japan’s declining population, the number ofpeople living in areas served by our stations is anticipated to fall overthe long term, and other factors such as ongoing competition withprivate car ownership means the operating environment in the Urban
Transportation Business is challenging (please see Figure 2).
In response to these conditions, the Group is taking every
measure to ensure low-cost operations, for example by pooling thetechnology and know-how of the Hankyu and Hanshin, deploying personnel more efficiently (for example by having staff of bothcompanies fill in for each other on major projects), and increasing
the convenience of public transportation by upgrading stations andtransport networks.
Hankyu and Hanshin
remain committed to creating
barrier-free station facilities.
For

example,atHankyuCorporation stations, recording-enabled security cameras
Ticket gates with a glass-walled information
counter at Hankyu Railway stations

28 Annual Report 2010

and passenger information

tion of smoke expulsion systems and elevators.
One example of upgrading transport networks approach is the
Hanshin Namba Line, opened in March 2009. This new line connects
the business and tourist areas of Kobe, Osaka-Namba, and Nara
without the need for transfers. Because many stations on it connect
directly with networks operated by other rail companies, the line
enhances connectivity within the Osaka-Kobe area and between
south and east Osaka. These and other steps have generated new rail
service demand. As a result, the Hanshin Namba Line has achieved allits revenue targets since the first fiscal year it was opened*3, illustrating
the importance of upgrading our network and the strong potential of
our lines (please see Page 30).
Also, in April 2009, we made Kobe Rapid Transit Railway Co, Ltd.
a consolidated subsidiary. This company’s lines link up with thoseof four railway operators servicing Kobe City (Hankyu Corporation,
Hanshin Electric Railway, Sanyo Electric Railway, and Kobe Electric
Railway). Having full control over Kobe Rapid Transit Railway will pave
the way for further enhancements to our railway network, including
customer convenience.
With only one-ninth of their CO2 emission levels, railways havea far smaller environmental footprint than cars. Amid growing publicconcern over environmental issues, we are working to encourageeven greater use of public transport by using a variety of approaches
to communicate the eco advantages of railways to customers.
*1 Service catchment area of stations: Area around stations from which customers using thestations are drawn, including people residing, working, studying, etc. in the area. Bus routes
bringing people in can also be counted as being in a catchment area.
*2 Source: Urban Transportation Report 2008 Edition (Institution for Transport Policy Studies).
Figures are for 2007.
*3 We estimate that the opening of the Hanshin Namba Line will boost overall annual revenues
at Hanshin Electric Railway by ¥3.8 billion under normal operating conditions. We targetedrevenues in the first fiscal year of operation (fiscal year ended March 2010) at 80% of this figure,but with growing awareness of the line, we estimate revenues will expand at five percentage
points annually, reaching our assumption for revenues under normal conditions in fiscal year
ending March 2014.

Figure 1: Population Trends in Areas Served by Hankyu and Hanshin Lines (1991=100)
Hankyu/Hanshin Service Areas
Kansai Area
Osaka
Hyogo
Kyoto

104
103

101
100
The Great Hanshin-Awaji earthquake

99
98
97

(CY)1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Interview with the President

102

Hankyu/Hanshin Service Areas:
Following areas with stations of Hankyu
Corporation, Hanshin Electric Railway(including tier 2 railway operator)
Osaka:
Osaka City (Fukushima, Konohana,
Nishi, Naniwa, Nishi-Yodogawa, HigashiYodogawa, Yodogawa, Kita, Chuo Wards
out of 24 wards), Toyonaka, Ikeda, Suita,
Takatsuki, Ibaraki, Minoh, and Settsu
cities, Shimamoto towns
Hyogo:
Kobe City (Higashi-Nada, Nada, Hyogo,
Nagata, Chuo Wards out of 9 wards),
Amagasaki, Nishinomiya, Ashiya, Itami,
Takarazuka, and Kawanishi cities
Kyoto:
Kyoto City (Nakagyo, Shimogyo, Ukyo,
Nishikyo Wards out of 11 wards), Muko
and Nagaokakyo cities, Oyamazaki Town

Our Business

105* Based on data in the Basic Resident Register, issued by the Ministry of Internal Affairs and Communications.

Figure 2: Estimated Changes in Population (2000=100)
Hankyu/Hanshin Service Areas
Whole of Country
Kansai

105
100

100.0

100.2

103.1
100.2
99.3

95

102.6

101.3
99.1

98.8
97.6

96.7

96.4
94.0

95.2

93.1
90.8

92.1

90

87.2

88.5
85

84.6
80

(CY) 2000

2005

2010

2015

2020

2025

2030

2035

* Figures for 2000 and 2005 are basedon statistics in the Population Census,
issued by the Ministry of Internal
Affairs and Communications. Estimatesfor 2010 onwards are based on
Population Projections for Japan (asof December 2008), compiled by the
National Institute of Population andSocial Security Research using the 2005
National Census.

Kobe Rapid Transit Railway Line Route Map

To Himeji

To Himeji

Minatogawa

To Shin-Osaka

Hankyu Railway

KosokuKobe

Nishidai Kosoku- Daikai Shinkaichi
NagataSanyo Shinkansen

To Umeda

Sannomiya
Hanakuma
Nishimotomachi

Motomachi

To OsakaHanshin Electric Railway
To Umeda

Financial Section

Kobe Rapid Transit Railway
Sanyo Electric Railway

Mt. Rokko

Management Organisation

Kosoku-Kobe Station

Hokushin Kyuko Railway

Kobe Electric Railway

To Himeji

Mt. MayaCore Businesses: Overview and Outlook

100.0
100.0

102.4
100.7

Special Feature

110

Sannomiya

Hankyu Hanshin Holdings

29

Urban Transportation

Focus: Expansion of rail network by opening the Hanshin Namba Line

SubwayNagahori Tsurumi-Ryokuchi Line

Kintetsu Nara Line

Kintetsu-Nara

Nankai Main Line/Koya Line

Kintetsu-Nara

Subway Yotsubashi Line80 minOsaka-Namba

Osaka-Namba

SannomiyaApprox.

Umeda

Approx.

Nankai Shiomibashi Line
(Koya Line)

Direct services to Kobe and Nara
without transfer*Sakuragawa (Shiomibashi)

JR Osaka Loop Line

*Dome-Mae*Kujo

Subway Chuo Line40 min

JR Tokaido LineOsaka

JR Yumesaki Line

SubwaySennichi-Mae
Line

Nishikujo

Amagasaki

Sannomiya* = New Station

Hanshin Main Line

Sannomiya

SubwayMidosuji Line

Hanshin Namba Line

(Kobe)To Nagoya, Mie

Prior to the opening of the Hanshin Namba Line, there was no single-line connection between Kobe and Osaka-Namba—
the so-called missing link in the transport network. However, with the opening of the Hanshin Namba Line in March 2009,
this problem was resolved. Thanks to direct access under a trackage rights agreement with the Kintetsu Line, wide-areacustomer flow was realised between the Osaka-Kobe belt zone, and Osaka-Namba, eastern Osaka, and the Nara area.
The Hanshin Namba Line also offers convenient transfers with other lines, enhancing connections in the Hanshin area
and in central and southern Osaka. Customers can transfer onto the Subway Chuo Line at Kujo Station, Subway Nagahori
Tsurumi-Ryokuchi Line at Dome-Mae Station, Subway Sennichi-Mae Line and Nankai Shiomibashi Line at Sakuragawa
Station, and Subway Midosuji Line, Yotsubashi Line, and Nankai Main Line/Nankai Koya Line at Osaka-Namba Station.
With the opening of the Hanshin Namba Line, Hanshin Electricand in February 2010, it received the Kansai Financial Seminar

Railway is directly connected to Osaka-Namba station, thePrize 2010 from the Kansai Economic Federation and the Kansai

second-largest railway hub in Kansai. Meanwhile, the construc-

Association of Corporate Executives. Going forward, we plantion of three new interchange stations (Kujo, Dome-Mae, andto enhance convenience and offer safe and convenient rail

Sakuragawa) that enable connection to existing lines has

services on the Hanshin Namba Line, given its important role insignificantly enhanced the railway network in central Osaka.

increasing the potential of our railway network.

Also, direct access under a trackage rights agreement with the
Kintetsu Line means that for the first time customers can travel
between Kobe, Osaka-Namba and Nara without changing,realising wide-area customer flow for commuting to work or
school, or for shopping and sightseeing. The new line allows
direct transfers between Osaka’s two main terminals, Umeda
and Namba, via the Hanshin Line, significantly boosting convenience for travellers in the Kobe city and Hanshin areas.
The new line’s contribution to revitalising the Kansai areaand enhancing convenience has been recognised. In October
2009, the committee running Japan’s annual Railway Dayawarded Hanshin Electric Railway the 8th Japan Railway Award,

30 Annual Report 2010

Strong start by the Hanshin Namba Line, butearnings weak owing to impact of economic
slowdown and H1N1 flu outbreakand upgrades to station operating equipment. Revenues fromoperations were also affected by a decline in advertising revenues
and a significant impact from the slowdown in the economy andcompanies.

in March 2009, got off to a solid start. The line boosted revenues*1

As a result of the above, revenues from operations in the Urban

from railway operations on Hanshin lines by roughly ¥3,454 million,

Transportation Business declined ¥129 million or 0.1% year-on-year

beating the original plan by approximately 14%.

to ¥195,114 million and operating income dropped ¥938 million or

However, owing to deterioration in employment conditions
and weak consumer sentiment amid the slowdown in the economy,
as well as the impact of the H1N1 flu outbreak*2, revenues fromrailway operations*3 declined ¥2,258 million, or 2.5%, year-on-year to¥89,708 million (-2.4% for commuter passes, -2.5% for other tickets)
at Hankyu Corporation, but rose ¥2,807 million, or 11.1%, to ¥28,038
Hanshin Electric Railway.
The opening of the Hanshin Namba Line, however, resulted
in tier 2 railway operator*4 line usage fees for the new section of*1 The boost to revenues from the opening of the Hanshin Namba Line is not a year-on-year calculation. Rather, it is based on a comparison with estimated revenues from all Hanshin Electric
Railway lines excluding the Hanshin Namba Line.
*2 In May 2009, the Kansai region experienced Japan’s first major outbreak of H1N1 flu. The resulting panic reaction and decision by many to stay at home had a sharp impact on our transportbusinesses. A spike in H1N1 flu from autumn later in the same year also led to people staying
at home.
*3 Total revenues from tier 1 and tier 2 railway operations at both Hankyu Corporation and Hanshin
Electric Railway.
*4 Tier 2 railway operators are defined as companies that operate passenger and freight transport
services using railway lines other than those under their ownership. In the case of the Hanshin
Namba Line, the tracks, station and other assets on the new 3.8km section of line between
Nishikujo Station and Osaka-Namba Station are owned by third-sector company Nishi-Osaka
Railway Co., Ltd., and Hanshin Electric Railway, as a tier 2 railway operator, carries out actual
operation of the line under the top-and-bottom (ownership/operation) separation method.

the line, and an increase in depreciation related to new carriages* Figures for each period are after application of “management approach” accounting.

In light of current operating conditions, including a decline in revenues from commuter passes owing to deteriorating employment
conditions, we have revised our projections for trends in revenues
from operations. Based on these new assumptions, we have revised

Numerical Estimates (¥ billion)
Revenues from Operations

191.1

191.5

Operating Income

191.9(196.4)

191.4

189.8
(196.6)

down our estimates announced on 15th May 2009 when we adjusted

Core Businesses: Overview and Outlook

Forecasts for Fiscal 2011 Onward (Estimates Adjusted from 2007 Medium-Term Management Plan)

Special Feature

million (+8.2% for commuter passes, +12.7% for other tickets) on

2.9% to ¥31,552 million.

Interview with the President

the H1N1 flu outbreak, which was also felt by other railway and bus
In the year under review, the Hanshin Namba Line, which opened

Our Business

Performance for the Fiscal Year ended March 2010

the estimates from our previous Medium-Term Management Plan.
For fiscal year ending March 2011, we estimate operating
lion, reflecting a decline in revenues from operations amid weakness
in the economy and special factors such as an increase in losses on
disposal of fixed assets expenses related to underpass construction

32.2

32.3

2008/3

2009/331.0(30.5)

27.0

29.9(34.1)

work on the Hankyu Line.
For the fiscal year ending March 2013, the final year of our current Medium-Term Management Plan, we project operating income
growth of ¥2.9 billion or 10.7% versus our estimates for the fiscal
assumption of a rise in passengers on the Hanshin Namba Line anda corrective decline in the above losses on disposal of fixed assets aswell as lower Hanshin Namba Line depreciation expenses.
* Please refer to note *3 on Page 28.

Result2010/3Result2011/3
Estimate

2013/3
Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting). Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

179.8

41.7

170.2

33.7

168.5
(174.1)

30.9(28.2)

199.8(212.7)

155.0

23.0

34.9
(37.7)
Hankyu Hanshin Holdings

Financial Section

year ending March 2011, to ¥29.9 billion. This outlook reflects our

ResultManagement Organisation

income will decline ¥4.0 billion or 12.9% year-on-year to ¥27.0 bil-

31

Urban Transportation

Basic Strategic Outlook
In the long term, while addressing the issues of declining population and intensifying competition with private transportation, and responding
to calls for greater social responsibility (including creating barrier-free facilities) and other structural change in demand and markets, we will build
competitiveness for sustainable growth and increase value along Group railway lines, through the following policies.

(1) Provide services of real value to our customers (various marketing policies and network development projects)• Marketing initiatives to increase passenger numbers on the Hanshin Namba Line• Integrated management including the Kobe Rapid Transit Railway(2) Rigorously commit to low-cost operation (sharing and upgrading technologies and know-how)(3) Provide safe, high-quality transportation services that fully justify public trust• Safe transportation, steady progress in large-scale projects, grade separation work, and installation of barrier-free facilities

Message from Heads of Urban Transportation Business
Tsuneo Wakabayashi
Managing Director
Head of Urban Transportation Business
Hankyu Corporation

On 10th March 2010 Hankyu Corporation marked the 100th anniversaryof the commencement of business operations. We would like to takethis opportunity to express our gratitude to all the customers who haveused our services over the years, as well as to our business partners.
We are now ready to take on new challenges of the next 100
years, while continuing to uphold “safety” as the concept at the heartof all our business operations.
The first priority is reducing the environmental burden. Last
year we operated our “Eco-train: Dreams and Communities of the
Future” to raise public awareness of environment issues. This wasvery well-received by the travelling public, and was followed by the
opening in March 2010 of Japan’s first carbon neutral railway station
at Settsu City (Settsu-Shi Station), which was achieved through the
installation of energy conservation equipment and the use of carbon
offsets to bring CO2 emissions effectively down to zero.
The second priority is our commitment to providing safe andconvenient services. In July, we set up the Hankyu Railway Traffic
Information Centre as a central unit to handle all telephone inquiries relating to us. We also carried out renovation work to enhancecustomer convenience, including making ticket gates in all major
stations fully visible to ticket office staff for more user-friendly
service, and installing security cameras, multifunctional intercom
systems, and up-to-date information display boards. In addition tothese measures, we plan to cooperate with our customers and local
governments to create communities served by our railway lines that
more and more people will want to visit and even reside in.

32 Annual Report 2010

Takaoki Fujiwara
Managing Director
Head of Urban Transportation Business
Hanshin Electric Railway

I am pleased to say that our new Hanshin Namba Line, which openedin 2009 to directly link Kobe, Osaka, and Nara, is being used by manycustomers. The number of office and school commuters is also risingsteadily, indicating that the line is playing an increasingly importantrole in the region. We plan to continue implementing measures that
boost convenience and generate new demand on our line, in aneffort to attract even more travellers to areas served by Hanshin lines
and stations.
Also during the year under review, the Hankyu Hanshin
Holdings Group is scheduled to take over management control of
the Kobe Rapid Transit Railway Line in October 2010. Drawing on theGroup’s expertise, we intend to upgrade equipment and enhancecustomer service to reinvigorate the company and raise operational
efficiency.
As an urban transportation business operator, safety is ourprimary concern, and we plan a number of steps to boost safety
further, such as constructing underpasses and elevated tracks andupgrading railway safety equipment. We will also work to improve
services for customers by making carriages, elevators, and multifunction toilet facilities barrier-free, while pushing ahead with theupgrades of Sannomiya and Mikage Stations.

Real Estate
Major Businesses(For details of major properties, please see Page 10)

Interview with the President

HEP FIVE

Major companies: Hankyu Corporation, Hanshin Electric Railway
Real estate sales:S ubdivision and sale of residential land lots and sale of condominiums andsingle-family housing, mainly along Hankyu and Hanshin lines
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty
Real estate management:O peration and management of buildings of various formats in the KyotoOsaka-Kobe and Tokyo areas, including buildings owned by the Group
Major company: Hankyu Hanshin Building Management

Our Business

Real estate leasing:E xtensive property-holdings, mainly along Hankyu and Hanshin lines

Basic Information and Business Environment

The Group has one of the largest rental real estate portfolios of any

gradually increase as the economy recovers, but with a number ofprivate rail company, with many properties located near Hankyu andlarge-scale rental properties set to boost supply from 2010 throughHanshin lines (please see Page 10 for a list of our major properties).

2014, we expect the average vacancy rate to remain stubbornly highOverall rentable area operated by the Group was approximately

for the time being.

ficult owning to an uncertain outlook.
Over the medium-term, demand for office space is likely to

1,350,000m (as of 31st March 2010). Half of this amount (approxi-

Additionally, in line with the cooling of consumer sentiment2

mately 650,000m , 60% commercial facilities and the rest officeand the uncertain employment picture, commercial facilities can bebuildings) was concentrated in the Umeda area, the heart of the

expected to face declining tenant sales notably in city-centre loca-

Kansai economy, where the Group has a large number of very com-

tions, as buyers seek out lower-priced properties or opt out of thepetitively located rental properties (near the Umeda stations of bothmarket for the moment.

2

Hankyu and Hanshin lines as well as JR Osaka Station) (please referAs the above suggests, the business environment surrounding theto Page 11 for detailed map of the Umeda area).

real estate leasing market is very challenging. However, the very
competitive locations of our major rental office buildings close tointensified as companies moved to cut costs through office integra-

the Hankyu and Hanshin Umeda stations means that even undertion and relocation. At the same time, a number of new buildingssuch conditions, we can expect relatively stable earnings on thecame onto the market, boosting supply. As a result, average vacancy

back of steady demand and rent levels. We likewise expect only

rates have been on the rise from a low in October 2007, and average

limited impact on earnings from the decline in tenant sales at ourrents also continue to decline moderately. While the rise in the aver-commercial facilities, due to the relatively high proportion of rental

age vacancy rate halted in June 2010, and there are positive signs

income that is accounted for by fixed-rent leases. Moreover, we are

emerging, with some tenants seeking larger premises or additionalseeing relatively stable tenant sales at commercial facilities which

Average Vacancy Rates for Office Buildings (Tokyo and Osaka Business Areas)(¥/3.3m2)(%)
Osaka Business Areas
Tokyo Business Areas

Umeda

15,00010

14,0008

Shinsaibashi/Namba

13,0006
42
0

2005/12

2006/12

2007/12

2008/12

2009/122010/6

Source: Miki Shoji, Latest trends in the office-building market

12,000

Osaka Business Area
Yodoyabashi/Hommachi

11,000Semba
Shin-Osaka

10,000Financial Section

16,000

14
12

Average Rents for Office Buildings (Osaka Business Area)

Management Organisation

In the central Osaka business district, competition to attract tenantsCore Businesses: Overview and Outlook

office space within their existing sites*, but conditions remain difSpecial Feature

Keeping our edge as the real estate leasing
market weakens

Minami-Morimachi

2005/12

2006/12

2007/12

2008/12

2009/122010/6

Source: Miki Shoji, Latest trends in the office-building market

Hankyu Hanshin Holdings

33Real Estate

depend on communities around stations served by our lines, due

we are taking steps to improve vacancy rates at our properties andto strong demand for foodstuffs and daily essentials. In particular,enhance the appeal and customer drawing power of the entire area,

Hankyu Nishinomiya Gardens, which has just celebrated its second

while leveraging our strong relationships with our tenants.

anniversary, saw monthly sales performance improve year-on-year.

(Please refer to Page 25 for more details on the Umeda Hankyu

Looking ahead, in the Umeda area, a strategic priority for theGroup, we expect new supply of major large-scale developments
to trigger intensified competition in the office building and com-

Building.)* Source: Miki Shoji, Latest trends in the Office-building market in Osaka (July 2010)

mercial facility markets. However, as market leader in this district,

Major New Office Buildings Planned for the Osaka Business Area (2010–14)
Building nameCompletion date

Office Tower of Umeda Hankyu BuildingStandard floor
rental space

Total office space

Project developer

April 2010

Approx. 103,000m2

Approx. 2,800m2

Our Group (Hankyu Corporation)

Osaka Fukoku Mutual Life Insurance Building

October 2010

2

Approx. 68,500m

2

Approx. 1,500m

Fukoku Mutual Life Insurance Company

North Gate Building Office Tower

Spring 2011 (planned)

Approx. 40,000m2

Approx. 1,500m2

West Japan Railway Company (JR West)

Nakanoshima Festival Tower

Autumn 2012 (planned)(excluding department store and other sections)

Osaka Station North District
Phase 1 Development Area Project
Nakanoshima Daibiru West (provisional name)
New Shin Daibiru (provisional name)

UnclearMarch 2013 (planned)

Approx. 236,800m2

Spring 2013 (planned)
Spring 2014 (planned)

Approx. 48,000m2
Approx. 76,000m2

The Asahi Shimbun Company,
Asahi Building Co., Ltd.
12 companies*
Undecided
including our Group (Hankyu Corporation)
Approx. 1,300m2, etc. DAIBIRU Corporation
Unclear DAIBIRU Corporation
2,644m2* The 12 companies participating in the Osaka Station North District Phase 1 Development Area Project are NTT Urban Development Corporation, Obayashi Corporation, Orix Real Estate Corporation, Kanden
Fudosan Co., Ltd., Nippon Steel City Produce, Inc., The Sumitomo Trust and Banking Co., Ltd., Sekisui House, Ltd., Takenaka Corporation, Tokyo Tatemono Co., Ltd., Nippon Tochi-Tatemono Co., Ltd., Hankyu
Corporation, and Mitsubishi Estate Co., Ltd.
Source: data from company websites, etc.

Signs of an upturn in sales in thecondominium businessing and property inventories to settle at a more appropriate level.

In the subdivision business, we market condominiums, single family

have acquired since the financial crisis triggered by the collapse ofhouses, and residential land lots. The core business is Geo branded

Lehman Brothers commanding more reasonable prices. Also, amid

condominiums, supplied as high value-added properties sited in

an improvement in consumer sentiment supported by low interest

excellent locations, mainly in areas along Hankyu and Hanshin lines

rates and government policies such as increased tax breaks for theas well as in the Tokyo area. With Geo branded condominiums, thegift tax. Against these backdrops, we forecast an increase of more

focus is on quality and functionality, and quality management isthan 10% in supplies of condominium units, rising to 43,000 units instrict. Our goal is to provide long-term housing, using an integrated

the Tokyo area and 22,000 units in the Kansai area. In addition, theframework spanning land purchase, project planning and sales,

monthly contract rate* for the period October 2009 to July 2010 has

and after-sales support. These efforts have been recognised by theshown basic year-on-year growth momentum is in the Tokyo andpublic, with Geo receiving high evaluation marks in many categories

Kinki areas. From May 2010 to July 2010, new supply of condomini-in a survey on condominium brands run by the Osaka edition ofums was higher year-on-year in both the Tokyo and Kansai areas.

In the remainder of 2010, we expect prices to continue correctWe have also begun to see condominiums built on land developers

the Nikkei newspaper (August 2009). Survey respondents gave Geo

Although uncertainties remain about the economic outlook,condominiums high scores for their refined design and desirability.

we see signs of an upturn in sales, centred on attractive properties
in good locations.

In 2009, condominium markets in the Tokyo and Kansai areas

Meanwhile, after a string of bankruptcies at newer developers

dropped sharply. The number of units supplied declined 16.8%

following the collapse of Lehman Brothers, banks have remained

year-on-year to 36,376 in Tokyo and 13.0% to 19,784 in Kansai. The

cautious about lending to small and mid-size developers. As such,

number of units supplied nationwide totalled 79,595, falling below

we expect real estate companies like ourselves, with strong brands

the 80,000 mark for the first time in 17 years.

and powerful financial backing from railway or trading company

Average sales prices fell 5.0% year-on-year (-1.2% per m ) in the
2

Tokyo area and 2.9% (-1.1% per m ) in the Kansai area, with the rises
2of the past few years coming to an end. However, prices are gradually correcting to a more affordable level for first-time homebuyers,
who primarily comprise children of the baby boomer generation.

34 Annual Report 2010

corporate groups, or specialist real estate company majors, to provide the bulk of condominium supplies.
* The monthly contract rate is the proportion of newly released condominiums that are contracted
for sale.
Note: The above figures and forecasts are based on research by the Real Estate Economic InstituteCo., Ltd.

(Unit/Year)

New Supply of Condominiums

95,635100,000

89,25688,51685,42983,18384,14874,46380,00061,02160,000(Tokyo and Kansai Areas)

33,06431,85731,25830,14630,21922,74420,0000(CY) 2000(¥10 thousand)Condominium Prices

43,73339,08736,673

2001

2002

2003

Tokyo Area (average price)Kansai Area (average price)

6,000
5,000

54.0

4,000

4,034
44.1

52.3

51.3

4,026

4,003

3,245
3,000

41.4
3,237

2005

2006

2007

2008

43,00019,78422,00020092010 (Est.)(¥10 thousand)Tokyo Area (¥/m2)
Kansai Area (¥/m2)

65.0

61.4

64.2

70
60

54.5

55.0

54.5

55.5

4,069

4,104

4,108
42.6

4,200
44.9

47.0

47.6

47.1

42.0
3,177

3,164

3,380

3,478

3,513

3,411 40

41.7
3,165

4,775

4,644

4,535
50

30
2,000
1,000

10

0

(CY) 2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0

(%)

Monthly Contract Rate

90

(Tokyo Area)
80

79.9

70

60

Monthly Contract Rate

71.0

70.2

70.6

64.7

78.2
75.3

70.9

63.1

78.3

73.9

69.3

69.0

68.8

68.6

63.0

63.2

61.9

70.3
64.2

70.7
61.7

60.1
53.5

50

60
40

Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Mar.

(%)

90

FY2009FY2010FY2011(Kansai Area)
80

90 72.3
80 62.7

76.0

70.2
64.5

60

70

50

60

40

76.9

64.5

73.7
68.4

63.8
59.4

60.4

62.4

62.4

60.9

62.0

56.3

56.3

60.9

63.2
59.4

58.8

56.1

64.8
64.6

55.1

50.1

51.3

50 Apr.

May

Jun.

Jul.

Aug.

Sep.

Oct.

Nov.

Dec.

Jan.

Feb.

Financial Section

70

Source: Based on Condominium Market
Trends in the Kansai Area, July 2010,
compiled by the Real Estate Economic
Institute Co., Ltd.

82.8

Management Organisation

Source: Based on Condominium andReady-built Housing Market Trends in
the Tokyo Metropolitan Area, July 2010,
compiled by the Real Estate Economic
Institute Co., Ltd.

64.7

77.0

83.9

FY2009FY2010FY2011

Core Businesses: Overview and Outlook

Source: Real Estate Economic InstituteCo., Ltd.: National Condominium Market
Trends 200920

Special Feature

41.7
3,188

2004

36,376

Interview with the President

39,73740,000Source: Real Estate Economic InstituteCo., Ltd.: National Condominium Market
Trends 2009, Condominium Supply
Forecasts in the Tokyo Metropolitan andKansai Areas 2010

Our Business(Tokyo and Kansai Areas)

Tokyo Area
Kansai Area

120,000

Mar.

40
Hankyu Hanshin Holdings

35Real Estate

Performance for the Fiscal Year ended March 2010
The subdivision business performed well,
but the leasing business saw profits decline
owing to the economic slowdown and theimpact of one-off factors

Department Store, was completed and opened in September 2009.
The completion of this led to an increase in depreciation expenses,
and floor space in the building was reduced from the second half ofthe fiscal year as the reconstruction project moved to Phase II of thedepartment store. Also, the repurchase of the Hankyu Grand Building,In the subdivision business, we rolled out new condominium devel-

which had been securitised, led to an increase in the tax burden

opments mainly in areas near stations on the Hankyu and Hanshin

due to higher real estate acquisition taxes. On top of these one-offlines, including Geo GRANDE Ibaraki Higashi-chujo Sakuradori (Ibaraki,factors, the vacancy rate at existing office buildings increased owing

Osaka Prefecture), The Senri Tower (Toyonaka, Osaka Prefecture), andto the impact of the economic slowdown, and sales at tenants in

Geo Koshienguchi 1-chome (Nishinomiya, Hyogo Prefecture). We also

retail facilities declined. Consequently, the leasing business reported

launched new projects in central Tokyo and its outlying suburbs. As ayear-on-year declines in revenues and profits.

result, the number of properties sold rose by 148 units year-on-year
to 1,064, supporting an increase in revenues and profits.
Residential land-lot sales centred on the Minoh Onohara
Residence (Minoh, Osaka Prefecture), Takarazuka Yamatedai
Residence (Takarazuka, Hyogo Prefecture), and Hapia Garden
Higashi-kakogawa (Kakogawa, Osaka Prefecture).

As a result of the above, revenues from operations in the Real
Estate Business declined ¥2,480 million or 1.4% year-on-year, to¥169,205 million and operating income dropped ¥3,186 million or
9.7%, to ¥29,629 million.

191.1

191.5

191.9
(196.4)

191.4

189.8
(196.6)In the leasing business, Hankyu Nishinomiya Gardens, opened
in November 2008, performed strongly throughout the fiscal year.
The Umeda Hankyu Building is currently being reconstructed, andthe department store section (Phase I), which houses the Hankyu
Geo GRANDE Ibaraki The Senri Tower
Higashi-chujo Sakuradori

32.2

31.0
(30.5)

32.3

Geo Koshienguchi 1-chome

29.9(34.1)

27.0

Forecasts for Fiscal 2011 Onward (Estimates Adjusted
2007 Medium-Term
Management
2008/3 from2009/3
2010/3
2011/3
2013/3Plan)* Figures for each period are after application of “management approach” accounting.

In light of recent weakness in the real estate market, we have revised
down our estimates announced on 15th May 2009 when we adjusted

ResultResultResultEstimate

Numerical Estimates (¥ billion)
Revenues from Operations

Operating Income

199.8(212.7)the estimates from our previous Medium-Term Management Plan.
For fiscal year ending March 2011, we estimate operating
income will decline ¥7.9 billion year-on-year or 25.6%, to ¥23.0 billion.

Estimate

179.8

170.2

168.5
(174.1)This reflects an anticipated temporary drop in condominium units

155.0

owing to the timing of new unit supplies, a full-year impact fromreduced floor space at the Umeda Hankyu Building (connected tothe shift in reconstruction work to Phase II of the department store),
and a projected rise in taxes and depreciation expenses following
the completion of Phase I in the Hankyu Building reconstruction

41.7

33.7

2008/3

2009/330.9(28.2)

project*1 and the Office Tower of Umeda Hankyu Building*2.
For fiscal year ending March 2013, we project operating income
growth of ¥11.9 billion or 51.7% versus our estimates for fiscal year
ending March 2011, to ¥34.9 billion. This is based on our assumption that condominium unit sales will increase and occupancy rates
in the Office Tower of Umeda Hankyu Building will rise, as well as
the completion of Phase II of the department store in the Umeda

ResultResult36 Annual Report 2010

Result2011/3
Estimate

2013/3
Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting). Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

Hankyu Building and grand opening scheduled for spring of 2012.
*1 Opened 3rd September 2009
*2 Completed 1st April 2010, opened 6th May 20102010/323.0

34.9(37.7)

99.4

105.8

107.9
(104.6)

105.7

114.5
(117.2)

We are taking the following measures as a matter of priority to further capitalise on our ability to create value along railway lines, which is underpinned by our strong brand image and sound reputation in the Kyoto-Osaka-Kobe area, and our project planning capabilities in commercial
facility development, mainly in the Umeda area, and the Geo brand-led condominium business.

that support community lifestyles• Revitalise property assets to build value along our railway lines• Supply condominiums and promote urban single-family housing along the Hankyu and Hanshin lines(2) Enhance enterprise value and optimise cash flow by striking an appropriate balance between investments and returns(3) Raise our profile in the Umeda area, through renovations of our properties

Interview with the President(1) By leveraging our expertise in community building, provide safe and convenient basic infrastructure and provide services

Our Business

Basic Strategic Outlook• Rebuilding of Umeda Hankyu Building, Chayamachi Redevelopment (Eastern District), and Osaka Station North District Phase 1 Development
Area ProjectSpecial Feature

Message from Heads of Real Estate BusinessYoshihiro Iwase

Managing Director
Head of Real Estate Business
Hankyu Corporation

Senior Managing Director(Representative Director)
Head of Real Estate Business
Hanshin Electric Railway

Hankyu Hanshin Holdings

Financial Section

In contrast to specialist real estate companies that focus on expanding business scale, the real estate division of a railway company isalso expected to help encourage greater use of the railways. We
see our mission as building the sort of communities along our linesthat will attract a growing number of residents, and providing theamenities they will need.
In this endeavour, the Umeda area is a strategic hub for bothHankyu and Hanshin, and we will continue working to raise the profile of the area. In addition to the ongoing rebuilding of the Umeda
Hankyu Building, we are committed to the development of a “greater
Umeda area” including West Umeda, where we are also involved invarious projects. We regard this as an important future mission for
the Hankyu Hanshin Holdings Group.
We are also engaged in single-family house building operations. By providing themed housing, we create beautiful townscapesthat harmonise human habitations with the natural environment,
and pleasantly spacious homes that feature extensive use of highceilings, open stairwells and other multifunctional spaces. In theseways, we create and market attractive residential areas, helping raisethe value of land along the Hankyu and Hanshin lines.

Management Organisation

Based on leasing operations, the Real Estate business works to increase
the appeal of the Umeda area and other areas served by stations
along Hankyu and Hanshin lines, and to maximise the asset value of
the Group. Key businesses include commercial facilities and officebuildings (the Umeda Hankyu Building and Hankyu Nishinomiya
Gardens) and its condominium business (the Geo series).
As is well known, the operating environment surrounding thereal estate business soured dramatically following the collapse of
Lehman Brothers in autumn 2008, with the collapse in land prices
and office demand and weak personal spending causing havoc
in the market. Despite these difficult operating conditions, we
continue to focus on the long term, and will invest in development
projects that contribute to the development and the revitalisation of
our region—creating communities along our lines that people findattractive to live in and visit—without overburdening our balance
sheet. We believe that this policy will increase the value of areas
served by our stations and enhance our own corporate value, fuelling growth for the entire Group.
Looking ahead, we will continue to make steady progress inongoing development projects centred on the Umeda area, suchas the rebuilding of Umeda Hankyu Building, and the Osaka Station
North District Phase 1 Development Area Project. In this way, we
aim to ensure sustainable growth for the Real Estate business, andcontribute to the local community.

Core Businesses: Overview and Outlook

Takehiro Sugiyama

37

Entertainment and Communications
Major Businesses

Sports business:P rofessional baseball business (the Hanshin Tigers) andHanshin Koshien Stadium, and related businesses
Revue and theatre business (stage business):T akarazuka Revue and related businesses; operation of Umeda Arts Theatre
and promotion of stage productions
 dvertising, publishing/broadcasting, musical entertainmentA(“Billboard Live” club and restaurant chain), information technology
services, and other leisure business©Hanshin Tigers

Basic Information and Business Environment
Strong fan base keeps the crowds coming

been completely immune to the prolonged economic downturn.
Consumers are being increasingly selective about the live entertain-

According to the Statistics Bureau’s Family Income and Expenditure

ment they choose to watch and market polarisation has become

Survey, total household consumption expenditure in 2009 (realmore pronounced, with some types of entertainment attracting aterms) excluding price fluctuation fell 1.4% year-on-year. However,high level of popularity while the rest struggle*2.
The Hanshin Tigers and Takarazuka Revue continue to enjoy

recreational service expenditures posted real growth of 0.1%

high levels of popularity, not only in Kansai but also throughout(though they fell 1.7% in nominal terms)
The live entertainment industry correlates relatively weakly

Japan, thanks to their passionate fan bases. We will continue towith broader economic trends, and is widely seen as recession-

further increase customer drawing power by enhancing these pow-

proof. Consumers tend to choose live entertainment in genres

erful brands and ensuring consistently high levels of performance.

with relatively low ticket prices, such as movies and sports, in place*1 *2 Source: “White Paper on Live Entertainment 2009,” published by PIA Research Instituteof other leisure activities, and the ailing economy is providing aboost to these categories*1. However, live entertainment has not

Consumption Expenditure and Recreational Service Expenditure(total households, real change, %)
(%)

6

5.9
Household Spending
Recreational Service Expenditure

5
4

2.3

3
2
1

0.5

0

-1.2

-1
-2
-3
-4

0.1

1.2

-0.1

(CY) 2004

-1.9

-3.5

2005

2006

-1.7
-3.6

2007

2008

-1.4
2009

Source: Family Income and Expenditure Survey of the Ministry of Internal Affairs and Communications

38 Annual Report 2010

The Group delivers inspiration and dreams through ‘the Hanshin Tigers professional baseball team/Hanshin Koshien Stadium’and ‘the Takarazuka Revue,’ both of which are popular and enthusiastically supported not only in Kansai but throughout Japan,

Our Business

Focus: Killer attractions that deliver inspiration and dreams

giving them unique brand recognition. In this feature, we give a brief overview of two of our unique strengths—attractions thatT he Hanshin Tigers professional baseballteam and Hanshin Koshien Stadium
The Hanshin Tigers have one of the longest histories among
Japan’s 12 professional baseball teams. They are also a highly
popular team supported by a large and passionate fan basein their home area of Kansai, as well as in the rest of Japan.
Attendances at host games in the pennant race have been thelargest in Japan for the past five years, and the Hanshin Tigers
was the only professional baseball team to register total attend-

other major events such as college student American footballcompetitions, the stadium has hosted many dramatic sports
events since it was opened in 1924. Displays featuring memorable videos, photos, uniforms and other treasured exhibits takevisitors on an 85-year journey through the history of high school
baseball and the Hanshin Tigers, introducing famous victories,
scenes and players from the past.
Museum guides also take visitors on stadium tours as partof the historical experience.

The Takarazuka Revue
Total Attendances at Hanshin Tigers Host Games

Performances were given by the Takarazuka Revue all over Japan,(Thousand)based on its two main venues, the Takarazuka Grand Theatre

4,000

3,155

3,144

3,000

2,977

3,007

(Hyogo Prefecture) (2,550 seats) and the Tokyo Takarazuka
Theatre (2,069 seats). The Takarazuka Revue specialises in a wide

2,500

range of western and Japanese-style stage productions includ-2,000

ing overseas musicals, as well as major musicals and shows

1,500

performed throughout the year. In 2009, the troupe gave a total

1,000

of 450 performances at both its theatres, and performed in front

500
0

of a total of 2.5 million people during the year, including troupe
(CY)

2005

Winners

2006

Second place

2007

Third place

2008

Second place

2009

tours of venues nationwide.

Fourth place*C apacity at the Hanshin Koshien Stadium declined from 2008 following a renovation
programme.

Opened in 1924, the Hanshin Koshien Stadium is steeped inhistory. The Hanshin Tigers have used the stadium as their homestadium also hosts Japan’s national high school baseball championships, held in spring and summer each year, and is known
nationwide as high school baseball’s hallowed ground.
The third phase of a renovation project, which added theMuseum of Hanshin Koshien Stadium and upgraded the exterior

The Takarazuka Revue Company is the only theatrical revue
troupe in the world in which all of the performers are women.
The male roles are portrayed so well and with so much sensitivity specifically because they are portrayed by women, fascinating and charming the female audience. This is because they areplayed by those who know a woman’s feelings best. This is whatholds women in thrall to the beautiful and graceful world of
Takarazuka.

structure, ended in March 2010. This completed the stadium’sManagement Organisation

ground for more than 75 years since they were founded. The

All-women cast open doors to a world of magicCore Businesses: Overview and Outlook

3,132

3,500

Special Featureances over 3 million in 2005-2007 and 2009.

and the Hanshin Tigers’ home ground, as well as the venue forInterview with the President

significantly enhance the Group’s brand value.

renovation, which was carried out in three stages from 2007.
Financial Section

The Museum of Hanshin Koshien Stadium
Following the completion of the Hanshin Koshien Stadium
renovation project in March 2010, the ground now houses theMuseum of Hanshin Koshien Stadium under the outfield stand,where visitors can take in the history of the Hanshin Tigers, highschool baseball and its stadium at a single location.
As the stage for spring and summer high school baseball©Takarazuka Revue
Company

Hankyu Hanshin Holdings

39Entertainment and Communications

Gorgeous costumes that bring the stage to life

Five troupes and superior members

Spectacular costumes play a large role in the splendour of the

From 1933, The Takarazuka Revue comprised four troupes, called

Takarazuka Revue. The Revue’s exclusive costume staff manages all

Hana (Flower), Tsuki (Moon), Yuki (Snow), and Hoshi (Star). On 1stof its costumes, which use

January 1998, the Sora (Cosmos) troupe was added. Each troupea variety of contrivances to

has its own stars in both the Otokoyaku (male role) and Musumeyaku

add glitter to the stars.

191.9
189.8
(female role). In addition there are
the Senka (superior members),(196.4)

191.5with any single troupe191.4
191.1
who arenot affiliatedbut instead(196.6)
work foreach troupe as needed. These are the jewels of the Takarazuka©Takarazuka Revue Company

Revue, deployed to bring perfection to performances.

Performance for the Fiscal Year ended March 2010
Both the sports and stage revue operations
posted strong results, with the Entertainment
and Communications Business the only
segment to report sales and profit growth
In sports business, the Hanshin Tigers battled right to the end of theseason for a place in the Climax Series playoff stage, cheered on by
thousands of fans. An increase in the number of host games (six morethan last year), as well as the renovation of Hanshin Koshien Stadium,
which led to introduction of “Royal Suite” seating, improved foodand beverage concessions, and an expansion in advertising space,
all supported an increase in revenues in the sports operation.
In stage revue business (the Takarazuka Revue), shows were
well attended, helping to drive revenue growth. Elizabeth performedby the Tsukigumi (Moon troupe) and performances to mark the
departure of top stars from the Tsukigumi proved particularly popular

31.0

29.9

during thereview. In (30.5)
theatre business,
32.2year under
32.3(34.1)Arts
27.0 the Umeda
Theatre put on a number of much-talked about performances,including the musicals AIDA and Musashi.

2008/3

2009/3

2010/3

2011/3

2013/3ResultResultResult we focused
Estimate on our
EstimateIn
the cable televisionbusiness,
triple-playservices, which offer discounted rates when users subscribe to a
package of multichannel cable TV, cable internet, and Cable-Plus
Phone services. Subscriber numbers grew steadily, partly on the

199.8 service*
popularity of our DVD Raku Tori easy-to-use TV recording(212.7)168.5
179.8
As a result170.2of the above,(174.1)revenues from operations in the155.0rose by ¥3,106 million
Entertainment and Communications Businesslaunched in June 2009.

or 3.1% year-on-year, to ¥103,667 million and operating income
increased by ¥907 million or 10.8%, to ¥9,292 million.
* This service allows users to easily record high-definition TV programmes using a leased HDD/
DVD set-top box.

41.7

30.9
(28.2)

33.7

34.9(37.7)

23.0

2008/3
2009/3
2010/3
2011/3
2013/3
Forecasts for Fiscal 2011 Onward (Estimates Adjusted
from2007 Medium-Term
Management
ResultResultResultEstimate
EstimatePlan)* Figures for each period are after application of “management approach” accounting.

In light of a decline in advertising demand amid persistent weakness
in the economy, we have revised down our estimates announced on

Numerical Estimates (¥ billion)
Revenues from Operations

15th May 2009 when we adjusted the estimates from our previous
Medium-Term Management Plan.
For fiscal year ending March 2011, we estimate operating

99.4

105.8

Operating Income

107.9(104.6)

105.7

114.5
(117.2)income will decline ¥0.6 billion or 5.4% year-on-year, to ¥10.5 billon, reflecting a decline in Hanshin Tigers host games, a drop in thenumber of performances at the Tokyo Takarazuka Theatre, as well asa decline in advertising demand due to continuing weakness in theeconomy.
For fiscal year ending March 2013, we project operating
income growth of ¥1.4 billion or 13.3% versus our estimates for fiscal
year ending March 2011, to ¥11.9 billion. This outlook reflects ourassumption for growth in the cable television and information technology service businesses and a recovery in advertising demand as
the economy turns up.

40 Annual Report 2010

10.8

10.7

11.1
(9.8)

10.5

2008/3

2009/3

2010/3

2011/3ResultResultResultEstimate

11.9(12.3)
2013/3
Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting). Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

79.5

71.0

As a group committed to offering inspiration and dreams, we plan to further enhance the appeal of our unique attractions: the Hanshin Tigers,
Hanshin Koshien Stadium, and Takarazuka Revue. We will also work to upgrade our media operations so that we can offer this content to fans

Our Business

Basic Strategic Outlook
through a variety of channels. Therefore, we will strengthen our revenue base, enhance the aura of the Group and build brand strength and(1) Maximise the value of the Hanshin Tigers, Koshien and Takarazuka brands• Increasing the appeal of live events (create superior attractions, and foster or acquire star talent (player), increase the appeal of live-event
venues, and use membership schemes)• Upgrading and expansion of media use (enhance the appeal of existing media, broaden the range of media channels, develop a better
media mix, and strengthen online publicity)

Interview with the President

greater value along our lines. Based on this basic policy, we will target the following issues:(2) Establish a communication and media business base
• Boost the value of media operations in areas served by our stations• Develop information technology service solutions both inside and outside the Group(3) Leverage our leisure facilities (facilities on top of Mt. Rokko, Takarazuka Garden Fields, etc.)
Special Feature• Enhance synergies between customer-oriented facilities and enhance joint promotions• Boost the appeal of the Mt. Rokko viewing area with the opening of the Rokko-Shidare observatory.

Eiji Igata

Yoji Kido

Senior Managing Director(Representative Director)
Head of EC Business
Hankyu Corporation

Managing Director
Head of EC Business
Hanshin Electric Railway

In our baseball business we continue to raise the brand image of our proprietary

one-tenth of the total stage show market in Japan, which is said to be worth

Hanshin Tigers professional baseball team so as to deliver inspiration and dreams.

around ¥160 billion. Particularly noteworthy is the popularity of the Tokyo

In the spring of 2010 we completed a three-year renovation of the Hanshin

Takarazuka Theatre, which has been booked out for every performance since

Koshien Stadium, which is famous throughout Japan, and are now able to offer

re-opening in 2001.

all spectators a comfortable and thoroughly enjoyable viewing environment.

The spread of digital technology is making its presence felt in the world

Through the recently completed renovation project, we have made great stridesof stage shows, and we are adapting our business model in response. We are

in boosting the stadium’s earning power. New features include the introduc-working to further expand our exploitation of a wide range of media so as totion of “Royal Suite” seating, and installation of the “Liner Vision” video display

deliver the Takarazuka Revue experience to a wider audience. These new formatsboard, which functions as a medium for both boosting spectator morale andinclude the Takarazuka Sky Stage communication satellite broadcasting service,

for advertising. We also completely revamped the stadium’s bars and restaurants

and the Takarazuka Channel (the Takarazuka Revue’s official mobile phone site).

to offer new, appealing menus. In addition, we have created the Museum of

We believe that this is possible precisely because of the superior quality of the

Hanshin Koshien Stadium, through which we hope to widen our fan base overshows put on by the Takarazuka Revue—the only stage shows in Japan that are

the medium term.
Regarding business operations other than baseball, in our cable television

In 2014, the Takarazuka Revue celebrates its 100th anniversary. The

business we not only provide a wide range of attractive and varied TV channels,

troupes’ productions now have a long and proud history, and have developed

but are also expanding our operations through our “triple-play service” pack-their own unique traditions. The inimitable Takarazuka style has been nurturedage (cable television, high-speed internet connection and IP phone services).

by the consistent and continuous concentration in the city of Takarazuka of all

Meanwhile, at our facilities on Mt. Rokko, which is one of the most popular

the performers, support staff, and facilities such as practice rooms. This is the solid

tourist spots in the Kansai region, this summer we opened the Rokko-Shidare

foundation that has enabled the creation of high-quality stage productions. We

observatory, a viewing platform that is expected to be a big crowd-puller. In all

aim to enhance the earning power of the Revue through further advances in the

our Entertainment and Communications businesses, we aim to raise customer

troupe’s artistic attainments, so as to make its live shows even more popular.

satisfaction and further strengthen our earnings.

Hankyu Hanshin Holdings

Financial Section

brimful of originality—which deliver inspiration and dreams to our audiences.

Management Organisation

Every year, the Takarazuka Revue attracts 2.5 million spectators annually—overCore Businesses: Overview and Outlook

Message from Heads of Entertainment and Communications Business41

Travel and International Transportation
Major Businesses

Travel Business: Hankyu Travel International Group (7 companies)
Total billings:¥381.8 billion (No. 2 in the Industry)
Overseas Travel: ¥245.2 billion (No. 3 in the Industry)Domestic Travel: ¥135.4 billion (No. 6 in the Industry)
		 * Total billings are based on fiscal year ended March 2010 actual results;
total of Hankyu Travel International and Hanshin Travel Service.

HANKYU HANSHIN EXPRESS (NETHERLANDS) B.V.

International Transportation Business: 	Hankyu Hanshin Express Group (25 companies)
Sales: ¥127.3 billion
	Air exports from Japan (Weight): 66,219 tons (No. 4 in the Industry)	Air imports to Japan (Number of customs clearances): 218,473 (No. 4 in the Industry)
		 * Sales are actual figures for fiscal year ended March 2010;
total of Hankyu Hanshin Express Group.

Basic Information and Business Environment
TravelAiming to achieve the highest customer
approval ratings in the industry

experienced travellers; and Hanshin Travel Friend Tour, a line of
package tours.
Despite a challenging operating environment in fiscal year

The Hankyu Hanshin Holdings Group’s travel business is especiallyended March 2010 owing to persistent weakness in the economy

strong in overseas operations, placing third in the sector in terms

and the impact of the H1N1 flu outbreak, active marketing effortsof overseas billings in fiscal 2010. The Group has also risen to sixth

supported share market gains for the travel business both in Japanposition in the domestic travel segment, and is now ranked secondand overseas (please see the graph below).
Looking ahead, we plan to boost the added value and quality

in the travel industry based on overall billings.
Since the 1990s, Hankyu Travel International has focused onof our travel products, and also broaden our lineup, to satisfy increas-using newspapers and other media (mail-order and online sales) toingly diverse demands, aiming ultimately to achieve the highest

market its travel packages, which are organised under five brands:

customer approval ratings in the sector through a constant focus

Trapics, the company’s mainstay brand; Crystal Heart, offering a highon security, safety and providing inspiration and dreams. Based onlevel of support and comfort to repeat customers; Royal Collection,

this approach, the Group will work as one to win the support of eventhe ultimate in travel quality; e-very, offering flexible packages tomore customers.

Total Travel Billings (Fiscal 2010)

Overseas Travel Billings (Fiscal 2010)

Travel Business Market Share

Rank

Company name¥ billion

Rank

Company name

14

1

JTB Group (14 companies)

1,078.2

1

JTB Group (14 companies)

338.3

2

Hankyu Travel International+
Hanshin Travel Service

381.8

2

HIS

262.8

3

Kinki Nippon Tourist

380.3

3

Hankyu Travel International+
Hanshin Travel Service

245.2

8

4

Nippon Travel Agency

347.4

4

JTB World Vacations

191.9

6

5

HIS

280.0

5

Kinki Nippon Tourist

122.6

4

Nippon Travel Agency

102.7

JALPAK

67.1

6

JTB Traveland

223.9

6

7

ANA Sales

204.4

7

¥ billion

8

JTB World Vacations

191.9

8

Nippon Express

58.9

9

Club Tourism International

133.8

9

JTB Traveland

56.0

10

JAL Tours

122.7

10

Club Tourism International

45.3

(%)

12

Total travel market share
Overseas travel market share
Domestic travel market share

102(FY) 2007

2008

2009

2010

* Source: Hankyu Hanshin Holdings, based on Japan Tourism Agency Bulletin (online):
Business Volume for Major Travel Agents* Source: Hankyu Hanshin Holdings, based on Japan Tourism Agency Bulletin (online):
Business Volume for Major Travel Agents (April 2009 to March 2010)(%)

942 Annual Report 20108

Market share of air cargo handling from Japan (Weight)
Market share of air cargo handling to Japan (Number of customs clearances)(%)

An advanced logistics provider using IT
to lead the global market

Total travel market share

The14 business Overseas
environment
insharefiscal year ended March 2010
travel market
Domestic travel market shareremained
12tough owing to the prolonged economic downturn since
the financial crisis of autumn 2008. However, active marketing activi-

Our Business

International Transportation

10

ties are boosting the international transportation business’ share inwhich are strong players in the global distribution sector, the Hankyu

both the 8freight import and export markets (please see the graphHanshin Group’s international transportation business has led rivals
in marine transportation and logistics to create a framework that

below). 6
With the global distribution market continuing to expand, we

optimises our customers’ supply chain management. The efficientplan to open new sites in growth markets and increase the Group’s

4combination of multiple transportation modes worldwide forms

2
brand value
as a powerfulcapable of support(FY)overseas
2007
2008 company
2009
2010

an infrastructure that allows us to respond to the complex logistics

ing customers’ logistics strategies with high-quality services andneeds of our customers as an advanced logistics provider with ansystems.

Interview with the President

Even compared with other Japanese freight forwarding companies,

advanced distribution management system.

Overseas Network (22 Companies, 88 Locations)International Transportation Business Market Share(%)

Market share of air cargo handling from Japan (Weight)
Market share of air cargo handling to Japan (Number of customs clearances)

9

AMSTERDAM
DUSSELDORFLONDON
PARIS

Special Feature

ROTTERDAM

MILAN

PRAHA
VIENNAMOSCOW

FRANKFURTWROCLAWBRUSSELSGUANGZHOU
DELHI
DUBAI

SEOUL

BANGKOK

BUSAN

CHENNAIPENANGPORT KLANGKUALA LUMPUR

LOS ANGELESSHANGHAITAIPEIHONG KONG
MANILACEBU

HANOI

KAOHSIUNGLEAM CHABANGCHIANG MAI

BUTTER WORTHDETROIT

SEATTLEBUCHEON
INCHEON

BEIJINGSAN FRANCISCO

CHICAGO
NASHVILLE

SAN DIEGOTORONTODALLASATLANTA

McALLEN
HOUSTON

7

HO CHI MINH

6SINGAPORE
JAKARTA

Number of locations: 58 in Japan, 88 overseas
Number of employees: 889 in Japan, 1,817 overseas

5(FY) 2007

2008

2009

2010

* Source: Hankyu Hanshin Holdings estimates, based on data from the Japan
Aircargo Forwarders Association and company websites

Focus: Hankyu Hanshin’s expanding global reach
In May 2009, the Chinese government relaxed its regulations on
foreign travel agencies operating in China. In April 2010, taking

Our Units in China(International Transportation Business)

Core Businesses: Overview and Outlook

JOHOR BAHRUPASIR PANJANG

MALACCAPASIR GUDANG

Subsidiary
BranchRepresentative Office

8

BOSTONNEW YORKCINCINNATI

advantage of this development, Hankyu Hanshin became the firstnew office has been opened in Shanghai as a subsidiary of Hankyu
International China Co., Ltd. (Beijing). We have positioned China as
our second key overseas market after Europe and we plan to enhance
travel quality and security management systems going forward.

Beijing

Tianjin

The international transportation business has actively

In China, the company has now largely completed its networkin coastal areas centred on the major cities, and it next plans tostrengthen its presence in inland areas. With India expected toplay an increasingly important role in the world’s economy, the

Wuhan

Kansai

NaritaNagoyaFukuokaShanghai

Wuxi

Hangzhou Ningbo

DongguanFinancial Section

and in Nanjing (local Chinese subsidiary) the following month.

YantaiQingdaoNanjing Suzhou

been expanding its reach, primarily into growth markets. It
opened offices in Mumbai (local Indian subsidiary) in July 2010

TangshanDalianManagement Organisation

foreign travel company to open a branch office in the country. The

FuzhouXiamenGuangzhou
Shenzhen
Hongkong

Headquarters
Branch officeinternational transportation business will open more sites in the
country and actively implement other steps in this promisinglogistics market that are in step with the dynamic developmentsin the global economy.
Hankyu Hanshin Holdings

43

Travel and International Transportation

Performance for the Fiscal Year ended March 2010
The travel business was hit by a flood of cancellations, mainly for over-in the global economy from autumn 2008. While there were signs ofseas trips, owing to the H1N1 flu outbreak. The business subsequently

a recovery, mainly in Asia, cargo shipments originating in Europe andsaw greater success in attracting customers by actively launching new

the US remained weak and business overall was challenging.

strategic products and rolling out other sales initiatives. Nevertheless,these efforts failed to fully offset the impact of H1N1 flu.
In the international transportation business, there was an easingin the sharp contraction in demand triggered by the rapid deterioration

As a result of the above, revenues from operations in the Traveland International Transportation Business declined ¥2,951 million or
4.5% year-on-year to, ¥62,854 million and operating income dropped¥1,175 million or 81.0%, to ¥276 million.

Forecasts for Fiscal 2011 Onward (Estimates Adjusted from 2007 Medium-Term Management Plan)* Figures for each period are after application of “management approach” accounting.

In our adjusted estimates for the travel business, we have factored

Japan and overseas, and service upgrades.

in the impact of a drop in commissions on sales of domestic airline

In the year ending March 2013, we expect to post growth intickets and sluggish sales prices owing to continued weak consumer

earnings on continuing recovery in the global economy as well as

spending.

through the above-mentioned sales campaigns coupled with realisa-

We project steady growth in profits through the fiscal year end-tion of synergies from integration of domestic and overseas units.

ing March 2013 on the back of recovery after the H1N1 flu outbreak,As a result, for the businesses combined, we estimate that

expanded overseas and strengthened domestic travel marketing, andoperating income will rise ¥1.7 billion year-on-year to ¥2.0 billion incost reductions, leading to a better revenue-expense balance.

the fiscal year ending March 2011, from a trough in the fiscal year

We also expect steady growth in earnings in the year ending
March 2013 through marketing initiatives in all categories, buoyed bya pickup in the national economy.
However, in the international transportation business, ouradjusted estimates have factored in slowdowns and persistent
weakness in the global economy that is likely to damage near-term

ended March 2010. We project further growth of ¥1.8 billion verses ourestimates for the fiscal year ending March 2011, to ¥3.8 billion.

Numerical Estimates (¥ billion)
Revenues from Operations

79.5
65.8

profitability.

Operating Income

62.9(66.4)

67.1

71.0(75.0)We expect a better balance of revenue and expenses in the year
ending March 2011, on the back of moderate recovery in demand as
the global economy recovers. Other factors include a strengtheningof fundamentals through expansion of bases in promising overseas
markets and a focus on next-generation growth sectors, as well as
creation of economies of scale through integration of businesses in

3.1

1.5

0.3
(1.9)

2.0

3.8
(5.2)

2008/3

2009/3

2010/3

2011/3

2013/3ResultBasic Strategic Outlook
TravelResultResultEstimate

Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting). Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

Under a basic strategy calling for “delivering inspiration and dreams” through the development of feature-rich products, we are aiming to shift
away from competition on price to focus more on offering customers added value. The objective is to win over the genuine support of customers,
secure stable earnings, and achieve improvement in the following areas.

(1) Raise customer satisfaction levels• Consistent quality management; comprehensive risk management(2) Stronger sales capacity• Stronger lineup of pre-planned package tours ; expanded sales channels; stronger corporate client sales(3) Foundation for consistent profits• Stronger, more efficient purchasing department; improved process efficiencies in back office/administrative departments

44 Annual Report 2010

We are pursuing a basic strategy that calls for “delivering reliable services and well-being” through an advanced logistics systems network.
Expanding our global network and delivering higher quality services in this area will lead to stability and growth, driven by improvements in thefollowing areas.

Our Business

International Transportation

Interview with the President(1) Strengthen our earnings base and marketing capabilities• Target opportunities in next-generation growth industries and global business• Expand involvement in the marine cargo/logistics business• Reinforce presence in Asian import market in North America and distribution market within Asia

(2) Expand network in promising markets(3) Pursue low-cost operations• Boost efficiency of consolidated cargo operations, integrate workflow processes, and renovate computer systems

TravelSpecial Feature

Message from Heads of Travel and International Transportation Business
International Transportation

Seisaku Okafuji

President
Hankyu Travel International

President
Hankyu Hanshin Express

Hankyu Hanshin Holdings

Financial Section

Hankyu Hanshin Express was formed as a new international logistics
company on 1st October 2009 through the merger of Hankyu
Express International and Hanshin Air Cargo. With the integration ofoverseas subsidiaries now complete, we aim to combine the experience and expertise of operations in both Japan and overseas tobecome a comprehensive logistics company that is one step aheadof the competition.
Since moving into the international air cargo business asJapan’s first IATA cargo agent in 1948, the company has provided thewhole range of distribution services—from marine freight transportand customs clearance through logistics and distribution consulting
services. Leveraging our 50-year track record and expertise, the services we offer that help customers optimise their logistic operations
have won a high level of trust in the market.
To support our future growth, we will focus on enhancing ourlogistics network spanning five regions worldwide—Japan/Korea,
the Americas, Europe, rest of Asia, and ASEAN—and on strengthening training programs to cultivate the professional human resources
we need. By tapping the strengths of the Group and providing
high-quality services, we will work to boost the value of the Hankyu
Hanshin brand amid ongoing expansion in the global logistics
market.

Management Organisation

Hankyu Travel International was originally established as an airline
agency business in 1948, when it signed Japan’s first agency contract
with Pan American World Airways of the US. This year, 62 years on,
Hankyu Travel International took over the Friend Tour business from
Hanshin Travel Service Co., Ltd. and is currently working to expand its
travel business as a newly regenerated company.
Since the early 1990s, we have focused on using newspapers
and other media to market our travel packages, sold under themainstay Trapics brand. Our basic strategy is to shift away from competing on price to offering more value to consumers. Guided by ourcustomer-first approach, we work on a daily basis to offer value suchas quality and security from the perspective of the customer. Even incustomised group package tours, we have won praise from customers for our constant efforts to turn their demands into a reality.
Going forward, we will continue to boost the added value
and quality of our travel products and also broaden our lineup tosatisfy increasingly diverse demands in the travel market. By further
developing our already strong presence in multi-channel marketing,customised group tours and other areas, and by enhancing ouronline sales, the whole business will work as one to help as many
people as possible experience the fun of travel.

Core Businesses: Overview and Outlook

Ichiro Namai

45

Hotels
Major Businesses

Principal directly operated hotels:
Hotel Hankyu International [Number of rooms: 168; total capacity: 316]
Hotel new Hankyu Osaka [Number of rooms: 922; total capacity: 1,304]
Dai-ichi Hotel Tokyo [Number of rooms: 277; total capacity: 554]
The Ritz-Carlton, Osaka* [Number of rooms: 292; total capacity: 584]
* The Ritz-Carlton, Osaka is operated by the Ritz-Carlton hotel chain under the management of Hanshin Hotel
Systems.

REMM guest room

Basic Information and Business Environment
Conditions in the hotel market

October 2009, is aiming to attract 10 million overseas (inbound) visitors to Japan by 2010 under its Tourism Nation Promotion Basic Plan.

According to estimates by the Japan Productivity Center* , Japan’s

However, according to the Japan National Tourism Organization

hotel market continued to expand from 2003 through to 2007, when

(JNTO), overseas visitors in 2009 declined by a sharp 18.7% year-on-

it was worth ¥1,093 billion. However, conditions in Japan, together

year, to 6.79 million, with visitors from Asia registering a particularly

with the global hotel market, slowed rapidly amid the dramatic

large drop of 21.8% (including declines of 33.4% for South Korea anddeterioration in the global economy triggered by the collapse of

10,000for Taiwan). Our hotels in the Kansai region had seen success
26.3%

Lehman Brothers in autumn 2008. The value of the domestic market

in attracting
visitors from Asia, so were hit hard by the drop2007
in Asian
8,000

1contracted to ¥1,038 billion. Based on statistics compiled by theJapan Tourism Agency*2, hotel room demand slumped in 2009 in
both the domestic tourist and business travel categories.
In addition, the Japan Tourism Agency, which was set up in

2006
2008
2009

visitors*3.
6,000*1 White Paper on Leisure, fiscal 2010 edition, published by the Japan Productivity Center
4,000Accommodation Statistics, Japan Tourism Agency*2 Travel*3 Statistics of foreign tourists visiting Japan, Japan National Tourism Organization (JNTO)

2,000
0

Asia
Europe North America
NumbersTotalof Overseas
Visitors
to Japan (Main AsianOtherCountries)

Numbers of Overseas Visitors to Japan(Thousand)(Thousand)

3,000

10,000

2006
2007
2008
2009

8,000
6,000

2006
2007
2008
2009

2,500
2,000
1,500

4,000

1,000

2,000
0

(Thousand)

500
Total

Asia

EuropeNorth America

Other* S ource: Hankyu Hanshin Holdings Group, based on Statistics of foreign tourists visiting Japan,
Japan National Tourism Organization (JNTO)(Thousand)0South Korea

TaiwanChina

Hong Kong* S ource: Hankyu Hanshin Holdings Group, based on Statistics of foreign tourists visiting Japan,
Japan National Tourism Organization (JNTO)

3,000

2006

2007
2,500
Efforts
to attract inbound visitors to our hotels

2,000

2008
2009

In 1,500
July 2009, the JNTO relaxed visa requirements for private visitors

Hankyu-Hanshin-Daiichi Hotel Group’s information provision for the
Asian market to attract even more hotel reservations from Asian
visitors.

from
China and is currently taking other steps to encourage more
1,000
peoplefrom China to visit Japan. In response to these moves, we
500

created a Chinese language version of the Hankyu Hanshin Hotels
0South Korea
China
Kong
website, began
acceptingTaiwan
payments with
Chinese Hongcreditcard

China UnionPay at our hotels REMM Hibiya and REMM Akihabara,
and worked to tap demand among Chinese visitors for shopping
trips to Ginza and Akihabara. Looking ahead, we plan to launch a
Korean-language website in December 2010 and boost the entire

46 Annual Report 2010

This website for the Hotels
group is translated into
simplified Chinese.

Our new hotel brand REMM (a format featuring speciallybuild a stronger business base using high-margin, recession-

designed guest rooms ensuring “a good night’s sleep,” including

proof formats (focused on lodging services), we plan to open

custom-made beds) has proved popular with many customers

new REMM hotels in Kagoshima in October 2011 and nearShin-Osaka Station in autumn 2012.

REMM Akihabara in April 2008, with both hotels performing

Occupancy Rates at Major Hotels

well amid stiff competition in a weak economy. In its 20th May
2010 edition, the weekly magazine Shukan Bunshun publisheda list ranking the Tokyo hotels people would most likely to stayat during a business trip. Both our REMM hotels did well, with
REMM Hibiya coming top and REMM Akihabara placing eighth.
In order to further raise the visibility of the REMM brand,which is at the centre of efforts to develop our hotel chain, andHotel new Hankyu Osaka
Hotel Hankyu International
Dai-ichi Hotel Tokyo
Senri Hankyu Hotel
The Hotel Hanshin
Dai-ichi Hotel Tokyo Seafort
REMM Hibiya
REMM Akihabara

2008/3
92.7
87.2
82.9
89.2
87.2
85.8
72.7
—

(%)

2009/3
89.3
81.4
79.5
86.4
87.4
84.8
80.3
75.5

2010/3
87.4
70.8
79.6
85.2
84.7
83.5
82.5
81.9

Hotels Business hit by economic slowdownand H1N1 flu outbreakto the weak economy, Hankyu Hanshin Hotels established an online
business promotion division, in October 2009. This division supports
our online strategy by enhancing the functionality of our hotel reservation portals and adding English- and Chinese-language sites. We
have also strengthened our membership card strategy. Specifically,
we worked to attract new customers with a promotional campaign
for our subscription-based club card and enhanced links with otherpoints into hotel products and services such as overnight stays andrestaurant vouchers. Also, we further enhanced business operations
by overhauling work processes. Despite these efforts, our hotels, particularly in the Kansai area, continued to face challenging operating
conditions which were exacerbated by the H1N1 flu outbreak.
As a result of the above, revenues from operations in the Hotels
Business declined ¥5,480 million or 8.2% year-on-year, to ¥60,977 million. We posted an operating loss of ¥1,705 million, compared withincome of ¥341 million in the previous year.

Core Businesses: Overview and Outlook

Amid weak demand from individuals and business travellers owing

cards issued by the Group. Our customers can now convert credit card

Special Feature

Performance for the Fiscal Year ended March 2010

Interview with the President

since the opening of REMM Hibiya in November 2007 and

Our Business

Focus: New REMM hotel brand gains ground among customers and boosts brand visibility

Forecasts for Fiscal 2011 Onward (Estimates Adjusted from 2007 Medium-Term Management Plan)

overhaul of work processes.
* We repurchased the land and buildings of the Dai-ichi Hotel Tokyo following the end of a realestate securitisation contract.

Numerical Estimates (¥ billion)
Revenues from Operations

Operating Income

72.9(69.5)
69.2

69.1

66.4
61.0
(66.3)
1.6

0.5

2008/3

2009/3ResultResult-1.7(0.0)
2010/3Result0.2
2011/3
Estimate

2.3(2.5)
2013/3Financial Section

Factoring in a decline in room rates and lower orders for banquets
and wedding receptions, we have revised down our estimatesannounced on 15th May 2009 when we adjusted the estimates fromour previous Medium-Term Management Plan.
For fiscal year ending March 2011, we expect to return to profit,
posting operating income of ¥0.2 billion, a ¥1.9 billion improvement,
reflecting a decline in rental costs following the repurchase of theDai-ichi Hotel Tokyo’s land and buildings*, a recovery at hotels
particularly in the Kansai region after the H1N1 flu outbreak in theprevious fiscal year, and benefits from upgrades to existing hotels.
For fiscal year ending March 2013, meanwhile, we project
operating income will rise ¥2.1 billion versus our estimates for fiscal
year ending March 2011, to ¥2.3 billion, as we expect revenues torecover (feeding through to profits) on the back of an upturn in theeconomy, and cost reductions from efficiency gains driven by an

Management Organisation* Figures for each period are after application of “management approach” accounting.

Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting) Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

Hankyu Hanshin Holdings47

Hotels

Basic Strategic Outlook
We are undertaking the following priority policies to consolidate our management base centred on Hankyu Hanshin Hotels, enabling us todevelop our fundamental strengths as a hotel chain operator.

(1) Create infrastructure for hotel chain operation• Strengthen platforms for supporting hotel chain marketing and management• Establish a framework for developing the new REMM hotel format(2) Strengthen the earnings structure through business reform• Boost productivity by rebuilding work processes• Maintain and enhance the competitiveness of our hotels based on an appropriate level of investment(3) Strengthen the earnings base by overhauling the business portfolio• Develop hotels using franchise or management contracts, based on operational capabilities and brand strength

Message from Head of Hotels Business
Tomokazu Yamazawa
President
Hankyu Hanshin Hotels

Our new REMM-brand hotels, with the theme of offering “a goodnight’s sleep,” have been well-received, scoring a high ranking inhotel surveys conducted by weekly magazines. We currently operate
two of these hotels, at Hibiya and Akihabara in Tokyo. The third hotelin this chain is scheduled to open in the city of Kagoshima in October
2011. The hotel is located at the centre of the Tenmonkan districtof Kagoshima, the largest shopping and entertainment district insouthern Kyushu. The opening is set to take advantage of the start ofoperations on the full length of the Kyushu Shinkansen (linking with
Kagoshima and Osaka) in March 2011, which is projected to greatly
stimulate business activity in the region. We expect the new hotel toattract both tourists and businesspeople. We have also decided toopen our fourth REMM brand hotel in the autumn of 2012 within the
Shin-Osaka Hankyu Building, which is being developed by Hankyu
Corporation in an area adjacent to JR Shin-Osaka Station, with thegoal of further strengthening the chain’s brand recognition. We

48 Annual Report 2010

intend to broaden our earnings base in the hotel business throughan aggressive strategy of opening new REMM-brand hotels at promising locations after carefully assessing the business risks involved.
At the Hotel new Hankyu Osaka, in May 2010 we commenced
a three-year project for the renovation of the entire hotel to capitaliseon the redevelopment of the Umeda area, including Osaka Station
North District Phase 1 Development Area Project. This aimed atmaking effective investments in our existing facilities, and is alsoa first step toward drawing up a strategy to take advantage of theChinese market, which is expected to grow still further in the coming years, thus enhancing the profitability of the Group’s business
operations. Through the steady pursuit of these measures, we aim tocontribute to the continuous growth of the Hankyu-Hanshin-Daiichi
Hotel Group as one of Japan’s leading hotel chain operators, the goal
which we set out in our Management Vision.

Retailing
Major Businesses
Our Business
Interview with the President

Retail: Hankyu Retails Corporation
Bookstore chain Book 1st.,
Convenience store chain asnas,
Station kiosk chain Lagare shop,
Cosmetics and accessories chain COLOR FiELD,
Furniture and daily accessories chain DOUBLEDAY,
High-end supermarket chain Seijo Ishii*, etc.
* Seijo Ishii is operated under a franchise agreement with Seijo Ishii Co., Ltd.

COLOR FiELD

Basic Information and Business Environment
Retailing formats primarily located inside andnear stations

magazines, and train use has declined amid a worsening employ-

The Group’s Retailing Business does not include a department store

in-station shops at other railway operators is on the rise, forcing our(setting us apart from other private railway operators) and is mainly

partner companies to be more rigorous in site evaluation.

ment situation and demographic change, with rising numbers of

In response, we are working to boost the competitiveness andand “Ekichika” format). Outlets and operators include station kiosks

operating efficiency of our formats, while at the same time enhanc-such as Lagare shop, the convenience store chain asnas, and formats

ing the overall appeal of our station retail areas based on the idea

run with partners, such as PLUM CUBE. We also run the bookstore

that our stations are a single retail facility. We are running sales cam-chain Book 1st. and the general merchandise formats COLOR FiELD

paigns tailored to customer needs. One example of this approachand DOUBLEDAY, and we are extending their operations beyond

can be seen at Hankyu Umeda Station, where we rolled out a newareas served by our stations and boosting their brand power andcake and confectionery format called PLUM CUBE from June 2009.

competitiveness.

In the PLUM CUBE corner at the station, to give exposure to a wide

* The department store business is not operated directly by the Company but by our equity affiliate H2O Retailing Corporation, which shares the Hankyu and Hanshin brands with us and works
to develop a highly specialised business.

range of businesses, operators of four shops are rotated for a limited
time. The PLUM CUBE corner is situated inside the ticket gate area,
making it easy for passengers to buy a cake while they are waiting
for their train. This together with the fact that PLUM CUBE regularlyCore Businesses: Overview and Outlook

focused on stores inside and near station buildings (the “Ekinaka”

Special Feature

senior citizens and a lower birth rate. In addition the number ofchanges the store operator to introduce the latest hit products, hasmade the format popular with customers in areas served by ourManagement Organisation

stations and beyond.

Many of the retail formats and stores run by the Group’s RetailingasnasBook 1st.

Book 1st.

PLUM CUBE

Financial Section

Enhancing the appeal of our station-based
retailing formats
Business can expect comparatively stable sales revenues, thanks totheir location within stations and their wide range of businesses.
These have been the strengths of the Group’s retailing operations.
However, our retailing operations continue to face difficult conditions. Changing lifestyle trends have eroded revenues from kiosk andconvenience store sales drivers such as cigarettes, newspapers andHankyu Hanshin Holdings

49

Retailing

Performance for the Fiscal Year ended March 2010
Active efforts to expand business throughnew store openings, but performance hurt byweak consumer spendingand Hanshin convenience store businesses from April 2009. The
stores were combined under the asnas brand. Efforts were made tointegrate systems and reduce product disposal losses by introducing
a shared point-of-sale system, to boost earnings. The Retailing

Amid a difficult operating environment due to weak consumer

Business continued to struggle despite new store openings andspending, the Retailing Business opened a number of new storesstore overhauls, combined with the impact of H1N1 flu and otherat our stations during fiscal year ended March 2010. These included

unforeseen factors.

an outlet of bookstore chain Book 1st. Noda Apla at Hanshin Noda

Also, owing to the integration of the convenience store

Station and COLOR FiELD Senri-Chuo, a cosmetics and accessories

businesses, one consolidated subsidiary that was included in thestore, at Senri-Chuo Station on the Kita-Osaka Railway. We also

Retail Business in the previous fiscal year has been reclassified underactively developed our retail formats in areas away from those served

the Urban Transportation Business. As a result of the above factors,

by our stations too, including the opening of DOUBLEDAY Fukuoka

revenues from operations declined ¥4,792 million or 7.1% year-on-

PARCO, a furniture and daily accessories store, inside the PARCO

year, to ¥62,788 million and we posted an operating loss of ¥297

department store in Fukuoka. Other developments during fiscal year

million, compared with income of ¥696 million in the previous year.

ended March 2010 included the integration of the separate Hankyu

Forecasts for Fiscal 2011 Onward (Estimates Adjusted from 2007 Medium-Term Management Plan)* Figures for each period are after application of “management approach” accounting.

Reflecting changes in the operating environment such as ongoing
weakness in the economy, we have revised down our estimates

Numerical Estimates (¥ billion)
Revenues from Operations

announced on 15th May 2009 when we adjusted the estimates fromour previous Medium-Term Management Plan.

66.3

67.5

For fiscal year ending March 2011, we estimate an operating
income of ¥0.4 billion, almost flat from the previous year, owing

Operating Income

62.9(67.0)
58.0(70.8)

to sluggish consumer spending amid continued weakness in theeconomy.

54.5

For fiscal year ending March 2013, the final year of the current
Medium-Term Management Plan, we project operating income willrise ¥0.7 billion or 175% versus our estimates for fiscal year ending

1.3

1.4

0.4
(1.3)

0.4

March 2011, to ¥1.1 billion, as we expect growth in the bookstore

2008/3

2009/3

2010/3

2011/3

chain business (Book 1st.) and general merchandise business(COLOR FiELD, DOUBLEDAY).
In our estimates for the year ending March 2011, we have factored in
the transfer of (1) the food and drink businesses operated by Creative
Hankyu Co., Ltd. to the Hotels segment, and (2) Creative Hankyu’sother businesses except landscape gardening to other segments.

50 Annual Report 2010

ResultResultResultEstimate

1.1(2.0)
2013/3
Estimate* Estimates and results for each period are after application of “management approach”
accounting (before 31st March 2010 figures are likewise adjusted for “management
approach” accounting). Figures may differ from those given in “Performance for the Fiscal
Year ended March 2010.”* Figures in brackets ( ) are previously adjusted estimates (“management approach”-adjusted
for May 2009)

The Retailing Business will contribute to increased value along Group railway lines by developing stations and locations adjacent to railway
lines through improved and enhanced business infrastructure (in terms of product merchandising capacity, human resources, IT environment,
organisation, and logistics). Concurrently, it will achieve sustainable growth by developing services with a focus on security, safety and providimplementing improvement in the following important areas.

(1) Reinforce and rebuild the operating frameworks for the bookstore chain business and general merchandise business• Further boost competitiveness by rolling out marketing initiatives and overhauling merchandise policy• Reinforce the earnings base by withdrawing from unprofitable or poorly performing stores and by rebuilding the store network(2) Increase earnings in the station-based retailing business

Interview with the President

ing inspiration and dreams, including for those who live outside the areas adjacent to our railway lines. In pursuit of this strategy, it will be

Our Business

Basic Strategic Outlook• Implement joint sales promotion activities for the whole station-based retailing marketing• Continue the scrap & build program for both stores and formats, to enable sustainable growth• Create new station retail demand and open stores more dynamicallySpecial Feature

Message from Head of Retailing Business
Managing Director
Head of Retailing Business
Hankyu Corporation

Hankyu Hanshin Holdings

Financial Section

fiscal year ended March 2010, we integrated the hitherto separate
Hankyu and Hanshin convenience store brands, took direct control
of station kiosk operations at Hankyu Railways stations and integrated our general merchandise store operations. On 1st April 2010
we restructured our restaurant and gardening goods operations.
Through this sort of selection and focus strategy, we are working to
refashion our efficient retail business portfolio to make the Retailing
Business into an operation centred on the sale of goods.
From here onward we will make further efforts to raise theearnings capability of our stores inside and just outside our railway
stations, which are the true source of our competitiveness, and will
pursue strategies to increase value along Group railway lines bydeveloping stations and locations adjacent to railway lines. At thesame time, we aim to set the stage for strong growth, through avariety of initiatives to expand our operations in the area, not servedby the Group’s railway network (Tokyo area, etc.).
Through the measures described above, we hope to takethe Retailing Business to a new level of efficiency and profitability,
thereby enhancing the Group’s brand value and helping establish
the market presence of the Hankyu Hanshin Group as a businessconglomerate fully capable of meeting the expectations of all its
stakeholders.

Management Organisation

Fifteen years have already passed since we started the asnas chainof convenience stores on the platform of Juso Station operated byHankyu Corporation. This was the first platform-type convenience
store in Japan, and since that time we have increased the numberof stores and expanded our operations into many different retail formats, including bookstores, general merchandise stores, and readycooked meals outlets. We have also expanded our area of operations
outside the Kansai region to the Tokyo area in the east and Kyushu in
the west. Our Retailing Business has now grown to encompass 320
retail outlets generating annual sales of ¥56 billion.
When we first set up the Retailing Business, our main strategy
was to open retail outlets in locations inside and just outside ourrailway stations, which had been relatively under-used up to thattime. Since then, however, particularly with respect to our bookstore
operations, we have expanded our business scale by opening newoutlets, including large stores in the Tokyo area. In the course of thisgrowth and development, we have also acquired considerable knowhow in store-opening and retail business operation, and have built
up significant capabilities in merchandising and price negotiation.
Currently, we are focusing our efforts not only on this kind of
business scale expansion, but also on steadily strengthening ouroperational base by restructuring our organisational system. In theCore Businesses: Overview and Outlook

Yoshihiro Nakagawa

51

Management Organisation

Creating Satisfaction and Making a Positive Contribution to Society
We, the Hankyu Hanshin Holdings Group, have a century ofhistory. Nurtured by the people living in the areas served by
the Hankyu and Hanshin lines, we have built strong relationships of trust with the community. We are strongly committed
to engaging in businesses that support our customers in their
daily lives. We feel pride in our role, and will continue to provide
high-quality services across a wide spectrum of fields.
In line with this business philosophy, at the time of thecreation of the Group in October 2006, we drew up a management philosophy that is summed up in our corporate creed:“Serenity and well-being, inspiration and dreams—by delivering these to our customers, we will create satisfaction and makea positive contribution to society.”
When drawing up the Group’s management philosophy, I
placed the greatest emphasis on always being sincere. Our mostinvaluable asset is the relationship of trust we have built with all
our stakeholders over the years. Many cases of corporate misconduct have been brought to light over the past few years andhave led to major scandals, but a company that loses the trustof society through dishonest actions does not pay for this onlyin terms of immediate losses: in many cases the company’s very
existence is imperilled. Learning a lesson from such cases, weconstantly exhort our executives and employees to behave withsincerity toward all our stakeholders, particularly our customers
and business partners, so as to forge new bonds of trust.
To this end, we are committed to upholding a high standard of corporate ethics with respect to such issues as legal compliance, creation of an internal control system, the provision ofa fair and pleasant working environment, and the implementation of ethical hiring practices. We also actively engage in public
and investor relations activities and other forms of disclosure ofcorporate information, so as to raise the level of transparency of
our management.
A company is also a member of the local community in theregion where it operates. If it fails to understand the needs andconcerns of the local community, or makes an insufficient contribution to the life of that community, or does not pay carefulattention to environmental issues, it will not survive or prosper.
Because the Hankyu Hanshin Holdings Group has constantly
grown in parallel with the areas served by its railway lines, wefeel very strongly that we have a duty to repay the people wholive in these areas through our business operations and social
contribution activities. To ensure that the Group will continue
to exist and prosper over the next century as a member of thelocal community, we intend to promote the creation of towns
and cities in all the areas where we operate—principally inthe areas served by our railway
lines—in which people will truly
want to live. In this way, we will
form strong ties of trust with our
stakeholders.

August 2010
Kazuo Sumi
President and Representative Director

Corporate Governance
Our Corporate Governance System
Hankyu Hanshin Holdings, Inc. is a pure holding company that is responsible for the overall management of the Group, and its governance system
is based on a system of appointed corporate auditors. As a pure holding
company, the Company possesses the authority to approve management
policies, matters relating to management strategy, or business plans drawn
up for the Company and other Group companies. In addition, the Company
receives timely reports from the operating companies in the Group on
investment plans and projects. In these ways, the Company monitors andsupervises the activities of the managements of all Group companies, andworks to further enhance the Group’s governance system.
Our Board of Directors, which includes external directors, receives
reports with respect to the above matters, and approves management
decisions. The Group Management Committee, whose members include
representatives with responsibility for core business operations at eachGroup company, has been set up to make preliminary reviews and

52 Annual Report 2010

decisions regarding material matters of business execution prior to sending
them to the Board of Directors, which gives them due consideration. With
Corporate Auditors attending these meetings, we take care to provide afavourable environment for auditing. In addition, a Core Business Strategy
Council has been set up within each core business, allowing discussions
between executives of the Company and of each core business regarding the state of progress of business plans. In this way, as a pure holding
company, the Company supervises the execution of business matters by
all the operating companies in the Group.
As Hankyu Hanshin Holdings is a pure holding company, the actual
execution of business is carried out by the operating companies under
the Company’s umbrella. The Company is principally responsible forsupervision and oversight of the activities of Group companies. In this way,
the Group’s business execution and supervisory functions are separated,
thereby creating an effective system of corporate governance.

Corporate Governance System

Appointment/
Dismissal of Auditors

Board of Directors

Call/Report on
execution situation

Part-time: 9(including 2 External
Directors)

Audit

Appointment/
Dismissal/Supervision

President

Board of Corporate Auditors
Standing Corporate
Auditors: 2
ReportReportExternal Corporate
Auditors: 3

ReportAccounting Auditors(CPAs)

Cooperation

Cooperation Assistants to Auditors

Group Auditing Department

Call

Group Management
Committee
Participate

Participate(as observer)

Interview with the President

Full-time: 5

Appointment/
Dismissal

ReportOur Business

General Meeting of Shareholders
Appointment/
Dismissal of Directors

AuditGroup Companies
Directors (representative of each core business)

Special Feature

Board of Directors and Board of Corporate Auditors

Hankyu Hanshin Holdings

Financial Section(3) Board of Corporate Auditors
The Company employs the corporate auditor system to ensure adequate
management oversight. We have five Corporate Auditors, who monitor
the business operations and financial position of the Company and its
subsidiaries, and audit the performance of the duties by the directors.
Three of the corporate auditors are the external auditors Takaharu Dohi,
Haruo Sakaguchi, and Junzo Ishii, who have been appointed in consideration of their high-level expertise in business administration and extensive
knowledge of compliance issues. The appointment of external auditors
ensures more objective oversight of the Group’s management.
The Board of Corporate Auditors meets once a month, in principle,
to discuss and pass resolutions on important matters.
Specialist staff members are appointed to assist the Corporate
Auditors in the performance of their duties. To ensure the independenceof these staff members, prior discussions are held with the corporate
auditors with respect to personnel changes, evaluations, and so on.
The President of the Company holds regular meetings with the
Corporate Auditors to promote dialogue and a common understanding
through discussions of issues facing the Company, risks to which theCompany is exposed, measures to develop a favourable auditing environment, and major issues encountered by the Corporate Auditors in theperformance of their audits. The management of the Company also holddiscussions with the Corporate Auditors prior to amending or deleting
any regulations pertaining to the functions of the Corporate Auditors,
such as matters involving corporate ethics.
As part of the auditing of the Group’s business operations, theGroup Auditing Department, composed of internal audit staff, carries out

Management Organisation(2) Directors etc.
Our Board of Directors has 14 members, with an emphasis on strengthening the flexibility of management and supervisory functions. Two ofthese directors, Noriyuki Inoue and Shosuke Mori, are external directors
who bring with them a wealth of experience in corporate management.
They contribute to the Company by invigorating deliberations of theBoard of Directors with outside viewpoints and bring greater objectivity to management judgement, thus reinforcing the Board’s oversightfunctions.
The term of office of directors was reduced to one year at thegeneral meeting of shareholders in June 2006, to clarify management
responsibilities following the introduction of anti-takeover measures(prevention of large-scale Company share purchases).

Core Businesses: Overview and Outlook(1) Board of Directors
The Board of Directors has powers of approval over management policy,
strategy and planning of the Company and the Group as a whole, andalso over medium-term and annual management planning of core businesses. It also supervises each core business under the Group governance rules requiring reporting of major investments and reorganisations
by Group companies.
In fiscal year ended March 2010, the Board dealt with management planning issues such as the amendment of the Medium-Term
Management Plan, and reviewed and gave approval for businessreorganisations, including of the international transportation business,
as well as measures to strengthen the Group’s internal system for theprevention of insider trading. The Board also reviewed the report onchanges in the systems under which a Group Company manages railway
stations, and issued reports on changes in the Group’s railway timetables,
major redevelopment projects and other investment projects, as well as
progress in the creation of an internal control system.
The Board of Directors met 10 times in the fiscal year under review,
with average attendance at 94% for Directors and 94% for Corporate
Auditors.

53

Management Organisationinternal audits, and the Corporate Auditors peruse the Department’s audit
plans and reports. The Corporate Auditors also receive from the Group
Auditing Department regular reports (and ad hoc reports when required)on internal audits at the Company and its subsidiaries, including on thestate of operation of the whistle-blowing system. At the same time, theCorporate Auditors receive regular reports on the audit situation fromthe accounting auditors (CPAs), and also act as observers at on-site auditsof the Company or its subsidiaries by the accounting auditor.
The Standing Corporate Auditors also attend the GroupManagement Committee meetings as observers, peruse documents(internal memos, etc.) relating to decision-making and other important
documents, and receive reports on any matter relating to the executionof business that they deem necessary. This system enhances the effectiveness of the auditors’ supervision of business execution.
(4) External Directors and External Corporate Auditors
The secretariats of the Company’s Board of Directors and Board of
Corporate Auditors provide assistance to the external directors andexternal corporate auditors, respectively. The secretariat to the Board of
Directors also sends materials relating to any proposals on the agenda
for discussion at a meeting of the Board to the external directors andauditors, in principle seven days prior to the date of the meeting, in orderto enhance the effectiveness of the management oversight exercised by
the external directors and auditors.

Relations with External Directors
Name

Reason for appointment, and potential conflict of interest with the Company

Noriyuki
Inoue

Representative Director for many years at Daikin Industries, Ltd. Also served as vice-chairman of Kansai Economic Federation. Appointed
for his wealth of management experience, perspective from top business circles, and ability to provide independent input. Meets criteria
for exercise of independent judgement stipulated by the stock exchanges, and there is no probability of a conflict of interest with theCompany.

(Independent
Director)

Shosuke
Mori(Independent
Director)

Representative director of Kansai Electric Power Co., Inc., a company whose operations, like those of the Hankyu Hanshin Holdings Group,
are closely bound up with the public good. Also served as vice-chairman of Kansai Economic Federation. Appointed for his wealth ofmanagement experience, perspective from top business circles, and ability to provide independent input. Meets criteria for exercise of
independent judgement stipulated by the stock exchanges, and there is no probability of a conflict of interest with the Company.

* Mr. Noriyuki Inoue attended eight out of the ten meetings of the Board of Directors held in fiscal year ended March 2010. He is able to provide the Company with useful opinions—at meetings of the Board of
Directors among other occasions—from his perspective as a business manager with extensive experience.
Mr. Shosuke Mori was appointed as an external director at the General Meeting of Shareholders held on 16th June 2010.

Relations with External Auditors
Name

Takaharu
Dohi(Independent
Auditor)

Haruo
Sakaguchi(Independent
Auditor)

Junzo
Ishii
(Independent
Auditor)Reason for appointment, and potential conflict of interest with the Company

Former prosecutor-general, currently a lawyer. Appointed to advise on more compliance-based management and for his ability toprovide independent input. Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is noprobability of a conflict of interest with the Company.
Currently a lawyer. Appointed to advise on more compliance-based management and for his ability to provide independent input.
Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is no probability of a conflict ofinterest with the Company.
Former Professor of Business Administration within the Graduate School of Kobe University, currently President of the University ofMarketing and Distribution Sciences. Appointed for his ability to express useful opinions based on his high-level specialist expertisein business administration. Meets criteria for exercise of independent judgement stipulated by the stock exchanges, and there is noprobability of a conflict of interest with the Company.

* Mr. Takaharu Dohi attended eight out of the ten meetings of the Board of Directors held in fiscal year ended March 2010 and ten out of the eleven meetings of the Board of Corporate Auditors. He is able toprovide the Company with useful opinions—at meetings of the Board of Directors and Auditors among other occasions—principally in relation to compliance matters.
Mr. Haruo Sakaguchi attended nine out of the ten meetings of the Board of Directors held in fiscal year ended March 2010 and ten out of the eleven meetings of the Board of Corporate Auditors. He is able toprovide the Company with useful opinions—at meetings of the Board of Directors and Auditors among other occasions—principally in relation to compliance matters.
Mr. Junzo Ishii was appointed as an external auditor at the General Meeting of Shareholders held on 16th June 2010.

54 Annual Report 2010

(1) Group Management Committee
The Group Management Committee, comprising full-time Directors(President, representative directors, head of Personnel and General Affairs
Dept. and head of Corporate Planning Dept.) and representatives of eachcore business, meets to discuss resolutions of the Board of Directors,
systems and rules for Group company management strategy and business planning and maintenance of the holding company system, andmajor Group management matters, such as investments beyond set
parameters and reorganisations. During the year under review, the GroupManagement Committee met 16 times.

Note: The payment of retirement benefits to directors and corporate auditors was discontinued in
April 2004 in order to realise a more transparent compensation system.

15
(3)

¥117
(¥19)

Corporate auditors(External auditors)

6
(3)

¥17
(¥6)

Total
(External directors and auditors)

21
(6)

¥134
(¥25)

*1 Recipients of compensation include one director and one corporate auditor who retired at theconclusion of the General Meeting of Shareholders held on the 17th June 2009.
*2 In addition to the above, compensation received by external directors and auditors from subsidiaries of the Company for their duties as directors and auditors, etc. amounted to ¥26 million.

Of the Company’s full-time Directors and Auditors, directors Kazuo
Sumi and Mitsuo Nozaki, and corporate auditor Hidekazu Sugisawa also
hold the same posts at the Company’s subsidiary Hankyu Corporation.
Compensation paid by Hankyu Corporation, including the three persons
already mentioned, was as shown below.
Number of recipients

Amount paid
(Millions of yen)

Directors

13

¥307

Corporate auditors(External auditors)

4
(2)

¥64
(¥17)

Total
(External directors and auditors)

17
(2)

¥371
(¥17)

Of the Company’s full-time Directors and Auditors, directors Shinya Sakai,
Masao Shin and Toru Nakashima, and corporate auditor Chikashi Suehara
also hold the same posts at the Company’s subsidiary Hanshin Electric
Railway Co., Ltd. Compensation paid by Hanshin Electric Railway, including
the four persons mentioned, was as shown below.
Number of recipients

Amount paid
(Millions of yen)

Directors(External directors)

15
(2)

¥289
(¥10)

Corporate auditors(External auditors)

5
(3)

¥69
(¥16)

Total
(External directors and auditors)

20
(5)

¥359
(¥27)

Hankyu Hanshin Holdings

Financial Section

We have adopted a system of determining compensation for directors thatprovides an incentive to contribute to enhancing the Group’s enterprisevalue and business performance. In this system, compensation comprises
two portions: a basic portion that is determined according to the post heldby the director, and a bonus-type compensation that is linked to businessperformance.
Half of the performance-linked compensation is paid into a fundemployed for the acquisition of shares in the Company.
However, the compensation paid to part-time directors, including
external directors, and to corporate auditors, comprises only the portion
determined by post held.
The total compensation paid to directors and corporate auditors is
kept within the total compensation amount approved by the Company’s
shareholders at the General Meeting of Shareholders. Compensation for
individual directors is determined by resolution of the Board of Directors,

Directors(External directors)

Management Organisation

Policies Relating to the Determination of
Method for Calculating Compensation for
Directors and Corporate Auditors

Amount paid
(Millions of yen)Core Businesses: Overview and Outlook(3) The Group Presidents’ Meeting—Initiatives to foster solidarity
within the GroupThe Group Presidents’ Meeting, held twice a year, brings together presidents of over 150 Group subsidiaries and affiliates. It is designed to fostera deeper sense of solidarity within the Group and ensure that the Groupphilosophy and management policies permeate the entire organisation.
This meeting ensures a joint sense of commitment to the Medium-Term
Management Plan, and awards are made to subsidiaries that boost earnings or individuals and groups that successfully launch initiatives or makesignificant contributions at their units.

Number of recipients

Special Feature(2) Core Business Strategy Councils
Each core business has a Core Business Strategy Council, comprising
the President, representative directors, the director in charge of the
Corporate Planning Dept. of the Company and executives of each corebusiness. The councils deliberate future business development for eachcore business and discuss business plans and progress management(performance evaluation). Each Core Business Strategy Council met threetimes in the year under review.

Compensation Paid to Directors and Corporate Auditors(Fiscal Year Ended March 2010)

Interview with the President

while compensation for individual corporate auditors is determined bydeliberation of Corporate Auditors.

Our Business

Other Deliberative Bodies

55

Management Organisation

Measures Taken to Enhance the Effectiveness of the Company’s General Meeting of Shareholders and to Facilitate the Exercise of Voting Rights
Remarks

Early forwarding of notice ofconvocation of general meeting ofshareholders

To allow shareholders sufficient time to examine the items for resolution at the shareholders’ meeting before
exercising their voting rights, we endeavour to send out the notices of convocation at the earliest possible
date. For the Regular General Meeting of Shareholders held on 16th June 2010, we sent out the notices 20
days ahead of the meeting date (27th May 2010).

Moving date of shareholders’meeting to avoid overlapping withother companies’ meetings

To enable as many shareholders as possible to attend our general meeting of shareholders, we held our 2010
general shareholders’ meeting on the 16th June, 13 days before the “busiest day” on which a large proportionof Japanese companies hold their general shareholders’ meetings.

Exercise of voting rights byelectronic means (online voting)To enable shareholders who cannot attend our general shareholders’ meetings to nevertheless exercise theirvoting rights, as well as to make voting more convenient, we accept votes made via the internet, and we also
participate in the electronic voting platform operated by ICJ Inc.

Other measures

Notices of convocation of general shareholders’ meetings and of resolutions passed at the meetings areposted on the Company’s website. We also post translations of the notices of convocation into English.

Internal Control System
Compliance

Risk Management

Recognising the importance of ensuring that the business operations of
the Company are conducted in an appropriate manner, we believe it isnecessary for us to establish an internal control system for the entire Group,and to revise the system when that is deemed advisable.
In particular, as a system to ensure compliance-focused management, we have set up a dedicated compliance office, and are working toraise awareness of compliance issues among our executives and employees by means of the measures detailed below.

At the Company, risks to which many different divisions are exposed aremanaged by the Risk Management Office, while risks involved in the business operations of individual divisions are managed by risk-management
units within the divisions themselves. In both cases, risks are identified
and analysed, and risk management systems are overhauled from time
to time. We evaluate the likelihood of materialisation of each risk and its
frequency, as well as the extent of impact in the event of materialisationand its importance. On that basis, we draw up measures to prevent thematerialisation of risk or to mitigate its impact (hereinafter referred to as“risk mitigation measures”). These measures are documented in the formof risk management manuals, and the results of risk analysis and how sucha risk is being handled when a risk arises are, reported, as appropriate, tothe Board of Directors.
We have also established a system enabling the effective transmission of information in the event of unforeseen circumstances. Under thissystem, in the event of materialisation of a risk, executives and employees
immediately take risk-mitigation measures as specified in the abovementioned documentation and other measures to prevent the further
spread of the impact. They also communicate their actions to the management. In the event of the materialisation of a serious risk, a crisis management headquarters is set up, headed by the President, to limit the spreadof damage to the minimum extent feasible.
The Company provides supervision to all companies in the Groupso that the same system is operated by them all, and has set up a systemenabling the transmission to the Company of accurate information in theevent of an unforeseen development.
It is especially vital for the companies in the Group that are engaged
in the public transportation business, such as the operation of railways, tocreate a system that places the highest priority on safety, including drawing
up emergency response regulations, a train-car operator’s handbook, a listof persons with responsibility in the event of accidents or disasters, and thecompilation of detailed measures to be taken in response, in the form of amanual. We take great care to ensure that all employees, from executives
down, are thoroughly familiar with such regulations and manuals.

(1) Our Compliance Manual and Training Programmes
The Company’s Compliance Manual and Compliance Card express theCompany’s determination not to tolerate violation of laws or social
norms or betrayal of customer trust, by any Group employee from executives down. It also aims to raise awareness by pointing out cases wherecompliance errors can easily be made.
The Company provides concentrated compliance training on
a Group-wide basis for new employees, midcareer hires and newly
appointed executives. In addition, all Group companies arrange theirown training programmes tailored to job grade and function, with theaim of further increasing compliance awareness.
(2) Corporate Ethics Consultation Desk (internal whistle-blower
procedures)
We have set up a dedicated whistleblower hotline enabling all employees to discuss or quickly bring to management’s notice suspected or
known legal violations and unethical conduct. Business partners arealso welcome to use this consultation and notification facility, and whennecessary we will use lawyers and other outside specialists to improve
its effectiveness.

56 Annual Report 2010

The Group’s public relations magazine, normally published monthly, carries a page devoted to compliance issues. To improve readability for our employees,
compliance issues are presented in an easy-to-understand way, interspersed with humour. (The characters Charlie and Jinsaku are based on actual employees in
our Legal Department.)

考える。コンプライアンス

Interview with the PresidentC

ompliance

公正な競争について
じんさく

最近「コートリ」ってニュースでよく聞きますね。

チャーリー

じんさく

ベテラン法務課長。一見まじめだが実はお茶目。某国皇太子風の風貌から愛称はチャーリー。欧州流でチェスを愛好するのかと思いきや大の将棋ファン。

ビギナー法務マン。その風貌のせいか、発言すると「おっしゃるとおり」と賛同してくれる人が多い。
モットーは「人を外見で判断してはいけない」。

チャーリー ユーはホラー番組以外も見るのか。
（見た目と違っ

じんさくと出ていましたよ。公取（公正取引委員会）
は、事て）意外だな。では、3月に「コートリ」が出した「下業者が不当・不公正な取引を行っていないかを監請取引の適正化について」を知っているかい？

視している。だから、昨年世間を騒がせた「食品失礼な。顔が怖いだけで、怖い番組は嫌いですよ。

偽装」などの「不当表示」についても監視してい厳しい経済情勢の中、そのしわ寄せが下請事業るんですよね（景表法）。でも、担当者は、会社の者に生じやすいことから、買いたたきや下請代金ためを思って、頑張って値切っているんじゃないの減額・支払遅延などがないよう、「コートリ」がかなぁ…。何か気の毒ですよね。
チャーリー

チャーリー

飛車をかわいがり」を知っているかな? 将棋で「飛車」は重要な駒とはいえ、「王」を取られたら負け

無言の圧力か…。ユーも公正な競争を妨げる行なんだ。それなのに「飛車」を大事にするあまり、為を規制している法律を勉強するべきだな。要「王」を取られて負けてしまう、即ち「本末転倒」

件はいろいろあるけど、要求の程度と不当に決を示唆する格言なんだ。目先の利益にこだわり、

めたものかどうかで、違法になるかどうかが決まる

コンプライアンスをないがしろにしてしまうことが、Core Businesses: Overview and Outlook

ビスしてくれますけどね。

んだ（下請法）。
じんさく

ユーは甘いな。将棋の格言で「ヘボ将棋 王よりSpecial Feature

親事業者に対して要請したんでしょ？ でも交渉はよくしますよね。ただ、ボクなんか黙っていてもサー

大きな損害につながるという教訓かな。

怖い顔を利用して弱い立場の相手に、一方的にじんさく

不当な要求をすることはダメっていいたいんでしょ？

チャーリー

将棋の格言の決めゼリフ、冴えていますね。
カッコイイだろ? まぁ、今回のテーマはユーの顔にチャーリー おっしゃるとおり! では「コートリ」って何だい？

もマッチしていて、読者にも説得力があったと思

じんさく 「コンプライアンスの手引き」の7〜8頁に、
ちゃん

うな。

Hankyu Hanshin Holdings

Financial Section

and remains in effect for three years.
These measures to prevent a takeover are in conformity with the“Three Principles” set out by METI and the Ministry of Justice in their“Principles relating to measures for the prevention of takeovers in order
to secure the enterprise value of a company and the common interests of
its shareholders.” The Three Principles are: “securing and/or further enhancing the enterprise value of a company and the common interests of its
shareholders,” “requirement to give prior notice and respect the wishes ofshareholders,” and ”the measures must be necessary and appropriate.”
For further details on the Company’s basic policies regarding thegovernance of joint-stock companies, including the takeover prevention
measures described above, please see the news release (in Japanese)
dated 17th June 2009 on our website at:
http://holdings.hankyu-hanshin.co.jp/ir/news/2009.html(Japanese version only)

Management Organisation

Measures to Prevent Takeovers
To secure and further enhance the enterprise value of the Company, andtherefore the common interests of its shareholders, we believe that it isimperative to conduct business operations from a medium- to long-term
perspective, to build and maintain a relationship of trust with local government institutions and residents in the areas served by our railway lines, andto place the highest management priority on strengthening cohesion andcollaboration within the Group, so as to enhance the Group’s comprehensive power.
For this reason, we have introduced a system to prevent a takeoverof the Company whereby, in the event of the appearance of a potential
buyer of the Company that wishes to raise their stake above 20% or moreof the Company’s outstanding shares, new share subscription rights are
granted to shareholders who are, de facto, shareholders other than thepotential buyer to confirm a potential buyer’s intention. This system wasapproved at the General Meeting of Shareholders held on 17th June 2009,

Our Business

Focus: Charlie & Jinsaku—A compliance-related column in the Group’s public relations magazine

57

Directors and Corporate Auditors (As of 16th June 2010)
Directors

Kazuo Sumi

Shinya Sakai

President, Hankyu Corporation

President, Hanshin Electric
Railway Co., Ltd.

* Mr. Noriyuki Inoue and Mr. Shosuke Mori satisfy the qualifications of external directors asprovided in Article 2, Paragraph 15 of the Corporate Law.
The Company has submitted notifications to the stock exchanges on which its sharesare listed, naming Mr. Noriyuki Inoue and Mr. Shosuke Mori as external (independent)
directors.

Noriyuki Inoue

Shosuke Mori

Isao Matsuoka

Shunichi Sugioka

Chairman and CEO,
Daikin Industries, Ltd.

President, the Kansai ElectricPower Co., Inc.

Honorary Chairman,
Toho Co., Ltd.

Chairman and CEO,H2O Retailing Corporation

President andRepresentative Director

Director (External*)

Representative Director

Director (External*)

Director (Part-time)

Director (Part-time)

Chairman, Hankyu Hanshin
Department Stores, Inc.

Hiroshi Ojima

Tomokazu Yamazawa

Tadashi Sano

Nobuo Minami

Chairman, Hankyu Hanshin
Express Holdings Corporation

President, Hankyu Hanshin
Hotels Co., Ltd.

President,
Bay Communications Inc.

President, Hanshin Tigers
Baseball Club, Ltd.

Koichi Kobayashi

Mitsuo Nozaki

Masao Shin

Toru Nakashima

Chairman,Takarazuka Revue Company

Head of Corporate Planning
Dept. and Personnel andGeneral Affairs Dept.

Head of Personnel and General
Affairs Dept.

Head of Corporate Planning
Dept.

Director (Part-time)

Director (Part-time)

58 Annual Report 2010

Director (Part-time)

Director

Director (Part-time)

Director

Director (Part-time)

Director

Hidekazu Sugisawa

Chikashi Suehara

Standing Corporate Auditor,
Hankyu Corporation

Standing Corporate Auditor,
Hanshin Electric Railway Co., Ltd.

Takaharu Dohi

Haruo Sakaguchi

Junzo Ishii

Lawyer and Corporate Auditor,
Hankyu Corporation (External)

Lawyer and Corporate Auditor,
Hankyu Corporation (External)

President of the University of Marketingand Distribution Sciences, andCorporate Auditor of Hanshin Electric
Railway Co., Ltd. (External)

Standing Corporate
AuditorCorporate Auditor(External*)* Mr. Takaharu Dohi, Mr. Haruo Sakaguchi, and Mr. Junzo Ishii satisfy the qualifications of external corporate auditors as provided in Article 2, Paragraph 16 of the
Corporate Law.
The Company has submitted notifications to the stock exchanges on which its
shares are listed, naming Mr. Takaharu Dohi, Mr. Haruo Sakaguchi, and Mr. Junzo Ishii
as external (independent) auditors.

Interview with the President

Corporate Auditor(External*)

Standing Corporate
AuditorOur BusinessCorporate
Auditors

Corporate Auditor(External*)

Special Feature
Financial Section

other issues that surface in the course of our auditing work.
The Hankyu Hanshin Holdings Group has introduced a system bywhich employees of the internal audit department etc. of the Company
or one of the core Group companies may be appointed as an auditor at aplural number of Group companies, where they carry out auditing activities as “quasi-full-time corporate auditors.” We, the standing corporate
auditors, maintain liaison with the quasi-full-time corporate auditors
at Group companies on an individual basis, and hold meetings of an“information exchange committee” consisting of standing corporate
auditors of the Company and its subsidiaries, quasi-full-time corporate
auditors, assistants to corporate auditors, and the staff of Group companies’ internal audit departments. By so doing, we further enhance theeffectiveness of the auditing activities of the Group’s corporate auditors.
It is my hope that by monitoring the directors’ performance of
their duties in this way, we will help ensure the continued growth of theCompany and the Group on a basis of financial soundness, maintain the
reputation for trustworthiness enjoyed by the Company and the Groupamong society at large, and establish an even higher-quality system ofcorporate governance.

Management Organisation

The Board of Corporate Auditors of Hankyu Hanshin Holdings comprises
three independent, external corporate auditors and two standing corporate auditors who were employees of Group companies. In addition toattending regular meetings of the Board of Corporate Auditors, held in
principle once each month, at which the auditors hold discussions andmake resolutions, the corporate auditors also attend meetings four times
a year with the Company’s two representative directors to exchange
opinions. Through this and other forums, the corporate auditors work toensure clear communication with the representative directors.
The duties of the corporate auditors with respect to the Company’s
internal control system, including internal controls on financial reporting, as stipulated in the Corporate Law, are to monitor and confirm thebasic policies of this internal control system as revealed in the Board of
Directors’ resolutions and the creation and operation of the system by
the Company’s directors in line with the aforesaid resolutions. In addition, the corporate auditors also have the important duty of monitoring
and confirming the performance of duties by the Company’s directors
through collaboration with the Group’s corporate auditors, internal audit
departments and the accounting auditors, and so on.
We, the standing corporate auditors, also hold meetings of theBoard of Group Corporate Auditors, consisting of the standing corporate
auditors of the Company and the core companies in the Group, where
we exchange opinions on management issues facing the Group andCore Businesses: Overview and Outlook

Message from the Standing Corporate Auditor

Hidekazu Sugisawa
Standing Corporate Auditor

Hankyu Hanshin Holdings

59Corporate Social Responsibility—Social Contribution & Environmental Protection Activities
Continuing with our efforts over the next century as well, the Hankyu Hanshin HoldingsGroup intends to fulfil its responsibility to society through the implementation of a range of
CSR measures in order to remain an indispensable part of the community. Specifically, we will
work to ensure safety—the very foundation of our business, thoroughly implement compliance activities, upgrade risk management systems, and work across the Group to contributeto society and protect the environment, primarily in areas along our railway lines.

Social Contribution Activities
Promoting the Hankyu Hanshin Dreams and Communities of the Future project
To ensure we continue to play a responsible role in local communities over the next century, we launched theHankyu Hanshin Dreams and Communities of the Future project in April 2009. Through this initiative, we plan
to contribute to society by engaging in environmental and human capital development that will be of future
benefit.

A betterenvironment

As a business tied to a particular locality,
we are committed to sustainable community-building with environmentfriendly developments that provide
local residents with security, peace ofmind and cultural enrichment.

Humancapital

We are creating opportunities
for the healthy developmentof ambitious children, upon
whose shoulders the task ofbuilding the communities ofthe future rests.

Three Core Aspects of the Project1.

Programme for approving and fostering social contribution activities at Group companies
This programme aims to ensure that the grass roots social contribution activities carried out by Group companies in a wide range offields follow the above Group-wide plan. As of the end of August 2010, 83 projects have been approved.

Focus: Example initiative by Hankyu Hanshin Hotels–donating the Takarazuka Hotel’s famous “hard donuts”
From an article about the Hankyu Hanshin Dreams and Communities of the Future project that featured on our website in May 2010.

Giving more people the opportunity to experience the traditional flavours of the Takarazuka Hotel
The Takarazuka Hotel’s popular hard donuts are famed for their great

sale because they don’t suit the Takarazuka Hotel brand image,” heflavour, well-balanced sweetness, and fresh cinnamon fragrance.

adds. “The start of the Hankyu Hanshin Dreams and Communities

In 2009, Hankyu Hanshin Hotels, which runs the Takarazuka Hotel,of the Future project gave us the idea of donating the donuts tobegan donating the donuts to facilities near our railway lines that

local facilities caring for children with disabilities.” To date, Hankyu

care for children with disabilities. The programme, which involves

Hanshin Hotels has provided donuts to a total of 5,400 people.

the delivery of donuts several times each month to four facilities,
mainly in Nishinomiya and Ashiya cities in Hyogo Prefecture, waslaunched on the initiative of people working in the hotel.
“Hankyu Hanshin Hotels ships 300,000 donuts every month,and the manufacturing process sometime results in donuts thatare too small or irregular in shape,” says Mr. Kazuhiko Ishida of thefood division at Hankyu Hanshin Hotels. “Naturally, this doesn’t
affect the taste or quality of the donuts, but we don’t put them on

60 Annual Report 2010

Kazuhiko Ishida
Hankyu Hanshin Hotels

Positive reaction from local people
Our Business“Knowing that the people at the care facilities appreciate thedonuts makes me very happy,” says Mr. Kozo Sendai, a chef working in Hankyu Hanshin Hotels’ food division. “I usually don’t havemuch direct contact with customers, so it was great to have had

Interview with the President

this opportunity (as part of the process for creating the website
article) to see everybody in the facility enjoying the donuts,” hesays. “We display the letters of appreciation in the office and theyKozo Sendai
Hankyu Hanshin Hotels

give all the employees a lift.”

Bonds created from social contribution
As part of research for the article, we visited the Sandaya Academyin Ashiya City which cares for children with mental disabilities, andis one of the facilities that receives donut donations from Hankyu
Hanshin Hotels. On the day of the visit, we handed out donuts
heads Sandaya Academy, says “group-living means our residents
have to follow many rules, and this can sometimes be monoto-

Mr. Takano
Head of Sandaya Academy

nous for them.” He adds, “Meal times and playing are small but

Special Feature

to the roughly 40 children staying in the facility. Mr. Takano, who

important ways of adding variety to everyday life here. Nowadays,
with Hankyu Hanshin Hotels. I hope you continue to support all

the children often ask me when the donuts are coming.” “Thethe different types of facilities along your railway lines throughmonthly donations have given a bit more enjoyment to the kids atthese kinds of activities.”

the facility,” he says. Mr. Takano provided further encouragement

A spin-off from the donut donations has been Hankyu

saying, “It’s great to see new bonds created from this kind of social

Hanshin Hotels’ decision to employ two disabled people to work

contribution. This project has led to the start of a new relationshipin its food division processing factory from April 2010.

l Other Major Initiatives by Group Companies
Holding the Million Person Candle Night in Osaka City
Hanshin Electric Railway, Hankyu Corporation

Management Organisation

A betterenvironment

Core Businesses: Overview and Outlookwith easy access to all types of food, donuts are not unusual, but

In partnership with local companies, Hanshin Electric Railway and Hankyu
Corporation run a range of events in Umeda during both summer and winter,
including candle art exhibitions and seminars on the environment. With the candle night events, lighting and neon signs on surrounding buildings are turned off,
and the experience of walking through Umeda illuminated solely by candle light,
is aimed at encouraging people to think more deeply about the global environment and sustainable living in urban environments.

Financial Section

Reusing linen and donating the laundry costs we save
Hankyu Hanshin Hotels

Hankyu Hanshin Hotels is working to reduce the volume of dirty water produced
by its laundry processes by calling on guests staying in hotels longer than one
night to reuse their linen. Money saved by reducing the amount of linen washedis donated to the Lake Biwa-Yodo River Water Quality Preservation Organization,an environmental group working to protect the Yodo River system.

Hankyu Hanshin Holdings

61Corporate Social Responsibility—Social Contribution & Protection Activities

Human
capitalHankyu Railway Festival

Hankyu Corporation, other companies

Hankyu Corporation’s Shojaku plant opens its doors every spring and autumn for arailway festival. Visitors can enjoy a variety of train and bus related events, including ademonstration of a train-lifting crane and a ride on a miniature Hankyu Railway train. The
event gives children the opportunity to see how we work behind the scenes to keep our
network running safely and is designed to make public transport more familiar.

Sports clinics for children

Hankyu Travel International

Hankyu Travel International, in a tie-up with professional sports teams, holds basic skills
sports clinics led by professional sportsmen and women. By giving children the chance
to play with soccer and basketball players, the clinics aim to promote a passion for sportand encourage teamwork and fair play.

2.

Hankyu Hanshin Dreams and Communities of the Future Fund
Employees of the Group are encouraged to contribute to this fund, with the collected proceeds distributed as grants to citizens’ groups
involved with the above plan in the areas served by the Hankyu and Hanshin lines. Hankyu Hanshin Holdings matches employee donations
by an equal amount and transfers the donations to the citizens’ groups.
In fiscal 2010, the first year of the project, a selection panel awarded ¥500,000 to each of the following four groups.

A betterenvironment

NPO Food Bank Kansai(Free distribution of food donated by companies)
Osaka, Kobe, Amagasaki,
Nishinomiya, andAshiya cities, etc.

HumancapitalNPO Childs(Support for children with learning difficulties and theircaregivers)
Osaka City

3.

Team Omaehama/Koroenhama—Satohama Zukuri(Protecting and revitalising the Omaehama andKoroenhama beach environments)
Nishinomiya City

NPO Pool Volunteer(Swimming instruction given at public pools forchildren with disabilities)
Osaka, Toyonaka,
Ikeda, Suita, andTakatsuki cities, etc.

Points-based social contribution activities
This programme enables employees and former employees of the Group to support social contributions through voluntary activities
and contribution of points. The accumulated points can be translated into donations in to non-government Groups or to a project toplant seedlings on Mt. Rokko, or exchanged for Fair Trade products.

For more detailed information on the Hankyu Hanshin Dreams and Communities of the Future project, please visit the following website.

http://www.hankyu-hanshin.co.jp/yume-machi/ (Japanese version only)

62 Annual Report 2010

Environmental Protection Activities

Basic Environmental Policy
In accordance with the following policies, we are implementing and improving on an ongoing basis a range of initiatives to protect
the environment.

(1) Identifying and reducing the environmental impact of our business activities(2) A ccurately interpreting and complying with environmental laws and regulations and related societal demands(3) Working to raise employee awareness of environmental issues so that they will give due consideration to theenvironment in their activities

Focus: E co-Train wins Environment Minister’s Green Purchasing Award (6th November 2009)

December 2008 through July 2009, were awarded the Environment Minister’s
11th Green Purchasing Award, sponsored by the Green Purchasing Network(GNP). The Eco-Trains were a cross-sector partnership project designed to promote awareness of environmental issues.
Using the entire train carriage as the promotional medium, the Eco-Trains
communicated their environmental messages to numerous people during theireight months of operation. The project was planned and directed by the Citizens
Environmental Foundation (CEF) in corporation with our Group, as well as local governments, companies, and citizen groups located near ourrailway network. The award recognised the cross-sector nature of the partnership and its efforts to raise awareness of the impact of global

Core Businesses: Overview and Outlook

Hankyu Railway’s Eco-Trains, which carried environmental messages fromSpecial Feature

Based on our Group Basic Environmental Philosophy and Basic Environmental Policy, each Group company is promoting environmental protection activities in line with its own philosophy and policy, tailored where necessary to the specific characteristics of its
business.

Interview with the President

Aiming to improve the living environment for future generations, the Hankyu Hanshin Holdings Group, based on the understandingthat protecting the global environment is a shared theme for all of humanity, is promoting environmentally friendly business activities and contributing to the realisation of a sustainable society.

Our Business

Basic Environmental Philosophy

warming and a wide range of other environmental issues using imaginative approaches such as a painting competition for children.
Management Organisationl Other Major Initiatives by Group Companies
Settsu-Shi Station, Japan’s first carbon neutral station, opened on the Hankyu Kyoto Line
Hankyu Corporation, Hankyu Retails, Hankyu Hanshin Holdings

We opened Japan’s first carbon neutral station, the Settsu-Shi Station on the Hankyu Kyoto Line, on 14th
March 2010. The station features solar panels, LED lighting and other environmental equipment that
results in roughly half the carbon dioxide emissions of a typical station. The remaining carbon dioxide
emissions are offset through emission credits earned by planting forests in Hyogo Prefecture.

Financial Section

Installation of solar panels at the Hanshin Koshien Stadium
Hanshin Electric Railway

The famous silver roof of the Hanshin Koshien Stadium now features solar panels, which were first turnedon in March 2010. Estimated power output is roughly 193,000kWh annually, equivalent to the power
needed to light all the night games at the stadium in one year, or approximately 5.3% of the stadium’s
total annual power consumption. Hanshin Electric Railway is also planning to reduce the stadium’s water
usage by using rain and well water.

Hankyu Hanshin Holdings

63Financial Section
Contents
65 Consolidated Six-Year Summary
66 Consolidated Financial Review
69 Business Risks
72 Consolidated Balance Sheets74	Consolidated Statements of Income
75	Consolidated Statements of Changes in Net Assets
76	Consolidated Statements of Cash Flows77	Notes to the Consolidated Financial Statements

About the compilation of this Annual Report and the auditing company used
The financial section of this Annual Report includes a digest of information including consolidated financial statements in the Company’s Securities
Report for the 172nd period, audited by KPMG AZSA & Co., presented in somewhat changed format. We have presented this information in sucha way as to ensure that there is no discrepancy with the data presented in the Annual Securities Report. However, the Annual Report itself has notbeen audited by KPMG AZSA & Co.

64 Annual Report 2010

Consolidated Six-Year Summary Six years ended 31st March(Thousands of U.S. dollars)*1

2006/3

2007/3*

2008/3

2009/3

2010/3

2010/3¥476,623¥486,154¥743,376¥752,300¥683,715¥653,287$7,024,591

Operating income

58,76864,84187,00390,724

77,82370,126754,043

EBITDA*

88,70094,500146,500

145,200

135,300

133,200

1,432,505

Income before income taxes and minority interests

36,042

43,21665,30526,09834,06433,899364,505

Net income

26,07825,326

36,619627

20,55010,793116,054

Capital expenditure

27,48852,09053,795

134,307

109,688

132,386

1,423,505

Depreciation and amortisation

29,97429,61143,88851,57754,79860,418649,656

Cash flows from operating activities¥67,650¥80,229¥ 78,981¥ 74,902¥108,597¥146,955$1,580,161

Cash flows from investing activities

24,175(43,199)(199,578)(100,058)(115,047)(132,737)(1,427,280)

Cash flows from financing activities(75,473)(61,960)

132,289

36,718

7,014(24,200)(260,215)

Increase (decrease) in cash and cash equivalents

16,338(24,484)

11,791

11,403(2,174)(9,680)(104,086)

Cash and cash equivalents at end of year

52,37028,37540,166

31,16630,69021,440230,538¥1,670,911¥1,609,116¥2,366,694¥2,348,476¥2,307,332 ¥2,337,331$25,132,591

Total net assets

277,393360,221522,286

476,639

473,878

480,633

5,168,097

Interest-bearing debt

988,111889,615

1,209,382

1,271,100

1,275,620

1,282,583

13,791,215

Net income—Basic¥ 28.11¥ 25.36¥ 31.84¥   0.50¥ 16.28¥   8.55$0.09

Net income—Diluted

27.70

25.22

—

0.41

16.18

8.51

0.09

Net assets

299.48343.45405.35369.25366.96371.70

4.00

Dividend

3.00

5.00

5.00

5.00

5.00

5.00

0.05

Operating income margin (%)

12.3

13.3

11.7

12.1

11.4

10.7

—

4

ROA (%)*

3.5

4.0

4.4

3.8

3.3

3.0

—

5

ROE (%)*

9.9

7.9

8.4

0.1

4.4

2.3

—

8
8.3 *

8.8

9.4

9.6

—

Result of Operations:
Revenues from operations

3

Interview with the President

2005/3

2

Our Business(Millions of yen)

Cash Flows:

Total assets

Ratios:11.1

9.4

Equity ratio (%)

16.6

22.4

21.7

19.9

20.1

20.1

—

Debt/equity (D/E) ratio (times)*6

3.6

2.5

2.4

2.7

2.8

2.7

—

Interest coverage ratio (times)*7

3.7

4.4

4.5

4.0

3.4

3.0

—

Number of outstanding shares (thousands)

927,867

1,049,538

1,271,406

1,271,406

1,271,406

1,271,406—

Number of employees

13,732

13,31920,49819,89220,80520,938—

Management Organisation

Interest-bearing debt/EBITDA (times)

Core Businesses: Overview and Outlook

Per Share Data (yen and U.S. dollars):Special Feature

Financial Position:

Others:*2 From the second quarter of the fiscal year ended 31st March 2007, consolidated results of Hanshin Electric Railway Co., Ltd. are included as a result of management integration,in the scope of consolidation of the Group.
*3 EBITDA = operating income + depreciation expenses + amortisation of goodwill attendant on the management integration of Hankyu and Hanshin
EBITDA figures are rounded to the nearest ¥100 million.
Figures in 2007/3 were calculated assuming the management integration had entered effect from the beginning of the term.
4* ROA = operating income/total assets (average of period-start and period-end totals)*5 ROE = net income/equity (average of period-start and period-end totals)*6 D/E ratio = interest-bearing debt/equity*7 Interest coverage ratio = (operating income + interest and dividend income)/interest expense*8 EBITDA is calculated assuming management integration at the beginning of the term.
Hankyu Hanshin Holdings

Financial Section*1 The U.S. dollar amounts have been translated, for convenience only, at ¥93 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2010.

65

Consolidated Financial Review

n Review of Business PerformanceWith the exception of Entertainment and Communications, each

Due to extraordinary losses that resulted from recording of aof our core segments experienced harsh economic times owing

lump sum amortisation of goodwill under the equity method, previ-

to the ongoing economic malaise and the spectre of H1N1 flu.

ously recorded in shares of an equity method affiliate, net income

Consequently, revenues from operations declined by ¥30,427 million

stood at ¥10,793 million, for a decline of ¥9,757 million (47.5%)(4.5%) year-on-year to ¥653,287 million.

compared to the previous fiscal year.

Despite the cost-cutting efforts at each core business, operating income decreased by ¥7,696 million (9.9%) year-on-year to

For an overview of consolidated business performance, please¥70,126 million, due to increased depreciation expenses as well as

refer to the Interview with the President (Business Environment

the adverse impact of reduced revenues.

and Assessment of Financial Results) on Page 14.

Operating Income(Millions of yen)

77,823

2009/3−30,427

Decrease in revenues from operations
Increase in depreciation
Decrease in operating expenses
and amortisationand cost of sales
Decrease in operating expenses+23,382 andcost of sales of transportation

Increase in selling, general and administrative expenses−652−5,483+28,866
Increase in personnel expenses−1,385Decrease in expense and taxes+870

Increase in depreciation and amortisation−136

70,126

2010/3−7,696from theprevious fiscal yearn Segment Information
The following table shows business performance for each core segment. For a review of these results, please refer to the page indicated at the footof the table.
(Millions of yen)

Urban
Transportation

Real EstateEntertainment
andCommunications

Travel andInternational
Transportation

HotelsRetailing

Other

Total

Eliminations
or
Corporate

Consolidated

Revenues from operations
2010/3

195,114169,205

103,667

62,85460,97762,78839,591

694,199−40,911653,287

2009/3

195,244

171,685

100,561

65,80566,457

67,58160,534

727,870−44,155

683,715

Difference−129−2,4803,106−2,951−5,480−4,792−20,942−33,671

3,244−30,427

YoY (%)

−0.1%

−1.4%

3.1%

−4.5%

−8.2%

−7.1%

−34.6%

−4.6%

—

−4.5%

2010/331,552

29,6299,292

276−1,705−297

516

69,263863

70,126

2009/332,49032,815

8,384

1,451

341

696

568

76,748

1,075

77,823Difference−938−3,186907−1,175−2,046−994−52−7,485−211−7,696

YoY (%)

−2.9%

−9.7%

10.8%

−81.0%

—

—

−9.2%

−9.8%

—

−9.9%

Reference page

P. 31

P. 36

P. 40

P. 44

P. 47

P. 50

*

—

—

P. 13

Operating income* Other segments recorded reduced revenues and profits as the decline in revenues resulting mainly from Station Finance Inc.’s secession from the Group after the February 2009sell-off and from construction orders received during the previous year by the Construction Business in connection with the construction of the Hanshin Namba Line.

66 Annual Report 2010

Our Businessn Review of Financial Position
2. Cash FlowsAt the end of the fiscal year under review, trade receivables declined,

Cash and cash equivalents (hereafter referred to as “Cash”) during thewhile total assets increased by ¥29,999 million year-on-year to standfiscal year under review declined by ¥9,249 million compared to theat ¥2,337,331 million, owing to an increase in net property and equip-

previous term end to stand at ¥21,440 million.

ment due to higher capital expenditure and the conversion of Kobe
Rapid Transit Railway Co., Ltd. into a consolidated subsidiary.

Net cash provided by operating activities stood at ¥146,955
million, while net cash used in investing activities and financing

Although capital expenditure-related payables declined, inter-

activities stood at ¥132,737 million and ¥24,200 million, respectively.

est-bearing debt increased. As a result, liabilities totalled ¥1,856,698

Although the capital outlay for investing activities increased, this was

million for an increase of ¥23,244 million on the previous year-end.

addressed with capital from operating activities.

Due to an increase in retained earnings, net assets totalled¥480,633 million for an increase of ¥6,754 million on the previous
year-end.
Equity stood at ¥469,128 million, an increase of ¥6,155 million
retained earnings due to the recorded net profit.
As a result, the equity ratio stood at 20.1%, and ROE (return on
equity) stood at 2.3%.

The following are the factors responsible for the variations ineach type of cash flow from the previous year.
(1) Cash Flows from Operating Activities
Net cash provided by operating activities increased by ¥38,357
million (35.3%) year-on-year. This was because although operating
income declined, inventories decreased and deposits increased.
(2) Cash Flow from Investing Activities(15.4%) year-on-year. This was because expenditure on purchases ofproperty and equipment increased.
(3) Cash Flow from Financing Activities
Net cash used in financing activities increased by ¥31,215 million year-on-year. This was because of a net decline in short-termborrowings.

Core Businesses: Overview and Outlook

Net cash used in operating activities increased by ¥17,689 million

Special Featureon the previous year-end. This was mainly the result of an increase inInterview with the President

1. Assets, Liabilities and Net Assets

Trends of Cash Flow Indicators
2007/3

2008/3

2009/3

2010/3

22.4

21.7

19.9

20.1

20.1

Equity ratio (%) (market value basis)

44.4

38.2

23.2

24.4

23.4

Cash flows/interest-bearing debt ratio (times)

11.1

15.3

17.0

11.7

8.7

Interest coverage ratio (times)

4.4

4.5

4.0

3.4

3.0

3. Fund Procurement

trade receivables and cash flows from operating activities, so that as

Interest-bearing debt increased during the fiscal year under review

the end of the reporting term, consolidated interest-bearing debt

due to capital expenditure in operating subsidiaries and the factincreased only ¥6,962 million from the previous year-end, to stand atthat the Kobe Rapid Transit Railway Co., Ltd. became a consolidated¥1,282,583 million.

Financial Section

Notes:
Equity ratio = equity/total assets
Equity ratio (market value basis) = market capitalisation/total assets
Cash flows/interest-bearing debt ratio = interest-bearing debt/operating cash flows
Interest coverage ratio = (operating income + interest and dividend income)/interest expense* Each index has been calculated in accordance with financial indicators on a consolidated basis.
* Market capitalisation has been calculated as follows: year-end closing stock price X total shares issued at year-end (after deduction of treasury stock).

Management Organisation

2006/3Equity ratio (%)

subsidiary. However, the Group was helped by the collection ofHankyu Hanshin Holdings

67Consolidated Financial Review

n Capital Expenditure and Depreciation & Amortisation
Capital expenditure (including intangible assets) during the fiscal year under review increased by ¥22,698 million (20.7%) year-on-year to stand at¥132,386 million.
The following is a breakdown for each business segment.
2009/3(Millions of yen)

2010/3(Millions of yen)

YoY
(%)

Urban Transportation

30,40829,099−4.3

Real Estate

58,106

71,51723.1

Entertainment and Communications

15,149

6,461

−57.3

Travel and International Transportation

1,521

1,523

0.1

Hotels

1,964

22,257

1,033.3

Retailing

2,295

1,875

−18.3

Other

1,005

533

−46.9

Total

110,450

133,269

20.7

−762

−883

—

109,688

132,386

20.7

Eliminations or Corporate
Consolidated<Urban Transportation Segment>

In the railway business, we took measures to enhance safety andservices by spending capital on the construction of overpasses, theenhancement of facilities, the construction of new barrier-free facilities and the manufacture and improvement of new rolling stock.
We also updated rolling stock in our bus and taxi business.
<Real Estate Segment>

consolidation of its eastern Japan headquarters’ operations.
<Hotels Segment>
In the hotels business, Hankyu Hanshin Hotels Co., Ltd acquired “Daiichi Hotel Tokyo”* and simultaneously spent capital on the refurbishment of its guest rooms.
*D ai-ichi Hotel Tokyo was acquired by repurchase from a special-purpose company
following completion of the property’s securitisation.

In the real estate leasing business, Hankyu Corporation rebuilt the<Retailing Segment>

Umeda Hankyu Building, demolishing part of the premises in the

In the retail business, Hankyu Retails Corporation developed a newprocess. Hankyu Realty Co., Ltd. acquired the Hankyu Grand Building*personnel schedule management system and opened new directly

and part of the Hankyu Five Building.

owned stores such as Book 1st. Lumine Kitasenju.

Hankyu Corporation, Hanshin Electric Railway Co., Ltd. andHankyu Realty Co., Ltd. spent capital on the renovation of rentalbuildings.
* Hankyu Grand Building was acquired by repurchase from a special-purpose company following completion of the property’s securitisation.

<Entertainment and Communications Segment>
In the sports business, Hanshin Electric Railway Co., Ltd. conducteda renovation of Hanshin Koshien Stadium. In the revue business,
Hankyu Corporation renovated and updated existing facilities suchas Takarazuka Grand Theatre.

<Other Segment>
In the freight forwarding business, Sanyo Jidosha Unso Co., Ltd.
updated its rolling stock.
In the fiscal year under review, depreciation and amortisation
increased by ¥5,620 million (10.3%) year-on-year to ¥60,418 million.
This was due to various factors in the previous year, including
large-scale capital expenditure for the completion of the Hankyu
Nishinomiya Gardens (November 2008), the purchase of rolling stockwith the opening of the Hanshin Namba Line (March 2009), the com-

<Travel and International Transportation Segment>

pletion of Phase II renovation work on the Hanshin Koshien Stadium

In the travel and international transportation business, Hankyu Travel(March 2009), and the Kobe Rapid Transit Railway Co., Ltd. becoming

International Co., Ltd. constructed new interior facilities, in line witha consolidated subsidiary.

n Dividends Policy
For information about the Group’s stance on shareholder returns, please refer to the Interview with the President (Shareholder Returns Policy) on
Page 21.

68 Annual Report 2010

Business Risks

In accordance with the stipulations of Article 3 of the Railway
Business Law, the Group must obtain separate permissions, from the
Ministry of Land, Infrastructure, Transport and Tourism, for each category of railway operations on each route that it intends to operate.
Moreover, under Article 16 of the Law, a railway operator must obtainthe Ministry’s approval for the passenger fares it intends to set and

The Group will take measures to diversify its fund procurement
methods to deal with an increase in interest-bearing debt resulting
from the integration, and will use all possible means to minimise thenegative impact of interest rate movements. But in the unlikely event

Interview with the President

Legal Risk

Our Business

The various categories of risk to which the business performance, stock price, financial position and other aspects of operations of the Hankyu Hanshin Holdings Group are subject are detailed below. Nevertheless, these dangers do not encompass
all risks attendant on Group activities and there are risks other than those stated below which are difficult to foresee.
Information about future events that appears in this report was determined by the Group to be current as of the date ofsubmission of the Securities Report.

that interest rates rise suddenly and in excess of our projections, this
could exert an adverse effect on the business performance andfinancial position of the Group.

on each occasion when it wishes to change the fares. Consequently,
constrained in some way by the Ministry’s administration of theseregulations.

Affiliated Companies
In order to ensure greater convenience for users of the Hokushin
Kyuko Railway Line (run by consolidated subsidiary Hokushin Kyuko
Railway Co., Ltd.), Hankyu Corporation (a consolidated subsidiary)

The Group seeks to utilise its working assets more effectively tofacilitate the development of areas served by Hankyu and Hanshinlines. To raise its asset effectiveness, the Group is pursuing the following initiatives: reconstruction of the Umeda Hankyu Building;development of the Chayamachi area of the Umeda district; Osaka
Station North District Phase 1 Development Area Project; and further
development of the International Culture Park “Saito” (a new town).
These projects are all seen as key to the Group’s future growth, andmanagement will be working to complete them as soon as possible.
However, in the event of rapid and major changes in the businessenvironment, affecting land prices or urban development plans, theadversely affected.

Interest-Bearing Debt
The balance of interest-bearing debt held by the Group as of the endof March 2010, on a consolidated basis, was ¥1,282,583 million.
As a result of the acquisition of shares in Hanshin Electricbid) on 27th June 2006, Hanshin Electric Railway has become aconsolidated subsidiary of Hankyu Holdings. This acquisition has
resulted in an increase in the balance of interest-bearing debt of
the Group. On the other hand, management integration between

subsidiary). To facilitate the plan, in fiscal 2003 (ended March 2003)
Hankyu Corporation provided Kobe Rapid Transit Railway withfinancing for part of the funds necessary to purchase the facilities.
In September 2007, Kobe Electric Railway Co., Ltd. (an equity
method affiliate), temporarily suspended support for the rehabilitation of Hokushin Kyuko Railway. To uphold the rehabilitation project,
additional financing was extended to Hokushin Kyuko Railway by
Hankyu Corporation.
We will continue to provide assistance to ensure that Hokushin
Kyuko Railway can conduct smooth and efficient operations as a tier2 railway operator. However, the business performance and financial
position of the Group could be affected by changes in this plan.

 ecline in the Market Value of Assets Held by
D
Members of the Hankyu Hanshin HoldingsGroup
In the case of a substantial decline in the market value of inventory
assets, property and equipment and intangible assets, investment
securities, and other assets, the recording of impairment losses orvaluation losses would likely have a negative impact on the earnings
performance and financial position of the Hankyu Hanshin HoldingsGroup.

Financial Section

Railway Co., Ltd. through a successful public tender offer (takeover

Kyuko Railway to Kobe Rapid Transit Railway Co., Ltd. (a consolidated

Management Organisation

business performance and financial position of the Group could be

has agreed to a plan transferring railway facilities held by Hokushin

Core Businesses: Overview and Outlook

Progress in Large-Scale Development Projects

Special Feature

there is a certain risk that the Group’s railway operations may be

Hanshin Electric Railway Group and the Hankyu Holdings Grouphas increased cash flows, so the Group is not expected to have any
significant difficulty in repaying its debts.

Hankyu Hanshin Holdings

69

Q&A on Business Risks
The following is the Group’s perspective which has been provided in response to questions received from our investors in
relation to the risks attendant on our business. Information about future events that appears in this report was determinedby the Group to be current as of the date of submission of the Securities Report and is not intended to negate the possibility of these risks impacting the business performance, financial position and other aspects of operations of the Group.

Economic Environment-related Risks

The Group’s overseas sales constitute less than 10% of its
consolidated operating revenues.

Interest Rate Fluctuations
Long-term debt and corporate bonds are comprised mainly of
long-term financing needed for capital expenditure programs,
while short-term borrowings and commercial paper are comprised

Business-related Risks

mainly of financing that is associated with short-term operating

Declining Birth-Rate and Aging Population

capital. Some floating exchange rate borrowings and corporate

Due to the declining birth-rate and aging population, it is expectedbonds are exposed to interest rate fluctuation risk (market risk);

that capital expenditure on safety measures and construction aimed

however, we lock in interest rates by concluding interest rate swap

at making facilities barrier-free will increase. At the same time, due toand option contracts to avoid the risks attendant upon interest rate

future population decline, it is possible that transportation demand

fluctuations.

(for the Group’s railroads, buses and taxis) will recede, and that

Nevertheless, in the unlikely event that interest rates were to
rise sharply and dramatically, the business performance and financial
position of the Group could be adversely affected.

Changes in the Financing Environment

demand in other businesses may also decline.
In order to respond to this challenge, the Group is working withgovernment and educational institutions on community-building
initiatives with a focus on peace of mind, education and culturalenrichment. By doing so, we are working to enhance the appeal of

Cash-flow management plans are made in a timely manner for thethe areas served by our stations so as to ensure that our railway lines

purpose of appropriately managing funds. By doing so, we avoid

enjoy the patronage of large numbers of people.

liquidity risks which could render the Group incapable of meeting(Please refer to Page 20 for the Interview with the President on

payment deadlines. Additionally, the centralisation of Group funds“Community-Building.” For more information about our strategies

through the use of cash pool systems and other mechanisms

for promoting utilisation in our Urban Transportation Segment,

facilitates the consolidation and efficient usage of surplus funds byplease refer to Page 28.)

Group companies, while the establishment of back-up lines such ascommitment lines enables the Group to obtain finance from financial

Safety Measuresinstitutions at a moment’s notice. We also disperse our transaction

In the Group’s core railway business, our passengers would suffer

partners over several financial institutions to maintain an appropriate

greatly if an accident were to occur. We are keenly aware of thebalance of direct and indirect financing. Thus, we ensure liquidity by

responsibility entrusted to us for our passengers’ lives. Therefore, thediversifying the methods we use for obtaining finance.

cornerstone of our business is ensuring that accidents do not occur

Foreign Currency Market Fluctuations

due to negligence on our part.
Accordingly, the Group has upgraded all aspects of its safety

Foreign exchange rate contracts, currency swap contracts and cur-capabilities in the conviction that putting passengers first and priori-

rency option contracts are employed to avoid the exchange rate

tising safety come above all else. We are engaged in a wide variety

fluctuation risks attendant on some foreign currency-denominatedof endeavours for ensuring that we go one step further to offer ourassets and liabilities. Although these derivative transactions involve

passengers even safer transportation.

some credit risk, such as the risk of being no longer able to enjoy

We meet this commitment through hardware solutions

the fruits of ongoing trading due to a transaction partner failing toand through good practice. One example of the latter is anmeet its obligations under the terms and conditions of the contract

initiative at Hankyu Corporation, which has adopted the safetyor going bankrupt, we avoid such risk by engaging in transactions

slogan “Everything we do is for our passengers, everything we do

only with highly rated institutions.

is for their safety” and instituted a code of conduct on ensuring

70 Annual Report 2010

Our Businessminimising the social impact in the unlikely event of an incident

boards at all of our stations and given to all of our staff to carrywhich causes long-term disruption to transit services or results in aaround with them wherever they go, so that they can be reminded

great number of casualties.

of it anywhere and at any time. We have also developed safety
management systems and convene regular meetings of our Safety

Infectious Disease Outbreaks and Epidemics

Management and Promotion Committee. Through these efforts, weGroup businesses could be significantly affected if economic activi-

are striving to ensure the safety of passengers. We have developed aties were restricted or customers refrained from going out due to ansystem for rewarding employees for meritorious service. We do thisoutbreak or epidemic of an infectious disease such as SARS (Severe

to encourage employees to take the initiative in making proposals

Acute Respiratory System) or H1N1 flu.
In fact, the Group was significantly impacted by customers

posals which will contribute to improving the way our employees

refraining from going out during the fiscal 2010 H1N1 flu epidemic.

perform their duties. In May 2009, Hankyu Corporation establishedThe main businesses affected at this time were Urban Transportation,

the “Safety Observation Room” within its Training Centre, which isTravel and Hotels.

a facility that provides training to train drivers and conductors. The
within our businesses and at other operators. By doing so, our crews
can learn about the background behind the development of various
systems and regulations on safe train operation.
In hardware initiatives, we are currently improving our ATS

Other Risks
Changes to Accounting Standards(Automatic Train-Stopping) system preventing trains from overrun-

In line with ongoing revisions to accounting standards in Japanning at railway crossings, mistakenly passing through stations with-to achieve convergence with International Financial Reportingout stopping, or colliding with other trains at terminal areas. We areStandards (IFRS), the government of Japan is considering requir-also adopting train operation monitoring systems and constructing

ing listed companies to apply IFRS in their consolidated financial

overpasses.

statements*.

Natural Disaster Mitigation and Acts of Terrorism

application could adversely affect the Group’s financial position and

The Group’s businesses and transportation network infrastructure

earnings performance due to the necessity of including additional

could be significantly damaged by natural disasters such as earth-accounting items such as presentation changes to the statement of

quakes, typhoons and floods or acts of terrorism.

comprehensive income, retroactive restatement and the shift fromIn the future, changes to accounting standards and IFRS

amortisation to impairment of goodwill.
Currently, we are studying the likely effect on our financial

way lines for collecting observation data. We also use real-time infor-

position of application of the new accounting standards andmation provided by meteorological observatories to ensure the safe

preparing for the systemic changes. In particular, we are setting up

operation of our trains. If an earthquake of JMA seismic intensity 4 oran in-house task force in preparation for compulsory IFRS adoption.

above is detected by a seismograph or predicted by an earthquake

Working closely with our independent auditor KPMG AZSA & Co., we

early warning system, all trains that operate in the zone in question

are positioning ourselves to deal with issues that may arise in thatwill immediately prepare for emergency stopping. For possible acts

connection.

of terrorism, or where suspicious items or persons are identified or*A ccording to materials published by the Financial Services Agency, a decision onwhether or not to require companies to adopt IFRS will be made by 2012; if the
Agency decides on their adoption, application is expected to begin in 2015 or
2016.

damage has occurred, we have risk-graded management response
systems.

Financial Section

installed rain, wind and river water gauges in the areas along our rail-

Management Organisation

Hankyu Corporation and Hanshin Electric Railway Co., Ltd. haveCore Businesses: Overview and Outlook

Safety Observation Room studies past accidents that occurred bothSpecial Featurefor improving safety. As a result, we have received a great many pro-Interview with the President

safe transportation. The code of conduct is displayed on notice

We have also developed emergency response systems for

Hankyu Hanshin Holdings

71Consolidated Balance Sheets As of 31st March 2009 and 2010

Thousands of
U.S. dollars
2010

Millions of yen
2009
2010
Assets:Current assets:
Cash and deposits (Note 3)...............................................................................................................................................

¥    31,973¥    23,792$   255,828

Trade receivables....................................................................................................................................................................

95,70378,969849,129

Land and buildings for sale .............................................................................................................................................

134,830

126,316

1,358,237

Finished products and merchandise..........................................................................................................................

7,104

8,138

87,505Work in progress......................................................................................................................................................................

7,156

5,445

58,548Materials and supplies.........................................................................................................................................................

3,430

3,791

40,763

Deferred tax assets.................................................................................................................................................................

16,063

14,623

157,237

Other...............................................................................................................................................................................................

43,81633,967365,237

Allowance for doubtful receivables.............................................................................................................................

(2,765)(2,023)(21,753)

Total current assets................................................................................................................................................................

337,315

293,0213,150,763

Buildings and structures—net (Note 3)............................................................................................................

555,809606,498

6,521,484

Machinery, equipment and vehicles—net (Note 3).................................................................................

60,17158,372

627,656

Land (Notes 3 and 5).....................................................................................................................................................

819,898

888,4319,553,022

Construction in progress............................................................................................................................................

131,666

134,215

1,443,172

Other—net (Note 3)......................................................................................................................................................

15,833

15,251

163,989

Total property and equipment (Notes 1 and 2)...........................................................................................

1,583,379

1,702,769

18,309,344

Goodwill...............................................................................................................................................................................

46,33543,966

472,753

Other (Notes 2 and 3)...................................................................................................................................................

18,603

17,989193,430

Total intangible assets.................................................................................................................................................

64,93861,955666,183

Investment securities (Notes 3 and 4)................................................................................................................

239,567

227,826

2,449,742

Long-term loans receivable.....................................................................................................................................

23,753——

Deferred tax assets.........................................................................................................................................................

5,293

4,996

53,720

Other.......................................................................................................................................................................................

60,39754,556586,624

Noncurrent assets:
Property and equipment

Intangible assets

Investments and other assets

Allowance for doubtful receivables....................................................................................................................

(7,313)(7,793)(83,796)

Total investments and other assets.....................................................................................................................

321,698

279,585

3,006,290

Total noncurrent assets.......................................................................................................................................................

1,970,016

2,044,310

21,981,828

Total assets.................................................................................................................................................................................................

¥2,307,332¥2,337,331$25,132,591

See the accompanying notes to the consolidated financial statements.

72 Annual Report 2010

Thousands of
U.S. dollars
2010

Liabilities:
Trade payables..........................................................................................................................................................................

¥    43,885¥    46,726$   502,430

Short-term borrowings (Note 3)....................................................................................................................................

266,906

287,346

3,089,742

Current portion of bonds...................................................................................................................................................

20,00025,000268,817

Income taxes payable..........................................................................................................................................................

3,489

4,008

43,097

Accrued expenses..................................................................................................................................................................

18,551

17,386

186,946

Provision for bonuses...........................................................................................................................................................

4,186

3,986

42,860

Other (Note 3)...........................................................................................................................................................................

156,635

139,417

1,499,108

Total current liabilities..........................................................................................................................................................

513,656

523,872

5,633,032

Bonds..............................................................................................................................................................................................

120,000

135,000

1,451,613

Long-term debt (Note 3)....................................................................................................................................................

866,717832,018

8,946,430

Deferred tax liabilities...........................................................................................................................................................

138,764

151,804

1,632,301

Interview with the President

Current liabilities:

Our BusinessMillions of yen
2009
2010

Long-term liabilities:

6,861

6,839

73,538Provision for retirement benefits...................................................................................................................................

57,06758,487

628,892

700

755

8,118

Reserve for investment losses.........................................................................................................................................

6,498

6,486

69,742Long-term deferred contribution for construction...........................................................................................

8,513

15,639168,161

Other...............................................................................................................................................................................................

114,672

125,794

1,352,624

Total long-term liabilities...................................................................................................................................................

1,319,796

1,332,825

14,331,452

Total liabilities..................................................................................................................................................................................

1,833,453

1,856,698

19,964,495

Net assets:
Shareholders’ equity:
99,474

99,474

1,069,613

Capital surplus...........................................................................................................................................................................

150,134

150,027

1,613,194

Retained earnings...................................................................................................................................................................

227,338

232,135

2,496,075

Less treasury stock, at cost................................................................................................................................................

(4,143)(3,808)(40,946)

Total shareholders’ equity.................................................................................................................................................

472,803477,829

5,137,946

Net unrealised holding gains on securities............................................................................................................

(9,253)(8,075)(86,828)

Net unrealised gains on hedging derivatives........................................................................................................

(681)

(845)

(9,086)

Surplus from land revaluation (Note 5).....................................................................................................................

1,978

1,956

21,032Foreign currency translation adjustments..............................................................................................................

(1,874)(1,736)(18,667)

Accumulated gains from revaluation and translation adjustments:

Total accumulated gains from revaluation and translation.........................................................................

(9,831)(8,700)(93,548)

Minority interests (Note 5)......................................................................................................................................................

10,906

11,505

123,710

Total net assets................................................................................................................................................................................

473,878

480,633

5,168,097

Total liabilities and net assets.......................................................................................................................................................

¥2,307,332¥2,337,331$25,132,591

Management Organisation

Common stock.........................................................................................................................................................................

Core Businesses: Overview and Outlook

Provision for directors’ retirement benefits............................................................................................................

Special Feature

Deferred tax liabilities related to land revaluation (Note 5)..........................................................................

Financial Section
Hankyu Hanshin Holdings

73Consolidated Statements of Income Years ended 31st March 2009 and 2010

Millions of yen
2009
2010
Revenues from operations..............................................................................................................................................................

Thousands of
U.S. dollars
2010¥683,715¥653,287$7,024,591

Operating expenses and cost of sales of transportation (Note 1)....................................................................

573,858

550,476

5,919,097

Selling, general and administrative expenses (Note 2)...........................................................................................

32,032

32,684351,441

Total costs of revenues from operations (Note 3)......................................................................................................

605,891

583,160

6,270,538

Operating income.................................................................................................................................................................................

77,82370,126754,043

Interest income................................................................................................................................................................................

486

168

1,806
10,032

Costs of revenues from operations:Non-operating income:
Dividends income...........................................................................................................................................................................

1,569

933

Amortisation of negative goodwill......................................................................................................................................

739

13

140

Equity in income of affiliates....................................................................................................................................................

886

3,455

37,151

Miscellaneous income.................................................................................................................................................................

2,872

2,397

25,774

Total non-operating income....................................................................................................................................................

6,553

6,968

74,925254,054

Non-operating expenses:
Interest expenses............................................................................................................................................................................

23,70323,627

Miscellaneous expenses.............................................................................................................................................................

3,229

3,058

32,882

Total non-operating expenses................................................................................................................................................

26,932

26,685286,935

Ordinary income....................................................................................................................................................................................

57,44550,409542,032

Gain on sale of property and equipment (Note 4).....................................................................................................

243

394

4,237

Gain on contributions for construction works..............................................................................................................

7,043

3,222

34,645Gain on sale of securities (Note 5)........................................................................................................................................

785

1,624

17,462Gain on investments in silent partnerships....................................................................................................................

8,531

8,241

88,613Extraordinary income:

Other.......................................................................................................................................................................................................

2,239

2,384

25,634

Total extraordinary income.......................................................................................................................................................

18,843

15,868

170,624Extraordinary loss:
Loss on sale of property and equipment (Note 6).....................................................................................................

123

325

3,495

Loss on reduction of property and equipment...........................................................................................................

6,927

3,044

32,731

Loss on disposal of property and equipment (Note 7)...........................................................................................

3,972

6,262

67,333

Loss on impairment of fixed assets (Note 8)..................................................................................................................

3,447

4,751

51,086

Special allowance for doubtful receivables....................................................................................................................

457

1,064

11,441

Special reserve for investment losses.................................................................................................................................

1,644

126

1,355

Restructuring costs (Note 9).....................................................................................................................................................

18,431——

Lump sum amortisation of goodwill equivalent amountunder the equity method (Note 10).................................................................................................................................

—

10,264

110,366

Other.......................................................................................................................................................................................................

7,219

6,538

70,301

Total extraordinary loss................................................................................................................................................................

42,22432,377348,140

Income before income taxes and minority interests...................................................................................................

34,06433,899364,505

Income taxes—current......................................................................................................................................................................

6,814

7,226

77,699

Income taxes—deferred...................................................................................................................................................................

6,070

15,357

165,129

Total income taxes................................................................................................................................................................................

12,884

22,583242,828

Minority interests in income..........................................................................................................................................................

628

523

5,624

Net income.................................................................................................................................................................................................

¥ 20,550¥ 10,793$  116,054

See the accompanying notes to the consolidated financial statements.

74 Annual Report 2010

Consolidated Statements of Changes in Net Assets Years ended 31st March 2009 and 2010

Capital surplus:
Balance at beginning of year...............................
Changes of items during the period:
Dividends from surplus......................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................

—¥ 99,474—¥ 99,474—$1,069,613¥150,134¥150,134$1,614,344

—

(107)

(1,151)—¥150,134(107)¥150,027(1,151)$1,613,194¥211,758¥227,338$2,444,495(6,339)20,550212—
1,155(6,335)
10,79321(20)
337(68,118)
116,054
226
(215)
3,624

15,579¥227,338

4,797¥232,135

51,581$2,496,075¥ (3,266) ¥ (4,143)$   (44,548)

(137)
472

(1,473)
5,075

(876)
335
¥ (4,143) ¥ (3,808)

3,602$   (40,946)¥458,100¥472,803$5,083,903(6,339)20,550
212
(876)
0
1,155

(6,335)
10,793
21
(137)
344
337

(68,118)
116,054226(1,473)
3,699
3,624

14,703¥472,803

5,025¥477,829

54,032$5,137,946

(876)
0

Deferred gains or losses on hedges:
Balance at beginning of year...............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................
Revaluation reserve for land:
Balance at beginning of year...............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................
Foreign currency translation adjustment:
Balance at beginning of year...............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................
Total valuation and translation
adjustments:
Balance at beginning of year...............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................
Minority interests:
Balance at beginning of year...................................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.....................................................................
Balance at end of year..................................................

¥ (9,253)$ (99,495)(15,874)

1,177

12,656(15,874)
1,177¥ (9,253) ¥ (8,075)

12,656$ (86,828)¥    (557) ¥   (681)$(7,323)(163)(1,753)

(124)
(163)
¥    (681) ¥   (845)(1,753)$(9,086)¥   2,192¥   1,978$    21,269

(214)

(21)

(226)

(214)
(21)
¥   1,978 ¥   1,956(226)$    21,032¥    212¥ (1,874)$ (20,151)(2,087)

137

1,473

(2,087)137¥ (1,874) ¥ (1,736)

1,473$ (18,667)¥   8,468¥ (9,831)$ (105,710)(18,300)

1,130

12,151(18,300)
1,130¥ (9,831) ¥ (8,700)

12,151$ (93,548)¥ 10,069¥ 10,906$  117,269

836

598

6,430

836
¥ 10,906

598¥ 11,505

6,430$  123,710¥476,639¥473,878$5,095,462(6,339)20,550
212
(876)
0
1,155

(6,335)
10,793
21
(137)
344
337

(68,118)
116,054226(1,473)
3,699
3,624

(17,463)

1,729

18,591(2,760)6,754¥473,878 ¥480,633

72,624$5,168,097(124)

Financial Section

Total net assets:
Balance at beginning of year...................................
Changes of items during the period:
Dividends from surplus...........................................
Net income.....................................................................
Reversal of revaluation reserve for land........
Purchase of treasury stock....................................
Disposal of treasury stock......................................
Change in scope of consolidation...................
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.....................................................................
Balance at end of year..................................................

¥   6,621

Management Organisation

Total shareholders’ equity:
Balance at beginning of year...............................
Changes of items during the period:
Dividends from surplus......................................
Net income................................................................
Reversal of revaluation reserve for land....
Purchase of treasury stock................................
Disposal of treasury stock.................................
Change in scope of consolidation..............
Total changes of items during
the period.................................................................
Balance at end of year.............................................

$1,069,613

Core Businesses: Overview and Outlook

Less treasury stock, at cost:
Balance at beginning of year...............................
Changes of items during the period:
Purchase of treasury stock................................
Disposal of treasury stock.................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................

¥ 99,474

Valuation and translation adjustments:
Valuation difference on available-for-salesecurities:
Balance at beginning of year...............................
Changes of items during the period:
Net changes of items other thanshareholders’ equity..........................................
Total changes of items during
the period.................................................................
Balance at end of year.............................................

Special Feature

Retained earnings:
Balance at beginning of year...............................
Changes of items during the period:
Dividends from surplus......................................
Net income................................................................
Reversal of revaluation reserve for land....
Disposal of treasury stock.................................
Change in scope of consolidation..............
Total changes of items during
the period.................................................................
Balance at end of year.............................................

¥ 99,474

Thousands of
U.S. dollars
2010

Millions of yen
2009
2010

Interview with the President

Shareholders’ equity:
Common stock:
Balance at beginning of year
Changes of items during the period:
Total changes of items during
the period.................................................................
Balance at end of year.............................................

Thousands of
U.S. dollars
2010

Our BusinessMillions of yen
2009
2010

See the accompanying notes to the consolidated financial statements.
Hankyu Hanshin Holdings

75

Consolidated Statements of Cash Flows Years ended 31st March 2009 and 2010

Millions of yen
2009
2010
Cash flows from operating activities:
Income before income taxes and minority interests.............................................................................................................
Depreciation and amortisation............................................................................................................................................................
Loss on impairment of fixed assets...................................................................................................................................................
Amortisation of goodwill.........................................................................................................................................................................
Amortisation of negative goodwill....................................................................................................................................................
Equity in (income) losses of affiliates................................................................................................................................................
Increase (decrease) in provision for retirement benefits.....................................................................................................
Increase (decrease) in allowance for doubtful receivables................................................................................................
Restructuring costs......................................................................................................................................................................................
Interest and dividend income..............................................................................................................................................................
Interest expense............................................................................................................................................................................................
Loss (gain) on sale of property and equipment........................................................................................................................
Loss on reduction of property and equipment.........................................................................................................................
Loss on disposal of property and equipment.............................................................................................................................
Loss (gain) on sale of marketable and investment securities...........................................................................................
Gain on contributions for construction works...........................................................................................................................
Loss (gain) on investments in silent partnerships....................................................................................................................
Lump sum amortisation of goodwill equivalent amount under the equity method.......................................
Decrease (increase) in trade receivables........................................................................................................................................
Decrease (increase) in inventories.....................................................................................................................................................
(Increase) decrease in trade payables..............................................................................................................................................
Increase (decrease) in other liabilities..............................................................................................................................................
Other.....................................................................................................................................................................................................................
Subtotal..............................................................................................................................................................................................................
Interest and dividends received..........................................................................................................................................................
Interest paid.....................................................................................................................................................................................................
Income taxes (paid) refunded...............................................................................................................................................................
Extra retirement payment.......................................................................................................................................................................
Net cash provided by operating activities....................................................................................................................................
Cash flows from investing activities:
Purchases of property and equipment...........................................................................................................................................
Proceeds from sale of property and equipment.......................................................................................................................
Purchases of investment securities...................................................................................................................................................
Proceeds from sale of investment securities...............................................................................................................................
Purchases of investments in consolidated subsidiaries affecting scope of consolidation.............................
Proceeds from sale of investments in consolidated subsidiaries affecting scope of consolidation........
Net decrease (increase) in short-term loans receivable.......................................................................................................
Long-term loans advanced....................................................................................................................................................................
Proceeds from collection of long-term loans receivable....................................................................................................
Receipt of contributions for construction works......................................................................................................................
Receipt of repayment of investments in silent partnerships............................................................................................
Other.....................................................................................................................................................................................................................
Net cash used in investing activities.................................................................................................................................................
Cash flows from financing activities:
Net increase (decrease) in short-term borrowings..................................................................................................................
Proceeds from long-term borrowings............................................................................................................................................
Repayment of long-term debt.............................................................................................................................................................
Proceeds from new bonds issued......................................................................................................................................................
Redemption of bonds................................................................................................................................................................................
Dividends paid...............................................................................................................................................................................................
Dividends paid to minority shareholders of consolidated subsidiaries......................................................................
Other.....................................................................................................................................................................................................................
Net cash provided by (used in) financing activities................................................................................................................
Effect of exchange rate changes on cash and cash equivalents...............................................................................
Increase (decrease) in cash and cash equivalents...............................................................................................................
Cash and cash equivalents at beginning of year.................................................................................................................
Increase in cash and cash equivalents from newly consolidated subsidiary...................................................
Increase in cash and cash equivalents resulting from merger with nonconsolidated subsidiary....
Cash and cash equivalents at end of year.................................................................................................................................

See the accompanying notes to the consolidated financial statements.

76 Annual Report 2010

Thousands of
U.S. dollars
2010¥ 34,064
54,798
3,447
2,677
(739)
(886)
(1,184)749
18,431(2,055)23,703
(119)
6,927
3,972
(772)
(7,043)(8,531)—
22,206643(7,423)(11,376)
2,527
134,016
3,008(23,328)(4,907)(191)
108,597¥ 33,899
60,418
4,751
2,677
(13)
(3,455)
1,647
792—(1,102)
23,627
(68)
3,044
6,262
(1,278)(3,222)(8,241)
10,26419,7509,361
2,559(9,712)
24,048176,010
2,502(23,512)(6,496)(1,549)146,955$  364,505
649,656
51,08628,785(140)(37,151)
17,7108,516—(11,849)
254,054(731)
32,731
67,333(13,742)(34,645)(88,613)110,366
212,366
100,656
27,516(104,430)
258,581
1,892,581
26,903(252,817)(69,849)(16,656)
1,580,161(120,346)
1,066(8,340)1,940—(1,777)(2,463)(11,900)
5,614
12,8999,181(921)(115,047)(161,078)
2,758(4,142)
3,628
1,813
—
250
(748)
363
11,865
10,5412,010(132,737)(1,732,022)
29,656(44,538)
39,011
19,495—2,688(8,043)
3,903
127,581
113,344
21,613(1,427,280)

12,982
118,523(111,979)
19,909(25,200)(6,339)
(267)
(614)
7,014
(2,739)(2,174)
31,1661,692
5¥ 30,690(28,685)
54,100(62,066)
39,773(20,000)(6,335)(249)(737)(24,200)
302(9,680)30,690430—¥ 21,440(308,441)
581,720(667,376)
427,667(215,054)(68,118)(2,677)(7,925)(260,215)
3,247(104,086)
330,000
4,624—$  230,538

Notes to the Consolidated Financial Statements(1st April 2008 to 31st March 2009) were prepared according to theConsolidated Financial Statement Regulations prior to their revision, andthe consolidated financial statements for the fiscal year under review (1stApril 2009 to 31st March 2010) were prepared according to the revised
Consolidated Financial Statement Regulations.

AUDIT VERIFICATIONThe Company’s consolidated financial statements for the previous fiscal
year (1st April 2008 to 31st March 2009) and for the fiscal year under review(1st April 2009 to 31st March 2010) were audited by KPMG AZSA & Co., as

per Article 193, Section 2.1 of the Financial Instruments and Exchange Act.

Interview with the President

The Company’s consolidated financial statements were prepared inaccordance with the “Regulations Concerning the Terminology, Forms
and Preparation Method of Consolidated Financial Statements” (Finance
Ministry Ordinance No. 28 of 1976; the “Consolidated Financial Statement
Regulations”).
The consolidated financial statements for the previous fiscal year

Our Business

METHOD OF PREPARATION FOR CONSOLIDATED FINANCIAL STATEMENTS

SPECIAL MEASURES TO ENSURE THE APPROPRIATENESS OF CONSOLIDATED FINANCIAL STATEMENTS AND OTHER REPORTS
firms, and other relevant organisations to establish a system for understanding the accounting standards in detail and responding suitably tochanges made to them.

BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS

Hankyu Hanshin Holdings

Financial Section

2. Items related to application of equity-method accounting
Fiscal year ended 31st March 2009(a) Number of affiliates for which equity method is applied—8.
(Names of major equity-method affiliates)
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,and Tokyo Rakutenchi Co., Ltd.
Nishi-Osaka Railway Co., Ltd. has been included in the scope of consolidation due to its increased significance.
(b) The nonconsolidated subsidiaries to which the equity method does
not apply (Hankyu Mediax Co., Ltd., Hanshin Motor Dock Co., Ltd., etc.) andaffiliates (OS Co., Ltd., Iwami Kotsu Co., Ltd., etc.) use the cost method, rather
than the equity method, because the total amounts of their net income orloss, retained earnings, and other figures are low, and the effect on the
consolidated financial statements as a whole is negligible.
(c) The differences in the investment amounts resulting from the equity
method calculation are amortised in equal amounts over five years fromthe date upon which each difference arises.
The difference in the investment amount in connection with H2O
Retailing Corporation that arose during the period ended 31st March 2008is amortised in equal amounts over 20 years.

Management Organisation

Fiscal year ended 31st March 2010(a) Number of consolidated subsidiaries—99.
Names of primary consolidated subsidiaries—Please refer to Page 101.
Kobe Rapid Transit Railway Co., Ltd., due to stock acquisition, andHankyu Hanshin Clean Service Co., Ltd. and three other companies,
due to their increased significance, have been included in the scope of
consolidation.

In addition, Hankyu Express Co., Ltd. and two other companies, due toa merger, and Hankyu Airlines Co., Ltd., due to the completion of its liquidation, have been excluded from the scope of consolidation.
(b) Major nonconsolidated subsidiaries
Hankyu Mediax Co., Ltd.
Nonconsolidated subsidiaries have been excluded from the scope of
consolidation because the total amounts of their entire assets, sales, net
income or loss, retained earnings, and other figures are low, and the effecton the consolidated financial statements as a whole is negligible.
(c) Special purpose entities subject to disclosure
Unchanged from previous fiscal year

Core Businesses: Overview and Outlook

1. Scope of consolidation
Fiscal year ended 31st March 2009(a) Number of consolidated subsidiaries—98.
Names of primary consolidated subsidiaries—Please refer to Page 101.
HANKYU INTERNATIONAL TRANSPORT (KOREA) CO., LTD. and six othercompanies were added to the scope of consolidation because of theirincreased importance, and Hanshin Cable Engineering Co., Ltd. was newly
established and added to the scope of consolidation.
Hotel Hanshin, Ltd., due to a merger, Soei Kosan Co., Ltd., due to thecompletion of its liquidation, and Station Finance Inc. and one other company, due to the sale of all held stock, have been excluded from the scopeof consolidation.
(b) Major nonconsolidated subsidiaries
Hankyu Mediax Co., Ltd., Hanshin Motor Dock Co., Ltd.
Nonconsolidated subsidiaries have been excluded from the scope of
consolidation because the total amounts of their entire assets, sales, net
income or loss, retained earnings, and other figures are low, and the effecton the consolidated financial statements as a whole is negligible.
(c) Special purpose entities subject to disclosure
An overview of special purpose entities subject to disclosure, an overview
of transactions using special purpose entities subject to disclosure, andthe monetary values and other details of transactions with special purpose
entities subject to disclosure are presented in “Special purpose entities
subject to disclosure.”

Special Feature

The Company makes special efforts to ensure the appropriateness of its
consolidated financial statements and other reports. More specifically, theCompany has joined the Financial Accounting Standards Foundation andparticipates in seminars and other events held by the Foundation, audit

77Notes to the Consolidated Financial Statements

Fiscal year ended 31st March 2010(a) Number of affiliates for which equity method is applied—8.
(Names of major equity-method affiliates)
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,Tokyo Rakutenchi Co., Ltd.
(b) The nonconsolidated subsidiaries to which the equity method does
not apply (Hankyu Mediax Co., Ltd., etc.) and affiliates (OS Co., Ltd., etc.)
use the cost method, rather than the equity method because the total
amounts of their net income or loss, retained earnings, and other figures
are low, and the effect on the consolidated financial statements as a wholeis negligible.
(c) The differences in the amounts invested resulting from the equity
method calculation are amortised in equal amounts over five years fromthe date upon which each difference arises.
The entire unamortised balance of the difference in the investment
amount concerning H2O Retailing Corporation that arose during the period
ended 31st March 2008 has been completely amortised in the fiscal year
under review because an impairment loss from the stocks of H2O Retailinghas been reported in the Company’s individual financial statements due
to a decline in the market price of H2O Retailing’s stocks held by theCompany.
3. Items related to fiscal year-ends, etc. for consolidated subsidiaries
Fiscal year ended 31st March 2009
The account closing date for HANKYU INTERNATIONAL TRANSPORT(NETHERLANDS) B.V., HANKYU INTERNATIONAL TRANSPORT(DEUTSCHLAND) GMBH and 16 other consolidated subsidiaries is 31st
December. The consolidated financial statements have been preparedusing the financial statements based on the closing date of each company,and major transactions conducted between the individual closing dates
and the consolidated closing date have been adjusted for as necessary forthe consolidation.
Fiscal year ended 31st March 2010
The account closing date for Hankyu Hanshin Express (Netherlands) B.V.,
Hankyu Hanshin Express (Deutschland) GmbH and 17 other consolidated
subsidiaries is 31st December. The consolidated financial statements havebeen prepared using the financial statements based on the closing date ofeach company, and major transactions conducted between the individualclosing dates and the consolidated closing date have been adjusted for asnecessary for the consolidation.
4. Items related to accounting treatment and standards(1) Valuation standards and method for major assets(a) Inventories
Fiscal year ended 31st March 2009Land and buildings for sale, comprising the major part of the inventories,
are assessed using the identified cost method (with balance sheet values
calculated by writing down book values based on decreased profitability).
Finished products and merchandise, work in progress, and materials andsupplies are assessed primarily using the moving average cost method(with balance sheet values calculated by writing down book values basedon decreased profitability).
(Changes in accounting policies)
The Accounting Standard for Valuation of Inventories (Statement No. 9
issued by the Accounting Standards Board of Japan on 5th July 2006) has
been adopted.
This has resulted in a decrease of ¥3,856 million in operating and

78 Annual Report 2010

ordinary income and ¥4,856 million in income before income taxes andminority interests.
The effect of this change on the segment information is described in
the segment information section.
Fiscal year ended 31st March 2010Land and buildings for sale comprising the major part of the inventories
are assessed using the identified cost method (with balance sheet values
calculated by writing down book values based on decreased profitability).
Finished products and merchandise, work in progress, and materials andsupplies are assessed primarily using the moving average cost method(with balance sheet values calculated by writing down book values basedon decreased profitability).
(b) Among available-for-sale securities, those with available fair market
values are assessed using the market value method based on the market
price, etc., as of the fiscal year-end (with the entire amount of valuation differences directly included under net assets, and the cost of sales calculatedusing the moving average method). Those without available fair market
values are assessed in most cases using the moving average cost method.
For investments in limited liability investment partnerships and similar
investments, however, the Company’s share of assets held by such partnerships is recorded.
(c) Derivatives are assessed using the market value method.
(2) Depreciation methods for major depreciable assets(a) While property and equipment (excluding leased assets) are depreciated for the most part using the declining balance method, there is also
some use of the straight-line method.
Depreciation of buildings acquired after 1st April 1998 (excluding facilities attached to buildings) is calculated using the straight-line method.
(b) Intangible assets (excluding leased assets) are depreciated using thestraight-line method.
Software (used by the Company), however, uses the straight-line method
based on the internal available life (one to six years).
(c) Lease assets related to finance leases other than those that transfer
ownership of the lease assets are depreciated using the straight-line
method, with the assumption that the lease term is the useful life and theresidual value as zero.
Finance leases that commenced prior to 31st March 2008 are accounted
for based on the method applied to usual lease transactions.
(3) Accounting for contributions for construction works
Fiscal year ended 31st March 2009
Hankyu Corporation and Hanshin Electric Railway Co. Ltd., consolidated
subsidiaries of the Company, accept contributions for construction works
from local governments and other organisations as part of the cost of
construction when carrying out railroad elevations such as continuous
grade separations and crossing-widening work.
The assets acquired using the contributions are recorded in property
and equipment at the acquisition cost, after deducting the amounts corresponding to the contributions.
The amounts received for construction works, including such contributions are recorded in extraordinary income in the consolidated statements of income, and the amount directly deducted from the acquisition
cost is recorded in extraordinary loss as loss on reduction of property andequipment.

Interest on bonds and loans
payable5. Items related to the valuation of assets and liabilities at consolidated subsidiaries
Fair value valuation is used for the valuation of all assets and liabilities of
consolidated subsidiaries.
6. Amortisation of goodwill and negative goodwill
Goodwill and negative goodwill are amortised, in general, in equal amounts
over five years. The goodwill resulting from the management integration
with Hanshin Electric Railway Co., Ltd. in the period ended 31st March 2007
is being amortised in equal amounts over 20 years.
7. Scope of cash included in consolidated statements of cash flows
In preparing the consolidated statements of cash flows, cash on hand,readily available deposits and short-term highly liquid investments withoutmaterial risk of changing their value and with maturities not exceeding
three months at the time of purchase are considered to be cash and cash
equivalents.

Financial Section

Interest rate swap contracts
Interest rate option contracts(8) A consolidated tax payment system has been adopted.

Management Organisation

Foreign currency tradereceivables and trade payables
and future foreign currencytransactions(7) Accounting for consumption tax is based on the tax exclusion method.
The non-deductible amount of the consumption tax on assets that are
not tax deductible is included in “Other” of investments and other assets
on the consolidated balance sheets as long-term prepaid consumption
tax and is amortised in equal amounts based on the provisions of the
Corporation Tax Law.

Core Businesses: Overview and Outlook

Foreign exchange contracts
Currency swap contracts
Currency option contracts(6) The assets and liabilities and income and expenses of overseas subsidiaries are converted to yen based on the spot exchange rate on the settlement
date. Differences in conversion are included in translation adjustments andminority interests in the net assets section.
Special Feature(5) Significant hedge accounting methods(a) Method of hedge accounting
Deferred hedge accounting is applied.
Exceptional accounting applies to interest rate swaps that satisfy therequirements for exceptional accounting for interest rate swaps.
Designation accounting applies to foreign currency denominatedassets and liabilities with foreign exchange forward contracts.
(b) Hedging instruments and hedged items
Hedging instruments:
Hedged items:

Interview with the President(4) Accounting standards for significant transactions(a) Provision for bonuses is recorded in the amount expected to be paid bysome consolidated subsidiaries as bonuses during the fiscal year.
(b) Provision for retirement benefits is provided based on the estimatedamount of projected benefit obligation and the fair value of plan assets in
preparation for retirement benefits to be paid to employees at the end of
the fiscal year.
Prior service costs are recorded in expenses in equal amounts using
the straight-line method over a certain number of years (3 to 15 years)
within the average remaining years of service of the employees at the time
when these costs are incurred, commencing, in general, in the fiscal year inwhich they arise.
Actuarial differences are recorded in expenses using the straight-line
method over a certain number of years (4 to 15 years) within the averageremaining years of service of the employees at the time when these costs
are incurred, commencing in the fiscal year following the year in which
they arise.
(c) Provision for directors’ retirement benefits is an amount based on theinternal rules of some of the consolidated subsidiaries for the payment of
retirement benefits to their directors.
(d) Allowance for doubtful receivables is provided based on the ratio of
past loan loss experience for general accounts and individually estimateduncollectible amounts for certain individual accounts.
(e) Reserve for investment losses is provided for possible losses in excess ofinvestments and loans to affiliates based on the evaluation of their assets
and other factors.

(c) Hedging policy
The Group is exposed to the risk of foreign exchange and interest rate
fluctuations and uses derivatives as a means of hedging these risks.
(d) Method for evaluating the effectiveness of hedges
Other than when the effectiveness of hedges is obvious, hedge effectiveness is evaluated semiannually using the comparison and analysis method.
(e) Other risk management methods concerning hedge accounting
The division of duties, the maximum transaction amount, and otherinternal rules have been established for the use of derivative transactions,based on which derivative transactions are used. The implementation andmanagement of derivative transactions are carried out by the accounting department with the approval of the decision makers in each Group
company. An internal control system has been developed to ensure thatthe contract signing and termination comply with the internal rules.

Our Business

Fiscal year ended 31st March 2010
Some consolidated subsidiaries of the Company accept contributions forconstruction works from local governments and other organisations aspart of the cost of construction when carrying out railroad elevations suchas continuous grade separations and crossing-widening work.
The assets acquired using the contributions are recorded in property
and equipment at the acquisition cost, after deducting the amounts corresponding to the contributions.
The amounts received for construction works, including such contributions, and are recorded in extraordinary income in the consolidated statements of income, and the amount directly deducted from the acquisition
cost is recorded in extraordinary loss as a loss on the reduction of property
and equipment.

Hankyu Hanshin Holdings

79Notes to the Consolidated Financial Statements

ADDITIONAL INFORMATION
Fiscal year ended 31st March 2009
(Change of purpose of possession)
The purpose of the possession of the part of the land included in “construction in progress” under “noncurrent assets” up until the previous fiscal year

has been changed in the fiscal year ended 31st March 2009. The amounttransferred from “construction in progress” to “land and buildings for sale”
as a result of this change is ¥6,720 million.

CHANGES IN ACCOUNTING POLICIESFiscal year ended 31st March 2009
(Accounting standards for lease transactions)
Finance lease transactions that do not transfer ownership rights werepreviously accounted for based on the method applied to ordinary leasetransactions. From the fiscal year ended 31st March 2009, however, the“Accounting Standard for Lease Transactions” (ASBJ Statement No. 13,
issued by the Accounting Standards Board of Japan on 17th June 1993, andrevised on 30th March 2007) and the “Guidance on Accounting Standard
for Lease Transactions” (ASBJ Guidance No. 16, issued by the AccountingStandards Board of Japan on 18th January 1994, and revised on 30th March
2007) are applied, and these transactions are accounted for in a similarmanner as ordinary sale and purchase transactions.
This change has a negligible effect on total assets and no effect on
profit or loss.
(Present handling related to accounting treatment for overseas subsidiaries in the preparation of consolidated financial statements)
The “Practical Solution on Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements (ASBJ PITF
No. 18, issued by the Accounting Standards Board of Japan on 17th May
2006) is applied.
The effect of this change is negligible.
Fiscal year ended 31st March 2010(“Accounting Standards for Construction Contracts” etc.)
Accounting Standards for Construction Contracts (Statement No. 15 issued

by the Accounting Standards Board of Japan on 27th December 2007)
and Implementation Guidance on Accounting Standards for Construction
Contracts (the Financial Accounting Standard Implementation GuidanceNo. 18 issued by the Accounting Standards Board of Japan on 27th
December 2007) have been adopted. The percentage-of-completion
method applies to construction projects whose contracts are initiated during the fiscal year, and which have measurable progress at the end of the
fiscal year (the proportion-of-cost method is mainly used to estimate theprogress of such construction projects). The completed-contract method
applies to other construction projects.
This change has resulted in an increase of ¥1,311 million (US$14,097
thousand) in revenues from operations and ¥66 million ($710 thousand)each in operating income, ordinary income, and income before income
taxes and minority interests, from the amounts that would have beenreported with the previous method.
The effect on the segment information is described in the segment
information section.
(Partial amendment to “Accounting Standards for Retirement Benefits”(Part 3))The partial amendment to the Accounting Standards for Retirement Benefits(Part 3) (Statement No. 19 issued by the Accounting Standards Board ofJapan on 31st July 2008) has been adopted. The effects of this change
on operating income, ordinary income, income before income taxes andminority interests, and projected benefit obligation are negligible.

CHANGES IN PRESENTATION(Consolidated Balance Sheets)
Fiscal year ended 31st March 2009
1. With the enforcement of the Cabinet Ordinance to Partially Amend Rules
on Financial Statements, etc. (No. 50 issued on 7th August 2008), the items
categorised as “inventories” in the previous fiscal year have been divided
into “land and buildings for sale,” “finished products and merchandise,”“work in progress,” and “materials and supplies” from the fiscal year ended
31st March 2009. “Land and buildings for sale,” “finished products andmerchandise,” “work in progress,” and “materials and supplies” included in“inventories” in the previous fiscal year are ¥127,618 million, ¥7,314 million,¥7,986 million, and ¥3,170 million, respectively.
2. Because the amount of short-term loans receivable (¥1,276 million in thefiscal year ended 31st March 2009) categorised under current assets in theprevious fiscal year was insignificant, it is included in “other” for the fiscal
year under review.
Fiscal year ended 31st March 2010
Because the amount of long-term loans receivable (¥6,415 million ($68,978
thousand) in the fiscal year under review) categorised under investments
and other assets in the previous fiscal year was insignificant, it is included in“other” for the fiscal year under review.

80 Annual Report 2010

(Consolidated Statements of Income)Fiscal year ended 31st March 2009
1. Because the amount of “subsidies” (¥17 million in the fiscal year underreview) categorised under extraordinary income in the previous fiscal year was
insignificant, it is included in “other” for the fiscal year ended 31st March 2009.
2. Because the amount of “gain on change in equity” (¥45 million in thefiscal year ended 31st March 2009) categorised under extraordinary incomein the previous fiscal year was insignificant, it is included in “other” for the
fiscal year under review.
3. Because the monetary significance of the “special reserve for investment
losses” included in “other” under extraordinary loss in the previous fiscal
year has increased, it is categorised separately in the fiscal year ended 31st
March 2009.
The amount of the “special reserve for investment losses” included in“other” in the previous fiscal year is ¥34 million.
(Consolidated Statements of Cash Flows)
Fiscal year ended 31st March 2009
1. Because the amount of “increase (decrease) in reserve for investment losses”(¥386 million in the fiscal year ended 31st March 2009) categorised under cash

4. Because the amount of “gain on change in equity by management integration” (¥45 million in the fiscal year ended 31st March 2009) categorised undercash flows from operating activities in the previous fiscal year was insignificant, it is included in “other” for the fiscal year ended 31st March 2009.

NOTES(Consolidated Balance Sheets)*1. Accumulated depreciation of property and equipment
Millions of yen*2. A ccumulated contributions for construction works directly deductedfrom the acquisition cost of noncurrent assets

Thousands of U.S. dollars

Millions of yen

Thousands of U.S. dollars

2009

2010

2010

2009

2010

2010

¥870,318¥920,215$9,894,785¥330,683¥348,741$3,749,903

Millions of yen

Thousands of U.S. dollars
2010

2009

2010

[¥      —]

¥    140[¥      —]

$     1,505[$        —]229,243
46,474
271,669
4,183[223,065][46,470][258,481][4,183]

235,852
46,456272,412
4,116[230,129][46,454][259,244][4,116]2,536,043
499,527
2,929,161
44,258[2,474,505][499,505][2,787,570][44,258]

1,432[1,432]

1,466[1,466]

15,763[15,763]

18,303¥571,311[—][¥533,633]

17,044¥577,489[—][¥541,410]

183,269$6,209,559[—][$5,821,613]

Core Businesses: Overview and Outlook¥       5Special Feature*3. Pledged assets and secured liabilities
The following table shows the assets pledged as collateral.

Current assets:
Cash and deposits................................................
Property and equipment:
Buildings and structures..................................
Machinery, equipment and vehicles........
Land..............................................................................
Other............................................................................
Intangible assets:
Other............................................................................
Investment and other assets:
Investment securities.........................................
Total......................................................................

Interview with the President

2. “Gain on sale of property and equipment” (¥243 million in the fiscal year
ended 31st March 2009) and “loss on sale of property and equipment”(¥123 million in the fiscal year ended 31st March 2009) categorised undercash flows from operating activities in the previous fiscal year are indicatedas “loss (gain) on sale of property and equipment” from the fiscal year
ended 31st March 2009 to improve the comparability of the consolidated
financial statements due to the introduction of XBRL to EDINET.

3. “Gain on sale of marketable and investment securities” (¥819 million in
the fiscal year ended 31st March 2009) categorised under cash flows fromoperating activities in the previous fiscal year is indicated as “loss (gain) on
sale of marketable and investment securities” from the fiscal year ended
31st March 2009 to improve the comparability of the consolidated financial
statements due to the introduction of XBRL to EDINET.

Our Businessflows from operating activities in the previous fiscal year was insignificant, it isincluded in “other” for the fiscal year ended 31st March 2009.

The following table shows the secured liabilities.

Current liabilities:
Short-term borrowings.....................................
Other............................................................................
Long-term liabilities:
Long-term debt.....................................................
Total......................................................................

Thousands of U.S. dollars
2010

2010

¥   9,997
67[¥ 8,891][—]¥ 10,979
59[¥ 9,572][—]$  118,054
634[$102,925][—]

95,719¥105,783[76,752][¥85,644]

94,464¥105,503[76,652][¥86,225]

1,015,742$1,134,441[824,215][$927,151]

Management Organisation

Millions of yen
2009

The amounts in brackets are the amounts for the Railway Foundation within the total of each category.

Millions of yen

Investment securities (stocks)....

Thousands of
U.S. dollars

2009

2010

2010

¥155,239¥151,052$1,624,215*5. Two consolidated subsidiaries and an equity method affiliate revaluatedland for business use based on the Law Concerning Revaluations of Land

(Law No. 34, promulgated on 31st March 1998) and the Law to Partially
Modify the Law Concerning Revaluations of Land (Law No. 19, promulgatedon 31st March 2001). Of the valuation differences identified as a result of
this, the consolidated subsidiaries recorded the amount corresponding
to the taxes on the valuation difference in the liability section as “deferred
tax liabilities related to land revaluation” and the amount belonging tominority shareholders as “minority interests.” The amount remaining after
subtracting these was recorded in the net assets section as “surplus fromland revaluation.” The equity method affiliates recorded the amountHankyu Hanshin Holdings

Financial Section*4. T he following table shows the securities for nonconsolidated subsidiaries and affiliates.

81Notes to the Consolidated Financial Statements

corresponding to its equity in the valuation difference (after subtracting
taxes) in the net assets section as “surplus from land revaluation.”
Revaluation method
The revaluation amounts were determined based on the revaluated value of noncurrent assets provided for in Article 2, Paragraph
3 of the Enforcement Ordinance. Concerning Land Revaluation(Ordinance No. 119, promulgated on 31st March 1998).
Date of revaluation: 31st March 2002.
The difference between the market value of the revaluated landat the end of the fiscal year under review and book value after
revaluation.
Millions of yen*2. The breakdown of selling, general and administrative expenses isshown below.

Personnel expenses........................
Expenses................................................
Taxes.........................................................
Depreciation andamortisation......................................
Amortisation of goodwill.............
Total..................................................

2009

2010

2010

¥14,697
12,835528¥16,083
11,988505$172,935
128,903
5,430

1,293
2,677
¥32,032

1,429
2,677
¥32,684

15,36628,785$351,441

Thousands of U.S. dollars

2009

2010

2010

¥(5,042)¥(4,866)$(52,323)

6. Contingent liabilities(A) The Company provides a liability guarantee for loans of the Companies,
etc. listed below.

Thousands of
U.S. dollars

Millions of yen
2009

2010

2010

¥1,133
4,350
8,934¥   159
4,413
10,027$   1,710
47,452
107,817

155

136

1,462

¥19,493
3,229
65¥22,788*4. T he gain on sale of property and equipment resulted from the transfer of land and other property.

Millions of yen*Nishi-Osaka Railway Co., Ltd. ...............................
Borrowers on loans for purchase ofland and buildings......................................................
Other (six companies)..................................................
Total................................................................................

*3. T he amounts of allowance and reserves included in the costs ofrevenues from operations are shown below.

Special allowance for doubtfulreceivables ........................................
Provision for bonuses....................
Retirement benefit expenses....
Provision for directors’
retirement benefits.......................

Fiscal year ended 31st March 2009

* Hanshin Electric Railway Co., Ltd. is joint and several liability for the lenders for all
liabilities borne by Nishi-Osaka Railway Co., Ltd. based on the commitment line agreement and interest rate exchange agreement signed by Nishi-Osaka Railway Co., Ltd.
with the lending financial institutions. The maximum contractual loan amount for thiscommitment line agreement is ¥13,000 million, and the balance of current borrowing,¥8,900 million, is included in the above liability guarantee.

*5. T he gain on sale of securities resulted from the sale of investment
securities.
*6. T he loss on sale of property and equipment resulted from the transfer of land and other property. The breakdown is shown below.

Fiscal year ended 31st March 2010

Thousands of
U.S. dollars

Millions of yen

Nishi-Osaka Railway Co., Ltd....................................
Borrowers on loans for purchase ofland and buildings......................................................
Cassiopeia Ltd. ................................................................
Other (five companies)...............................................
Total................................................................................

Millions of yen

Thousands of
U.S. dollars¥24,610$264,624

5,780
2,625
139
¥33,155

62,151
28,226
1,495$356,505(B) The Company guarantees the loans of Senchu Parking by reserving theright of purchasing real property held by Senchu Parking.
Millions of yen

Thousands of U.S. dollars

2009

2010

2010

¥8,500¥7,007$75,344

Note: Major partner companies included in (A) above are the Company’s affiliates.

(Consolidated Statements of Income)*1. Year-end inventory balance
Fiscal year ended 31st March 2009
The year-end inventory balance is the amount after write-down due todecreased profitability, and the following write-down of inventories is
included in operating expenses and cost of sales.
¥3,856 million

82 Annual Report 2010

Thousands of
U.S. dollars

Millions of yen

Land..........................................................
Tools, furniture and fixtures,etc. .........................................................
Machinery, equipment andvehicles, etc. . ...................................

2009

2010

2010

¥101

¥309

$3,323

22

—

—

—

16

172

*7. Loss on disposal of property and equipment
Fiscal year ended 31st March 2009
The loss on disposal of property and equipment resulted primarily from therenovation of the Hanshin Koshien Stadium of Hanshin Electric Railway Co.,
Ltd. The breakdown is shown below.
Millions of yen

Book value upon removal.........................................
(Breakdown)
Buildings and structures....................................
Tools, furniture and fixtures, etc. .................
Cost of removal work...................................................

¥3,431
3,250
181
541

Thousands of
U.S. dollars¥4,613$49,602

Book value upon removal.........................................
(Breakdown)
Buildings and structures....................................

4,446

47,806

Tools, furniture and fixtures, etc. .................

166

1,785

Cost of removal work...................................................

1,649

17,731

Use

Type of assets
Construction inprogress, etc.

¥2,090

Kochi

Hotel
Total: 1

Land and buildings,
etc.

1,200

Kyoto, etc.

Retailing stores, etc.
Total: 6

Land and buildings,
etc.

157

The following table shows the breakdown of the loss on impairment of
fixed assets in each region.
RegionOsaka

Kyoto, etc.

Millions of yen

Buildings and structures¥    14

Construction in progress

2,075

Other

1

Land

645

Buildings and structures

554

Land

69

Buildings and structures

68

Machinery, equipment and vehicles

1

Other

17

Intangible assets

0

Idle assets, etc.
Total: 11

Construction inprogress, etc.

¥4,576$49,204

Kyoto

Retailing stores
Total: 2

Buildings andstructures, etc.

112

1,204

Hyogo,
etc.

Retailing stores, etc.
Total: 12

Buildings andstructures, etc.

61

656

The following table shows a breakdown of the loss on impairment of fixed
assets in each region.
RegionFiscal year ended 31st March 2010
The loss on impairment of fixed assets was calculated by grouping theassets based on the smallest unit that creates a cash flow that is generally

Type of assets
Buildings and structures

Kyoto

Hyogo, etc.

Thousands of
U.S. dollars¥  132$ 1,419

8

86

4,407

47,387

Other

15

161

Intangible assets

12

129

Buildings and structures

94

1,011

Other

18

194

Intangible assets00

Buildings and structures

38

409

Land
Osaka

Millions of yen

Construction in progress

Machinery, equipment and vehicles

2

22

Land

12

129

Construction in progress

0

0

Other

8

86

The recoverable value of this asset group has been calculated based primarily on the net sale value.
The net sale value uses the amount calculated by rationally adjusting
the expected sale prices, appraised values based on the Japanese Real
Estate Appraisal Standards, and/or fixed asset tax assessment values.
*9. Restructuring costs
Fiscal year ended 31st March 2009
Restructuring costs related to the exclusion of Station Finance Inc. from thescope of consolidation consist of a loss of ¥537 million from the sale of theshares of the Company held by Hankyu Corporation and a loss of ¥17,893
million from the sale of receivables on financing to third parties.
*10. Amount corresponding to goodwill
Fiscal year ended 31st March 2010
The lump sum amortisation of goodwill equivalent amount under theequity method refers to the process by which the entire unamortised balance of the “goodwill equivalent amount” recognised when the sharesof H2O Retailing Corporation, an equity method affiliate of the Company,
were acquired through the exchange of shares in the consolidated settlement because an impairment loss from the stock of H2O Retailing has beenreported in the Company’s individual financial statements due to a decline
in the market price of H2O Retailing’s stock held by the Company.

Hankyu Hanshin Holdings

Financial Section

The recoverable value of this asset group has been calculated based on the
net sale value or value in use, etc.
The net sale value uses the amount calculated by rationally adjusting
the expected sale prices, appraised values based on the Japanese Real
Estate Appraisal Standards, and/or noncurrent asset tax assessment values.
When the value in use is used for the calculation, the future cash flow is
discounted by 4.0%.

Thousands of
U.S. dollars

Management Organisation

Kochi

Type of assets

Millions of yen

OsakaMillions of yen

Idle assets, etc.
Total: 3

Osaka

Type of assets

Core Businesses: Overview and Outlook

RegionUse

Special Feature*8. Loss on impairment of fixed assets
Fiscal year ended 31st March 2009
The loss on impairment of fixed assets was calculated by grouping theassets based on the smallest unit that creates a cash flow that is generally
independent of the cash flow of other assets or asset groups. As a result,the book values of a total of ten noncurrent assets groups, whose market
values have been sharply declining from their book values due to a continuous decrease in land value, and those that have continuously resulted inoperating losses and whose profitability is unlikely to recover in the future,
were reduced to the recoverable amount, and the amount of the reduction
has been recorded as a loss on impairment of fixed assets (¥3,447 million)
under extraordinary loss in the fiscal year ended 31st March 2009.

RegionInterview with the President

Millions of yen

independent of the cash flow of other assets or asset groups. As a result,the book values of a total of 25 noncurrent assets groups, the market valuesof which have been declining sharply from their book values due to a continuous decrease in land value, and those that have continuously resulted inoperating losses and whose profitability is unlikely to recover in the future,
were reduced to the recoverable amount, and the amount of the reduction
has been recorded as a loss on impairment of fixed assets (¥4,751 million($51,086 thousand)) under extraordinary loss in the fiscal year under review.

Our Business

Fiscal year ended 31st March 2010
The loss on disposal of property and equipment resulted primarily from thereconstruction of the Umeda Hankyu Building of Hankyu Corporation. The
breakdown is shown below.

83Notes to the Consolidated Financial Statements(Consolidated Statements of Changes in Net Assets)
1. Items related to types and total number of shares issued and types and number of treasury stock sharesFiscal year ended 31st March 2009
No. of shares as of 31st March 2008

Increase in number of shares(Thousands of shares)

Decrease in number of shares

No. of shares as of 31st March 2009

No. of shares issued
Common stockTotal

1,271,406——

1,271,406

1,271,406——

1,271,406

Treasury stock, at cost
Common stock (Notes 1 and 2)
Total

7,857

1,903

0

9,761

7,857

1,903

0

9,761

(Overview of reasons for fluctuations)
Notes:
1. The increase of 1,903 thousand shares of common stock of the Company includes 1,067 thousand shares of treasury stock (the Company’s own shares) belonging to theCompany among the treasury stock acquired by equity method affiliates, and an increase of 836 thousand shares from the purchase of odd lot shares.
2. The decrease of 0 thousand common shares of the Company includes 0 thousand shares as a result of a decreased equity ratio of equity method affiliates.

Fiscal year ended 31st March 2010

(Thousands of shares)

No. of shares as of 31st March 2009

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2010

No. of shares issued
Common stockTotal

1,271,406——

1,271,406

1,271,406——

1,271,406

Treasury stock, at cost
Common stock (Notes 1 and 2)
Total

9,761

311

794

9,278

9,761

311

794

9,278

(Overview of reasons for fluctuations)
Notes:
1. The increase of 311 thousand shares of common stock of the Company represents the increase from the purchase of odd lot shares.
2. The decrease of 794 thousand shares of common stock of the Company includes a decrease of 731 thousand shares as a result of an exchange of shares (three-way exchangeof shares) using the treasury stock (the Company’s own shares) of consolidated subsidiaries and a decrease of 63 thousand shares due to the sale of odd lot shares.

2. Items related to subscription rights for shares and own share options
Fiscal years ended 31st March 2009 and 2010
No items
3. Items related to dividends
Fiscal year ended 31st March 2009
(1) Dividends paid
(Resolution)

Type of shares

25th June 2008
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)

Dividend per share(Yen)¥6,339¥5

Record date

Effective date

31st March 2008

26th June 2008

(2) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
(Resolution)

Type of shares

17th June 2009
General meeting ofshareholders

Common stock

Dividends paid
(Millions of yen)
¥6,335

Source of dividends

Dividend per share(Yen)

Retained earnings¥5

Record date

Effective date

31st March 200918th June 2009

Fiscal year ended 31st March 2010
(1) Dividends paid
Dividends paid
(Resolution)

Type of shares

17th June 2009
General meeting ofshareholders

Common stock

84 Annual Report 2010

(Thousands(Millions ofof U.S.
yen)
dollars)¥6,335$68,118

Dividend per share(Yen)(U.S. dollars)

¥5

$0.05

Record date

Effective date

31st March 200918th June 2009

Dividends paid
Type of shares

16th June 2010
General meeting ofshareholders

Common stock¥6,337

Source of dividends$68,140

Retained earnings(Consolidated Statements of Cash Flows)
1. Relationship between cash and cash equivalents at fiscal year-end
and amounts shown on consolidated balance sheets
Millions of yen
2009

2010

2010

¥31,973¥23,792$255,828(1,283)(2,351)(25,280)¥30,690¥21,440$230,538

2. Major breakdown of assets and liabilities of subsidiaries added toscope of consolidation via acquisition of sharesFiscal year ended 31st March 2010

¥5

$0.05

Record date

Effective date

31st March 2010

17th June 2010

3. Major breakdown of assets and liabilities of companies that are nolonger consolidated subsidiaries of the Company after the sale oftheir sharesFiscal year ended 31st March 2009
Hankyu Cargo Service Co., Ltd.
Millions of yen
Current assets...................................................................
¥1,965
Noncurrent assets ........................................................
502
Current liabilities.............................................................
(1,439)Long-term liabilities......................................................
(619)
Station Finance Inc.
Millions of yen
Current assets . ................................................................ ¥44,048
Noncurrent assets..........................................................
2,046
Current liabilities ...........................................................
(10,467)
Long-term liabilities......................................................
(34,758)

Thousands of
U.S. dollars$ 71,839
595,419(133,086)(529,172)(Lease Transactions)<As lessee>
1. Finance lease transactions that do not transfer ownership of the lease asset, prior to the initial year for commencement of the application of theaccounting standards for lease transactions(1) Amount equivalent to acquisition cost, accumulated depreciation and net leased property at fiscal year-end
Millions of yen

Thousands of U.S. dollars

2009

2010

2010

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property

Acquisition Accumulated Net leased
cost
depreciation property¥      7
4,766
6,420
¥11,194¥     74,440
4,670
¥9,117$     75
47,74250,215$98,032¥     42,450
4,104
¥6,559¥     32,315
2,316
¥4,635¥     52,716
3,272
¥5,994¥     1
1,723
1,397
¥3,123$     54
29,20435,183$64,452$     11
18,52715,022$33,581Note: The acquisition cost includes interest paid due to a low percentage of future lease payments in the year-end balance of property and equipment.

(2) Amount equivalent to future lease payments

Due within one year.......................
Due after one year...........................
Total..................................................

2009

2010

2010

¥1,431
3,203¥4,635¥1,210
1,912¥3,123$13,011
20,559$33,581Note: The future lease payments include interest paid due to a low percentage of
future lease payments in the year-end balance of property and equipment.

(3) Lease payments, reversal of impairment loss on leased assets, andamount equivalent to depreciation expenses
Thousands of
U.S. dollars

Millions of yen

Lease payments.................................
Reversal of impairment
loss on leased assets....................
Amount equivalent todepreciation expenses . ............

2009

2010

2010

¥2,386¥1,496$16,086

7

—

—

2,386

1,496

16,086

Hankyu Hanshin Holdings

Financial Section

Millions of yen

Thousands of
U.S. dollars

Management Organisation

Buildings and structures........................................
Machinery, equipment and vehicles..............
Other..................................................................................
Total............................................................................

Core Businesses: Overview and Outlook

Kobe Rapid Transit Railway Co., Ltd.
Millions of yen
Current assets................................................................... ¥ 6,681
Noncurrent assets ........................................................
55,374Current liabilities ...........................................................
(12,377)
Long-term liabilities......................................................
(49,213)(U.S. dollars)Special Feature

Cash and deposits in the
consolidated balance sheets....
Deposits with maturities
over 3 months..................................
Cash and cash equivalents inthe cash flow statements..........

Thousands of
U.S. dollars(Yen)Interview with the President(Resolution)

Dividend per share(Thousands(Millions ofof U.S.
yen)
dollars)

Our Business(2) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date

85

Notes to the Consolidated Financial Statements(4) Method for calculating the amount equivalent to depreciation expenses
The straight-line method using the term of the lease as useful life withresidual value of zero.
2. Operating lease transactions
Millions of yen

Future lease payments
Due within one year...............
Due after one year...................
Total..................................................

Thousands of
U.S. dollars

2009

2010

2010

¥ 7,628
19,564¥27,193¥ 3,320
12,153¥15,473$ 35,699
130,677$166,376<As lessor>
1. Operating lease transactions
Millions of yen

Future lease payments
receivables
Due within one year...............
Due after one year...................
Total..................................................

Thousands of
U.S. dollars

2009

2010

2010

¥    81
1,060¥1,142¥    81979¥1,060$   871
10,527$11,398(Financial Instruments)
Fiscal year ended 31st March 2010
(Additional information)
Beginning with the fiscal year under review, the Company has adopted the“Accounting Standard for Financial Instruments” (Statement No. 10 issued
by the Accounting Standards Board of Japan on 10th March 2008) and the“Implementation Guidance for the Disclosure of Fair Value, etc. of Financial
Instruments” (Implementation Guidance No. 19 issued by the AccountingStandards Board of Japan on 10th March 2008).
1. Matters regarding the conditions of financial instruments(1) Policy on financial instruments
It is the Group’s policy to limit the investment of its funds to short-term
deposits, which are highly secure, and the Group has raised funds chiefly
through loans from financial institutions, bonds and commercial papers.
Derivative transactions have been used to avoid risk, as discussed later. It is
our policy to refrain from speculative transactions.
(2) Details of the financial instruments used, the risk involved, and the risk
management system
Marketable and investment securities consist primarily of stocks and bonds,
and are exposed to market price fluctuation risk. However, fair values andthe financial condition of the issuers are checked periodically, and thereasons for holding the securities continue to be confirmed.
Trade receivables, namely note receivables and trade accountreceivables, are exposed to the credit risk of customers. The Group limits
its exposure to this credit risk by controlling the due date and balanceby customer, and by making periodical checks of the credit conditions ofmajor customers pursuant to the internal regulations of each company.
Almost all trade payables, namely note payables and trade accountpayables, have a payment date that falls within one year.
Some foreign currency denominated assets and liabilities are exposed
to exchange rate fluctuation risk (market risk), which was hedged through86 Annual Report 2010

forward exchange contracts, currency swap transactions and currency
option transactions.
Long-term debts and bonds are used primarily to raise the long-term
funds necessary for capital investment plans, and short-term borrowingsand commercial papers are used primarily to raise the short-term funds
for working capital. Some floating-rate debts and floating-rate bonds are
exposed to interest rate fluctuation risk (market risk). Exposure to interest
rate fluctuation risk is limited by fixing interest rates through interest rate
swap transactions and interest rate option transactions. In addition, there
is liquidity risk that payment will not be made by the due date. Liquidity
risk is limited by the timely preparation of financing plan and proper fundmanagement. In addition, the surplus funds of the Group companies areconcentrated and used effectively through centralisation of Group funds byusing the cash pool system, etc. Immediate fund raising from financial institutions became possible through the establishment of backup financing
such as commitment lines. In addition, the Company maintained a properbalance between direct financing and indirect financing, and advanced thediversification of its fund raising means by using many financial institutions,thus securing liquidity.
Regarding the use of derivative transactions, internal regulationsprescribe the division of duties and transaction limits. With respect toderivative transactions, the main purpose of interest rate swap transactions and interest rate option transactions is to hedge the interest rate
fluctuation risk involved in certain loans and bonds. Forward exchange
contracts, currency swap transactions and currency option transactions areused mainly to avoid exchange rate fluctuation risk involved in a portionof foreign currency denominated assets and liabilities. These derivativetransactions involve credit risk because, if the other party to a transaction
defaults on debts based on contracted conditions, or becomes bankrupt,
the benefit that would have been obtained in the future if the transaction
had continued will not be enjoyed. However, credit risk was limited bycarrying out transactions only with financial institutions with high ratings.
For more information regarding the means and objectives of hedging,hedging policy, and the method of evaluating the effectiveness of hedges
relating to hedge accounting for derivative transactions, refer to “significant hedge accounting methods” outlined in “BASIS OF PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS” above.
(3) Supplementary explanation regarding fair values of financial
instruments
The fair values of financial instruments include values based on market
prices. If market prices are not available, the fair values of financial instruments include values that have been reasonably calculated. Certain
assumptions are used to calculate the above values. As a result, if different assumptions are used, the values may differ. For derivative contracts,
the amount of the contract, which is indicated in the note on “derivativetransactions,” does not indicate the market risk involved in derivativetransactions themselves.

Millions of yen(1) Cash and deposits.....................
(2) Trade receivables.......................
(3) Securities.........................................
Total assets...................................
(4) Trade payables............................
(5) Short-term borrowings (*1)...
(6) Bonds (*2).......................................
(7) Long-term debt (*1)................
Total liabilities.............................
(8) Derivative transactions..........

Book value

Fair value

Difference¥    23,792
78,96946,107
148,869
46,726
182,087
160,000
937,277
1,326,091—¥    23,792
78,96946,107
148,868
46,726
182,087
163,078
944,593
1,336,484(21,119)¥     —
—
(0)
(0)
—
—
3,078
7,315
10,393—Thousands of U.S. dollars
Book value

Fair value

Difference(Note 2) Financial instruments whose fair value is extremely difficult to ascertain

Category

Millions of yen

Thousands of
U.S. dollars

Book value

Book value¥ 4,833$ 51,968

Available-for-sale securities
Non-listed equity securities...........................................

(*1) Current portion of long-term debt is included in (7) Long-term debt.
(*2) Current portion of bonds is included.

Investments in limited liability investment
partnerships and similar investments...................

8,850

95,161

Negotiable certificates of deposit..............................

16,988

182,667

Total.....................................................................................

¥30,672$329,806

It is extremely difficult to ascertain the fair values of these because market prices
are not available and future cash flow cannot be estimated. As a result, they are notincluded in (3) Securities.

(Note 1) Method for calculating of the fair values of financial instruments and mattersregarding securities and derivative transactions(1) Cash and deposits, (2) Trade receivables
The fair values of these are almost equal to their book values because they will besettled within a short period of time. As a result, their fair values are based on theirbook values.

(Note 3) The stocks of nonconsolidated subsidiaries and affiliated companies are notincluded in (3) Securities.

Core Businesses: Overview and Outlook$      —
—
(0)
(0)
—
—
33,09778,656
111,753—

Special Feature(1) Cash and deposits..................... $   255,828 $   255,828(2) Trade receivables.......................
849,129
849,129(3) Securities.........................................
495,774
495,774
Total assets...................................
1,600,742
1,600,731(4) Trade payables............................
502,430
502,430(5) Short-term borrowings (*1)...
1,957,925
1,957,925(6) Bonds (*2).......................................
1,720,430
1,753,527(7) Long-term debt (*1)................ 10,078,247 10,156,914
Total liabilities............................. 14,259,043 14,370,796(8) Derivative transactions..........
—(227,086)

Interview with the President(3) Securities
The fair values of stocks are based on prices quoted by stock exchanges, and thefair values of bonds are based on prices quoted by stock exchanges or prices
presented by trading financial institutions. With respect to securities categorised by
the purpose for which they are held, refer to notes on “Securities.”(4) Trade payables, (5) Short-term borrowings
The fair values of these are almost equal to their book values because they will besettled within a short period of time. As a result, their fair values are based on theirbook values.
(6) Bonds
The fair values of fixed-rate bonds issued by the Company and some of its consolidated subsidiaries are based on market prices. The fair values of floating-rate bonds
are based on their book values because the fair values of floating-rate bonds reflectmarket interest rates within a short period of time, and closely approximate theirbook values.
(7) Long-term debt
The fair values of fixed-rate long-term debts are based on a method of calculation
whereby the total principal and interest is discounted at an interest rate that isassumed for the introduction of similar debts. The fair values of floating-rate longterm debts are based on their book values because the fair values of floating-ratelong-term debts reflect market interest rates within a short period of time andclosely approximate their book values.
(8) Derivative transactions
Refer to notes on “Derivatives.”

Our Business

2. Matters regarding fair values of financial instruments
Book value, fair value and the differences between them as of the end of
the fiscal year under review are as shown below.

(Note 4) Redemption and repayment schedule of monetary claims and securities with maturities
Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due after
ten years

Due within
one year

Due after one Due after five
year through years throughfive years
ten years

Due after
ten years

Cash and deposits.............................................................

¥ 23,792

¥—

¥ —

¥—

$  255,828$ —$    —$—

Trade receivables...............................................................

78,969———849,129

—

—

—

5

9

—

—

54

97

—

—

Securities.................................................................................
Held-to-maturity debt securities(government bonds, etc.).................................

2

18

176

—

22

194

1,892

—

Total.........................................................................

¥102,768

¥28

¥176

¥—

$1,105,032$301$1,892$—(Note 5) Amount of planned redemption and repayment of bonds and long-term debt after the consolidated closing dateMillions of yen
Due within
one year

Due after one Due after five
year through years throughfive years
ten years

Thousands of U.S. dollars
Due after
ten years

Due within
one year

Due after one Due after five
year through years throughfive years
ten years

Due after
ten years$      —

Bonds........................................................................................

¥ 25,000¥105,000¥ 30,000¥     —$  268,817$1,129,032$  322,581

Long-term debt..................................................................

105,258

590,774

198,151

43,091

1,131,806

6,352,409

2,130,656

463,344

Total..................................................................................

¥130,258¥695,774¥228,151¥43,091$1,400,624$7,481,441$2,453,237$463,344

Hankyu Hanshin Holdings

Financial Section

Available-for-sale securities withmaturities (government bonds, etc.).........

Management Organisation

Due within
one yearThousands of U.S. dollars

87Notes to the Consolidated Financial Statements(Securities)
Fiscal year ended 31st March 2009
1. Available-for-sale securities with available fair market values
Millions of yen
Classification

Securities with book value exceeding acquisition cost:
1) Equity securities........................................................................................
2) Bonds
Government bonds, etc. ....................................................................
3) Other................................................................................................................
Subtotal...............................................................................................
Securities with book value not exceeding acquisition cost:
1) Equity securities........................................................................................
2) Bonds...............................................................................................................
Government bonds, etc. ....................................................................
3) Other................................................................................................................
Subtotal...............................................................................................
Total...............................................................................................

Acquisition cost

Book value

Difference¥11,485¥24,249¥12,76363
47
11,59665
47
24,3621
0
12,76548,37025,747(22,623)2
2
48,374¥59,971

1
2
25,751¥50,113(0)(0)(22,623)¥ (9,857)

2. Available-for-sale securities that were sold during the fiscal year under review
Millions of yen
Amount soldTotal gains on sale

Total losses on sale

¥1,266¥737¥39

3. Securities with no available fair values
Millions of yen
Classification

Book value

1) Held-to-maturity debt securities:
Discount bank debentures.............................................................................................................................
2) Available-for-sale securities:
Non-listed equity securities............................................................................................................................
Investments in limited liability investment partnerships and similar investments.....
Negotiable certificates of deposit..............................................................................................................
Total....................................................................................................................................................................

¥      44,82711,14818,248¥34,229

4. Redemption schedule of available-for-sale securities with maturities and held-to-maturity debt securities
Millions of yen
Classification

Due within
one year

Due after one year
through five years

Due after five years
through ten years

Due after
ten years

Bonds1) Government bonds.....................................................................................................................
2) Other.....................................................................................................................................................
Total....................................................................................................................................................

¥ 9
4
¥14

¥12
—
¥12

¥45
—
¥45

¥—
—
¥—

88 Annual Report 2010

Millions of yen

Thousands of U.S. dollars

Classification

Book value

Fair value

DifferenceBook value

Fair value

Difference

Securities with fair value not exceeding book value...............

¥14

¥14

¥(0)

$151

$151

$(0)

2. Available-for-sale securities
Millions of yen
Classification

Difference

Acquisition cost

Book value

Difference¥ 9,50955
3
9,568¥20,54557
4
20,607¥ 11,036
1
1
11,039$102,247591
32
102,882$220,914
613
43
221,581$ 118,667
11
11
118,699

47,715140
247,857¥57,426

25,343139
225,485¥46,092(22,371)(1)(0)(22,372)¥(11,333)

513,0651,505
22514,591$617,484

272,5051,495
22
274,032$495,613(240,548)(11)(0)(240,559)$(121,860)

3. Available-for-sale securities sold during the fiscal year under review
Millions of yen
Classification

Amount soldTotal gains
on saleEquity securities..............................................................................................

¥3,386¥1,508

Thousands of U.S. dollars
Total losses
on saleAmount soldTotal gains
on saleTotal losses
on sale¥395$36,409$16,215$4,247

Financial Section

Hankyu Hanshin Holdings

Management Organisation(Derivatives)
Fiscal year ended 31st March 2009
1. Items related to transactions(1) Transaction types and purpose of transaction
The Group includes companies whose lines of business require a high degree of reliance on external debt such as bank borrowings and corporate bonds.
For these companies, managing the risk of changing interest rates is necessary for stable operations. This goal is being achieved by using derivative transactions — under a certain set of conditions — as a means of cost efficient interest risk hedging. Derivative transactions employed comprise interest rate swaps
and interest swaptions, which change floating and fixed interest rates, covering outstanding bonds, borrowings, and deposits.
The Group also includes companies operating in the travel, forwarding and other businesses whose financial statements are denominated in foreign
currencies. For these companies, protection from the risks of currency fluctuations affecting the value of foreign currency denominated assets and liabilities
is necessary for stable operations. The use of foreign exchange forward contracts as well as currency options — within certain conditions — provides aneffective and cost efficient way of protecting against such risks.
(2) Policy for entering into transactions
The purpose of the derivative transactions of the Group is to avoid risk from interest rate and exchange rate fluctuations. The Group refrains from entering
into complicated derivative transactions, derivative transactions with a high degree of risk and derivative transactions for speculation.
(3) Details of risks involved in transactions
In general, derivative transactions involve market risk and credit risk. Market risk arises from the possibility of a decline in the value of a transaction due tothe fluctuation of interest rates or foreign exchange rates. Credit risk arises from the possibility that, if the other party to a transaction defaults, or becomesbankrupt, the benefit that would have been obtained if the transaction had continued will not be enjoyed.
The purpose of the derivative transactions used by the Group is to manage and reduce the market risk associated with the assets and liabilities on the
consolidated balance sheets. General market risks involved in derivative transactions and transactions on the consolidated balance sheets will be offset andkept within a certain limit. The other parties to transactions are limited to financial institutions with high ratings, centred on the financial institutions used by
the Company. Transactions are not concentrated with specific parties. As a result, the company is not exposed to significant credit risk.

Core Businesses: Overview and Outlook

Book value

Special Feature

Securities with book value exceeding acquisition cost:
1) Equity securities........................................................................................
2) Bonds...............................................................................................................
3) Other................................................................................................................
Subtotal.......................................................................................................
Securities with book value not exceeding acquisition cost:
1) Equity securities........................................................................................
2) Bonds...............................................................................................................
3) Other................................................................................................................
Subtotal.......................................................................................................
Total.......................................................................................................

Thousands of U.S. dollars

Acquisition cost

Interview with the President

1. Held-to-maturity debt securities

Our Business

Fiscal year ended 31st March 2010
(Additional information)
Beginning with the fiscal year under review, the Company has adopted the “Accounting Standard for Financial Instruments” (Statement No. 10 issued by the
Accounting Standards Board of Japan on 10th March 2008) and the “Implementation Guidance for the Disclosure of Fair Value, etc. of Financial Instruments”(Implementation Guidance No. 19 issued by the Accounting Standards Board of Japan on 10th March 2008).

89Notes to the Consolidated Financial Statements(4) Risks related to transactions
Group companies that employ derivative transactions have established handling regulations that prescribe the division of duties and the transaction limits
with respect to the use of derivative transactions. Derivative transactions are entered into based on these regulations. The Accounting Division of each Group
company conducts and manages derivative transactions by obtaining the approval of each company’s person in charge of approval. In particular, a company
with a large volume of transactions has established an internal control organisation, and the internal control organisation determines whether or not theoperations for entering into and cancelling agreements conform to the regulations concerned.
(5) Supplementary explanation regarding the “Items related to market value, etc., of transactions”
With respect to matters regarding the fair value of transactions, a contract amount is a nominal contract amount for derivative transactions and an assumed
principal amount for the sake of calculation. The contract amount does not reflect the risk involved in derivative transactions themselves.
2. Items related to fair value, etc., of transactions
Contract amount, fair value and valuation gain and loss of derivative transactions(1) Currency
Millions of yen

Classification

Transactions
other thanmarket transactions

Type

Forward exchange contracts
Buy contract
Euro....................................................................................................
US dollar..........................................................................................
New Zealand dollar..................................................................
Australian dollar.........................................................................
Total...................................................................................................

Portion ofcontract amountexceedingContract amount
one year

¥423
3
28
6
¥461

¥—
—
—
—
¥—

Fair value

Valuation
gain and loss

¥340
3
20
4
¥369

¥(82)
0
(7)
(1)
¥(92)

Notes:
1. With respect to foreign currency denominated assets and liabilities whose amounts in yen at the time of settlement are fixed through forward exchange contracts, thoseforeign currency denominated assets and liabilities whose amounts are recorded in yen on the consolidated balance sheets are not disclosed.
2. Those to which hedge accounting applies are not disclosed.
3. The transactions shown above are not transactions for the purpose of speculation.

(2) Interest rate
No items
Notes:
1. Those to which hedge accounting applies are not disclosed.
2. Interest rate swaps that qualify for special treatment are not disclosed.

Fiscal year ended 31st March 2010
(Additional information)
Beginning with the fiscal year under review, the Company has adopted the “Accounting Standard for Financial Instruments” (Statement No. 10 issued by the
Accounting Standards Board of Japan on 10th March 2008) and the “Implementation Guidance for the Disclosure of Fair Value, etc. of Financial Instruments”(Implementation Guidance No. 19 issued by the Accounting Standards Board of Japan on 10th March 2008).
1. Derivative transactions for which hedge accounting has not been applied
No items

90 Annual Report 2010

Our Business

2. Derivative transactions for which hedge accounting has been applied(1) Currency
Millions of yen

Type

Trade
receivables¥13,066
4,742
18
953
530
188
219
127
18
52
678
¥20,595

¥—
—
—
—
—
—
—
—
—
—
—
¥—

Fair value¥(559)
106
0
(2)
33
2
13
2
0
1
(16)
¥(417)

Portion ofcontract amountexceedingContract amount
one year$140,495
50,989194
10,247
5,699
2,022
2,355
1,366
194
559
7,290
$221,452

Fair value

$—
—
—
—
—
—
—
—
—
—
—
$—

$(6,011)
1,140
0
(22)
355
22
140
22
0
11
(172)
$(4,484)

Note: Fair value calculation
Fair value is determined based principally on price quotes from counterparty financial institutions.

Millions of yen

Classification

Type of transaction

Interest rate swap
Deferral hedge
contracts
accounting andPayable fixed rate/
exceptional
Receivable floating rateaccounting ofReceivable
fixed rate/interest rate swaps
Payable floating rate
Total

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one yearLong-term
debt andbonds

Thousands of U.S. dollars

Fair value

Portion ofcontract amountexceedingContract amount
one year

Fair value¥683,092¥643,495¥(20,750)$7,345,075$6,919,301$(223,118)

5,097

—

49

54,806—527¥688,190¥643,495¥(20,701)$7,399,892$6,919,301$(222,591)

Core Businesses: Overview and Outlook(2) Interest rate

Special Feature

Forward exchange contracts
Buy contractEuro
Deferral
US dollar
hedge
Pound sterling
accounting
Swiss francandCanadian dollar
designationof forward
New Zealand dollar
exchange
Australian dollar
contracts,
Hong
Kong dollar
etc.
Singapore dollar
Thai baht
Japanese yen
Total

Thousands of U.S. dollars

Interview with the President

Classification

Portion ofcontract amount
Main hedged
exceedingitems
Contract amount
one year

Note: Fair value calculation
Fair value is determined based principally on prices quotes from counterparty financial institutions.

2. Items related to retirement benefit obligations
Millions of yen
2009

2010

2010

$(1,377,043)
712,290(664,742)
63,237
1,785(599,699)
29,183$  (628,892)

Financial Section

1) Projected benefit obligation.... ¥(130,786) ¥(128,065)
2) Plan assets.......................................
61,581
66,2433) Unfunded projected benefit
obligation (1+2).........................
(69,205)(61,821)4) U nrecognised actuarial
differences....................................
13,9355,8815) Unrecognised prior service
costs..................................................
168
1666) Book value (net) (3+4+5).......
(55,101)(55,772)
7) Prepaid pension costs..............
1,965
2,714
8) Provision for retirement
benefits (6-7)............................... ¥ (57,067) ¥ (58,487)

Thousands of
U.S. dollars

Management Organisation(Retirement Benefits)
1. Overview of retirement benefit plan
Consolidated subsidiaries provide three types of defined benefit plans,
tax qualified pension plans, defined benefit pension plans and unfunded
lump-sum payment plans. Hankyu Corporation has also established aretirement benefits trust.

Note: Certain consolidated subsidiaries use simplified methods for calculating retirement benefit obligations.

Hankyu Hanshin Holdings

91Notes to the Consolidated Financial Statements

3. Items related to retirement benefit expenses

1) Service cost (Note 3).................
2) Interest cost on projected
benefit obligation....................
3) Expected return on plan
assets................................................
4) Amortisation of actuarial
differences....................................
5) Amortisation of prior service
costs..................................................
6) Retirement benefit expenses(1+2+3+4+5)...............................

Millions of yen

Thousands of
U.S. dollars

2009 (Note 1) 2010 (Note 2)2010 (Note 2)¥6,900¥ 6,119$ 65,796

2,808

2,686

28,882(1,444)(1,123)(12,075)

1,269

2,434

26,172

(599)

1

11

¥8,934¥10,118$108,796(Deferred Tax)
1. Significant components of the Company’s deferred tax assets andliabilities
Millions of yen
2009

Notes:
1. In the fiscal year ended 31st March 2009, in addition to the retirement benefit
expenses shown above, the Company made extra retirement payments of ¥2,362
million, which are principally recorded as extraordinary loss.
2. In the fiscal year under review, in addition to the retirement benefit expenses
shown above, the Company made extra retirement payments of ¥239 million($2,570 thousand), which are principally recorded as extraordinary loss.
3. Retirement benefit expenses of consolidated subsidiaries that use a simplified
method are recorded in 1) Service cost.

4. Items related to basis for calculating retirement benefit obligations, etc.
1) P eriodic distribution method for estimated amount of retirement
benefits
Allocated equally to each service year using the estimated number of
total service years2) Discount rate
Principally 2.5%
3) Expected rate of return on plan assets
Principally 2.5%
4) Number of years over which prior service costs are written off
3 to 15 years (amortised using the straight-line method over a period notexceeding the average remaining service life of active employees)5) Number of years over which actuarial differences are written off
4 to 15 years (amortised using the straight-line method over a period notexceeding the average remaining service life of active employees andrecognised in expenses starting from the following fiscal year)

Thousands of
U.S. dollars

2010

Deferred tax assets:
Loss on revaluation of realestate for sale.................................... ¥ 49,190 ¥ 60,440
Loss on impairment of fixed
assets.....................................................
4,262
31,382
Provision for retirement
benefits.................................................
22,396
22,946
Tax loss carryforwards....................
25,762
13,336
Losses on revaluation of
investment securities..................
7,624
8,750
Special reserve for investment
losses.....................................................
7,699
8,727
Revaluation of assets on
consolidation....................................
50,196
7,354
Unrealised profit from assets....
7,007
6,891
Loss on adjustment oftransferred profit and loss.........
—
4,897
Loss on valuation of propertiesof business reorganisation.......
5,034
4,823
Allowance for doubtfulreceivables.........................................
3,153
3,244
Provision for bonuses....................
2,068
1,969
Enterprise taxes and businessoffice taxes.........................................
620
756
Depreciation and amortisation....
306
373
Provision for directors’
retirement benefits.......................
289
284
Other........................................................
11,174
13,558Subtotal of deferred tax
assets.............................................
196,786
189,736
Valuation allowance.......................
(53,269)(57,779)
Less amounts offset against
deferred tax liabilities..................
(122,160) (112,336)
Total deferred tax assets......
21,357
19,620
Deferred tax liabilities:
Gain on reversal of difference
from land revaluation..................
(132,198) (136,142)
Revaluation of assets on
consolidation....................................
(103,421) (102,964)
Net unrealised holding gains
on securities......................................
(19,068)(18,464)
Gain on valuation of propertiesof business reorganisation.......
(3,066)(2,983)
Other........................................................
(3,173)(3,589)Subtotal of deferred tax
liabilities.......................................
(260,928) (264,144)
Less amounts offset against
deferred tax assets.........................
122,160
112,336
Total deferred tax liabilities....
(138,768) (151,807)
Net deferred tax liabilities.... ¥(117,411) ¥(132,187)

2010

$

649,892
337,441
246,731
143,398
94,086
93,83979,07574,09752,65651,86034,882
21,172
8,129
4,011
3,054
145,785
2,040,172(621,280)(1,207,914)
210,968(1,463,892)(1,107,140)(198,538)(32,075)(38,591)(2,840,258)
1,207,914(1,632,333)$(1,421,366)

Note: The Company reversed the “Surplus from land revaluation” when, as a resultof a (physical) absorption-type corporate split on 1st April 2005, it handed over all of
its land to Hankyu Corporation (which changed its name from Hankyu Corporation
Spin-Off Preparation Inc. to Hankyu Corporation on the same day). As a result,“Deferred tax liabilities relating to land revaluation” are recorded as deferred tax
liabilities starting from the fiscal year ending 31st March 2006.

92 Annual Report 2010

2010

40.6%

17.8

20.2

—
5.2
2.3
2.8
1.4
(18.1)

12.3
7.1
3.2
2.2
1.4
(19.7)(12.7)
(1.1)
(0.4)
37.8%

—
(4.1)
3.4
66.6%

Balance as of
31st March 2009

Increase/Decrease

Balance as of
31st March 2010

Fair value as of
31st March 2010

¥524,634¥45,695¥570,329¥647,511

Thousands of U.S. dollars
Book value
Balance as of
31st March 2009

Increase/Decrease

Balance as of
31st March 2010

Fair value as of
31st March 2010

$5,641,226$491,344$6,132,570$6,962,484

Notes:
1. B
 ook value is acquisition cost less accumulated depreciation and loss on impairment of fixed assets.
2. T he increase/decrease this fiscal year principally reflects an increase due to theacquisition of real estate (¥58,178 million ($625,570 thousand)) and a decrease due
to depreciation and amortisation (¥12,395 million ($133,280 thousand).
3. F air value as of end of the fiscal year under review is the appraisal value according
to an outside real estate appraiser based on the Japanese Real Estate Appraisal
Standards in the case of key properties and the fair value based on indicators suchas the assessed value of noncurrent assets and road tax rating in the case of otherproperties.
4. P roperty under development (Book value ¥136,564 million,($1,468,430 thousand)is not included in the above table, as it is still in the development stage, making it
difficult to determine fair value.

(Segment Information)[Segment information by business category]
Fiscal year ended 31st March 2009
Millions of yen

HotelsRetailing

Other

Total

¥ 54,921
5,613
60,534¥  683,715
44,155
727,870¥     — ¥  683,715(44,155)—(44,155)
683,715

59,966¥    568

651,122¥    76,748(45,230)
605,891¥ 1,075 ¥    77,823¥185,455¥2,361,641¥(54,309) ¥2,307,332

1,130

55,338(539)

54,798

—
1,005

3,447
109,634

—
(762)

3,447
108,871

Hankyu Hanshin Holdings

Financial Section

I Revenues from operations and operating income
Revenues from operations:(1) Customers...................................... ¥190,774 ¥  149,756 ¥ 90,334¥65,595¥66,041¥66,291(2) Intersegment...............................
4,469
21,92910,226
210
415
1,290
Total..................................................
195,244
171,685
100,561
65,80566,457
67,581
Costs of revenues
from operations..............................
162,753
138,870
92,17664,354
66,116
66,884
Operating income............................ ¥ 32,490 ¥    32,815 ¥   8,384¥ 1,451¥   341¥   696
II Assets, depreciation and amortisation, loss on impairment of fixed assets, and capital expenditures
Assets....................................................... ¥787,773 ¥1,041,786 ¥149,247¥93,622¥79,478¥24,277
Depreciation andamortisation......................................
28,34014,978
5,549
1,212
3,109
1,018
Loss on impairment of
fixed assets.........................................
5
2,087
—
57
1,200
98
Capital expenditures......................
29,81357,97915,060
1,521
1,964
2,289

Eliminations
or
Corporate Consolidated

Management Organisation

Urban
Transportation Real Estate

Travel &Entertainment & International
Communications Transportation

Core Businesses: Overview and Outlook(Rental Property)
Fiscal year ended 31st March 2010
(Additional information)
Effective from the fiscal year ended 31st March 2010, the Company has
adopted the “Accounting Standard for Disclosures about Fair Value ofInvestment and Rental Property” (ASBJ Statement No. 20, 28th November2008) and the “Guidance on Accounting Standard for Disclosures about
Fair Value of Investment and Rental Property” (ASBJ Guidance No. 23, 28th
November 2008.)

Millions of yen
Book value

Special Feature

2009

40.6%

Interview with the President

The normal effective statutory tax rate.............
(Adjustment)
Elimination of dividends from consolidated
subsidiaries.......................................................................
Lump sum amortisation of
goodwill equivalent amount under theequity method...............................................................
Valuation allowance.....................................................
Amortisation of goodwill...........................................
Nondeductible expenses..........................................
Per capita amount of citizen tax...........................
Non taxable income.....................................................
Effect of Station Finance Inc.’s secession
from the Group.............................................................
Equity in (income) losses of affiliates..................
Other......................................................................................
The effective tax rate....................................................

Some consolidated subsidiaries own rental property such as officebuildings for lease and commercial facilities for lease in the Kita Ward of
Osaka and other areas. Rental income relating to such rental property inthe fiscal year ended 31st March 2010 is ¥24,598 million ($264,495 thousand) (significant rental revenues are recorded in revenues from operations
and significant rental expenditures are recorded in costs of revenues fromoperations).
Book value, increase/decrease this fiscal year and fair value are as
follows.

Our Business

2. A reconciliation of the differences between the normal effective statutory tax rate and the effective tax rate reflected in the accompanying
consolidated statements of income

93Notes to the Consolidated Financial Statements

Notes:
1. Businesses segments represent classifications used for management and administration purposes in order to accurately reflect the diversification of the Group’s operations.
2. The principal lines of business of each segment are as follows.
Urban Transportation: railways, buses and taxis, and the manufacture of rolling stock
Real Estate: the rental of real estate, purchase and sale of real estate and property management services
Entertainment and Communications: sports-related businesses, revue business, advertising, information services and publishing businesses
Travel and International Transportation: travel and international cargo services
Hotels: hotel ownership and management businesses
Retailing: retail sales, food and drink sales
Other: construction, domestic logistics services, consumer finance and outsourcing services for personnel and accounting services
3. Significant corporate assets included in corporate and eliminations include the surplus working capital (cash and deposits) and long-term investment capital (investment securities) of Hankyu Corporation and Hanshin Electric Railway Co., Ltd.
Fiscal year ended 31st March 2008 ¥91,447 million
Fiscal year ended 31st March 2009 ¥57,877 million
4. Change of segment
Starting from the first quarter of the fiscal year ended 31st March 2009, domestic logistics services provided by Sanyo Jidosha Unso Co., Ltd. and one other company have beentransferred from the Travel and International Transportation Segment to the Other segment following a review of the classifications used for management and administration
purposes as a result of business restructuring effective 1st April 2008.
In the Travel and International Transportation Segment, this had the effect of reducing revenues from operations by ¥13,721 million, costs of revenues from operations by¥13,612 million, operating income by ¥109 million, assets by ¥6,926 million, depreciation and amortisation by ¥536 million and capital expenditures by ¥765 million comparedwith the amounts that would have been recorded without the segment change, while in the Other Segment this had the effect of increasing revenues from operations by¥13,821 million, costs of revenues from operations by ¥13,711 million, operating income by ¥109 million, assets by ¥2,677 million, depreciation and amortisation by ¥536 million
and capital expenditures by ¥765 million.
5. Change in accounting policies(Application of Accounting Standard for Measurement of Inventories)
As stated in “Basis of Preparation of Consolidated Financial Statements,” effective from the fiscal year ended 31st March 2009, the Company adopted the “Accounting Standard
for Valuation of Inventories” (Statement No. 9 issued by the Accounting Standards Board of Japan on 5th July 2006).
This has the effect of increasing costs of revenues from operations for the fiscal year ended 31st March 2009 by ¥3,820 million in the Real Estate Segment and by ¥36 million
in the Entertainment & Communications Segment and reducing operating income by the same amounts compared with the amounts that would have been recorded with theprevious method.

Fiscal year ended 31st March 2010
Millions of yen
Urban
Transportation Real Estate

Travel &Entertainment & International
Communications Transportation

HotelsRetailing

I Revenues from operations and operating income
Revenues from operations:(1) Customers...................................... ¥191,799 ¥  150,037 ¥ 94,253 ¥62,626¥60,364¥61,273(2) Intersegment...............................
3,315
19,167
9,413
228
612
1,515
Total.................................................. 195,114
169,205 103,667
62,85460,97762,788
Costs of revenues
from operations.............................. 163,562
139,575
94,37562,57862,682
63,086
Operating income (losses).......... ¥ 31,552 ¥    29,629 ¥   9,292 ¥   276
¥ (1,705) ¥   (297)
II Assets, depreciation and amortisation, loss on impairment of fixed assets, and capital expenditures
Assets....................................................... ¥806,499 ¥1,071,745 ¥148,055 ¥96,006¥95,611¥24,294
Depreciation andamortisation......................................
30,953
16,645
7,083
1,359
3,067
1,106
Loss on impairment of
fixed assets.........................................
20
4,418
—
—
—
312
Capital expenditures......................
28,322
69,957
6,430
1,523
22,2571,870

94 Annual Report 2010

Other

Total

Eliminations
or
Corporate Consolidated¥ 32,933 ¥  653,287 ¥     — ¥  653,287
6,658
40,911 (40,911)—
39,591
694,199 (40,911)
653,287
39,075624,936 (41,775)
583,160¥    516 ¥    69,263 ¥    863 ¥    70,126¥166,310 ¥2,408,524 ¥(71,192) ¥2,337,331
822

61,037(618)

60,418

—
533

4,751
130,895

—
(883)

4,751
130,012UrbanTransportation Real Estate

HotelsRetailing

Other

Total

Eliminations
or
Corporate Consolidated

Financial Section

Hankyu Hanshin Holdings

Management Organisation[Revenues from foreign customers]
Fiscal years ended 31st March 2009 and 2010
Revenues from foreign customers are not disclosed as they account for less than 10% of consolidated revenues from operations.

Core Businesses: Overview and Outlook[Geographic segment information]
Fiscal years ended 31st March 2009 and 2010
Geographic segment information is not disclosed as Japan accounts for more than 90% of both the total revenues from operations of all segments and thetotal assets of all segments.

Special Feature

Notes:
1. Businesses segments represent classifications used for management and administration purposes in order to accurately reflect the diversification of the Group’s operations.
2. The principal lines of business of each segment are as follows.
Urban Transportation: railways, buses and taxis, and the manufacture of rolling stock
Real Estate: the rental of real estate, purchase and sale of real estate and property management services
Entertainment and Communications: sports-related businesses, revue business, advertising, information services and publishing businesses
Travel and International Transportation: travel and international cargo services
Hotels: hotel ownership and management businesses
Retailing: retail sales, food and drink sales
Other: construction, domestic logistics services and outsourcing services for personnel and accounting services
3. Significant corporate assets included in corporate and eliminations include the surplus working capital (cash and deposits) and long-term investment capital (investment
securities) of Hankyu Corporation and Hanshin Electric Railway Co., Ltd.
Fiscal year ended 31st March 2009 ¥57,877 million
Fiscal year ended 31st March 2010 ¥54,659 million ($587,731 thousand)
4. Change of segment
Starting from the first quarter of the fiscal year ended 31st March 2010, Hanshin Station Net Co., Ltd. has been transferred from the Retailing Segment to the Urban Transportation
Segment following a review of the classifications used for management and administration purposes as a result of business restructuring effective 1st April 2009.
In the Retailing Segment, this had the effect of reducing revenues from operations by ¥3,251 million ($34,957 thousand), costs of revenues from operations by ¥3,065 million($32,957 thousand), operating income by ¥186 million ($2,000 thousand), assets by ¥2,660 million ($28,602 thousand), and depreciation and amortisation by ¥7 million ($75
thousand) and increasing capital expenditures by ¥228 million ($2,452 thousand) compared with the amounts that would have been recorded without the segment change,
while in the Urban Transportation Segment, this had the effect of increasing revenues from operations by ¥2,748 million ($29,548 thousand), costs of revenues from operationsby ¥2,594 million ($27,892 thousand), operating income by ¥154 million ($1,656 thousand), assets by ¥2,566 million ($27,591 thousand), depreciation and amortisation by ¥40
million ($430 thousand) and capital expenditures by ¥78 million ($839 thousand).
5. Change in accounting policies(Application of Accounting Standard for Construction Contracts)
As stated in “Changes in accounting policies,” effective from the fiscal year ended 31st March 2010, the Company adopted the “Accounting Standard for Construction Contracts”(Statement No. 15 issued by the Accounting Standards Board of Japan on 27th December 2007) and the “Implementation Guidance on Accounting Standards for Construction
Contracts” (the Financial Accounting Standard Implementation Guidance No. 18 issued by the Accounting Standards Board of Japan on 27th December 2007).
This had the effect of increasing revenues from operations of the Entertainment & Communications Segment for the fiscal year ended 31st March 2010 by ¥273 million($2,935 thousand) and operating income by ¥48 million ($516 thousand), and reducing the revenues from operations of the Others Segment by ¥1,543 million ($16,591
thousand) and operating income by ¥75 million ($806 thousand) compared with the amounts that would have been recorded with the previous method.

Interview with the President

I Revenues from operations and operating income
Revenues from operations:(1) Customers...................................... $2,062,355 $ 1,613,301 $1,013,473 $  673,398 $  649,075 $658,849 $  354,118 $ 7,024,591 $      — $ 7,024,591(2) Intersegment...............................
35,645
206,097
101,215
2,452
6,581
16,29071,591
439,903 (439,903)—
Total.................................................. 2,098,000 1,819,409 1,114,699
675,849
655,667 675,140
425,710 7,464,505 (439,903) 7,024,591
Costs of revenues
from operations.............................. 1,758,731 1,500,806 1,014,785
672,882
674,000 678,344
420,161 6,719,742 (449,194) 6,270,538
Operating income (losses).......... $  339,269 $   318,591 $    99,914 $     2,968 $   (18,333) $ (3,194) $     5,548 $   744,763 $    9,280 $  754,043
II Assets, depreciation and amortisation, loss on impairment of fixed assets, and capital expenditures
Assets....................................................... $8,672,032 $11,524,140 $1,591,989 $1,032,323 $1,028,075 $261,226 $1,788,280 $25,898,108 $(765,505) $25,132,591
Depreciation andamortisation......................................
332,828
178,978
76,161
14,61332,978
11,892
8,839
656,312(6,645)649,656
Loss on impairment of
fixed assets.........................................
215
47,505
—
—
—
3,355
—
51,086—51,086
Capital expenditures......................
304,538
752,226
69,14016,376239,323
20,1085,731 1,407,473(9,495) 1,397,978

Our BusinessThousands of U.S. dollars
Travel &Entertainment & International
Communications Transportation95

Notes to the Consolidated Financial Statements(Related Party Transactions)
1. Related party transactions
Fiscal year ended 31st March 2009
(Additional information)“The Accounting Standard for Related Party Disclosures” (ASBJ Statement No. 11; 17th October 2006) and the “Guidance on Accounting Standard for Related
Party Disclosures” (ASBJ Guidance No. 13; 17th October 2006) are applied from the fiscal year under review.
As a result, in addition to the previous scope of disclosure, transactions between consolidated subsidiaries of the company submitting the consolidated
statements and related parties have been included in the scope of disclosure.
(1) Transactions between the company submitting the consolidated financial statements and related parties
No items(2) Transactions between the consolidated subsidiaries of the company submitting consolidated statements and related parties
Directors and principal shareholders (only individual shareholders) of company submitting the consolidated financial statements
Type

Name ofrelated party

Company inwhich director
or close family Tateishi Sangyo
thereof holds
Co., Ltd.
a majority ofvoting rights

Address

Ikeda City,
Osaka

Amount ofcapital(Millions of yen)

¥100

Business

Voting interest

Relationshipwithrelated party

Details oftransaction

Transaction
amounts(Millions of yen)

Item

Balance as of
31st March 2009
(Millions of yen)

Rent income¥ 16Long-term
lease
deposited¥30

Concurrent
Rent expense
post (director)

272

Lease ofreal estate

Real estatebusiness

None

—
—

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions and method of determining transaction terms and conditions
Director of the Company, Koichi Kobayashi, and his close family own 58% of the voting rights.
The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.

Fiscal year ended 31st March 2010
(1) Transactions between the company submitting the consolidated financial statements and related parties
No items(2) Transactions between consolidated subsidiaries of the company submitting the consolidated financial statements and related parties
Directors and principal shareholders (only individual shareholders) of company submitting consolidated financial statements

Type

Director

Amount ofcapitalName ofrelated party

Address

TakehiroSugiyama—

Company inwhich Director
or close family Tateishi Sangyo
thereof holds
Co., Ltd.
majority ofvoting rights

Ikeda City,
Osaka(Thousands(Millions of U.S.
of yen) dollars)
¥ —

¥100

Business$    —

Director of theCompany$1,075

Real estatebusiness

Voting interest

Directly
0.01%

Relationshipwithrelated party

Details oftransaction

Transaction
amounts(Millionsof yen)Sale of
Sale of¥44
condominiums condominiums

Balance as of
31st March 2010

(Thousandsof U.S.
dollars)

Item

$473

$172

(Millionsof yen)(Thousandsof U.S.
dollars)

—

¥—

$ —

Deposit¥30$323

Lease of realestateNone

Rent income¥16

Concurrent
post (director)

Notes:
1. The transaction amount and the balance at the end of the fiscal year do not include consumption tax, etc.
2. Transaction terms and conditions and method of determining transaction terms and conditions(1) The terms and conditions of the sale of the condominium were determined with reference to similar transactions in the neighbouring area.
(2) Director of the Company, Koichi Kobayashi, and his close family own 58% of voting rights in Tateishi Sangyo Co., Ltd.
The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.

2. Notes about Parent Company and Major Affiliated Companies
Fiscal years ended 31st March 2009 and 2010
No items(Special Purpose Entities)
1. Purpose of establishment: Diversity and stability of financing
Fiscal year ended 31st March 2009
Some consolidated subsidiaries invested in two special purpose entities (inthe form of a special limited liability company or a special purpose entity

96 Annual Report 2010

under the SPC Law) established for the purpose of real estate securitisation. In the securitisation, the consolidated subsidiaries transfer real estate(trust beneficiary rights) to the special purpose entities and, using thetransferred assets as backing, the special purpose entities receive capitalraised through non-recourse loans, etc. from financial institutions as sale

Significant income and expenditure
Item

Real estate purchased.....
Investments in silent
partnerships(Notes 1 and 2)..................

Investments in silent
partnerships (Note 1).....

3,392

Receivable amount ofdividends (Note 3)...........

5,717

Lease (leaseback)transactions.........................

—

Lease payments (Note 2)

5,376Management business...

—

Management fees
(Note 4)254

343

Distributed income(Note 3)¥9,819

3,207

70
—

Lease payments (Note 3)—

Management fees
(Note 4)

Management business...

Significant transaction amounts
or balance as of
31st March 2010
(Thousands of
U.S. dollars)
Real estate purchased.....
Investments in silent
partnerships(Notes 1 and 2)..................

9

Significant income and expenditure(Thousands of
U.S. dollars)

Item$802,366

3,688

Distributed income(Note 3)$105,581

Receivable amount ofdividends (Note 1)...........

753

Lease (leaseback)transactions.........................

—

Lease payments (Note 3)—

Management fees
(Note 4)

Management business...

34,48497

Hankyu Hanshin Holdings

Financial Section

2. Purpose of establishment: development and increase value of assets
Fiscal year ended 31st March 2009
Some consolidated subsidiaries invested in nine special purpose entities(in the form of special limited liability companies, joint ventures, etc.). The
special purpose entities use non-recourse loans, etc. from financial institutions to acquire real estate (trust beneficiary rights), which they plan to sell
to investors upon development, leasing, etc. The consolidated subsidiaries
are expected to recover their investments in an appropriate manner uponcompletion of the business, and even in cases in which losses arise (seeNote 1), the cost to the consolidated subsidiaries is limited to the amountinvested. Moreover, the consolidated subsidiaries do not own equity withvoting rights in any of the special purpose entities nor do they dispatch
directors or employees to them. As of the most recent balance sheet dateof these special purpose entities, total assets were ¥81,316 million and total
liabilities were ¥54,564 million. These are simple totals regardless of theinvestment ratio.

Management Organisation

Notes:
1. Investments in silent partnerships and receivable amount of dividends are expected
to be recovered upon completion of liquidation proceedings.
2. In the fiscal year ended 31st March 2010, the company recorded a loss ondevaluation of assets as a result of completion of securitisation (¥748 million ($8,043
thousand)).
Investments in silent partnerships are recorded as investment securities.
3. Distributed income includes distributed income on the liquidation of special
purpose entities of ¥8,241 million ($88,613 thousand), which is presented in extraordinary income. In the consolidated statements of income. The residual amount of
distributed income is presented in costs of revenues from operations after offsetting
lease payments.
4. Management fees are presented in revenues from operations in the consolidated
statements of income.

Core Businesses: Overview and Outlook

Fiscal year ended 31st March 2010
Some consolidated subsidiaries invested in two special purpose entities (inform of a special limited liability company or a special purpose entity under
the SPC Law) established for the purpose of real estate securitisation, but,by the end of the fiscal year ended 31st March 2010, the special purpose
entities had sold the securitised properties and completed the securitisation. In this securitisation, the consolidated subsidiaries transferred realestate (trust beneficiary rights) to the special purpose entities and, using
the transferred assets as backing, the special purpose entities received
capital raised through non-recourse loans, etc. from financial institutions
as sale proceeds and leased (lease back) the transferred real estate. The
consolidated subsidiaries did not own equity with voting rights in any of
the special purposes entities nor do they dispatch directors or employees
to them.

(Millions of yen)

Lease (leaseback)transactions.........................

¥11,275

Notes:
1. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
2. Distributed income includes distributed income on the liquidation of special purpose entities of ¥8,531 million, which is presented in extraordinary income. In the
consolidated statements of income. The residual amount of distributed income ispresented in costs of revenues from operations after offsetting lease payments.
3. The receivable amount of dividends includes ¥5,656 million, equivalent to thesuspended payments of dividends.
4. Management fees are presented in revenues from operations in the consolidated
statements of income.

Item¥74,620

Special Feature¥11,300

Significant income and expenditure

Receivable amount ofdividends (Note 1)...........

(Millions of yen)

Real estate purchased.....

Distributed income(Note 2)Significant transaction amounts
or balance as of
31st March 2010
(Millions of yen)Interview with the President

Significant transaction amounts
or balance as of
31st March 2009
(Millions of yen)Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2010 are as follows.

Our Businessproceeds and lease (lease back) the transferred real estate. In cases inwhich such securitisation is completed, the consolidated subsidiaries are
expected to recover their investments, etc. in an appropriate manner, and,in cases in which losses arise, the cost to the consolidated subsidiaries islimited to the amount invested. Moreover, the consolidated subsidiaries
do not own equity with voting rights in any of the special purposes entities
nor do they dispatch directors or employees to them. As of the most recent
balance sheet date of these special purpose entities, total assets were¥72,645 million and total liabilities were ¥63,465 million. These are simple
totals regardless of the investment ratio.
Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2009 are as follows.

97Notes to the Consolidated Financial Statements

Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2009 are as follows.
Significant transaction amounts
or balance as of
31st March 2009
(Millions of yen)

Significant transaction amounts
or balance as of
31st March 2010
(Millions of yen)

Significant income and expenditure
Item

Investments in silent
partnerships(Notes 1 and 2)..................

¥7,741

Receivable amount ofdividends (Note 4)...........

533

Distributed loss (Note 5)—

Management fees
(Note 6)

Management business...

thousand) and total liabilities were ¥57,895 million ($622,527 thousand).
These are simple totals regardless of the investment ratio.
Amounts and other details of transactions with special purpose entities in the fiscal year ended 31st March 2010 are as follows.

Distributed income(Note 3)

(Millions of yen)

¥1,191
17

Investments in silent
partnerships(Notes 1 and 2)..................

¥8,357

1,233

Receivable amount ofdividends (Note 4)...........

716

Management business...

—

Notes:
1. Accrued future loss from valuation of investments in the aggregate amount of¥2,282 million for the year ended 31st March 2009 was recorded.
2. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
3. Distributed income is recorded in revenues from operations.
4. The receivable amount of dividends is equal to the suspended payments ofdividends.
5. Distributed loss is presented in costs of revenues from operations.
6. Management fees are presented in revenues from operations in the consolidated
statements of income.

Fiscal year ended 31st March 2010
Some consolidated subsidiaries invested in nine special purpose entities (inthe form of special limited liability companies, joint ventures, etc.). The special purpose companies use non-recourse loans, etc. from financial institutions to acquire real estate (trust beneficiary rights), which they plan to sell
to investors upon development, leasing, etc. The consolidated subsidiaries
are expected to recover their investments in an appropriate manner uponcompletion of the business, and even in cases in which losses arise (seenote 1), the cost to the consolidated subsidiaries is limited to the amountinvested. Moreover, the consolidated subsidiaries do not own equity withvoting rights in any of the special purpose entities nor do they dispatch
directors or employees to them. As of the most recent balance sheet dateof these special purpose entities, total assets were ¥87,704 million ($943,054

Significant income and expenditure
Item
Distributed income(Note 3)¥523

Management fees
(Note 5)463

Significant transaction amounts
or balance as of
31st March 2010
(Thousands of
U.S. dollars)
Investments in silent
partnerships(Notes 1 and 2)..................

$89,860

Receivable amount ofdividends (Note 4)...........

7,699

Management business...

—(Millions of yen)

Significant income and expenditure(Thousands of
U.S. dollars)

Item
Distributed income(Note 3)

$5,624

Management fees
(Note 5)

4,978

Notes:
1. A
 ccrued future loss from valuation of investments in the aggregate amount of ¥580
million ($6,237 thousand) for the year ended 31st March 2010 was recorded.
2. Investments in silent partnerships are recorded as investment securities in the
consolidated balance sheets.
3. Distributed income is recorded in revenues from operations.
4. T he receivable amount of dividends are equal to the suspended payments ofdividends.
5. M
 anagement fees are presented in revenues from operations in the consolidated
statements of income.

(Per Share Information)
Yen

Net assets per share .............................................................................................................................................................................
Net income per share .........................................................................................................................................................................
Net income per share—diluted.....................................................................................................................................................

U.S. dollars

2009

2010

2010

¥366.96
16.28
16.18

¥371.70
8.55
8.51

$4.00
0.09
0.09

Note: Basis for the calculation
1. Net assets per share
Millions of yen

Thousands of U.S. dollars

2009

2010

2010

Total net assets on consolidated balance sheets¥  473,878¥  480,633$5,168,097

Net assets related to common shares¥  462,972¥  469,128$5,044,387¥    10,906¥    11,505$  123,710

1,271,406

1,271,406

Treasury stock shares (Thousands of shares)

4,312

3,829

Common shares held by consolidated subsidiaries and equity method affiliates (Thousands of shares)

5,449

5,449

1,261,645

1,262,128

Item

Major causes of difference
Minority interests
Common shares issued (Thousands of shares)

Common shares used to calculate net assets per share (Thousands of shares)

98 Annual Report 2010

Millions of yen
Item

Thousands of U.S. dollars

2009

2010

2010
$116,054

Net income per share¥    20,550¥    10,793¥        —¥        —$      —Net income related to common shares¥    20,550¥    10,793$116,054

Average number of common shares during term (Thousands of shares)

1,262,258

1,261,824

Interview with the President

Net income
Amount not belonging to common stockholders

Diluted net income per share
Adjustment to net income¥      (124)¥       (56)$    (602)(Equity in income of affiliates)¥      (124)¥       (56)$    (602)

Increase in number of common shares——

Summary of potential shares that were not included in the calculation of diluted income per sharebecause their effect was not dilutive.

——

Our Business

2. Net income per share and diluted net income per share

CONSOLIDATED SUPPLEMENTARY STATEMENTS(Corporate Bond Statements)

Name

—

¥ 10,000(10,000)$  107,527(107,527)

10,000—10,000—15,000

2.46%

None

—

2.23

None

—

2.23

None

15,000(15,000)

161,290(See Note 2)(161,290)

None

10,00010,000107,527(See Note 3)

None

20,00020,000215,054

1.85

None

10,00010,000107,527

1.39

None

10,00010,000107,527

1.66

None

20,00020,000215,054

1.46

None

—

10,000107,527

1.10

None

—

10,000107,527

1.87

None

—

20,000215,054

1.25

None

15,00015,000161,290

3.525

None

10,00010,000107,527

2.22

None

¥140,000¥160,000(25,000)$1,720,430(268,817)——

Notes:
1. The amount in parenthesis in the “Outstanding as of end of the fiscal year underreview” column is the current portion of the total amount and is recorded incurrent liabilities on the consolidated balance sheets.
2.
1) From the day after 28th September 2000 to 30th September 2001
3.00% annualised2) From the day after 30th September 2001
The floating rate was then the 20-year swap rate minus the 2-year swap rate plus

17th Sept.
2010
28th Aug.
2009
28th Aug.
2009
30th Sept.
2010
28th June2011
18th July
2012
14th Nov.
2011
14th Nov.
2013
29th July
2011
23rd Oct.
2014
23rd Oct.
2019
27th Jan.
2017
25th June
2012
23rd June2014—

0.95% from 1st October 2001. (If the result of this calculation was below 0, therate would be 0%)3.
1) From the day after 28th June 2001 to 28th June 2004
1.30% annualised2) From the day after 28th June 2004
The floating rate was then the 20-year swap rate minus the 2-year swap rate plus
0.15% from 29th June 2004. (If the result of this calculation was below 0, the ratewould be 0%)

Hankyu Hanshin Holdings

Financial Section—¥ 10,000

Redemption
dateManagement Organisation

Total

18th Sept.
1998
30th Aug.
1999
30th Aug.
1999
28th Sept.
2000
28th June
2001
18th July
2007
14th Nov.
2007
14th Nov.
2007
30th July
2008
23rd Oct.
2009
23rd Oct.
2009
28th Jan.
2010
25th June
1997
23rd June
2004

Security

Core Businesses: Overview and Outlook

Series 19 unsecured
corporate bonds
Series 25 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 26 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 27 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 28 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 33 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 34 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 35 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 36 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 37 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 38 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 39 unsecured
Hankyu Hanshin Holdings, Inc.
corporate bonds
Series 12 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Series 14 unsecured
Hanshin Electric Railway Co., Ltd.
corporate bonds
Hankyu Hanshin Holdings, Inc.

Issue dateSpecial Feature

Company

Balance
Balance as of Balance as of
as of 31st
31st March
31st March
March 20102009 (Millions 2010 (Millions (Thousands ofof yen)of yenU.S. dollars) Interest rate (%)

99

Notes to the Consolidated Financial Statements

4. Redemption schedule of bonds for five years subsequent to 31st March 2010.
Millions of yen

Thousands of
U.S. dollars

Due within one year....................................................................

¥25,000$268,817

Due after one year through two years.............................

40,000430,108

Due after two years through three years........................

35,000376,344

Due after three years through four years.......................

10,000107,527

Due after four years through five years...........................

20,000215,054(Statements of Loans Payable)

Item

Balance as of
31st March 2009
(Millions of yen)

Balance as of
31st March 2010
(Millions of yen)

Balance as of
31st March 2010
(Thousands of
U.S. dollars)

Average interest
rate (%)

Repayment deadline

Short-term borrowings..............................................................................
Current portion of long-term debt....................................................
Current portion of lease obligations.................................................
Long-term debt (excluding current portion)...............................
Lease obligations (excluding current portion)............................
Other interest-bearing debt...................................................................
Total...............................................................................................................

¥  210,073
56,833449
866,717
1,547—¥1,135,620¥  182,087
105,258
835
832,018
2,383—¥1,122,583$ 1,957,925
1,131,806
8,978
8,946,430
25,624—$12,070,785

0.965%
1.550
—
1.315
—
—
—

—
—
—
2011-2030
2011-2017——

Notes:
1 Corporate and eliminations are not shown.
2 The “Average interest rate” of loans payable is the weighted average interest rate foroutstanding loans payable as of end of the fiscal year under review.
3 The “Average Interest rate” is not shown for lease obligations because the Company
principally adopts the method of including the amounts equal to interest in total
capital lease obligations and the method of spreading the total amount equal tointerest equally over each fiscal year of the lease period.
4 Repayment schedule of long-term debt and lease obligations (excluding current
portion) for five years subsequent to 31st March 2010.

Millions of yen

Thousands of
U.S. dollars

Due after one year through two years.............................

¥124,442$1,338,086

Due after two years through three years........................

138,139

1,485,366

Due after three years through four years.......................

183,459

1,972,677

Due after four years through five years...........................

144,732

1,556,258

Millions of yen

Thousands of
U.S. dollars

Long-term debt

Lease obligations
Due after one year through two years.............................

¥849$9,129Due after two years through three years........................

741

7,968

Due after three years through four years.......................

440

4,731

Due after four years through five years...........................

187

2,011

OTHERS
Quarterly revenues from operations, etc. in fiscal year ended 31st March 2010
1st Quarter

Revenues from operations (Millions of yen)
Income before income taxes and minority interests(Millions of yen)
Net income (Millions of yen)
Net income per share (Yen)

100 Annual Report 2010

3rd Quarter

4th Quarter¥169,025¥151,972¥175,001

3,723(1,971)(1.56)

20,814
10,900
8.64

8,381
4,705
3.73

979
(2,840)( 2.25)

1st Quarter

Revenues from operations (Thousands of U.S. dollars)
Income before income taxes and minority interests(Thousands of U.S. dollars)
Net income (Thousands of U.S. dollars)
Net income per share (U.S. dollars)

2nd Quarter¥157,288

2nd Quarter

3rd Quarter

4th Quarter$1,691,269$1,817,473$1,634,108$1,881,731

40,032(21,194)( 0.02)

223,806
117,204
0.09

90,11850,591
0.04

10,527(30,538)(0.02)

Major Group Companies (As of 31st March 2010)Urban Transportation ■ ■ ■Travel and International Transportation ■ ■ ■Business Subsegments for
Financial Reporting Purposes

Business Subsegments for
Financial Reporting Purposes

Name of Company

Railway Operations

Travel Agency

Hanshin Travel Service Co., Ltd.
Hankyu Travel Support Co., Ltd.

Nosé Electric Railway Co., Ltd.

Hankyu Hanshin Express International Co., Ltd.

Hokushin Kyuko Railway Co., Ltd.

International
Transportation

Kobe Rapid Transit Railway Co., Ltd.

Other

Hankyu Hanshin Express Holdings Corporation

Kita-Osaka Kyuko Railway Co., Ltd.

Hankyu Hanshin Logipartners Co., Ltd.

Hankyu Bus Co., Ltd.
Hankyu Kanko Bus Co., Ltd.
Bus Operations

Hanshin Bus Co., Ltd.
Osaka Airport Transport Co., Ltd.
Hankyu Denen Bus Co., Ltd.

Taxi Operations

Hankyu Taxi Inc.

Hotels ■ ■ ■Business Subsegments for
Financial Reporting Purposes

Dai-ichi Hotel Kyushu Co., Ltd.

Hankyu Railway Service Co., Ltd.
Hotel Management

Arima View Hotel Co., Ltd.
Amanohashidate Hotel Co., Ltd.

Special Feature

Globaltech Co., Ltd.
Other

Name of Company

Hankyu Hanshin Hotels Co., Ltd.

Hanshin Taxi Co., Ltd.
Railway Technology Co., Ltd.

Hotel New Hankyu Kochi Co., Ltd.

Hankyu Hanshin Electric System

Hanshin Hotel Systems Co., Ltd.

Hankyu M-TECH Corporation
Hanshin Motor Dock Co., Ltd.
Nippon Rent-A-Car Hankyu Inc.
Alna Sharyo Co., Ltd.

Business Subsegments for
Financial Reporting Purposes

Name of Company

Retailing ■ ■ ■Business Subsegments for
Financial Reporting Purposes

Rental ofReal Estate

Hankyu Corporation
Hankyu Retails Corporation

Restaurants, etc.

Iina Dining Co., Ltd.
Creative Hankyu Co., Ltd.

Hankyu Realty Co., Ltd.
Osaka Diamond Chikagai Co., Ltd.
Hanshin Real Estate Co., Ltd.

Purchase and Sale ofReal Estate

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.
Hankyu Hanshin Building Management Co., Ltd.
Hankyu Hanshin Security Service Co., Ltd.
Hankyu Hanshin Techno Service Co., Ltd.
Hankyu Hanshin Clean Service Co., Ltd.
High Security System Co., Ltd.

REIT Operations

Hankyu REIT Asset Management, Inc.

Other ■ ■ ■Business Subsegments for
Financial Reporting Purposes

Construction

Name of Company

Hanshin Construction Co., Ltd.

Domestic Logistics

Chuo-Densetsu Co., Ltd.
Sanyo Jidosha Unso Co., Ltd.

Group FinanceHankyu Hanshin Financial Support Co., Ltd.

Outsourcing Services
for Personnel andAccounting Services

Hankyu Hanshin Business Associate Co., Ltd.

Entertainment and Communications ■ ■ ■Business Subsegments for
Financial Reporting Purposes

Name of Company

Equity-method Affiliates

Management Organisation

Property Management

Name of Company

Sales of Goods

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.

Core Businesses: Overview and Outlook

Real Estate ■ ■ ■Interview with the President

Hanshin Electric Railway Co., Ltd.

Name of Company

Hankyu Travel International Co., Ltd.

Hankyu Corporation

Our Business

Consolidated Subsidiaries

Hanshin Electric Railway Co., Ltd.
SportsHanshin Tigers Baseball Club, Ltd.
Hankyu Corporation

Revue

Advertising Agency

Department Store

Railway Operations

Umeda Arts Theater Co., Ltd.
Hankyu Advertising Agency Inc.
Hanshin Contents Link Corporation

Information
Technology Service

Itec Hankyu Hanshin Co., Ltd.

Publishing

Hankyu Communications Co., Ltd.

Cable Television

Bay Communications Inc.

Name of Company

H2O Retailing Corporation[Securities code: 8242]
Nishi-Osaka Railway Co., Ltd.

Takarazuka Creative Arts Co., Ltd.
Takarazuka Stage Co., Ltd.

Theatre Operations

Main BusinessMotion Picture Business
Commercial Broadcasting

Kobe Electric Railway Co., Ltd.
[Securities code: 9046]
Toho Co., Ltd. [Securities code: 9602]

Financial Section

Wellness Hanshin Inc.

Tokyo Rakutenchi Co., Ltd.
Kansai Telecasting Corporation

Hankyu Hanshin Holdings101

Investor Information (As of 31st March 2010)

Hankyu Hanshin Holdings, Inc.
Paid-in Capital:¥99,474 million
Fiscal Year-End:
31st March
Number of Employees: 20,938 (consolidated basis)
Authorised Shares:
3,200,000,000
Issued Shares:
1,271,406,928
Number of Shareholders: 134,473
Unit of Trading:
1,000 shares
Stock Exchange Listing: Tokyo, Osaka
Transfer Agent:	Mitsubishi UFJ Trust and Banking
Corporation

Head Office:1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001(Corporate Planning Dept., IR Office)Fax:+81-6-6373-5042
Tokyo Office (Personnel and General Affairs Dept.):
Toho Twin Tower Bldg.,
1-5-2, Yurakucho, Chiyoda-ku, Tokyo 100-0006, Japan
Phone: +81-3-3503-1568
Fax:+81-3-3508-0249

Principal Shareholders:Ownership Breakdown:
Number of shares
Percentage (%)(thousands)Name

56,512
42,68032,80430,947
20,418Japan Trustee Services Bank, Ltd. (Trust account)
Nippon Life Insurance Company
The Master Trust Bank of Japan, Ltd. (Trust account)
Sumitomo Mitsui Banking Corporation
H2O Retailing Corporation

13,665

1.07

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

11,1900.88

State Street Bank West Pension Fund Clients Exempt(Standing Agent: Mizuho Corporate Bank, Ltd.)

10,067

0.79

9,878
9,291

0.77
0.73

Japan Trustee Services Bank, Ltd. (Trust account 1)
Takenaka Corporation

0.00%

52.58%

4.44
3.35
2.58
2.43
1.60

Japan Trustee Services Bank, Ltd.
(The Sumitomo Trust & Banking Co., Ltd. Retirement Benefit Trust Account)

National government andlocal public organisations

Individuals
and others

Financial
institutions

26.82%
Securities
companies

0.51%
Other
corporations

10.26%
Foreign corporations
and individuals

9.83%

Stock Price Range and Trading Volume (Tokyo Stock Exchange):
Stock Price (¥)

Nikkei Average (¥)

900

21,000

Nikkei Average (right scale)600

14,000Stock Price (left scale)

300

7,000

0
100,000

0

50,000
Trading Volume 0(thousand shares)

High
Low
At year-end

102 Annual Report 2010

4

5

6

7

8

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

2

Fiscal year ended March 2008

Fiscal year ended March 2009

Fiscal year ended March 2010

719
400
431

539
406
447

485
381
433

3

Creating

Ne

ay
w W

s t

ns
o I

pir

e

d
an

S

is
at

fy

Hankyu Hanshin Holdings, Inc.
1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001 Fax: +81-6-6373-5042
http://www.hankyu-hanshin.co.jp/english/

Hankyu Hanshin Toho Group