ANNUAL REPORT 2014

Hankyu Hanshin
Holdings
Securities code: 9042

Linking to the Next Stage

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 and make a positive contribution to society.

ValuesWhat 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.

ANNUAL REPORT 2014

Contents
Section

1 Key Facts  2 Our BusinessSearch Index▶ Group Overview  4 Business Portfolio  6 Our Strength
10 Performance Highlights (Consolidated)

2~9, 36~37, 118~119▶ Business Performance10~13, 16~17, 81~84▶ Forecasts for Fiscal 2015 Onward

Group: 18
Urban Transportation: 41
Real Estate: 47
Entertainment and Communications: 50
Travel: 53
International Transportation: 56
Hotels: 59▶	Medium-Term Management Plan and

Growth Strategies
19~22, 24~27▶ Progress in Large-Scale Projects

32~33▶ Safety Measures in the Railway Business

67~74, 86~87▶ Financial Policy and Shareholder Returns

22~23, 27Section2 Business Policies andStrategies

14 To Our Stakeholders
16 Message from the President
24 Medium-Term Management Plan
28 Special Feature: Enhance value along rail lines
including the Umeda area

Section3 Core Businesses:

Overview and Outlook

36 Core Business Highlights
38 Urban Transportation
42 Real Estate
48 Entertainment and Communications
51 Travel
54 International Transportation
57 Hotels

Forward-looking Statements
The reader is advised that this report contains
forward-looking statements regarding the futureplans, strategies, and earnings performanceof Hankyu Hanshin Holdings, Inc., which are
not statements of historical fact but constituteestimates or projections based on facts known
to the Company’s management as of the timeof writing. Actual results may therefore differ
substantially from such 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 176th period, audited by
KPMG AZSA LLC presented in somewhat changed
format. We have presented this informationin such a way as to ensure that there is no discrepancy with the data presented in the Annual
Securities Report. However, the Annual Report
itself has not been audited by KPMG AZSA LLC.
Definition“Fiscal 2014” refers to the fiscal year ended 31st
March 2014. Other fiscal years are referred to ina corresponding manner in this Annual Report.
Figures are basically rounded off. Sums expressedin units of ¥100 million are rounded to the nearest ¥100 million.

Section

4 Social Responsibility andManagement Organisation

60 Message from the President
61 Management Organisation
67 Safety Initiatives
75 Corporate Social Responsibility
78 Directors and Audit & Supervisory Board Members

Section5 F inancial Section andCorporate Data

81 Consolidated Six-Year Summary
82 Consolidated Financial Review
85 Business Risks
88 Consolidated Balance Sheets90	Consolidated Statements of Income/Consolidated Statements of Comprehensive Income
91 Consolidated Statements of Changes in Net Assets
93 Consolidated Statements of Cash Flows
94 Notes to the Consolidated Financial Statements
118 Major Group Companies
119 Investor Information

Hankyu Hanshin Holdings

Annual Report 2014

1

Our Business

Hankyu Hanshin Holdings
The Group comprises six core businesses: Urban Transportation, Real Estate, Entertainment and Communications, Travel,
International Transportation and Hotels. The businesses are operated by five core companies: Hankyu Corporation, Hanshin Electric
Railway Co., Ltd., Hankyu Travel International Co., Ltd., Hankyu Hanshin Express Co., Ltd., and Hankyu Hanshin Hotels Co., Ltd., withthe aim of the organic growth of the entire Group.

P.38

Forming a mega network in
the Kansai area that provides
various urban transportation
services linking Group railways, buses and taxis

Urban
Transportation

Real Estate

P.48

Hanshin Electric Railway

2 Hankyu Hanshin Holdings

P.42

Annual Report 2014

P.54

Offer high-quality global
logistics services mainly
through Hankyu Hanshin
Express

TravelInternational
Transportation

HotelsHankyu Travel
International

Hankyu Hanshin
Express

Hankyu Hanshin
HotelsEntertainment andCommunications

Hankyu Corporation

Develop and manage
high-quality housing, commercial facilities and officesin the areas served by ourlines

Expand businesses of highbrand value such as Hanshin
Tigers professional baseballteam, Hanshin Koshien
Stadium and Takarazuka
Revue

Expanding sales, focusing on
our mainstay Trapics brandwith its extensive travel
packages, through various
media including newspaper
advertising, member magazines, and the Web.

P.51

Operate Japan’s major hotel
groups under the HankyuHanshin-Daiichi HotelGroup, and manage The
Ritz-Carlton, Osaka

P.57

Section

1

Key Facts

Fiscal 2014 Core Business Operating Results

The Urban Transportation and Real Estate Businesses drive income
and contribute to generating a stable cash flow.
The major revenue pillars for the Group are the Urban Transportation Business and Real Estate Business, with both
holding about 60% of revenues from operations and roughly 80% of operating income. Among these, the Urban
Transportation Business’ railway business and the Real Estate Business’ leasing business account for more than half ofGroup profits, and generate a stable cash flow. A major characteristic of the Group is also that the Entertainment andCommunications Business stably records about 10% of the Group’s total operating income.

Revenues from Operations

Operating Income

Approx.
Approx.

Approx.
Approx.

60%60%¥

80%80%

679.2¥679.2

91.8
91.8

¥ ¥
billionbillionbillionbillion

32.5%
28.9%
15.3%
4.6%
5.2%
8.8%
4.8%

Urban Transportation
Real EstateEntertainment and Communications
TravelInternational Transportation
Hotels
Other

40.3%
39.8%
14.8%
1.3%
2.1%
0.8%
0.9%

* Figures for % of revenues from operations are calculated based on the simple aggregate amount (including intersegment transactions) of each segment.

Operating Income by Core Business(¥ billion)

100

80

11.1

60

30.9

40

4.2
10.1

3.0
10.0

29.1

24.0

4.8
11.2

4.1
14.2

37.3

38.0

37.2

38.5

Urban Transportation
Real EstateE ntertainment andCommunications
Other

20

31.0

32.3

29.4

-1.0

0
2010

2011

2012

2013

Hankyu Hanshin Holdings

2014

(FY)

Annual Report 20143

Business Portfolio

Developing a Balanced Business Portfolio
Capable of Sustainable Growth
Urban Transportation

Annual number of passengers carried (FY2014)

Total length of lines operated

143.6km

Hankyu Railway

630 million

Core Companies: Hankyu Corporation, Hanshin Electric Railway

Hanshin Electric Railway

Total length of lines operated

230 million

48.9kmReal Estate

Leasable area (As of the end of March 2014)

Approx.

1.7 million m

Of this total,
approximately
800,000m2 areconcentrated in
the Umeda area

Core Companies: Hankyu Corporation, Hanshin Electric Railway

2

Number of condominiums sold for FY2014

1,356
Entertainment andCommunications

Core Companies: Hankyu Corporation, Hanshin Electric Railway

Total attendances (FY2014*)
Hanshin Tigers (Home games)

Approx.

* Total attendance at Hanshin
Tigers home games during
the 2013 season

2.77 million

Takarazuka Revue (Including nationwide stage productions)

Approx.

2.50 million
4Focusing on its Railway Business, the Group is working to enhance the value of the areas served by its stations by expandingorganic links primarily between the Real Estate Business and the Entertainment and Communications Business. In addition, we
will realise a stable and balanced business portfolio by building on the unique strengths of each business. Looking ahead, thecomprehensive strength of the entire Group will be redoubled in such areas as bolstering competitiveness in each core business,aiming to be a No.1 and only one company, and generating Groupwide synergies that transcend barriers between businesses.

TravelTotal travel billings:
Core Company: Hankyu Travel International

No. 5 in the industry

Overseas travel billings:

No. 3 in the industry

Total travel billings* (FY2014)¥408.7 billion* The total of both Hankyu Travel International and Hankyu Hanshin Business Travel

International Transportation
Japan outbound export
handling volume:

No. 4 in the industry

Japan inbound importhandling volume:

No. 4 in the industry

Core Company: Hankyu Hanshin Express

Sales* (FY2014)¥78.5 billion* Includes the equivalent amount of initial export freight charges

HotelsNumber of rooms*
Core Company: Hankyu Hanshin Hotels

10,326

Group hotels*48* As of 31st March 2014

Hankyu Hanshin Holdings

Annual Report 2014

5ai

Our Railway Network
The Group’s railway network connects
the Kansai economy’s main urban area,
Kobe and Kyoto, and neighbouring cities
with Umeda (Osaka) as a starting point.
From the Group’s initial start-up, we havecontributed to the creation and development of culture through our high-quality
homes, commercial facilities, and amusement facilities, as well as attracting universities and so on, and we have developed
together with the people of the region.

Our Strength
The Potentialof the Kansai Area

N

Population:

About

16% of Japan
Kansai

Area:

Tokyo

Hyogo

7

Tokyo

The Kansai area, the Group’s

Shiga

Osaka City
Osaka
Nara

Kyoto
Kyoto City

making it the second largest

Shiga
Kobe Rapid Transit Railway Line
Shin-Kobe

Kobe
Sannomiya

Hanshin Main Lin

Minatogawa

Wakayama

populated area in Japan. The

Hokushin Kyuko
Railway Line

Hankyu Kobe Line

Osaka City
Osaka
Nara

lation of about 20 million,

Tanigami

Wakayama

Kobe City

business base, has a popu-

Kyoto City

Kobe City

About % of Japan

Hyogo

Kyoto

Shinkaichi

economic scale of the Kansai

Nishidaiarea, on the basis of GDP,

Motomachi

Improvement works at
Hanshin Sannomiya Sta(Completed in March 2013)

is approximately $971.0 billion, boasting one of Asia’s largest
economies.

($ billion)ji

To Hime

Sources: IMF/World Economic and Financial Surveys 2011
Cabinet Office, Government of Japan,“Prefectural Accounts FY2011”15,53415,000

7,322
5,906

6,000
4,000

One of Asia’s
Largest Economies

3,631
2,785

2,000

Strength1

Ability to create value inareas served by our stations

1,169 1,114 971 846
834

0Netherlands (17th)

Indonesia (16th)

Kansai Area

Korea (15th)

Mexico (14th)

France (5th)Germany (4th)Japan (3rd)

China (2nd)

United States (1st )As a result of valuing the relationships of trust with residents living
along the railway line, our long-term efforts to enhance the value ofthe areas served by our stations have been well received. At present,
the area along the Group’s rail lines has, on the whole, become highly
popular within the Kansai area. This creative ability for enhancing thearea along our rail lines is one of the strengths of our Group.

6 Hankyu Hanshin Holdings

Annual Report 2014

Hanshin Electric Railway Network 48.9km

Kawaramachi

Kyoto Pref.

Kobe Line 46.9km

Hanshin Line 43.9km(Kobe Line, Imazu Line, Itami Line, Koyo Line)(Hanshin Main Line, Hanshin Namba Line, Mukogawa Line) Hankyu Arashiyama Line

Takarazuka Line 28.5km

Kobe Rapid Transit Railway Line 5.0km(Takarazuka Line, Mino-o Line)

Katsura

Kyoto

Section1

Kyoto Line 65.4km(Kyoto Line, Senri Line, Arashiyama Line)

Kobe Rapid Transit Railway Line 2.8km
New station “Nishiyama-tennozan Station”

Myokenguchi
Nissei-chuo

Hankyu Kyoto Line
Nosé Electric
Railway Line

Osaka Pref.

Hyogo Pref.

Hankyu Mino-o Line
Kita-Osaka Kyuko Line
Extension Project
Mino-oKawanishi-noseguchi
Kita-senri

Hankyu Koyo
Line

n
se
an

Hankyu Senri Line

Itami

Hankyu Itami Line
Hankyu Takarazuka Line

KoyoenShukugawa

Kita-Osaka Kyuko
Railway Linenk

Hankyu Imazu Line

Ishibashi Senrichuo

Sh
i

Osaka
International
AirportTakarazuka

Tsukaguchi
Nishinomiya-kitaguchi

Esaka

Awaji

Shin-Osaka Hankyu Building

Shin-Osaka

Imazu

Nara Pref.

(Construction completed in July 2012)

Imazu
Mukogawa

Daimotsu
Amagasaki

Juso

Tenjimbashisujirokuchome

Rebuilding of Umeda Hankyu Building(Grand opening held in November 2012)

Umeda

GRAND FRONT OSAKA (Opened in April 2013)
Umeda 1-1 Project

Mukogawadanchi-mae

Hanshin Mukogawa Line

Osaka Bay
Hanshin Namba Line
Osaka-Namba

Subway Sakaisuji Line

ation

Hankyu Railway Network 143.6km

Key FactsneArashiyama

Kintetsu Nara LineTop ranked area in survey ofpreferred residential areas

To Kintetsu-Nara

Survey of Preferred Residential
Areas (Kansai Area)
Tenga chaya
Rank

Place

1

Nishinomiya

2Ashiya3

Shukugawa

4

Umeda

5

Kobe

6

Okamoto

7

Kyoto

8
9
10

Location

Nishinomiya, Hyogo

11

MikageKobe, Hyogo (Higashi-nada-ku)

Ashiya, Hyogo

12

Namba

Osaka (Chuo-ku)

Nishinomiya, Hyogo

13

Takarazuka

Takarazuka, Hyogo

Osaka (Kita-ku)

14

Tennoji

Osaka (Tennoji-ku)

Kobe, Hyogo (Chuo-ku)

15

Toyonaka

Toyonaka, Osaka

Kobe, Hyogo (Higashi-nada-ku)

16

Downtown Kobe

Kyoto

17

IbarakiSannomiya

Kobe, Hyogo (Chuo-ku)

18

Fukushima

Senri-chuo

Toyonaka, Osaka

19

Abeno

Takatsuki

Takatsuki, Osaka

20

Motomachi

Kobe
Ibaraki, Osaka
Osaka (Fukushima-ku)
Osaka (Abeno-ku)
Kobe, Hyogo (Chuo-ku)

Source: Survey by Sumitomo Realty & Development and six other major real estate firms (26th September 2013)

Hankyu Hanshin Holdings

Annual Report 2014

7

Strength2

Leveraging our strong presence in Umeda,
Kansai’s economic centre
The Umeda area of Osaka, the Group’s most important base, is one of the most famous shopping and entertainment districts ofJapan, served by the Umeda stations of the Hankyu and Hanshin lines and the Osaka Municipal Subway as well as JR Osaka Station.
It is Kansai’s economic centre. In the Umeda area, the Group operates railway network terminuses serving both the Hankyu andHanshin networks, and also runs key commercial facility, office building, hotel, theatre and other businesses, demonstrating its
significant presence in the area.

20

14
15

1

5

2

16

18

17
19 Hankyu Umeda Sta.
6

JR OSAKA Sta.

13

7
8

Hanshin Umeda Sta.

12

9

3

11
10

4

Umeda 1-1 Project■ Owned solely by the Group■ Joint ownership■ Owned by Hankyu REIT Inc.
1 HERBIS OSAKA

8 HEP NAVIO

15 Hankyu Corporation Head Office

2 HERBIS ENT

9 HEP FIVE

16 Kitano Hankyu Bldg.

3 Dai Hanshin Bldg./Hanshin Umeda Sta.

10 Higashi Hankyu Bldg.

17 Kita Hankyu Bldg.

4 Shin Hankyu Bldg.

11 Umeda Centre Bldg.

18 Nishi Hankyu Bldg.

5 Umeda Hankyu Bldg.

12 NU chayamachi

19 Hotel new Hankyu Osaka

6 Hankyu Grand Bldg.

13 NU chayamachi Plus

20 GRAND FRONT OSAKA

7 Hankyu Umeda Sta./Hankyu Sanban Gai Shopping Centre/Hankyu Terminal Bldg.

14 Applause Tower

8 Hankyu Hanshin Holdings

Annual Report 2014

* HEP FIVE is jointly owned with Hankyu REIT Inc.

Our Strength

Section3

Key Facts

Strength

1

Ownership of content with strong brand value
The Group delivers inspiration and dreams through the Hanshin Tigers professional baseball team/Hanshin Koshien Stadium and the
Takarazuka Revue, both of which are unique assets that are popular and enthusiastically supported not only in Kansai area but throughout Japan. These two powerful attractions are assets that none of our rivals have.
They help increase passenger numbers in the areas served by our
stations when there is a show or a game on. They also contribute greatly to increased brand recognition for theGroup.

©Takarazuka Revue Company©Hanshin Tigers

Hankyu Hanshin Holdings

Annual Report 20149

Performance Highlights (Consolidated)
Key Financial Indicators(¥ million)

2009

FY

2010

2011

($ thousand)

2012

2013

2014

2014

¥ 679,157
91,828149,200$ 6,593,757
891,534
1,448,544

Result of Operations:
Revenues from operations
Operating income
EBITDA
Income before income taxes andminority interests
Net income
Comprehensive income
Capital expenditure
Depreciation and amortisation¥ 683,715 ¥ 653,287 ¥ 638,770 ¥ 649,703 ¥ 682,439
77,82370,12664,74373,80987,921
135,300
133,200
127,100
133,500
145,100
34,06433,89932,76043,41962,192

83,542811,087

20,550—109,688
54,798

10,793
12,541
132,386
60,41818,06814,72868,431
59,66939,252
44,99255,26756,96839,70254,081
59,51254,54046,352
55,94180,72254,474450,019
543,117783,709528,874¥ 146,955 ¥ 103,252 ¥ 124,525 ¥ 127,655(132,737)(62,516)(44,295)(58,923)
14,21740,73580,23068,732(24,200)(39,544)(78,978)(69,195)¥ 146,991(45,517)
101,474(105,079)$ 1,427,097(441,913)
985,184(1,020,184)¥2,307,332 ¥2,337,331 ¥2,314,669 ¥2,274,380 ¥2,281,007
473,878
480,633
486,947
524,801
573,154
1,275,620
1,282,583
1,251,665
1,183,647
1,126,633¥2,286,928
617,598
1,032,307$22,203,184
5,996,097
10,022,398¥    16.28 ¥     8.55 ¥   14.32 ¥    31.13 ¥   31.48
16.18
8.51
14.27
31.13
31.47
366.96371.70377.17407.01443.63
5.00
5.00
5.00
5.00
5.00

¥   36.76
36.75
477.696.00$      0.36
0.36
4.64
0.06

12.9
3.3
7.4
7.8
24.5
2.0

13.5
3.6
8.0
6.9
26.3
1.7

—
—
—
—
—
—

¥      433 ¥      384 ¥      361 ¥      569¥     562$      5.46

Cash Flows:
Cash flows from operating activities ¥ 108,597
Cash flows from investing activities
Free cash flow
Cash flows from financing activities(115,047)(6,449)
7,014

Financial Position:
Total assets
Total net assets
Interest-bearing debt
Per Share Data (yen and U.S. dollars):
Net income

Basic
DilutedNet assets
Dividend
Ratios:Operating income margin (%)
ROA (%)ROE (%)
Interest-bearing debt/EBITDA (times)
Equity ratio (%)
Debt/equity (D/E) ratio (times)

11.4
2.5
4.4
9.4
20.1
2.8

Stock Price Index:
Stock price at the end of fiscal year¥      447
(yen and U.S. dollars)Market capitalisation (¥ billion, $ million)
568.3
PER (times)
27.5
PBR (times)

10.7
2.2
2.3
9.6
20.1
2.7

10.1
2.0
3.8
9.8
20.6
2.6

11.4
2.8
7.9
8.9
22.6
2.3

1.2

550.5
50.6
1.2

488.2
26.8
1.0

459.0
11.6
0.9

723.4
18.1
1.3

714.5
15.3
1.2

69,369——618,585
182,997

605,963
193,620603,233
205,202608,632
218,560

615,324
221,133

629,125
226,004

—
—

5.88

8.90

11.22

7.29

11.50

9.22

—

Business Data:
Hankyu Railway (thousand)Hanshin Electric Railway (thousand)Average vacancy rates of rental officebuildings (Umeda area, Osaka; %)Notes:The U.S. dollar amounts have been translated, for convenience only, at ¥103 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market at 31st March 2014.
EBITDA = operating income + depreciation expenses + amortisation of goodwill. EBITDA figures are rounded to the nearest ¥100 million.
Free cash flow = cash flows from operating activities + cash flows from investing activities
ROA = ordinary income/total assets (average of period-start and period-end totals)
ROE = net income/equity (average of period-start and period-end totals)
D/E ratio = interest-bearing debt/equity
Average vacancy rate figures are overall rates for the Umeda downtown area at the end of March for major rental office buildings (including properties not owned by the Group) with a total floor area of atleast 3,300m2. Based on Latest trends in the office-building market in Osaka, Miki Shoji.
Annual number of passengers carried

10 Hankyu Hanshin Holdings

Annual Report 2014

Section

1

Key Facts

Revenues from operations:¥679.2 billion(down ¥3.3 billion or 0.5% from the previous fiscal year)
Operating income: ¥91.8 billion(up ¥3.9 billion or 4.4% from the previous fiscal year)
Despite the impact of the sale of the bookstore business toan outside company in the Urban Transportation Business,
the full-year operation of the Umeda Flagship Store of the
Hankyu Department Store in the Umeda Hankyu Building,favourable sales in the sports business of the Entertainment
and Communications Business, and other factors resulted in a
decline in revenues from operations of 0.5%, or ¥3,281 million,
year on year to ¥679,157 million. Operating income increased
4.4%, or ¥3,907 million to ¥91,828 million due to aforementioned positive earnings factors in the Entertainment andCommunications Business and so on.

■ Operating income: Factor analysis (YoY change)

87,921FY2013(¥ million)

Entertainment andCommunications

FY2014+2,933
Urban Transportation+1,285
Real Estate+729
Hotels +284
International Transportation +241
Travel
-1,227
Other
542
Adjustments-883
91,828Net income: ¥46.4 billion (up ¥6.6 billion or 16.7% from the previous fiscal year)
Net non-operating loss improved 18.2%, or ¥2,370 million year
on year, for a non-operating loss of ¥10,636 million due to adecrease in interest expenses.
Net extraordinary gain of ¥2,350 million was recorded, an
improvement of ¥15,072 million, year on year. This was mainly■ ‌Net income:

Factor analysis(YoY change)

attributable to a gain on sales of noncurrent assets owing to thepartial sale of equity in Hankyu Nishinomiya Gardens.
In addition to the increase in operating income, net income
climbed 16.7%, or ¥6,649 million, to ¥46,352 million due to theabove-mentioned factors.

Decrease in operating expenses and cost of sales of transportation
Decrease in selling, general and administrative expenses
Decrease in non-operating expenses (primarily a decrease in interest expenses)
Increase in extraordinary income (primarily due to an increase in gain on sales of noncurrent assets)
Decrease in extraordinary loss (primarily a decrease in loss on impairment of fixed assets)
Decrease in revenues from operations
Decrease in non-operating income (primarily a decrease of equity in income of affiliates)
Increase in income taxes (including income taxes-deferred)
Increase in minority interests in income+¥3.8 billion+¥3.4 billion+¥2.4 billion+¥3.5 billion+¥11.5 billion-¥3.3 billion-¥0.1 billion-¥14.4 billion-¥0.3 billion

Interest-bearing debt: ¥1,032.3 billion (down 8.4% or ¥94.3 billion from the previous fiscal year)
Despite capital investments in the partial acquisition ofequity in HEP FIVE and the acquisition of NU chayamachi, as
well as building new rolling stock, the outstanding balance ofinterest-bearing debt came to ¥1,032,307 million, a substantial
decrease of 8.4%, or ¥94,325 million, year on year.

Hankyu Hanshin Holdings

Annual Report 201411

Key Financial Indicators (Graphs)
Revenues from Operations

Operating Income/Operating Income Margin(¥ billion)(¥ billion)
800

(%)

100

683.7
600

653.3 638.8 649.7

87.9

682.4 679.2

80

60
400

77.8
11.4

70.1

200

15

64.7
10.1

12.9

11.4

13.5
10

5

20

0

0

0
2009

2010

2011

2012

2013

2014 (FY)2009

Net Income

2010

2011

2012

2014

2013

(FY)

Interest-Bearing Debt and D/E Ratio(¥ billion)
50

46.4
39.3

40

39.7

(¥ billion)(Times)

1,500

4

1,200

30

20

73.8

10.7

40

20

91.8

900

20.6

2.8

2.7

1,183.6

1,126.6

1,032.3

2.3
2

2.0
1.7

300

0

1

0
2009

2010

2011

2012

2013

2014 (FY)

3

2.6

600

18.1
10.8

10

1,275.6 1,282.6 1,251.7

2009

2010

2011

2012

2014

2013

(FY)

* D/E ratio = interest-bearing debt/equity

Total Assets/ROA(¥ billion)
2,500

Total Net Assets/ROE(%)

2,307.3 2,337.3 2,314.7 2,274.4 2,281.0 2,286.9

2,000

5

4

3.3
2.5

1,000

3

2.8

2.2

2

2.0

1

0

0
2009

2010

2011

2012

2013

2014 (FY)* ROA = ordinary income/total assets (average of period-start and period-end totals)

12 Hankyu Hanshin Holdings

Annual Report 2014

473.9 480.6 486.9

524.8

573.2

617.6

7.9

400

7.4

10

8.0

8
6

300
200

500

(%)
12

600
500

3.6
1,500

(¥ billion)
700

4.4

4

3.8

2

2.3

100
0

0
2009

2010

2011

2012

2013

2014

(FY)

* ROE = net income/equity (average of period-start and period-end totals)

Performance Highlights (Consolidated)

Section1

Annual Number of Passengers Carried/Hankyu Railway

Key Facts

Operating and Business Environmental Data
Annual Number of Passengers Carried/Hanshin Electric Railway(Thousand)(Thousand)

800,000

300,000

700,000

Total

Opening of Hanshin Namba Line
(20th March 2009)

600,000

200,000

500,000
400,000

Changes in method of recognition for Kobe Rapid
Transit Railway Line (1st October 2010)

Commuter pass

300,000
200,000

Total

100,000

Other tickets

Commuter pass
Other tickets

100,000
0

0
04

05

06

07

08

09

10

11

12

13

14

Average Vacancy Rates of Rental Office Buildings (Tokyo/Osaka Business Area)
(%)
14

04

(FY)

05

06

07

08

09

10

11

12

13

14

(FY)

* S um of tier 1 and tier 2 operators for bothHankyu and Hanshin* A mong tier 2 operators, we have modified
our method of recognising Kobe Rapid Transit
Railway Line’s passenger volumes followingchanges to its management organisation,effective October 2010 (for both Hankyu andHanshin-operated stretches of the line)

Source: Miki Shoji, Latest trends in theoffice-building market

Significant increase in vacancy rates in the Umeda area andOsaka’s business areas overall following the opening of
GRAND FRONT OSAKA

12
10
8
6
4
2

Osaka businessareas (all)Source: Compiled by the Group based on data from Toyo Keizai, Inc.’s Local Economy Directory
and the Ministry of Internal Affairs and Communications Basic Resident Register

Umeda area
Tokyo business areas (all)

0
2007

2008

2009

2010

2011

2012

2013

(As of 31st March of each year)2014* Areas served by Hankyu and Hanshin lines:
Below are lists of areas with Hankyu Corporation and Hanshin Electric Railway stations (including tier 2 operators).
Osaka Prefecture: Osaka City (Fukushima, Konohana, Nishi, Naniwa, Nishi-Yodogawa, HigashiYodogawa, Yodogawa, Kita and Chuo, out of a total of 24 wards); and Toyonaka, Ikeda, Suita,
Takatsuki, Ibaraki, Minoh, Settsu cities and Shimamoto town
Hyogo Prefecture: Kobe City (Higashi-Nada, Nada, Hyogo, Nagata and Chuo, out of a total of 9
wards); and Amagasaki, Nishinomiya, Ashiya, Itami, Takarazuka and Kawanishi cities
Kyoto Prefecture: Kyoto City (Nakagyo, Shimogyo, Ukyo, Nishikyo, out of a total of 11 wards);
and Muko and Nagaokakyo cities and Oyamazaki town

Population Trends in Areas Served by Hankyu and Hanshin Lines (1991=100)
105
104
103
102

The Great Hanshin (Kobe) Earthquake

Kansai area

101
100
99
98

Areas served by Hankyu and Hanshin lines

97
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Hankyu Hanshin Holdings(FY)

Annual Report 201413

Section

2 Business Policies and Strategies

To Our Stakeholders

President and Representative Director

14 Hankyu Hanshin Holdings

Annual Report 2014

Section

2

Business Policies andStrategies

We achieved an interest-bearing
debt/EBITDA ratio of aroundseven times, our most importantmanagement target, and are
now heading to a new stage.

The Group has built enterprise value through major projects, such as the reconstruction of the
Umeda Hankyu Building and the extension of the Hanshin Namba Line, and used the resulting cash
flow generated to lower interest-bearing debt and improve its financial position. As a result, in fiscal
2014, operating, ordinary, and net income hit record highs, and the Group’s management goal ofinterest-bearing debt/EBITDA ratio being around seven times was achieved. We will continuously
strengthen our financial position and work together as a group to raise enterprise value over the
medium to long term by allocating funds for investment in future growth.
August 2014

Hankyu Hanshin Holdings

Annual Report 201415

Message from the President

Fiscal 2014 Performance
Railway operation revenue increased and the sports business was strong.
Operating income, ordinary income, and net income reached new record highs, andwe achieved our most important management target — an interest-bearing debt/EBITDA ratio of around seven times.
In fiscal 2014, despite concerns of an overseas economic recession following the economic slowdown in China and otheremerging countries, the Japanese economy staged a modest
recovery on improved corporate earnings as the high yen depreciated and stock prices rose, and consumer spending increased.
As a result, earnings at all Group businesses were solid.
Under these circumstances, in the Real Estate Business, theUmeda Flagship Store of the Hankyu Department Store in the
Umeda Hankyu Building was in full operation throughout theyear, while in the Railway Business, the Hankyu and Hanshinlines both performed steadily thanks to higher revenue due tothe grand opening of the Umeda Flagship Store of the Hankyu
Department Store and the GRAND FRONT OSAKA, as well as theimpact of last-minute demand for commuter passes prior to theconsumption tax increase. Moreover, despite higher revenue due
to favourable sales in the Sports Business of the Entertainment
and Communications Business, the bookstore business was
sold to an outside company and travellers to China and South
Korea decreased in the Travel Business. As a result, revenues fromoperations on a consolidated basis declined ¥3.3 billion (down
0.5%) to ¥679.2 billion. However, if we exclude the effects (abouta ¥19.0 billion decline) of the sale of the bookstore business to an
outside company, revenues increased in real terms.

In contrast, in terms of income, negative factors such as therising power costs due to hikes in electricity fees were morethan offset by positive factors for increased income mentioned
above and efforts to reduce costs. As a result, operating income
climbed 4.4%, or ¥3.9 billion, year on year to ¥91.8 billion,
ordinary income rose 8.4%, or ¥6.3 billion to ¥81.2 billion, andnet income increased 16.7%, or ¥6.6 billion, to ¥46.4 billion, allof which hit record highs. Accordingly, the Group’s operating
income and operating income margin remained the highest fora major private railway operator group for the second consecutive year.
As for the improvement of our financial position, a management issue that we have been addressing, our investments ingrowth have paid off, with EBITDA steadily increasing ¥4.1 billion
year on year to ¥149.2 billion, and interest-bearing debt shrinking significantly from ¥1,126.6 billion in the end of fiscal 2013 to¥1,032.3 billion in the end of fiscal 2014, mainly due to a detailed
review of capital investments. As a result, the consolidated
interest-bearing debt/EBITDA ratio was 6.9 times, achieving
management’s target of an interest-bearing debt/EBITDA ratio ofaround seven times, the Group’s top priority.
This target was initially contained in the Hankyu Hanshin
Holdings Group 2007 Medium-Term Management Plan, with■ Past Six Years’ Performance(¥ billion)

Operating income

New record
Ordinary income

Net income

100
80
60

77.8

70.1

57.4

50.4

40
20

20.6

73.8
65.4

64.7
46.5

39.3

87.9
74.9
39.7

91.8
81.2
46.4

18.1

10.8

0

2009

16 Hankyu Hanshin Holdings

2010

Annual Report 2014

2011

2012

2013

2014

(FY)

early as possible prior to fiscal 2016, but achieving it at the end of
fiscal 2014 fulfils our promise to the stakeholders and has laid asteady foundation for future growth.

Improve cash flow generation through earnings
from major projects such as Hankyu Nishinomiya
Gardens, Hanshin Namba Line, and the Hanshin
Koshien Stadium refurbishment, and the reconstruction of the Umeda Hankyu Building.

(¥ billion)

180

1,900

Interest-bearing debt/EBITDA ratio

1,500
1,400

9.6 times

9.4 times

1,700
1,600

1,100

9.8 times

170
160

8.9 times

8.8 times

7.8 times

EBITDA (¥ billion) (right scale)

145.2

135.3

1,271.1

1,275.6

133.2

1,300
1,200

1,282.6

133.5

1,251.7
1,126.6

800

150
140

6.9 times(7.7 times)
1,183.6

144.0

145.1

127.1

Interest-bearing debt (¥ billion) (left scale)

149.2(142.0)130

6.7 times
120

1,032.3(1,100.0)

1,000
900

2

Leveraging cash flow generation boosted through completion of largescale projects, reduce total interest-bearing debt and steadily improve
our financial position by maintaining a certain level of strategic capitaloutlays but at the same time keeping total capital investment to roughly
the equivalent to depreciation and amortisation costs.

(¥ billion)

1,800

SectionBusiness Policies andStrategies

fiscal 2013 as the target year for achievement. However, theplan’s duration was extended to fiscal 2016 because the fiscal
2013 target was viewed as unattainable as a result of the sudden
deterioration of economic conditions triggered by Lehman
Brothers’ collapse in the autumn of 2008. Therefore, we set out
anew to achieve this target. We wanted to achieve the target as

970.0

110
100

Investment in developments for growth

Payback from major projects

Reconciling growth and financial soundness

FY2008FY2009FY2010FY2011FY2012FY2013

FY2014*1

2008/3

2009/3

2010/3

2011/3

2012/3

2013/3

2014/3

FY2015(Estimate)

90

Hankyu Nishinomiya Gardens Development (September 2004 – November 2008)
Hanshin Namba Line (Opening of new extension) (October 2003 – March 2009)
Renovation of Hanshin Koshien Stadium*2 (October 2007 – March 2010)
Rebuilding of Umeda Hankyu Building (May 2005 – November 2012)
September 2009:
Opening of Department Store Building (Phase I)

April 2010: Completion of Office Tower

November 2012: Grand opening of the Umeda Flagship Store of Hankyu Department Store

Osaka Station North District (Umekita) Phase I Development Area Project(GRAND FRONT OSAKA) (March 2010 – March 2013)

Note: Project start times are as of works commencement. Also, finish times are project completion dates(completion of A and B blocks for Osaka Station North District (Umekita) Phase I Development Area Project).
*1 Figures shown in parentheses are for the previous plan announced in May 2013.
*2 Renovation work conducted during three off-seasons.

Hankyu Hanshin Holdings

Annual Report 201417

Performance Outlook for Fiscal 2015
Revenues from operations and operating income are both expected to decrease slightly due to the start ofconstruction of the Umeda 1-1 Project. However, through ongoing effort to improve our financial position,
we expect to achieve an interest-bearing debt/EBITDA ratio of 6.8 times,
our fiscal 2016 plan value announced in May 2013, one year ahead of schedule.
In fiscal 2015, revenues from operations are expected to decline
1.3%, or ¥9.2 billion, year on year, to ¥670.0 billion and operating income to drop 6.3%, or ¥5.8 billion, to ¥86.0 billion. The
reasons for the projected decline include a downturn in railway
operation revenue caused by last-minute demand for commuter
passes following the consumption tax hike in the previous fiscal
year and a decrease in rental income (rental floor space) due tothe start of construction of the Umeda 1-1 Project (Dai Hanshin
Building and Shin Hankyu Building rebuilding projects). Further,ordinary income declined 5.2%, or ¥4.2 billion, to ¥77.0 billion
and net income dipped 2.9%, or ¥1.4 billion, to ¥45.0 billion,
largely due to an improvement in the financial account balance
resulting from a decrease in interest expenses.
Meanwhile, we plan to continue reducing interest-bearing
debt from the previous fiscal year through an ongoing detailed
review of capital investments, and anticipate interest-bearing
debt of ¥970.0 billion at the end of fiscal 2015. As a result, aninterest-bearing debt/EBITDA ratio of 6.7 times is projected andwe expect to achieve the ratio of 6.8 times, our fiscal 2016 planvalue announced in May 2013, one year ahead of schedule.

Operating Income (Fiscal 2014  Fiscal 2015)
Fiscal 2014 (Results)  Fiscal 2015 (Estimate) –¥5.8 billion● E ffects of last-minute demand (FY2014)-¥5.8 billion¥91.8
billion¥86.0
billion

FY2014
Results

FY2015
Estimatefollowing consumption tax increase in railway
business● Decrease in rental income (rental floor space)following start of construction of Umeda 1-1
Project● Decrease in condominium income in condominium business● Increase in depreciation and amortisation instage business● Decrease in income from sales of goods / foodand drink in sports business● Increase in office leasing income in real estateleasing business● Recovery in attracting customers for overseas
travel● Factors causing a decrease in operating income● Factors causing an increase in operating income■ Consolidated Performance and Key Performance Indicators during the Medium-Term Management Plan Period

(FY)

2008

2009

2010

2011

2012

2013

Operating income (¥ billion)

90.7

77.8

70.1

64.7

73.8

87.9

EBITDA (¥ billion)

145.2

135.3

133.2

127.1

133.5

145.1

Interest-bearing debt (¥ billion)

1,271.1

1,275.6

1,282.6

1,251.7

1,183.6

1,126.6

Interest-bearing debt/
EBITDA (times)

8.8

9.4

9.6

9.8

8.9

7.8

ROE (%)

0.1

4.4

2.3

3.8

7.9

7.4

Debt/equity ratio (times)

2.7

2.8

2.7

2.6

2.3

2.0

2014 (Results)

91.8(84.0)
149.2(142.0)1,032.3(1,100.0)
6.9
(7.7)
8.0
(7.5)
1.7
(1.9)

2015 (Est.)

86.0
144.0
970.0
6.7
7.2
1.5

Notes: 1. Includes department store business (Hanshin Department Store Group) (treated as a consolidated subsidiary up to the first half of fiscal 2008)
2. Due to a change in the accounting method, consolidated interest-bearing debt from fiscal 2009 and after includes lease obligations
3. EBITDA = operating income + depreciation + amortisation of goodwill
4. Figures shown in parentheses are for the plan announced in May 2013.

18 Hankyu Hanshin Holdings

Annual Report 20142016 (Plan)

82.0(85.0)
141.0(143.0)950.0(980.0)
6.7
(6.8)
6.8
(7.2)
1.4
(1.5)

Message from the PresidentManagement and Strategic Direction
Section2

Since the management integration of October 2006, the Grouphas operated under the three basic policies of (1) strengthening
the competitiveness of each business and raising profitability,(2) rigorously pursuing and developing integration effects, and(3) improving financial position and obtaining a higher return on
assets. In particular, in recent years our primary focus has been to
improve our financial position, an urgent task, and in fiscal 2014
we achieved our initial target of an interest-bearing debt/EBITDA
ratio of around seven times thanks to a detailed review of capital
investments. In addition, in our fiscal 2015 forecast, we expect
to achieve a consolidated interest-bearing debt/EBITDA ratio of
6.8 times, our fiscal 2016 plan announced in May 2013, one year
ahead of schedule.
In light of these circumstances, we will move to the nextmanagement phase in fiscal 2016 and after, and not only focus
on improving our financial position, but establish new businessstrategies and financial policies for future growth, and raise
enterprise value over the medium- to long-term while building
relationships of trust with various stakeholders.
Specifically, we have positioned the period between fiscal
2016 and fiscal 2019 as a time for developing the infrastructure
for medium- to long-term growth and will address, as a new
management direction, the financial policy of flexibly allocating
funds on a well-balanced basis for the two business strategies
of “enhancing value along rail lines including the Umeda area”
and “developing new markets (Tokyo area, overseas, etc.)
for medium- to long-term growth,” and the three themes of“forward-looking investments,” “continuous strengthening of our
financial standing,” and “returns to shareholders.”

Business Policies andStrategies

We will enhance enterprise value over the medium- to long-term,even in the new management phase from fiscal 2016 and beyond.

Taking on the challenge ofa new management phase.

Hankyu Hanshin Holdings

Annual Report 201419

Business Strategy ❶Enhance value along rail lines
including the Umeda area
To date, a pillar of the Group’s management strategy has been
to “build good rail lines, build good communities.” Since ourfoundation, centring on railway operation business, we have also
been operating real estate and leisure oriented businesses along
our railway lines. Having received high ratings for increases invalue along our railway lines as a result of these synergies, thepopulation living along these lines is still now steadily growing(see page 13 for details on the population along the lines).
Accordingly, in order for the Group to maintain sustainablegrowth for the future, it first needs to continuously improvevalue of the areas along its railway lines, its most important
operating foundation.
Therefore, we will build an area along our railway lines thatmakes people think how fortunate they are to live there, and is
an area where they will want to go to have fun time and again.
In the Umeda area, the Group’s most important base, theUmeda 1-1 Project is about to begin, which involves rebuilding both the Dai Hanshin Building (in which the Hanshin
Department Store Umeda Flagship Store is located) and theadjacent Shin Hankyu Building in an integrating way. The Groupis scheduled to begin demolition work on the Shin Hankyu

Building around the autumn of 2014 and will steadily press
ahead to final completion around the spring of 2022. Further, we
will revitalise and improve the attractiveness of the Umeda areain all areas to create a community that meets today’s needs.
We are considering the revitalisation of major bases, evenalong other Hankyu and Hanshin lines, and will systematically
implement facility reconstruction along existing rail lines,
thereby making the areas along those lines more attractive.
In addition, the Urban Transportation Business provides safeand high-quality transportation services that are socially trusted
and the Group is encouraging greater use by upgrading station
facilities and expanding networks. We will continue to improvestandards of convenience for customers and make our railway
lines more safe, secure and appealing by expanding our generaltransportation services, especially our rail lines. Moreover, theproject to extend the Kita-Osaka Kyuko Line (see page 34 fordetails) will continue to collaborate with municipalities.
The Group’s unique Hanshin Tigers and Hanshin Koshien
Stadium, and Takarazuka Revue brands retain their passionate
fans not only in the Kansai area, but all over Japan. We will work
to maximise brand value by pursuing high-quality performancesthat deliver inspiration and dreams to our customers.

We will enhance enterprisevalue over the medium- tolong-term.

20 Hankyu Hanshin Holdings

Annual Report 2014

Message from the President

Business Strategy ❷Developing new markets (Tokyo area, overseas,etc.) for the medium- to long-term growth

Section2

Business Policies andStrategies

As previously stated, the population living along the Group’s raillines is now increasing, but when seen from a medium- to longterm timeline against a backdrop of declining birth rates and an
aging population, a decline in the population living along theGroup’s rail lines and shrinking of the Kansai economy are alsosufficiently possible. With the expected arrival of such a harshbusiness environment, we must have our sights set on growthby enhancing value along our rail lines and developing newmarkets in order to achieve sustained growth into the future.
Based on this concept, we will begin to strengthen businesses
outside of the Hankyu and Hanshin lines including the Tokyo
metropolitan area, a large market, and overseas markets that are
growing at a significant rate.
With respect to business expansion in the Tokyo area, thecosts for construction and acquisition of sites for holding the2020 Tokyo Olympics and building the Linear Chuo Shinkansen
will likely remain high for some time, but we will take steps toincrease earnings while closely monitoring market trends.
First, the real estate sales business is emphasising operating
margins while keeping a watchful eye on market trends, aggressively capturing business opportunities, especially in the Jonan,
Josai, and Yokohama areas, and will continue to raise its visibility
in the Tokyo area. The residential land-lot subdivisions business,in light of its sales record and the business environment in theTokyo area, will expand the scale of its business and strengthen
its foundation by aggressively capturing business opportunities,
mainly in areas where it has a clear shot at high price range sales.
In the real estate leasing business, we will ensure medium- tolong-term earnings in the leasing business in the Tokyo area andtry to establish a business foundation. We will consider various
policies and measures such as acquiring properties for development and management, while carefully monitoring market
conditions. To that end, we will collaborate more closely withother business operators, gather information, and create business opportunities for future development projects by acquiringand reconstructing old buildings and participating in the urban
redevelopment business.
In the Travel Business, we will pursue cross-media strategies
and raise our visibility with the aim of strengthening businessin the Tokyo area. Further, in the REMM, a hotel that prioritises agood night’s sleep over other services, and information services
business field, we will expand our business base in the Tokyo area.
Overseas, in the International Transportation Business, wewill further expand our global network centred on Asia whileproviding a high value-added comprehensive logistics service
for customers and increase the scale of our business. As one partof this, in the ASEAN region, where growth in logistics demandis expected, we are considering the purchase of a logistics
warehouse through collaboration and cooperation with the Real
Estate Business. In the Travel Business, we reinforced purchasingof travel products and raised quality by setting up a businessbase overseas, and we would like to get involved in travel to various countries outside of Japan over the medium- to long-term.
The Takarazuka Revue’s performance in Taiwan in April 2013,
which was well received, is preparing for its second performancescheduled for August 2015.

Hankyu Hanshin Holdings

Annual Report 201421

Financial Policy

Targeted Management Indicators (through fiscal 2019)

Because the improvement of the Group’s financial position had
been its greatest management challenge, it has kept total capital
investment to roughly the equivalent of depreciation and amortisation, and preferentially allocated surplus funds for the repayment of interest-bearing debt. However, we reviewed that policy
for fiscal 2016 and beyond and will allocate surplus funds in awell-balanced manner between “forward-looking investments,”“continuous strengthening of our financial standing,” and“returns to shareholders.”
First, with regard to “forward-looking investments,” wehave decided to allocate funds mainly for the aforementioned
Strategies 1 and 2 without regard to past levels of roughly theequivalent of depreciation and amortisation. During the fouryear period from fiscal 2016 through 2019, we anticipate capital
investments and loans of around ¥300.0 billion. Of this amount,around ¥150.0 billion is projected for investment in maintaining
and upgrading existing infrastructure (investments in railway
safety, and renovation pertaining to the real estate leasing
business) and ¥100.0 billion for investment in large-scale development and new market development.
Meanwhile, to “continuous strengthening our financial
standing,” we will constantly reduce interest-bearing debt, yet ata slower pace than before. This is because we have, to deal withrisk associated with interest rate increases and ensure a mediumto long-term surplus.
Although “returns to shareholders” will be discussed in detaillater, starting in fiscal 2014 (dividend payment in June 2014),
in order to enhance profit returns to shareholders, the annual
dividend per share was raised from ¥5 to ¥6. We will work tomaintain a stable dividend while balancing forward-looking
investments with the need to strengthen our financial standing.
At the same time, our approach to shareholder returns will be
continuously reviewed.

Based on the business strategies and financial policies outlined
above, we have set operating income and the balance of interestbearing debt as our management indicators for the period fromfiscal 2016 to fiscal 2019.
First, despite declining profit levels due to lower rental
income (rental area) associated with progress on the Umeda 1-1
Project, we will seek to maintain operating income at the ¥80.0
billion mark from fiscal 2016 and beyond. In order to increase
future earnings, it is inevitable that profits will fall to a certain
level. However, we want to strengthen the competitiveness ofeach business and ensure this level.
On the other hand, despite forward-looking investments, wewill continuously strengthen our financial standing with the aimof steadily reducing interest-bearing debt to under ¥900.0 billion
by the end of fiscal 2019.
In addition to these two goals, aiming for a longer term
perspective with the idea of providing the highest level offinancial soundness for a private railway operator group line, weestablished, as guidelines, an interest-bearing debt/EBITDA ratio
over the medium- to long-term of five times level and a D/E ratio
over the medium- to long-term of one time.

22 Hankyu Hanshin Holdings

Annual Report 2014

Message from the President

Returns to Shareholders
Section2

The expansion of shareholder returns had been a subject to bereviewed when the achievement of an interest-bearing debt/
EBITDA ratio of around seven times, which had been positioned
as a priority management issue, appeared to be within reach,and the achievement of that target was nearly within reach
during fiscal 2014. Moreover, we believe that the foundation
has been set for posting net income of around ¥40.0 billion on astable basis. Therefore, as a result of reconsidering the enhancement of shareholder returns, in February 2014, we changed ourdividend policy so as to raise our annual dividend for fiscal 2014by ¥1, from ¥5 to ¥6, and implement a stable dividend set at aminimum of ¥6 per share annually.
This level of dividend corresponds to a dividend payout
ratio of around 17% against net income of ¥45.0 billion in fiscal

2015. However, since this can by no means be considered a highpayout ratio, we must carefully consider from various angles ourapproach to shareholder returns.
In order to become a corporate group that is capable ofsustaining growth into the future, we must steadily carry out
our two aforementioned business strategies from a medium- tolong-term perspective and strengthen our financial standing,which is the basis for achieving those strategies. As alreadypresented in Financial Policy, we will enhance shareholder
returns while balancing forward-looking investments with thestrengthening of our financial standing, based on assessment ofchanges in the business environment. Under this concept, weseek to further raise the Group’s enterprise value and meet the
expectations of shareholders.

Hankyu Hanshin Holdings

Annual Report 2014

Business Policies andStrategies

To enhance profit returns to shareholders, the annual dividend per share was raised from ¥5 to ¥6.
We will work for the stable and continuous enhancement of shareholder returns.

23

Medium-Term Management Plan
In March 2007, the Group announced its first Medium-Term Management Plan since the management integration.
Since then, we have worked together as a team to achieve the plan’s targets while making yearly adjusted estimates.
The target of an interest-bearing debt/EBITDA ratio of around seven times, viewed as our top management target,
was reached in fiscal 2014.
In the forecast for fiscal 2015, we are expected to achieve the previous target figures for fiscal 2016 (announced in
May 2013) one year ahead of schedule. Therefore, from fiscal 2016 and after, we will move to a new management
phase and enhance enterprise value over the medium- to long-term.

Looking Back on the 2007 Medium-Term Management Plan

M a r ch 2 0 0 7

Formulation of Medium-Term Management Plan

After the management integration, we drew up our first Medium-Term Management Plan and set a target of achieving an interest-bearing
debt/EBITDA ratio of around seven times in fiscal 2013 by balancing EBITDA expansion with interest-bearing debt reduction.

¥100.0 billion

Operating income
EBITDA¥150.0 billion or more

March 2013 rolling forecast

Interest-bearing debt

¥1,100.0 billion or lessAiming for the plan’s fiscal 2016 targets ofinterest-bearing debt of ¥980.0 billion andinterest-bearing debt/EBITDA ratio of 6.8 times
and to achieve interest-bearing debt/EBITDA
ratio of around 7 times as early as possible

Interest-bearing debt/EBITDA ratio

Around 7 times

ROE

6.0% or more

D/E ratio

Around 2 times

March 2012 rolling forecast

Formulation of Medium-Term
Management Plan

FY2008Plan’s duration extended to fiscal 2016

FY2009FY2010FY2011FY2012

March 2010 rolling forecast
Not expected to achieve target (interest-bearing debt/EBITDA ratioof around seven times) by fiscal 2013 due to rapidly deteriorating
economic situation triggered by the Lehman Brothers’ collapse in
the autumn of 2008

Investment in developments for growth

24 Hankyu Hanshin Holdings

Annual Report 2014

FY2013

Targeted fiscal year
achieving initial plan

Payback from major projects

FY2014

SectionTargeted Management Indicators (through fiscal 2019)
Operating income: Maintain¥80.0 billion level

2

Business Policies andStrategies

New Management Phase (fiscal 2016 through fiscal 2019)

Interest-bearing debt: Steadily reduce to under¥900.0billionby end of fiscal 2019

Achieve one year
ahead of schedule
Expected outstanding balance of interest-bearing debt at end of
fiscal 2015 is ¥970.0 billion, and interest-bearing debt/EBITDA ratiois 6.7 times, and fiscal 2016 targets (announced in May 2013) arescheduled to be achieved one year ahead of schedule

Outstanding balance of interest-bearing debt:¥970.0 billion (forecast)Fiscal 2015 Outlook

Duration of
initial plan extended

FY2015FY2016

Interest-bearing debt/EBITDA ratio

FY2017

6.7 times

FY2018

Fiscal 2014 Status
Revenues from operations: Initial forecast
Operating income: Initial forecast
Interest-bearing debt/EBITDA ratio

6.9 times

Improvement of financial standing¥670.0 billion¥84.0 billion

Results ¥679.2 billion
Results¥91.8 billion

Both revenues from operations andoperating income are substantiallyabove initial targets

Achieve the target of interest-bearing debt/EBITDA ratio of aroundseven times, the top management target, at the end of fiscal 2014

Create foundation for medium- to long-term growth

Hankyu Hanshin Holdings

Annual Report 201425

Toward a New Management Phase

Future Management Direction (fiscal 2016 through fiscal 2019)
Positioned as a time for developing the infrastructure for medium- to long-term growth
The period up to fiscal 2019 is positioned as a time for developing the infrastructure
for medium- to long-term growth, during which we will address the two business strategies andthe financial policies as basic strategies and policies.
Business Strategy

1Enhance value along rail lines including the Umeda area
Build areas along rail lines where people will want to live for many years to come and will want to go to have fun time and again<Umeda 1-1 Project><Extension of Kita-Osaka Kyuko Line>

Construction on the Umeda 1-1
Project, which involves rebuilding
the Dai Hanshin Building in which
the Hanshin Department Store(Hanshin Umeda Flagship Store)
is located, and the adjacent Shin
Hankyu Building into an integrated
complex, began in the autumn of2014 and is targeted for completionin 2022.
☞See pages 32–33 for details.

The Kita-Osaka Kyuko Line, a shared-line service with the
Osaka Municipal Transportation Bureau’s Midosuji Line, isscheduled to be extended 2.5km from Senrichuo Station to
the north.
☞See pages 34–35 for details.

2<Acquisition of Amagasaki Municipal Bus Business>
The acquisition of the bus line of Amagasaki City, a key area ofthe bus business, is under discussion for 2016 for integrated
operation by the Group.

Development of new markets (Tokyo area, overseas, etc.) for medium- to long-term growth
Begin to expand business in Tokyo area and develop new business overseas

Tokyo area

Overseas<Residential Business><Acquisition of overseas logistics warehouse>

Emphasising profitability while keeping a watchful eye on market
trends, we will aggressively obtain business opportunities, especiallyin the Jonan, Josai, and Yokohama areas, and further increase recognition of Geo brand condominiums in the Tokyo area.

In the International Transportation Business, we will further expand
our global network centred on Asia and, collaborating with the Real
Estate Business, we will purchase a logistics warehouse in the ASEAN
region.

<Leasing Business/Development Business><Overseas Performance of Takarazuka Revue>

Purchase properties depending on market conditions and participate in future development projects. Collaborate on an ongoingbasis with the Hotels Business for joint development of REMM.

The Takarazuka Revue is eagerly preparing for its second performance in Taiwan scheduled for August 2015.

<Establishment of Overseas Subsidiary (Travel Business)><Travel Business>
Promote cross-media strategy and increase recognition of Trapics
with the aim of strengthening business in the Tokyo area.

26 Hankyu Hanshin Holdings

Annual Report 2014

Established Singapore subsidiary (April 2014). Reinforce purchasingof travel products and improve quality with aim of gaining inboundcustomers in the future.

Medium-Term Management Plan

Section2

Financial Policy

To date, we had improved our financial standing bykeeping total capital investment to roughly the equivalent of depreciation and amortisation and preferentiallyallocating surplus funds to reduce interest-bearing debt.
However, from fiscal 2016 and after, we will allocate
funds in a well-balanced manner between (1) forwardlooking investments, (2) continuous strengthening of
our financial standing, and (3) returns to shareholders.

Up to fiscal 2015

Fiscal 2016 and beyond

Payback from major investment projects
Reconciling growth and financial soundness

Formulate and implement growth strategy
conditional on maintaining financial discipline

Reducing
interest-bearing
debt

Investment

Business Policies andStrategies

Distribute cash flow in a balanced
and flexible manner

Reducing
interest-bearing
debt

Investment

Returns to shareholders

Returns to shareholders

Allocated over four years (Fiscal 2012–2015)

Allocated over four years (Fiscal 2016–2019)(1) Forward-looking investments
We will allocate funds for forward-looking investments
without regard to past levels (equivalent to depreciation
and amortisation expenses), focusing on efforts based on
the aforementioned strategies 1 and 2.

Investment

Investment

Taxes,
interest rates,
dividends(2) Continuous strengthening of
our financial standing
To deal with risk associated with interest rate increases andensure a medium- to long-term surplus, we will continue
to strengthen our financial standing, even after achieving
our previous management target (interest-bearing debt/
EBITDA ratio of seven times). Specifically, we will steadily
aim for an outstanding balance of interest-bearing debt ofunder ¥900.0 billion by the end of fiscal 2019.

Improve financial
standing

Improve financial
standing

Taxes,
interest rates,
dividends■ Investment Funds(3) Returns to shareholders
From fiscal 2014, we changed our dividend policy so
as to implement a stable dividend set at a minimum of¥6 per share annually. Thereafter, we will work to pay astable dividend while balancing forward-looking investments with the strengthening of our financial standing.

Investments in large-scale developments
and for new market development
Investments in maintaining andupgrading existing infrastructure¥300.0 billion(around)¥230.0 billion¥100.0 billion¥50.0 billion● Investments in railway safety● Investments in renovation

pertaining real estate leasing business
Fiscal 2012–2015

Capital investment/
Investments and loans

Fiscal 2016–2019

Capital investment/
Investments and loans

Management Indicators based on Business Strategies and Financial Policies

Targeted Management Indicators (through fiscal 2019)

Target levels at a longer term perspective

Operating income:Interest-bearing debt/EBITDA ratio:

Interest-bearing debt:

D/E ratio: around

Maintain ¥80.0 billion level
Steadily reduce to under ¥900.0 billion by end of fiscal 2019

over 5.0 times

1 timeHankyu Hanshin Holdings

Annual Report 201427

Special Feature

Enhance value along rail lines
including the Umeda area
● Umeda 1-1 Project: Dai Hanshin Building and Shin Hankyu Building Rebuilding Projects● Extension and Improvement Project for the Kita-Osaka Kyuko Railway Line

In order to achieve sustainable growth in the future as the Group moves into a new management phase, it is necessary
to further improve value along Group railway lines, which are the Group’s most important operating fundamental, by
making efforts to create attractive railway lines and communities where people want to live for many years to come andvisit many times. In this special feature, while looking at the potential of the Umeda area as the Group’s core strategic
base, we will introduce the Umeda 1-1 Project and the Extension and Improvement Project for the Kita-Osaka Kyuko
Railway Line enhance value along rail lines including the Umeda area that are put forth as a new business strategy in theMedium-Term Management Plan.

28 Hankyu Hanshin Holdings

Annual Report 2014

The current state and future of the Umeda area as the Group’s core strategic baseown individual special characteristics in the Umeda area form oneof Japan’s largest concentration of commercial facilities. With theorganic connection of a myriad of attractive facilities including
offices, hotels, convention halls, theatres, and stations throughconnecting decks and one of Japan’s largest underground shopping centres, the Umeda area has been developed into one of
Kansai’s customer-drawing and information distribution hubs.
A series of large multipurpose building development projects composed of commercial facilities and offices have been
completed over the past few years, including the Umeda Hankyu
Building and GRAND FRONT OSAKA that were projects developed by the Group, as well as Osaka Station City. Furthermore,various projects including the Umeda 1-1 Project (see page 32),
the Osaka Station North District (Umekita) Phase 2 Development
Area Project, JR Tokaido Branch Line Underground Relocation
Project, and the Umeda 3 Project(provisional name) are planned
HankyuChayamachi
Applausein the future, through which the
Corporation
Head OfficeHotel Hankyu
Group will further demonstrate
International
the potential of the Umeda area.

■ Umeda area detailed map

Owned solely by the Group
Joint ownership
Owned by Hankyu REIT Inc.
Master lease (underground)

NU–
chayamachi

Kita Hankyu Bldg.

Hankyu Umeda Station

Nishi Hankyu Bldg.

Hotel
new
HankyuHankyuSanban Gai
Shopping
CentreHankyuTerminal Bldg.
HEP FIVE
HankyuGrand Bldg.

JR

a
sak

O

2

NU
–
chayamachi
Plus

Kitano Hankyu
Bldg.

GRAND FRONTOSAKASectionBusiness Policies andStrategies

As the gateway of Osaka, Umeda (the area surrounding Osaka
Station) serves as a hub for the Hankyu, Hanshin, JR, and Osaka
Municipal Subway lines with approximately 1.2 million passengers
per day. It is has largest rail terminal in western Japan, and nationwide it has the fourth highest number of passengers, following
only Shinjuku Station, Shibuya Station, and Ikebukuro Station.
In addition, with the area’s easy access from KansaiInternational Airport, Osaka International Airport, and theshinkansen (bullet train) via Shin-Osaka Station, it also serves as
not only a domestic transport hub, but also as an internationaltransport hub that connects people from Asia and other places
all over the world.
Furthermore, multiple department stores including theHankyu Department Store, Hanshin Department Store, Daimaru,
and Mitsukoshi Isetan and major commercial facilities with their

Umeda
Centre Bldg.

HEP NAVIO

Higashi Hankyu
Bldg.

ion

t
Sta

a

d
me

Umeda Hankyu Bldg.
(Hankyu Department Store)

nU
shi n
n
HatatioS

Development trends
in the Umeda area
Red characters = Development the Groupis involved with

❶ Umeda 1-1 Project❷ New Dai Building
Daibiru Corporation

Shin Hankyu Bldg.
Dai Hanshin Bldg.
(Hanshin Department Store)❸ Osaka-shi Chayamachi Area LandHERBIS ENTHERBIS OSAKA

t

aS

him

us
Fuk

n
atio

Hotel Hanshin
Laxa Osaka

Hanshin Sankei
The Ritz-Carlton,
Sakurabashi Bldg.
Osaka

Diamor Osaka(underground mall)

Development Project

Yanmar Co., Ltd.
Josho Gakuen Educational Foundation❹ Yodobashi Umeda Phase 2 Plan
Yodobashi Camera Co., Ltd.
❺ Umeda 3 Project (provisional name)
Japan Post Co., Ltd.
Osaka Terminal Building Co., Ltd.
❻ Seiwa Umeda Building
Seiwa Sogo Tatemono Co., Ltd.
❼ Sonezaki Link City (provisional name)
Sumitomo Realty & Development Co., Ltd.

(As of the end of March 2014)
Hankyu Hanshin Holdings

Annual Report 201429

Potential of the Umeda area: 1 Transportation access and an international tourism hub

The Umeda area not only serves as a transport hub linking major
cities in Kansai, but it is also directly linked with the major cities ofAsia through Kansai International Airport, serving as the gatewayfrom Asia to Japan.
Furthermore, there has been a successive increase in LCC

flights serving Kansai International Airport, which provides a
24-hour service, and as result increased use by tourists from both
Japan and overseas can be expected. As a result of these factors,
the area is expected to develop even further as a gateway for thecontinually growing major cities of Asia.

■ The Umeda area’s transportation potential

From Osaka Station: 3 hours 45 min.
From Tokyo Station: 4 hours 25 min.

Approx. 29 min. (43km)

Beijing

From Osaka Station: 2 hours 25 min.
From Tokyo Station: 3 hours 20 min.
From Osaka Station: 2 hours 35min.
From Tokyo Station: 3 hours 55 min.

Approx. 21 min. (31km)

Kobe

Seoul

ShanghaiFrom Osaka Station: 4 hours 30 min.
From Tokyo Station: 5 hours 20 min.

Hong Kong

From Osaka Station: 7 hours 00 min.
From Tokyo Station: 8 hours 25 min.

Singapore

Kyoto

Approx. 39 min. (53km)

Otsu

Umeda Area

KansaiInternational
AirportWakayama

Approx. 41 min. (38km)

Approx. 51 min. (68km)* Excluding time taken to change trains
Source: Basic city planning for Osaka Station North District

Gakkentoshi
Nara

Approx. 60 min. (45km)

Approx. 42 min. (49km)

Potential of the Umeda area: 2 One of Japan’s largest concentration of commercial facilities

When comparing the official land values of the main commercial areas of Osaka, one can see that land prices are highest in
Umeda, and that the increase in land prices has been the moststable in this area, even during the period since 2011 when land
prices underwent a recovery phase.

Furthermore, because the Umeda area now contains Japan’shighest concentration of large-scale commercial facilities,
exceeding Shinjuku in Tokyo, the area’s presence within Japan is
growing even more.

■ Comparison of Concentration of Commercial Facilities■ Land price trends in Osaka’s main commercial areas

by Region (Store Area) (m2)Commercial district (official designation)

June 2008

June 2013

Umeda (Kita-ku, Osaka)

480,148

682,362

Namba, Shinsaibashi (Chuo-ku, Osaka)*

438,856

470,437

Tennoji (Abeno-ku, Osaka)

127,577

220,277

Shibuya, Omotesando (Shibuya-ku, Tokyo)

419,226

427,513

Shinjuku (Shinjuku-ku, Tokyo)

424,994438,979

Ikebukuro (Toshima-ku, Tokyo)

389,093

381,588

Ginza, Nihonbashi (Chuo-ku, Tokyo)

347,969

320,277

Marunouchi, Yurakucho (Chiyoda-ku, Tokyo)

364,588342,709

Source: Toyo Keizai, Inc. “List of Large-Scale Retail Outlets 2014”
Store area calculated on basis of official designation in the above table.
Stores surveyed are those with areas in excess of 1,000m2, as of June 2013, based on data onlarge-scale stores registered with prefectural governments under the Large-Scale Retail Stores
Location Law.
* Including 54,042m2 for Namba Parks (Naniwa-ku, Osaka)

30 Hankyu Hanshin Holdings

Annual Report 2014

(Thousand yen per square meter)
12,00010,800
8,790

9,000

7,050
6,000

4,990
4,200
3,000

Umeda
Shinsaibashi
Namba
Tennoji

3,790

7,610
5,240
3,490
2,120

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (CY)

Potential of the Umeda area: 3 Improving reputation as a business district

In terms of the recent market conditions for rental officebuildings, although there were concerns that the balance of
supply and demand would deteriorate with the large-scale
supply provided by facilities such as GRAND FRONT OSAKA, thislarge supply has been gradually absorbed recently, and the average vacancy rates for office buildings are undergoing a gentle
recovery. Accordingly, we believe that demand will continue toexpand steadily in the future.
(☞See page 43 for the average vacancy rates and average rent
levels for office buildings.)

Section2

Business Policies andStrategies

With the advance of office concentration accompanying thecompletion of the large multipurpose buildings described previously and the great convenience of having the largest rail terminal in western Japan, the area’s reputation as a business district
has improved dramatically over the past few years. Furthermore,
efforts are being made to even further improve the attractionof GRAND FRONT OSAKA as a business centre, including the
introduction of “Knowledge Capital” as a facility for creating newvalue and supporting human resource exchanges.

The Group’s Initiatives Going Forward
Up until now the Group has contributed greatly to the appeal of
the Umeda area through a large number of real estate development projects in the area. As part of initiatives going forward, theGroup will implement the new large-scale Umeda 1-1 Projectin an effort to improve the competitiveness and ability of the
Umeda area to attract customers, as well as improve its appeal
as a region (see page 32). In addition, Council for collaborationin the Management of the Umeda Area* has been established
to commence area management aimed at improving the valueof the entire Umeda area through events taking advantage of
public spaces and other initiatives that also give consideration
to addressing environmental issues and disaster prevention andmitigation.
Through these initiatives, the Group aims to further improve
the attractiveness of the Umeda area while developing it as asustainable community.
In addition, for the Kita-Osaka Kyuko Railway Line Extension
and Improvement Project is planned as a new project aimed atachieving sustainable growth for the Group areas adjacent torailway line outside of the Umeda area as well (see page 34).

Umeda Yukata Festival* Established by four companies: JR West, Hankyu Corporation, Hanshin Electric
Railway, and GRAND FRONT OSAKA TMO

Umeda Snowman Festival (Chayamachi Area Marching Band)

Hankyu Hanshin Holdings

Annual Report 201431

Special
FeatureEnhance value along rail lines including the Umeda area

Umeda 1-1 Project
Dai Hanshin Building and Shin Hankyu Building Rebuilding Projects

Implementation of projects symbolic of the integration of Hankyu and HanshinThis project involves rebuilding the Dai Hanshin Building (in which the Hanshin Department Store’s Umeda FlagshipStore is located) and the opposite Shin Hankyu Building into an integrated complex. A new high-rise building approximately 190m high will be built on a prime location facing Umeda (Osaka) Station.

Overview of Umeda 1-1 Project
We will undertake this rebuilding project using the space above
the road separating the Dai Hanshin Building and Shin Hankyu
Building. This is the first time that an area specified for urgent
urban regeneration work in accordance with the Act on Special
Measures concerning Urban Regeneration is being used to easeregulations on aboveground construction. In addition, we will

promote the development of a comfortable, superior-quality
community by undertaking this project in conjunction with
upgrades to surrounding public facilities. Looking ahead, we aim
to complete this project by 2022 through the ongoing cooperation of the government and business partners.

Overview of Umeda 1-1 Project Building (provisional name)
Office Zone
Featuring advanced equipment, a high-rise section(11th–38th floors) is planned to have western Japan’s largest* floor space per storey of approximately 4,500m2.

• Start of construction: Around autumn 2014
• Date of completion: Around spring 2022
• Total investment: Approx. ¥90 billion* Covering office buildings built after 2000

Conference Zone
Taking advantage of the large space made possible bybuilding above roads, we plan to construct an approximately 4,000m2 conference zone on the 11th floor that willcontribute to revitalised business activities in the Umeda
area. During disasters, these facilities function as temporary
shelters for those unable to return home.

Department Store Zone
The total floor space of the newly refurbished Hanshin
Department Store Umeda Flagship Store at present isapproximately 100,000m2 and is planned to encompass 11
floors (9 floors above ground and 2 below). In addition, thestore is scheduled to remain open during rebuilding work.
■ The Planned Building

Umeda 1-1 Project Building (provisional name)Location

1-1 Umeda, Kita-ku, Osaka

Site area

Approx. 12,200m2 (includes the space used above the road separating the two sites)

Specified floor-area ratio

2,000%

Total floor area

Approx. 257,000m2

Floors38 above ground and 3 below

HeightApprox. 190m

Major uses

Department store, office, hall, etc.

Structure

Steel constructions (portion below ground: steel framed reinforced concrete)

Construction completion

2022 (planned)

32 Hankyu Hanshin Holdings

Annual Report 2014

Department store zone
9 floors above ground and 2 below
Total floor space approx. 100,000m2

Facility composition

Office zone
11th to 38th floors above groundTotal floor space approx. 140,000m2
Conference zone
11th floor above groundTotal floor space approx. 4,000m2
Other (parking lot, passageways, etc.)
Total floor space approx. 13,000m2

Overview of Main Upgraded Public Facilities Located Nearby■ Diagram of Upgraded Area

Hanshin Umeda Sta.

Sta
.

i Um
eda
ish
eN
Lin

ub
ash
i
Yot
s
[Underground]

Underpass upgrading
Barrier free[Ground level]

Widen and improve
attractiveness of passageways
Upgrade plaza[Aboveground]Elevated walkway
Sections above road

Shin Hankyu Bldg.
Umeda DT
Tower

Osaka Ekimae
4th Bldg.
Osaka Ekimae
2nd Bldg.

.

	Upgrade on-site passageways(2nd floor of the planned building)

Osaka
Marubiru

igashi
Umeda
Sta

Deck level(aboveground)Osaka
Dai Hanshin Bldg.
Dai-ichiSeimei Bldg.
Hilton Hotel

Osaka Ekimae
1st Bldg.

	Improve decorations and seismic resistance ofthe new Umeda elevated walkway

Umeda
Hankyu Bldg.

Tanimachi LineH

Ground level	Widen and perform regular maintenance ofeast-west underpass (the urban development
project’s passageway No.1 in front of Osaka
Station)	Make surrounding sites barrier free	Upgrade underpasses at surrounding sites
	Widen, perform regular maintenance andimprove attractiveness of Midosuji passageway	Upgrade the on-site plazas on the planned westside

2South Gate Bldg.

HERBIS
ENT

Underground

Section

JR Osaka Sta.

Business Policies andStrategies

The vicinity of the Dai Hanshin Building and Shin Hankyu Building
features an upgraded three-level (underground, ground level,
deck level) pedestrian network that improves the comfort andconveniences of pedestrian spaces and, in turn, contributes tothe revitalisation of the immediate area and the rest of Osaka city.

Osaka Ekimae
3rd Bldg.

Overview of Construction Plan
Current state
Construction Phase I

N

Dai Hanshin Bldg.

N

Shin Hankyu
Bldg.

1.	Commencement of Shin Hankyu Building

Dai Hanshin
Bldg.

demolition work

Around autumn 2014

Shin
HankyuBldg.

2.	Commencement of East Wing of Dai Hanshin
Building demolition work
Around spring 2015

3. Umeda 1-1 Project Building (provisional name)Commencement of construction of Phase I portion
Around autumn 2015

4. Completion of Phase I construction	(Shin Hankyu Building, East Wing of Dai Hanshin
Building)

Construction
Phase IDai Hanshin Bldg.,
West Wing(in business)

Dai Hanshin Bldg.,
East Wing and
Dai Hanshin Bldg.,
Shin Hankyu Bldg.
West Wing(under construction) (in business)

Around spring 2018

Construction
Phase I

* Partial opening of new department store

Construction Phase II

5.	Commencement of Dai Hanshin Building West
Wing demolition work
Around spring 2018

6.	Umeda 1-1 Project Building (provisional name)	Commencement of construction of Phase II portion
Around spring 2019

Construction
Phase II

Dai
DaiHanshin
HanshinBuilding,Bldg.,
West Wing(under construction)

Construction Phase II

Phase I Area(in business)

7. Completion of Phase II construction(new department store)
Around autumn 2021

* Full opening of new department store

Phase I Area(in business)

8. Full completion of construction
Around spring 2022

* Opening of office portion

Hankyu Hanshin Holdings

Annual Report 201433

Special
FeatureEnhance value along rail lines including the Umeda area

Extension and Improvement Project
for the Kita-Osaka Kyuko Railway Line• Extension distance: 2.5 km• S tations to be established: Mino-o-Semba Station (provisional name)and Shin-Mino-o Station (provisional name)• Developing bodies: Minoh City, Kita-Osaka Kyuko Railway Co., Ltd.
• Operating body: Kita-Osaka Kyuko Railway Co., Ltd.
• Demand: 42,000 people per day• Expected development costs: Approximately ¥65 billion(¥8.0 billion to be covered by Kita-Osaka Kyuko Railway Co., Ltd.)

About Kita-Osaka Kyuko Railway Co., Ltd.
Kita-Osaka Kyuko Railway Co., Ltd. (“Kita-Osaka Kyuko Railway”) wasestablished in order to access the 1970 Osaka World Exposition,
which was the first such exposition held in Asia. Following thecompletion of the exposition, the railway was operated for 5.9 km
through four stations from Senri-Chuo Station to Esaka Station for

Basic Agreement on the Extension
For purposes including the strengthening of Osaka’s north-southaxis, reducing traffic congestion on National Highway No. 423 (ShinMidosuji), and improving the convenience of public transportationin northern Osaka, the Osaka Prefectural Government, Minoh City,
Kita-Osaka Kyuko Railway, and Hankyu Corporation conductedstudies on extending the Kita-Osaka Kyuko Railway Line (from SenriChuo Station to Shin-Mino-o Station (provisional name)), and on 31st
March, 2014 a basic agreement was reached between the four parties concerning the overview of the line and the cost burden ratio.
In the future, the legal procedures required for the commercialisation of the project will be advanced via city planning decisions andthe acquisition of railway project licenses and permits, and following
the conclusion of a basic contract, the project will be commenced.
Furthermore, in order to maximise the effect of the project, thefour parties are currently studying specific measures for community
building in the areas around the railway line.

34 Hankyu Hanshin Holdings

Annual Report 2014

the purpose of transport for everyday life.
As a result of the mutual use of each other’s tracks with theMidosuji Line of the Osaka Municipal Subway, it has been usedby many people as the main transportation artery connecting the
Hokusetsu district centred around Senri New Town with Osaka City.

■ Map of the Kita-Osaka

Kyuko Railway Line

HighwayNo. 171

Shin-Mino-o Station(provisional name)Kita-Osaka
Kyuko
Railway Lineand
2.5km Extension
Improvement
Project

Mino-o-Semba Station(provisional name)Shin-Mino-o Station
Mino-o-Semba Station
Senri-Chuo
Momoyamadai
Ryokuchi-Koen

Senri-Chuo Station
Osaka Loop LineEsaka

To KobeOsaka

HighwayNo. 423

JR Tokaido Main LineUmeda

To Kyoto

JR Osaka Loop Line

Midosuji
SubwayLine

Namba
Tennoji
Kintetsu Minami-Osaka LineOverview of the Extension and Improvement Project
Extension area and new stations

SectionEstimated project costs and the cost burden ratio
As of the point when the basic agreement wasreached in March 2014, total project costs are
expected to be ¥65.0 billion, with ¥60.0 billion
consisting of construction costs and ¥5.0 billion
consisting of vehicle costs.
The construction costs will be borne by
the national government, the Osaka Prefectural
Government, Minoh City, Kita-Osaka Kyuko
Railway as shown in the diagram to the right,
while the vehicle costs will be split 50-50 by thenational government and Minoh City.

2

Business Policies andStrategies

This extension project will extend the line approximately 2.5 km north from Senri-Chuo Station and establish two stations named Shin-Mino-oStation (provisional name) and Mino-o-Semba Station (provisional name) in the strategic transportation hub where the National Highway No. 171
and National Highway No. 423 intersect.

Construction cost: ¥60.0 billion
Regional government

Kita-Osaka
Kyuko
Railway(A)

National government((Construction costs - A)/2)(C)(Construction costs/6)(Construction costs - (A+B+C))¥8.0 billion¥26.0 billion¥10.0 billion¥16.0 billion(B)

Osaka Prefectural
Government

Minoh City

The developing bodies and operating body
For this extension project, social capital development general subsidies from the national government will be used for developing therailway extension.
For this reason, Kita-Osaka Kyuko Railway will conduct development on the section from Senri-Chuo Station up to Mino-o-Semba
Station (provisional name). For the remaining section, Minoh City willN

Senri-Chuo
StationOperating body

Developing body

Highway No. 423(main line)

Groundconduct infrastructure development and Kita-Osaka Kyuko Railway
will develop railway facilities other than infrastructure. While eachdeveloping body will own the facilities and equipment after development, Kita-Osaka Kyuko Railway shall be responsible for the operationof the railway.

Mino-o-Semba Station(provisional name)Shin-Mino-o Station(provisional name)Operated by Kita-Osaka Kyuko Railway

Developed by Kita-Osaka Kyuko Railway

Infrastructure developed by Minoh City
Railway facilities other than infrastructure developedby Kita-Osaka Kyuko Railway

Demand Forecast
While the current demand forecast 42,000 people per day, thisestimate was calculated in consideration of various elements
including population within a certain range of the new stations
and the number of buses to stations.

Note that these demand forecasts have not incorporated
potential increases in demand from community building initiatives
in the areas around the railway line and that demand could exceed
initial forecasts depending on development trends in the future.
Hankyu Hanshin Holdings

Annual Report 201435

Section

3 Core Businesses: Overview and Outlook

Core Business Highlights
Revenues from Operations

Urban Transportation

P.38% of Revenues from Operations

32.5%
Real Estate

P.42% of Revenues from Operations

28.9%
Entertainment and Communications P.48

% of Revenues from Operations

15.3%©Hanshin Tigers

TravelP.51% of Revenues from Operations

4.6%
International Transportation

P.54% of Revenues from Operations

5.2%
HotelsP.57% of Revenues from Operations

8.8%

234.6

(¥ billion)

249.3

234.6

230.2

(YoY +0.5%)

2013

2014

2015 (FY)

208.6

198.3

208.6

206.3

2013

2014

2015 (FY)

110.4

109.7

Revenues from¥billionOperations(YoY −5.9%)
Operating
Income Margin

16.4%

Segment
Assets

¥764.1 billion

Revenues from¥billionOperations(YoY +5.2%)
Operating
Income Margin18.2%

Segment
Assets¥1,009.4 billion(YoY −0.7%)

110.4

Revenues from¥billionOperations(YoY +7.5%)
Operating
Income Margin

12.8%

Segment
Assets¥142.8 billion

102.7(Est.)(Est.)(YoY +0.9%)

2013

2014

2015 (FY)

33.0

34.1

33.0

33.3

(YoY +3.7%)

2013

2014

2015 (FY)

37.7

36.7

37.7

38.6

(YoY +21.8%)

2013

2014

2015 (FY)

63.7

64.7

63.7

64.3

2013

2014

2015 (FY)

Revenues from¥billionOperations(YoY −3.2%)
Operating
Income Margin

3.7%

Segment
Assets¥74.5 billion

Revenues from¥billionOperations(YoY +2.6%)
Operating
Income Margin

5.4%

Segment
Assets¥39.8 billion

Revenues from¥billionOperations(YoY −1.5%)
Operating
Income Margin

1.3%

Segment
Assets¥85.7 billion(YoY −1.7%)(Est.)(Est.)(Est.)(Est.)

Notes: 1. Figures for % of revenues from operations are calculated based on the simple aggregate amount (including intersegment transactions) of each segment (fiscal 2014 results).
2. Revenues from operations in other businesses accounted for 4.8%.

36 Hankyu Hanshin Holdings

Annual Report 2014

Operating Income(¥ billion)

37.2

38.5

36.5

2013

2014

2015 (FY)

37.3

38.0

35.8

2014

2013

1.2

1.8

2013

2.1

2014

2015 (FY)(Est.)

2.3

2015 (FY)(Est.)

1.0
0.8
0.5

2013

2014

3

(Est.)

1.8

2014

This segment offers a wide variety of live entertainment, centred on the sports business — thenationally popular and famous Hanshin Tigers professional baseball team and their home groundand high-school baseball mecca, Hanshin Koshien Stadium — and the stage revue business, basedon the hugely popular Takarazuka Revue, which celebrated its 100th anniversary in 2014. In addition,
this segment runs wide range of businesses such as broadcast and communications business and theinformation services business.

Section2015 (FY)

2.5

2013

The Real Estate segment derives its core revenue from leasing and management of commercial facilities and office buildings and its condominium business. Its attractive business portfolio includes rental
properties located mainly in the Umeda area and along the Group’s rail lines, such as Umeda Hankyu
Building, Hankyu Sanban Gai Shopping Centre, HERBIS OSAKA, HERBIS ENT, GRAND FRONT OSAKA,
Hankyu Nishinomiya Gardens and the highly regarded Geo condominium brand in the Kansai area andTokyo metropolitan area.

(Est.)

11.4

2014

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

2015 (FY)

14.2
11.2

This segment comprises railway operations (with Hankyu Corporation operating the Kobe, Takarazuka
and Kyoto lines out of Umeda (Osaka) and Hanshin Electric Railway lines directly linking Kobe with
Osaka’s major northern and southern terminals, Umeda and Namba). Together, the Hankyu andHanshin network, combined with other lines, and bus, taxi and other urban transportation services,form a single large-scale network in the Kansai area, centred on the cities of Kyoto, Osaka and Kobe.

Core Businesses:
Overview and Outlook

2013(Est.)Nature of Business2015 (FY)(Est.)

Since its establishment in 1948, while meeting the diversified needs of customers through always
taking their perspective, Hankyu Travel International has sold its products via various media throughits five brands. They are the Trapics brand that provide enhanced content at a reasonable price, the“Crystal Heart” brand, the “Hanshin Aviation Friends’ Tour” brand for relaxed travel, the “e-very” brandfor self-planning travel, and the “Royal Collection” brand for luxurious travel. It provides safe, comfortable travel for customers’ inspiration and dreams, ranging from package tours through to original plansfor individual customers, travel to Japan, and business travel services.

In 1948, as Japan’s first International Air Transport Association (IATA) certified freight agency, Hankyu
Hanshin Express (Hankyu Corporation at that time) began international airline freight transportation
operations. Since then, regardless of whether for imports or exports, it has been providing fast and safe
door-to-door international transportation services. As a pioneer in international logistics, it utilises the
track record and experience it has cultivated in developing its overseas business over many years andprovides high-quality customised logistic services and support for its customers with optimised supply
chain management.

The Hankyu-Hanshin-Daiichi Hotel Group operates 48 hotels, consisting of 17 that are directly managed and 31 belonging to chains operated by franchises. It is one of Japan’s leading hotel chains with
10,326 guest rooms (as of 31st March 2014). As a hotel operator with many directly managed hotels in
the Tokyo and Kansai areas, Japan’s two largest markets, it offers a wide range of hotel formats, fromgeneral-purpose “city hotels” to new style hotels (with very limited function facilities). In addition to
chain operations, it also manages The Ritz-Carlton, Osaka, a venerable international luxury brand withwhich it has formed an alliance.

Hankyu Hanshin Holdings

Annual Report 201437

Urban Transportation
Major Businesses□ Railway operations: Hankyu Corporation, Hanshin Electric Railway, Nosé Electric Railway, Kita-Osaka Kyuko Railway, Hokushin Kyuko Railway,
Kobe Rapid Transit Railway□ Automobile business (bus, taxi): Hankyu Bus, Hanshin Bus, Hankyu Kanko Bus, Osaka Airport Transport, Hankyu Denen Bus, Hankyu Taxi, Hanshin Taxi
□ Retailing business: Eki Retail Service Hankyu Hanshin, Iina Dining□ Advertising business: Hankyu Corporation, Hankyu Advertising Agency

Sna p s h o t
Performancein FY2014

Revenues from Operations

Operating Income

¥

¥

234.6

billion (−5.9%)

38.5

billion (+3.5%)

Priority I ssues
1

Provide high-value customer services■ Improve the appeal of our transportation services and products■ Expand our networks and catchment areas

2

Ensure low-cost operations (pool and improve technology and know-how)3

Provide safe, high-quality transportation services that fully justify public trust■ With ongoing major projects and grade separation (track elevation) works underway, as well as barrier removal at stations,this segment is committed to providing safe transportation services

38 Hankyu Hanshin Holdings

Annual Report 2014

Key Facts and Business Environment

Population growth continues in areas served by our lines
Figure 1: Population by Age Group, along Hankyu and Hanshin Lines (Population Census of Japan)■ Old■ Working age■ Young(Million)

6
55,406,883

5,315,694

5,426,516

486,155
3,802,239

423,032
3,652,948

564,789
3,924,390

4

5,371,402

5,229,907
654,455
3,805,897* T allies do not add up to thetotal at the top for each year as
age group is not known in manycases. Unknowns account for thedifference.
* A reas served by Hankyu andHanshin lines are as defined in
Figure 2.

5,557,782

5,498,123

829,343

1,014,126

1,200,690

3,807,524

3,715,180

3,636,224

Source: Compiled by the Group, basedon data from 2010 Population
Census of Japan, issued by the
Ministry of Internal Affairs andCommunications.

3

1,230,823

1,113,080

910,891

758,909

0
1980

1985

1990

1995

718,503

720,424
2000

2005

3

Core Businesses:
Overview and Outlook

2
1

Section

720,868
2010 (CY)

Figure 2: Population Trends in Areas Served by Hankyu and Hanshin Lines (1991=100)
105

Areas served by Hankyu
and Hanshin lines
Kansai area
Osaka
Hyogo
Kyoto

104
103

Great Hanshin (Kobe) Earthquake

102
101
100
99
98
97
1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(CY)

Source: Compiled by the Group based on data from Toyo Keizai, Inc.’s Local Economy Directory and the Ministry of Internal Affairs and Communications Basic Resident Register

Areas served by Hankyu and Hanshin lines:
Below are lists of areas with Hankyu Corporation and Hanshin Electric Railway stations (including tier 2 operators).
Osaka Prefecture: Osaka City (Fukushima, Konohana, Nishi, Naniwa, Nishi-Yodogawa, Higashi-Yodogawa, Yodogawa, Kita and Chuo, out of a total of 24 wards); and Toyonaka,
Ikeda, Suita, Takatsuki, Ibaraki, Minoh, Settsu cities and Shimamoto town
Hyogo Prefecture: Kobe City (Higashi-Nada, Nada, Hyogo, Nagata and Chuo, out of a total of 9 wards); and Amagasaki, Nishinomiya, Ashiya, Itami, Takarazuka and Kawanishi cities
Kyoto Prefecture: Kyoto City (Nakagyo, Shimogyo, Ukyo, Nishikyo, out of a total of 11 wards); and Muko and Nagaokakyo cities and Oyamazaki town

In recent years, the population of the Kansai area has been in
decline, with a falling birth-rate and a rising proportion of elderly
people. The official Population Census of Japan shows that the
population between the ages of 15 and 64 — the working-age
generations — has already begun to decline (please see Figure 1).

Despite this severe external environment surrounding the
Urban Transportation Business, areas served by our lines are
popular and populations here have maintained gradual growth
momentum since the trough of 1996, the year after the Great
Hanshin (Kobe) Earthquake (please see Figure 2).

Hankyu Hanshin Holdings

Annual Report 201439

Measures to increase the appeal of areas along our lines
In order to respond to this kind of operating environment, theGroup aims to thoroughly achieve low-cost operations throughsharing Hankyu’s and Hanshin’s human resources and expertise.
At the same time, it is encouraging greater public transport use

by upgrading station facilities and expanding networks. Looking
ahead, we will continue to improve standards of conveniencefor customers and make our railway lines more appealing by
expanding and improving all our general transportation services.

▶Opening of Nishiyama-tennozan Station adjacentto the Nagaokakyo Interchange on the Kyoto-Jukan Expressway
On 21st December 2013, Hankyu Corporation opened a new station between Oyamazaki Station
and Nagaokatenjin Station on the Hankyu Kyoto Line. In addition to improving the convenienceof the traffic network in the surrounding area, the new Nishiyama-tennozan Station directly
connects the railway with the expressway, which up until then had been separately constructedtraffic networks. At its high-speed bus stop, passengers can transfer from a train to a high-speed
bus that runs along the Meishin Expressway, Keiji Bypass, and Kyoto-Jukan Expressway. They canalso use the newly established Park & Ride parking lot, which greatly improves the connection
between private and public transportation. The station will dramatically improve convenience
not just for people living next to the Hankyu line, but also for those who travel across a wide area.
It is also expected to reduce the impact on the environment by encouraging people to use more
public transportation. Please refer to the Train Line Map on page 6 and 7.

Nishiyama-tennozan Station▶Start of operation of a temporary direct train service for groups from Hanshin Kobe Sannomiya
Station using Kintetsu Limited Express rolling stock to tourist sites along the Kintetsu LineOn 22nd March 2014, Hanshin Electric Railway and Kintetsu Corporation launched a temporary train service for groups that uses Kintetsu Limited Express rolling stock to directly
connect the Hanshin lines, alongside which are numerous exotic street scenes and venues
such as Hanshin Koshien Stadium, with the Kintetsu lines, besides which are some of thenation’s most famous tourist spots, such as Ise-Shima and the ancient capital Nara. This
temporary service is for passengers travelling in groups, including on travel packages offeredto the general public or school trip packages, and it runs on a special schedule, primarily on
weekends and holidays. It is offered between various line sections, such as for passengers
visiting Ise-Shima or Nara from Hanshin lines, or passengers visiting Kobe from Kintetsu lines.
Please refer to the Train Line Map on page 6 and 7.

Departure ceremony of the temporary direct train service

Performance for the Fiscal 2014

While the sale of the bookstore business to an outside company decreased earnings, this was offset
by the effects of the opening of commercial facilities in the area around Umeda Station, which is theterminal station for the Hankyu and Hanshin lines, and also the effects of the increase in demand prior
to the hike of the consumption tax rate.
In the Railway Business, as was previously stated in December
2013, Hankyu Corporation opened Nishiyama-Tennozan Station.
Moreover, with the aim of making station names easier to understand for customers, the names of four stations were changed,
including changing Sannomiya Station to Kobe Sannomiya
Station. In addition, station numbering was introduced for all stations. Elsewhere, we started operations of the new rolling stock
1000 series and 1300 series in order to reduce noise within trains
and to realize energy-saving performance. With the approach

40 Hankyu Hanshin Holdings

Annual Report 2014of the 5th anniversary of the opening of the Hanshin Namba
Line, Hanshin Electric Railway implemented various initiatives
to further attract passengers, including launching a temporary
train service for groups that directly connects Hanshin Kobe
Sannomiya Station and Kintetsu Kashikojima Station. Elsewhere,
the new elevator on the west wicket side of Koshien Station was
opened for use in October 2013, while we have been working tofurther improve customer satisfaction through enhancing bothfacilities and services. These include having employees at everyUrban Transportation

As a result of the above, in Urban Transportation as a whole,revenues from operations decreased 5.9% or ¥14,787 million
year on year, to ¥234,555 million. However, mainly due to thedecrease in retirement benefit expenses and also the abovedescribed factors in the Railway Business and Automobile
Business, operating income increased 3.5%, or ¥1,285 million
year on year, to ¥38,494 million.
Hankyu Corporation and Hanshin Electric Railway:
Performance Results
Fare revenues (¥ million)*

HankyuHanshin

FY2014FY2013

Change%Other tickets

61,63060,749880

1.4%Commuter pass

31,29930,391

908

3.0%

Total

92,92991,141

1,788

2.0%

Other tickets

20,26019,669590

3.0%Commuter pass

11,008

10,740

268

2.5%

Total

31,26930,410859

2.8%

Passenger volumes (thousands)*

HankyuHanshin

FY2014FY2013

Change%Other tickets

313,241

308,716

4,524

1.5%

Commuter pass

315,884

306,607

9,277

3.0%

Total

629,125

615,324

13,801

2.2%

Other tickets

112,360

110,385

1,974

1.8%

Commuter pass

113,644

110,748

2,896

2.6%

Total

226,004

221,133

4,870

2.2%

Section3

Core Businesses:
Overview and Outlook

station acquire service care-fitters qualifications. In terms of revenues, the effects of the grand opening of the Umeda FlagshipStore of Hankyu Department Store and the GRAND FRONTOSAKA, the increase in population in areas alongside lines, andthe demand for commuter passes and other products prior
to the hike in the consumption tax rate resulted in increases inrevenues on both the Hankyu and Hanshin lines. Consequently,
revenues from operations in the Railway Business as a wholeincreased 1.4%, or ¥2,001 million year on year, to ¥146,436
million.
In the Automobile Business, Hankyu Bus began services of
the UMEGLE-BUS that operates around the Umeda area. Also,
after a break of three years, Hanshin Bus restarted the Hanshin
Koshien to Namba direct bus that runs after the end of night
games at Hanshin Koshien Stadium. Hankyu Taxi has been
striving to improve convenience for customers, including by
accepting PiTaPa electronic money and starting a loyalty point
payment service to enable passengers to pay their fair directlywith STACIA points. In addition to these factors, the increasein use of the airport routes had a positive effect, and revenues
from operations increased 1.2%, or ¥577 million year on year, to¥47,557 million.
In the Retailing Business, the increase in revenues frommeasures to improve the appeal of facilities Ekinaka, such as the
opening of an event shop within Hankyu Umeda Station, wasoffset by the decrease from the sale of the bookstore business to
a company outside of the Group. Consequently, revenues fromoperations decreased 36.2%, or ¥18,716 million year on year, to¥33,032 million.

* Sum of tier 1 and tier 2 operators for both Hankyu and Hanshin

Forecasts for Fiscal 2015

In the Railway Business, because of the extra demand that was
generated in the previous fiscal year in advance of the hikein the consumption tax rate and also the decline in passenger
numbers in the Automobile Business, we forecast that revenues
from operations will decline 1.9%, or ¥4,400 million year on year,
Hankyu Corporation and Hanshin Electric Railway:
Performance Forecasts (Fiscal 2015)■■ Operating income
Operatingincome(¥ billion)

Fare revenues (¥ million)*
FY2015FY2014

Change%Hankyu91,717

92,929–1,212–1.3%

Hanshin

30,981

31,269

–287

–0.9%

Passenger volumes (thousands)*
FY2015FY2014

Change%Hankyu621,260

629,125–7,865–1.3%

Hanshin

223,679

226,004–2,325–1.0%* Sum of tier 1 and tier 2 operators for both Hankyu and Hanshin

to ¥230,200 million. In addition to the factors that will cause
revenues to decline, depreciation and amortisation expenses
and power-related expenses are expected to rise. Therefore, we
forecast operating income will decrease 5.2%, or ¥2,000 million
year on year, to ¥36,500 million.

50
40

249.3
37.2

Revenues from operations
Revenues
from operations(¥ billion)

234.6

230.2

38.5

36.5

250
200

30

150

20

100

10

50
0

0
2013

2014

Hankyu Hanshin Holdings

2015(Est.)(FY)

Annual Report 201441

Real Estate
Major Businesses□ Real estate leasing business: Extensive property-holdings, mainly in the Umeda area and along Hankyu and Hanshin lines (for details of major properties, please see page 47)
Promote development business including the Umeda 1-1 Project
Major companies: Hankyu Corporation, Hanshin Electric Railway, Hankyu Realty□ Real estate sales and other business: W
 e market condominiums, residential land lots, and single family houses, mainly alongside the Hankyu and Hanshinlines in the Kansai area. In recent years we have also focused on the Tokyo area.
We are engaged in property management, building maintenance and other building operation and management
services, as well as real estate fund management, including private placement funds, and J-REIT businesses.
Major company: H ankyu Corporation, Hanshin Electric Railway, Hankyu Realty, Hankyu Hanshin Building Management,
Hankyu REIT Asset Management

Sna p s h o t
Performancein FY2014

Revenues from Operations

Operating Income

¥

¥

208.6

billion (+5.2%)

Priority I ssues
1 	Enhance the appeal of and revitalise Umeda and other areas

served by our lines■ Steadily promote the Umeda 1-1 Project (Dai Hanshin Building andShin Hankyu Building rebuilding projects)■ Formulate and advance new development projects and systematically

implement facility reconstruction along rail lines to enhance the value ofHankyu and Hanshin lines
2 	Undertake measures to strengthen organisations andexpand operations in the real estate leasing business■ Improve the profitability of the Umeda Hankyu Building and

GRAND FRONT OSAKA■ Consolidate and improve profitability by strengthening management

models while optimising costs
3 	Agile responses attuned to changes in the real estate sales

business environment■ Planning and development of condominiums tailored to customer needs

and promoting business and sales focused on changing market conditions(such as the effects of the consumption tax rate hike).
■ Develop communities of detached single-family town houses andsteadily market residential land-lots (Yamatedai, Nakajima and Saito)■ Maintain supply network and aggressively obtain business opportunities

in the Tokyo area while increasing recognition of Geo-brand condominiums
and Hapia single family housing
4 	Further expand the Group’s Real Estate Businessthrough the stable operation of real estate funding
and REIT businesses■ Pursue external growth of the Real Estate Businessthrough linkage with Hankyu REIT■ Expand fee-based revenues that include asset andproperty management

42 Hankyu Hanshin Holdings

Annual Report 2014

38.0

billion (+2.0%)

Key Facts and Business Environment

A moderate improvement in vacancy rates
Figure 1: Average Vacancy Rates at Office Buildings (Osaka and Tokyo business areas)
Osaka business areas (all)Umeda area
Tokyo business areas (all)

(%)

14

2010.10 11.94%

2014.05 8.47%

12
10

2007.10 2.55%

8

Section3

6

2012.09 6.07%

2
0
2007.
04

2008.
04

2009.
04

2010.
04

2011.
04

2012.
04

2013.
04

2014. (CY)04

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

Core Businesses:
Overview and Outlook

4* The main factor for the significant increases in vacancy rates in the Umeda area and Osaka’s business districts overall from December 2012 to April 2013 is the opening of
GRAND FRONT OSAKA.

Figure 2: Average Rents at Office Buildings (Osaka and Tokyo business areas)

Osaka business areas (all)Umeda area
Tokyo business areas (all)(¥/3.3m2)

25,00023,00021,0002014.05 ¥14,120

19,0002008.04 ¥15,965

17,00015,00013,00011,000
9,000
2007.
04

2008.
04

2009.
04

2010.
04

2011.
04

2012.
04

2013.
04

2014. (CY)04

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

Most operating income in the Group’s Real Estate Business isgenerated by the real estate leasing business, which contributes
to a stable cash flow. The Group has one of the largest rental realestate portfolios of any private rail company, with many properties located near the Hankyu and Hanshin lines (☞ for details,
please see ‘Major Rental Properties’ on page 47). Overall rentablearea operated by the Group was approximately 1.7 million m2(as of 31st March, 2014). Of this total, approximately one half, or
800,000 m2 (70% being commercial facilities and the rest officefacilities) are concentrated in the Umeda area, the heart of the
Kansai economy, where the Group has a large number of very
competitively located rental properties (near the Umeda stationsof both Hankyu and Hanshin lines as well as JR Osaka Station(☞ please see page 29 for detailed map of the Umeda area).
Looking at the current market for rentable office space in the
Umeda area, the opening of the GRAND FRONT OSAKA OfficeTower building in April 2013 had a negative impact as it supplieda large volume of new office space, and vacancy rates worsened
temporarily. However, thanks to tenants relocating from other
districts, as well as large-scale business relocations accompanying mergers and corporate consolidations, vacancy rates havebeen gradually improving up to the present time (☞ see Figure
1 and 2 for average vacancy rates and average rent levels).
Accordingly, while there have been moderate improvements

Hankyu Hanshin Holdings

Annual Report 201443

in the vacancy rates, they still have not recovered to the previous
level (the levels in 2012), and the environment surrounding theoffice leasing business remains severe and the future uncertain.
However, as explained earlier, thanks to the very competitive
locations of our major rental office buildings which lie close to
the Hankyu and Hanshin Umeda stations in central Umeda,
we can expect relatively stable earnings on the back of steadydemand and rent levels, even under the current conditions.
On the other hand, while the market environment forcommercial facilities has changed in the Umeda area with the
opening of GRAND FRONT OSAKA, the Group’s commercial
facility-related sales currently remain on par with the previous
fiscal year. This is attributable to renovations and a major tenantreshuffling at key Group facilities, as well as a rise in the numberof visitors to the Umeda area on the whole. Moreover, in March
2014, Hankyu Nishinomiya Gardens, which is one of our leading
commercial facilities alongside our lines, implemented its largest
ever refurbishment since its opening and is performing strongly
both in terms of sales and visitor numbers.
While the tough business environment is expected to continue for a while, in addition to utilizing our strong relationships
with our tenants, we are aiming to optimize costs throughstrengthening our leasing business management model. We areworking to raise occupancy rates at the properties that we own
and also improve the appeal and tourist potential of both the
Umeda area and the areas alongside our lines as a whole.

We have achieved our initial targets for both visitor numbers and sales for GRAND FRONTOSAKA, and moreover are on course to achieve our target for leasing to office tenants
On 26th April 2014, GRAND FRONT OSAKA celebrated its firstanniversary, and including for visitors to “Knowledge Capital”
and “Shops & Restaurants,” visitors to the entire facility exceeded
the target for the year (36.5 million people), with in excess of
53 million people visiting it. Moreover, sales from the “Shops &Restaurants” commercial facilities that are managed by Hankyu
Corporation and Hankyu Hanshin Building Management reached¥43.6 billion for the approximately 11 months up to 31st March
2014, surpassing the initial fiscal year sales target of ¥40.0 billion.
In leasing to office tenants, the occupancy and informal

tenancy commitment rates in July 2014 were around 60%, meaning the present leasing performance is on course to achieve its
target.
Since the opening of the Office Tower, we have received
requests from many companies and corporations wishing tocome and view the office space and we are still receiving theserequests today. Therefore, all of the 12 operators including
Hankyu Corporation that form a consortium for Knowledge
Capital Management will continue to work together and leverage their collective strength to attract office tenants.

Shops & Restaurants

GRAND FRONT OSAKA

44 Hankyu Hanshin Holdings

Knowledge Capital (The Lab. A laboratory for the world)

Annual Report 2014

Real Estate

The real estate sales business continues to enjoy robust sales
to a decline in demand as a reaction to the surge in demand in
the previous period in advance of the hike in the consumption
tax rate, that increases in the prices of land and construction
materials, and also labour costs, has resulted in a trend spreading
among developers of holding back from sales.
Due to the impact of these kinds of market changes, thebusiness environment is expected to become even more severe in
the future. However, the Group is striving to secure the feasibilityof this business by keeping a close watch on market trends andcarefully selecting land for purchases, and moreover it is working
to reduce costs without sacrificing functionality or quality.
Note: The above figures are based on research by Real Estate Economic InstituteCo., Ltd. Reference was made to National Condominium Market Trends 2013,
and Condominium Market Forecasts in the Tokyo Metropolitan and Kansai Areasin the First Half of 2014.
■ New Supply of Condominiums (Tokyo and Kansai areas)(Unit/year)
100,000
90,00080,000Kansai area
Tokyo area

Section3

Core Businesses:
Overview and Outlook

In the real estate sales business, we market condominiums,
residential land lots, and single family houses. The core businessis Geo-branded condominiums, supplied as high value-added
properties situated in excellent locations, mainly in areas along
Hankyu and Hanshin lines and in the Kansai and Tokyo areas.
With Geo-branded condominiums, the focus is on the conceptof “quality and functionality, wherever you live,” and quality
management is strict. We use an integrated framework spanning
development, sales, and management, and the Geo marqueerates highly in market research into condominium brand image.
The number of individual condominium units supplied in2013 stood at 56,478 in the Tokyo area, up 23.8% year on year,
as customers are increasingly interested in purchasing in popularareas where prices are expected to rise in the future, particularlyin the Tokyo wards. In the Kansai area, the number of individual
condominium units supplied in 2013 was 24,691, up 6.1% year
on year, as with the exception of Osaka Prefecture, where thesupply was basically unchanged, sales increased in both Kyoto
Prefecture and Hyogo Prefecture. The combined number ofunits supplied by the Group in the Tokyo and Kansai areas was
1,408, placing it 18th (3rd in the Kansai area) in the nationwide
condominium supply rankings.
Looking at current conditions, in the first half of 2014
the average rate of conclusion of a sales contract in the firstmonth after a condominium came on the market was 78.4%
in the Tokyo area and 77.3% in the Kansai area, both above thegenerally employed benchmark level of 70% for condominium
sales. But on the other hand, the number of condominium
units forecast to be supplied to the market in 2014 is 46,000 to
48,000 in the Tokyo area and 20,000 to 21,000 in the Kansai area,
both down around 20% year on year. The factors behind thesesignificant year-on-year downward projections is, in addition

85,429 84,148
83,18374,46370,00061,02160,00050,00040,00030,00020,00056,47843,733 44,535
44,499 45,602 46,000
31,85748,00030,219 36,376
24,691
31,258 33,064 30,146
21,716 23,266
22,74410,00019,784

20,21920,00021,00002003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (CY)
(Est.)

Source: Prepared by the company based on National Condominium Market Trends 2013, publishedby the Real Estate Economic Institute Co., Ltd.
■ Condominium Prices (Tokyo and Kansai areas)(¥ million)

60
50
40
30

■ Kansai area (average)■ Tokyo area (average)

Kansai area (thousand/m2)
Tokyo area (thousand/m2)

550

555

614
545

545

42.00
41.08
41.04
40.69
449
426
420
417
33.80
31.65
31.77
31.64

46.44

650
47.75

642

664
47.16

45.35

697

470

476

471

488

34.78

35.13

34.11

34.52

650
45.78

499

34.90

(¥ thousand/m2)

700

645
45.40

600

49.29
491

501

500

34.38

34.96

400
300

20

200

10

100

0

0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

(CY)

Source: Prepared by the company based on National Condominium Market Trends 2013, published by the Real Estate Economic Institute Co., Ltd.

Hankyu Hanshin Holdings

Annual Report 201445

Performance for the Fiscal 2014

Increases in revenues and earnings from the full-year operations of
the Umeda Flagship Store of Hankyu Department Store in Umeda Hankyu Building
In the real estate leasing business, as was previously described,
GRAND FRONT OSAKA opened in April 2013. It received many
visitors over the course of the year and sales from the “Shops &Restaurants” commercial facilities achieved the initial fiscal year
target. In addition, the same month saw the grand opening of
the AMASTA AMASEN (formerly AMASEN) commercial facility
in Hanshin Amagasaki Station, while in March 2014, Hankyu
Nishinomiya Gardens implemented a large-scale refurbishment.
In addition to such measures, each company in the Group
worked to strengthen the competitiveness and maintain theoccupancy rates of the commercial facilities and office buildingsthat it owns, despite the tough business environment. Thanks
to these efforts and also the contribution from the full-year ofoperations of the Umeda Flagship Store of Hankyu Department
Store, revenues from operations increased 8.7%, or ¥8,125 million
year on year, to ¥101,309 million.
In real estate sales business, sales of condominiums in the
Kansai area were made for Geo Tower Tenroku (Kita Ward, Osaka
City), Geo Takatsuki Muse EX (Takatsuki City, Osaka Prefecture),
and Geo Grande Shukugawa Aioi Town, (Nishinomiya City, Hyogo
Prefecture), and in the Tokyo area, at Geo Monzennakacho Fuyuki(Koto Ward, Tokyo). In residential land-lot and single-family
housing subdivisions, we marketed units including Hankyu

Takarazuka Yamatedai Cleas/View-Uno (Takarazuka City, Hyogo
Prefecture), Saito/Minoh Garden Terrace (Minoh City, Osaka),
HAPIA Garden Neyagawa City Ekinote Koen Dori no Machi(Neyagawa City, Osaka Prefecture), and HAPIA Garden Oji Sky
Hills (Oji Town, Kitakatsuragi District, Nara Prefecture). As a result,revenues from operations in the real estate sales business roseby 4.6%, or ¥5,477 million, to ¥123,876 million.
Also, through the acquisition in April 2013 of part of theequity of HEP FIVE that was owned by Hankyu REIT Inc., and of
NU chayamachi, the Group is taking the initiative to increase thevalue of commercial facilities and aiming to further revitalise theUmeda area. In addition, it has sold some of the equity it held inHankyu Nishinomiya Gardens to the same corporation.
As a result of these factors, revenues from operations in theReal Estate Business overall increased by 5.2%, or ¥10,267 million,to ¥208,610 million, and operating income rose 2.0%, or ¥729
million, to ¥38,008 million.
* Condominium unit sales in previous year (fiscal 2013): 1,548
Condominium unit sales in year under review (fiscal 2014): 1,356
Note: N umber of condominiums sold (number of deliveries) includes units inshared buildings in which only a portion of the units are subdivisions for sale.

HAPIA Garden Neyagawa City Ekinote Koen Dori no Machi

Umeda Hankyu Building

46 Hankyu Hanshin Holdings

Geo Tower Tenroku

Annual Report 2014

Hankyu Nishinomiya Gardens

Real Estate

Forecasts for Fiscal 2015

In the real estate leasing business, while we expect an increase
in office rental income, we also anticipate that there will be a
decline in rental income (from the reduced rental area) due tothe start of construction work of the Umeda 1-1 Project (therebuilding of the Dai Hanshin Building and the Shin Hankyu
Building), and also a reduction in earnings from sales of condominiums within real estate sales business. Consequently, we
forecast revenues from operations will decline 1.1%, or ¥2,300
million year on year, to ¥206,300 million, and operating income
will fall 5.8%, or ¥2,200 million, to ¥35,800 million.

■■ Operating income
Operatingincome(¥ billion)

50

198.3

40

37.3

Revenues from operations

208.6

206.3

38.0

35.8

Revenues
from operations(¥ billion)

200
160

30

120

20

80

10

40

0

0

Section* Please refer to P.32 for details of the Umeda 1-1 Project.

2014

2015
(Est.)■ Major Rental Properties (as of the end of March, 2014)

Property Name

Location

Completed

Leasable Area* (m2)

Use

Umeda Hankyu Bldg.

Kita-ku, Osaka2012

213,147

Department stores (Hankyu Department Store), Offices

Dai Hanshin Bldg.

Kita-ku, Osaka

1963

98,578Department stores (Hanshin Department Store)

Umeda Hanshin Daiichi Bldg. (HERBIS OSAKA)

Kita-ku, Osaka

1997

81,631

Hotels (The Ritz-Carlton, Osaka), Offices,
Commercial facilities, Multifunctional convention hall

Umeda Hanshin Daini Bldg. (HERBIS ENT)

Kita-ku, Osaka2004

54,799

Offices, Commercial facilities, Theatre (Osaka Shiki Theatre)

Hankyu Chayamachi Bldg. (Applause Tower)

Kita-ku, Osaka

1992

52,099Hotel (Hotel Hankyu International), Offices,
Commercial facilities

Hankyu Sanban Gai Shopping Centre

Kita-ku, Osaka

1969

41,043

Commercial facilities

Hankyu Grand Bldg.

Kita-ku, Osaka

1977

36,054

Offices, Commercial facilities

Shin Hankyu Bldg.

Kita-ku, Osaka

1962

32,962

Offices, Commercial facilities

GRAND FRONT OSAKA

Kita-ku, Osaka2013

28,125

Offices, Commercial facilities, Knowledge Capital,
Hotel (InterContinental Hotel Osaka)

Hankyu Terminal Bldg.

Kita-ku, Osaka1972

26,491

Offices, Commercial facilities

Hankyu Five Bldg. (HEP FIVE)

Kita-ku, Osaka

1998

19,738Commercial facilities

Navio Hankyu (HEP NAVIO)

Kita-ku, Osaka1980

15,711

Commercial facilities

Kita Hankyu Bldg.

Kita-ku, Osaka1971

13,356

Offices, Commercial facilities

NU chayamachi

Kita-ku, Osaka2005

11,895

Commercial facilities

Umeda Centre Bldg.

Kita-ku, Osaka1987

10,214

Offices, Commercial facilities

NU chayamachi PLUS

Kita-ku, Osaka

2011

3,021

Commercial facilities

Noda Hanshin Bldg. (WISTE)

Fukushima-ku, Osaka

1992

31,630Commercial facilities, Offices

Fukushima Hanshin Bldg.

Fukushima-ku, Osaka

1987

21,764

Offices

Shin-Osaka Hankyu Bldg.

Yodogawa-ku, Osaka2012

24,240

Offices, Hotel (REMM Shin-Osaka), Commercial facilities

Sannomiya Hanshin Bldg.

Chuo-ku, Kobe

1933

13,672

Department stores (SOGO)

Motomachi Hanshin Bldg.

Chuo-ku, Kobe

1987

7,865

Outside horse-racing ticket booth

Kobe Hankyu Bldg.

Chuo-ku, Kobe

1936

7,657

Commercial facilities

Hankyu Nishinomiya Gardens

Nishinomiya, Hyogo

2008

108,240

Commercial facilities, Department stores(Hankyu Department Store)

EBISTA Nishinomiya(Commercial facility under elevated railway tracks)

Nishinomiya, Hyogo

2003

10,359Department stores (Hanshin Department Store),
Commercial facilities

Itami Hankyu Station Bldg. (Itami Reita)

Itami, Hyogo

1998

11,800Commercial facilities

Hankyu Kawaramachi Bldg.

Shimogyo-ku, Kyoto

1974

38,237

Department stores (Takashimaya)

Shijo Kawaramachi Bldg.
(Kotocross Hankyu Kawaramachi)

Shimogyo-ku, Kyoto

2007

2,979

Commercial facilities

Katsura Higashi Hankyu Bldg. (MEW Hankyu Katsura)

Nishikyo-ku, Kyoto

1993

2,874

Commercial facilities

TX Akihabara Hankyu Bldg.

Chiyoda-ku, Tokyo

2008

10,297

Hotel (REMM Akihabara), Commercial facilities

3

(FY)

Core Businesses:
Overview and Outlook

2013* Leasable area does not include areas for public use.

Hankyu Hanshin Holdings

Annual Report 201447

Entertainment andCommunications
Major Businesses□ Sports business: Professional baseball business (the Hanshin Tigers) and Hanshin Koshien Stadium, and related businesses□ Stage businesses: Takarazuka Revue and related businesses, operation of Umeda Arts Theatre and promotion of stage productions□ Communication and media businesses: Information services business, broadcast and communications business□ Leisure businesses: Facilities on top of Mt. Rokko, and other leisure businesses

Sna p s h o t
Performancein FY2014

Revenues from Operations

Operating Income

¥

¥

110.4

billion (+7.5%)

14.2

billion (+26.1%)

Priority I ssues
1

Maximise the value of the Hanshin Tigers, Koshien and Takarazuka brands■ Improve the appeal of live events(create superior attractions, train and acquire star talent, and increase the appeal of our live-event venues)■ Broaden the fan base and improve customer retention(developing sales by actively using CRM and by leveraging to the maximum extent the appeal of contents, andstrengthening promotions through external media)■ Create value chain of live events, media, and secondary contents(enhance the appeal of established media, broaden the range of media channels)
2

Establish the business foundations for communications media■ Raise the value of mediums as media alongside lines and deepen communication with local customers■ In the information service business, develop the solution business both inside and outside of the Group3

Leverage our leisure facilities (facilities on top of Mt. Rokko)■ Enhance the attractiveness of Mt. Rokko and its customer-drawing power by taking advantage of facilities

that bring together its natural, scenic and various other attractive features©Takarazuka Revue Company

48 Hankyu Hanshin Holdings

Annual Report 2014

Key Facts and Business Environment

Two attractions enhancing Group brand value
fan bases all over Japan, and the games and shows continue todraw crowds. These two powerful brands are assets that none of
our rivals can match and form a proprietary core strength of theGroup, contributing significantly to Group brand value.
Going forward, we will work to improve customer loyalty andmaximise the Group’s brand value by pursuing high-quality performances that deliver inspiration and dreams to our customers.
Section3▶Hanshin Tigers and the Hanshin Koshien Stadium
Of the professional baseball leagues in Japan, the Hanshin Tigers has both
one of the longest histories and a bedrock of fans not only in their homearea, Kansai, but also across Japan. Attendances at home games in the
Pennant Race have each year been at the highest level among the 12 professional baseball teams in both the Central and Pacific Leagues in Japan.
Opened in 1924, the Hanshin Koshien Stadium is a sports venue ofconsiderable historical value. Known as the home ground of the Hanshin
Tigers and also the home of the spring and summer high school baseballchampionships, it now also hosts major events such as the Koshien Bowl
(annual American college football final) and open-air concerts.
From the autumn of 2007, refurbishment work began on the themeof passing down its history and tradition while offering improved safety
and comfort, and in March 2010 the work was completed and thestadium was reborn with its new appearance. This year marks the 90th
anniversary of its opening, and while continuing to evolve as a temple ofbaseball culture in Japan, it is aiming to be a stadium loved by all evenmore than before.

■ Total Attendances at Hanshin Tigers Home Games

Core Businesses:
Overview and Outlook

According to the Ministry of Internal Affairs and Communications
Statistics Bureau’s Family Income and Expenditure Survey, recreational service expenditure of total household in 2013 (real terms)
rose 3.7% year on year, the second consecutive year of increase.
Personal consumption spending was strong, but the polarisation
trend continued in the live entertainment industry, with demandfocused only on some popular contents and the rest struggling.
Despite these headwinds, our unique contents of the
Hanshin Tigers and the Hanshin Koshien Stadium, andTakarazuka Revue brands retain their popularity and passionate(Thousand)

4,000
3,000

3,007

3,006

2,898

2,772

2,728

2,000
1,000
0

4th
2009

2nd
2010

4th
2011

(Central League rankings)

5th
2012

2nd

2013

(CY)

▶Takarazuka Revue
Takarazuka Revue is one of the few theatrical companies in the world composed of only women, and from the stage the performers invite
the inspiration and dreams of the audience. It gives performances throughout the year at its two main venues, the Takarazuka Grand Theatrein Hyogo Prefecture (2,550 seats) and the Tokyo Takarazuka Theatre (2,069 seats), and also gives performances nationwide. Up to the present
time, it has also given 25 performances overseas in 18 countries and regions and has established a wonderful reputation throughout theworld. It is also utilising media in a number of fields to distribute video and music, including through the specialist Takarazuka Revue channel
TAKARAZUKA SKY STAGE and over Internet. In 2013, the troupes gave over 450 performances, reaching a total of approximately 2.5 million
people during the year, at both its main theatres and also on troupe tours of venues nationwide.
This year marks the Takarazuka Revue’s centennial anniversary and from here on, based on its philosophy of “Modesty, Fairness and Grace”
it will continue to make its history while also aiming to take a leap forward. As following on from its performances in Taiwan in April 2013, it
intends to expand into Asia and capture new fans from all across the region.

Hankyu Hanshin Holdings

Annual Report 201449

Entertainment and Communications▶C ommunication and media business that delivers inspiration anddreams to customers’ homes through diverse contents
In the broadcast and communications business, we provide services that can meet customers’ diverse needs in order to enhance convenience
for their use of cable television, the Internet, and the telephone. Also, in our information services business, we are providing optimised solutions in each of the areas of e-commerce, webpage production, railway- and building-related systems development, and the construction of
public wireless LAN infrastructures at Group facilities. In this way, we are providing a wide range of support for homes and businesses.

Performance for the Fiscal 2014

Revenues and earnings increased, as in the sports business the Hanshin Tigers was able to go all the way to
the Climax Series, while both the stage business and information services business performed steadily
In the sports business, the number of Hanshin Tigers regular season home games increased (from 70 in fiscal 2013 to 72 in fiscal
2014). Moreover, supported by their many fans, the team was able
to go all the way to the Climax Series, finishing in second place.
At Hanshin Koshien Stadium, we implemented various
projects for merchandising, food and drink, and fan services, andwe strove to manage the facility in order to maximise its appeal
to fans. Merchandise launched for players who had newly joined
the team was well received, as were the eating and drinking
establishments that were newly attracted to the stadium. As
a result, revenues from operations increased 10.0%, or ¥2,817
million year on year, to ¥30,910 million.
In the stage business, the stage revue business had notablesuccesses with productions at the Takarazuka Grand Theatre andTokyo Takarazuka Theatre. The Yuki (Snow) troupe’s performanceof Versailles no Bara — Felsen ed. — (La Rose de Versailles — Felsen
ed. —) featured its top stars, while the Hoshi (Star) troupe celebrated the Revue’s centennial year by performing L’Homme sanssommeil: Napoléon ~Au-delà de l’Amour et de la Gloire — (Napoléon,
the Man Who Never Sleeps —At the End of His Love and Glory). In
addition, the Revue performed overseas for the first time in eight
years and its performance in Taiwan was a great success. Moreover,as part of the celebrations in 2014 of the Takarazuka Revue’s centennial anniversary, refurbishment work at the Takarazuka Grand

Theatre was carried out, including to its main front gate. In thetheatre business we put on a variety of highly topical productions
that received favourable reviews, including DREAM, A DREAM,
which featured stars of successive generations of the Takarazuka
Revue, at Osaka’s Umeda Arts Theatre and Tokyo’s Tokyu Theatre
Orb, and the independently produced 4 Stars, in which famousstars from overseas were invited to perform. As a result, revenues
from operations in these businesses increased 3.2%, or ¥1,057
million year on year, to ¥33,747 million.
Elsewhere in the communication and media business, within
the information services business Hankyu Corporation followedon from Hanshin Electric Railway and installed high-speed public
wireless LAN services at all its stations. In the broadcast and communications business, subscriber numbers steadily grew in thecable television business, mainly thanks to sales from discountplans for long-term contracts and mobile phone set menus. In
addition, Rworks, Inc. was added to the scope of consolidation.
Consequently, revenues from operations in the communicationand media business increased 8.7%, or ¥3,732 million year on
year, to ¥46,474 million.
As a result of the above, revenues from operations in theEntertainment and Communications Business overall improved
7.5%, or ¥7,654 million year on year, to ¥110,350 million, while
operating income rose 26.1%, or ¥2,933 million, to ¥14,172 million.

Forecasts for Fiscal 2015

In the sports business, we expect a decline in revenues fromsales of Hanshin Tigers merchandise and food and drink, as they
performed particularly strongly in the previous year, and therefore forecast that revenues from operations will decline 0.6%, or¥700 million year on year, to ¥109,700 million. Also, in addition
to the above factors causing decreases, we expect an increasein depreciation and amortisation expenses in the stage businessin conjunction with the theatre refurbishment work, and so
are forecasting that operating income will fall 19.6%, or ¥2,800
million, to ¥11,400 million.

■■ Operating income
Operatingincome(¥ billion)

20

102.7
15
10

Revenues from operations
Revenues
from operations(¥ billion)

110.4

109.7

90

14.2
11.4

11.2

5

0
2013

Annual Report 2014

60
30

0

50 Hankyu Hanshin Holdings

120

2014

2015
(Est.)(FY)

TravelMajor Businesses□ Travel Business: H ankyu Travel International, Hankyu Hanshin Business Travel, Hankyu Travel Support
Total travel billings: ¥408.7 billion* Total travel billings is the fiscal 2014 total of two companies, Hankyu Travel International and Hankyu Hanshin Business Travel

Sna p s h o t
Revenues from Operations
Performancein FY2014

billion (–3.2%)

1.2¥

Section3

billion (–50.1%)

Priority I ssues
1

Raise customer satisfaction levels

Core Businesses:
Overview and Outlook

33.0

¥

Operating Income■ Rigorous quality and risk management

2

Strengthening of Product Planning■ Create products supported by customers and expand the lineup of products we offer,centred on our original product range of core brand travel packages
3

Create the fundamentals for stable earnings■ Improve the structure of the back office/administrative departments, carry out direct purchasing for the main overseas hotels

4Enhance management resources■ Develop diverse human resources on which the future of the Group depends, effectively utilise these human resources,

improve levels of employee satisfaction, and strengthen inbound demand by developing the overseas business©Austrian Tourism Board

Hankyu Hanshin Holdings

Annual Report 201451

Key Facts and Business Environment

Aim to achieve the highest customer approval ratings in the industry
Since the 1990s, the Group’s Travel Businesses have focused onusing newspapers and other media (mail-order and online sales)
to market packages, which are organised under a stable of brands
spearheaded by the mainstay Trapics brand, which has constantly
maintained a top position in the industry. We have won the support of countless customers over many years to the extent that in2014, the Trapics brand celebrates its 25th anniversary.
The business environment is characterised by external factors
such as economic and social trends, earthquakes and other natural disasters, and the numbers of Japanese traveling overseas has
been sluggish. But in contrast, in recent years there has been asteady increase in the number of overseas visitors to Japan.
In this environment, we have been developing sales activities with a sense of speed characterised by media sales, which
is one of the strengths of Hankyu Travel International, and havealso been proactively developing our product lineup. As aresult of these efforts, we are achieving steady growth in bothoverseas travel and domestic travel. We are also actively working
on new businesses so that our customers continue to choose
our services. For example we are striving to provide productsthat provide value to customers and that also reflect our ability
to read the trends of the times, while also focusing our energies
into our inbound business.

■ Total Travel Billings (FY2014)

Rank

Company name

Looking ahead, we plan to further broaden our productlineup to satisfy customers’ increasingly diverse demands, aiming ultimately to achieve the highest customer approval ratings
in the sector through a constant focus on safety, comfort, andproviding customers with inspiration and dreams. We intend
to attract still more customers by working together to provide
high-quality travel services that truly meet customer wishes.

■ The Hankyu Travel International travel brand■ Overseas Travel Billings (FY2014)¥ billion

Rank

Company name■ Domestic Travel Billings (FY2014)¥ billion

Rank

Company name¥ billion

1JTB

1,494.4

1

JTB

496.6

1

JTB

958.0

2

KNT-CT Holdings

525.4

2

HIS

364.9

2

KNT-CT Holdings

345.8

3

Nippon Travel Agency

411.7

3

*Hankyu Travel International

261.6

3

Rakuten Travel

344.9

4

HIS

410.8

4

JTB World Vacations

253.6

4

Nippon Travel Agency

251.6

5

*Hankyu Travel International

408.7

5

KNT-CT Holdings

170.1

5

ANA Sales

187.6

6

Rakuten Travel

364.5

6

Nippon Travel Agency

144.5

6

*Hankyu Travel International

146.3

7

JTB World Vacations

253.6

7

JALPAK

67.9

7

JALPAK

107.7

8

ANA Sales

213.1

8

JTB Business Travel Solutions

50.4

8

JR TOKAI TOURS

89.4

9

JALPAK

175.7

9Travel Plaza International

48.8

9

Top Tour78.6

10

Top Tour

112.3

10

Nissin Travel Service

43.0

10

Meitetsu World Travel

74.0

Source: Japan Tourism Agency Bulletin: Business Volume for Major Travel Agents (April 2013 to March 2014)

Note: Billings are rounded down to the nearest ¥100 million.
* The total of both Hankyu Travel International and Hankyu Hanshin Business Travel

52 Hankyu Hanshin Holdings

Annual Report 2014

Travel■ Number of Japanese visiting overseas countries and overseas visitors to Japan

Fiscal 2004

The Japan Tourism Agency
has set the target of achieving 20 million visitors toJapan in 2020

Total:

Overseas visitors
to Japan

5.21

18.51
millionpeoplemillion people(28%)

Japanese visiting
overseas countries

Overseas visitors
to Japan

10.36

13.30

Fiscal 2014
Total:

27.84
millionpeoplemillion people(37%)

million people(72%)

Japanese visiting
overseas countries

17.47

million people(63%)
SectionSource: prepared by the Company based on statistical data of the Japan National Tourist Organization (JNTO)

3Core Businesses:
Overview and Outlook

Performance for the Fiscal 2014

Decreases in revenues and earnings in overseas travel from the decline in tourists
visiting China and South Korea
In overseas travel, no recovery was seen to the decline in thenumber of tourists visiting China and South Korea from early
autumn in the previous fiscal year, and the sluggish performancecontinued. The number of tourists visiting the Middle East also
fell due to its unstable political situation, and there was nochange to the tough business environment.
In domestic travel, sales were strong for tourists visiting
Hokkaido, Tohoku, and Okinawa. In addition, we aimed toenhance our lineup of products that take advantage of specific
events, such as the ceremonies to move the shrines at Ise Jingu
Shrine and the Grand Shrine of Izumo, and in such ways worked

hard to attract more customers.
Elsewhere, we have been continuously developing productsthat are highly appealing to customers. These included plans fora charter cruise to celebrate the 25th anniversary of the Trapics
brand, and plans for overseas and domestic tours to celebrate
the 65th anniversary of the establishment of Hankyu Travel
International.
Despite these efforts, the tough business environment
meant that revenues from operations were down 3.2%, or ¥1,079
million year on year, to ¥33,006 million, while operating income
decreased 50.1%, or ¥1,227 million, to ¥1,224 million.

Forecasts for Fiscal 2015

Although we expect a year-on-year decline in domestic travel,
we also anticipate a recovery in overseas travel for tourists visiting Taiwan, Turkey, and Egypt. So we forecast revenues fromoperations will increase 0.9%, or ¥300 million year on year, to¥33,300 million, and operating income will rise 47.1%, or ¥600
million, to ¥1,800 million.

■■ Operating income
Operatingincome(¥ billion)

Revenues from operations
Revenues
from operations(¥ billion)

4

34.1

40

33.0

33.3

3

30

2.5
2

1.8
1.2

1

20
10

0

0
2013

2014

Hankyu Hanshin Holdings

2015(Est.)(FY)

Annual Report 201453

International
Transportation
Major Businesses□ International Transportation Business: H ankyu Hanshin Express Group 22 companies
Sales: ¥78.5 billion* Sales are total of Hankyu Hanshin Express Group figures for fiscal 2014.

Sna p s h o t
Performancein FY2014

Revenues from Operations

Operating Income

¥

¥

37.7

2.1

billion (+2.6%)

billion (+13.4%)

Priority I ssues
1

Build a global governance system

5 	Expand the network for promising markets andstrengthen existing bases■ Controlling functions for each of the five poles2■ Promote investment to expand the logistics business andincrease sales for growth industries3■ Further expand into newly developing countries in Africa,

Provide total solutions to growth industries

South and Central America, and ASEAN
6 	
Control information, knowledge and finances, andemploy and train human resources

Construct a sales system that meets customer needs■ Disseminate to employees the Hankyu Hanshin Express Way,

employ and train human resources, and promote ERM■ Conduct sales that prioritise the customer and expand sales,

including for non-Japanese companies
4

Build a system for creating high-value-added services■ Advance BPR and WSI and reform product development andexisting services

54 Hankyu Hanshin Holdings

7

Expand into new business areas■ Strengthen the logistics and marine transportation businesses

and create new businesses
Five poles: North America, Europe, East Asia, ASEAN, South Korea and Japan
BPR: Business Process Re-Engineering
WSI: Working Style Innovation
ERM: Enterprise Risk Management

Annual Report 2014

Key Facts and Business Environment

Utilising advanced ICT to be an innovative logistics provider
that is the leader in international logistics■ Weight of freight exports of mixed cargo carried by airlines

from Japan(10,000 tons)
200.0

150.0

Section

131.8

3

132.1

130.5
130.8

100.0

98.3

93.4 107.6

99.6
86.2
85.6

50.0

Core Businesses:
Overview and Outlook

Even compared with other Japanese freight forwarding companies, which are strong players in the global distribution sector, theHankyu Hanshin Group’s International Transportation Businesshas led rivals in marine transportation and logistics to create aframework that optimises our customers’ supply chain management. We are a total provider of logistics management systems,
capable of handling multiple transportation modes from bases allover the world. By using advanced information technologies, wehave built up an infrastructure capable of meeting the increasingly sophisticated logistics needs of our customers.
In terms of the business environment, in recent years there
has been a decline in airlines exporting freight from Japan due
to Japan’s manufacturing industry moving its plants overseas.
In order to be a winner in the global competition in this harshbusiness environment, while of course always concentrating on
quality, we are also aiming to construct bases to service newly
developing markets and to strengthen the foundations of ourlogistics business and marine transportation business in order torealise a system that can provide total solutions. Therefore, wehave set fiscal 2016 as the time period for our structural reforms
and we are putting in place the business infrastructure that isnecessary to steadily tackle our priority issues.

0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014 (FY)■ Our network of overseas bases

Local subsidiary
BranchRepresentative office

Number of bases: domestically, 32 / internationally, 96 (as of 31st March 2014)
Hankyu Hanshin Holdings

Annual Report 201455

International Transportation

Performance for the Fiscal 2014

Revenues and earnings increased due to the moderate recovery in freight demand,
particularly from Europe, the United States, and Asia, and also the effects ofthe exchange rate fluctuations since the previous fiscal year
Competition in the International Transportation Businesshas become over fiercer and the business environment eventougher. But on the other hand, we have seen a moderate
improvement in freight demand thanks to the recovery of the
global economic environment.
Within this trend, we have established local subsidiaries in
the growth market of Mexico and also in Myanmar, into which
Japanese, American, and European companies are advancing at
an incredible speed. We have additionally established in office inĐồng Nai Province in the southern part of Vietnam, into which alarge number of Japanese companies have already establishedbases. In such ways, we are aiming to enhance our global
network and to strengthen our system so we can provide ourcustomers with even higher quality services.
Thanks to these efforts, and also because of the effects of
the improvement in the performances of overseas subsidiaries
due to exchange rate fluctuations, revenues from operations
increased 2.6%, or ¥950 million year on year, to ¥37,696 million,
and operating income rose 13.4%, or ¥241 million, to ¥2,051
million.

Forecasts for Fiscal 2015

We expect a moderate recovery in logistics demand among ouroverseas subsidiaries, particularly those in ASEAN and East Asia.
Consequently, we forecast revenues from operations will grow
2.4%, or ¥900 million year on year, to ¥38,600 million, and that
operating income will increase 12.1%, or ¥200 million, to ¥2,300
million.

■■ Operating income
Operatingincome(¥ billion)

4

36.7

Revenues from operations

37.7

38.6

3
2

1.8

2.1

2.3

20
10

0

0
2013

Annual Report 2014

40
30

1

56 Hankyu Hanshin Holdings

Revenues
from operations(¥ billion)

2014

2015
(Est.)(FY)

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.

Sna p s h o t
Revenues from Operations
Performancein FY2014

billion (–1.5%)

0.8¥

Section3

billion (+54.2%)

Priority I ssues
1

Improve profitability of established hotels

2

Develop the chain by opening new hotels; roll-out the plan to open new REMM hotels, centred on the Tokyo area

3

Develop the chain

Core Businesses:
Overview and Outlook

63.7

¥

Operating Income■ Enhance the service functions of the chain headquarters■ Increase the number of chain franchises

Hankyu Hanshin Holdings

Annual Report 201457

Key Facts and Business Environment

One of the leading hotel groups in Japan
Since the opening of the Takarazuka Hotel in 1926, the HankyuHanshin-Daiichi Hotel Group has managed various types ofhotels as one of the leading hotel groups in Japan, with a total of
48 hotels and 10,326 guest rooms (as of 31st March 2014).

Conditions in the hotel market
According to estimates by the Japan Productivity Center*1,
Japan’s hotel market continued to expand from 2003 through2007 (based on sales). However, in 2009 and 2010, room demand
slumped and the scale of the hotel market fell back to ¥976
billion, 10% below its peak in 2007. This was due to a decline
in numbers of business people visiting Japan after the global
economic crisis following the collapse of Lehman Brothers in
the autumn of 2008 and to weak leisure spending owing to the
H1N1 flu scare in 2009. In 2011, the size of the market contracted
further to ¥949 billion due to sluggish demand in the aftermathof the Great East Japan Earthquake and subsequent nuclear
accident. But these effects ran their course and the number ofoverseas visitors to Japan (inbound) recovered and increased
in 2012, and the size of the market has returned to around thesame level as it was before the earthquake, of ¥979 billion.

In the background to the growth in inbound demand has
been the expansion of low cost carrier (LCC) airlines and theincrease in the number of routes they offer. But in addition,in 2013 the rapid devaluation of the yen, one of the effects of
Abenomics, also proved to be a fair wind, in that inbound visitors
sense that tour fees and products purchased in Japan are comparatively inexpensive.
The trend in inbound visitors*2 traces roughly the same pathas the trend in the scale of the hotel market. It fell greatly in2009 after the Lehman Brothers’ collapse and then once again
increased from 2012 onwards, exceeding 10 million for the firsttime in 2013.

■ Size of the Hotel Market in Japan■ Trends in inbound visitors(¥ billion)

1,200
1,000

*1. White Paper on Leisure, fiscal 2013 edition, published by Japan Productivity
Center*2. F rom “Visitors to Japan from Overseas” by the Japan National Tourist
Organization (JNTO)(Million)

1,072 1,093 1,038

12

976

976

949

979

800

8

600

6

400

4

200

2

0

10.36

10

7.33

8.35

8.61

8.35
6.79

8.36
6.22

0
2006

2007

2008

58 Hankyu Hanshin Holdings

2009

2010

2011

Annual Report 20142012 (CY)

2006

2007

2008

2009

2010

2011

2012

2013 (CY)Hotels

Performance for the Fiscal 2014

A decline in revenue due to the elimination of unprofitable bases in the preceding fiscal year andthe deterioration in the performances of the restaurant and banquet businesses, but an increasein profit from the recovery of demand for hotels specialising in lodging services
In our Hotels Business, we are actively developing our REMM
hotels that prioritise a good night’s sleep over other services.
In September 2012, we opened our fourth REMM hotel, REMM
Shin-Osaka, and in addition to maintaining its occupancy rates,
it has benefited from an increase in the number of overseas visitors. Each of our hotels has performed strongly, especially thosespecialising in lodging services.

Occupancy rates■ Dai-ichi Hotel Tokyo■ Hotel Hankyu International■ Hotel new Hankyu Osaka

Dai-ichi Hotel Tokyo
Hotel Hankyu International
Hotel new Hankyu Osaka

ADR
(¥)

Occupancy rates
(%)

100

Section3

Core Businesses:
Overview and Outlook

ADR

Also, April 2013 marked the 75th anniversary of the openingof Dai-ichi Hotel Tokyo. In addition to holding a variety of events
to celebrate the anniversary, each hotel implemented a numberof projects and sales initiatives.
However, due to the effects of the elimination of unprofitable
hotels in the previous fiscal year, and also the incident in which
ingredients other than those shown on the menu were used
at restaurants, the restaurant business performed poorly. Dueto this and other factors, revenues from operations decreased
1.5%, or ¥1,002 million year on year, to ¥63,695 million. However,thanks to the recovery of demand for hotels specialising in lodging services, operating income increased 54.2%, or ¥284 million,to ¥809 million.

90
80
25,00070

20,00015,00010,000
5,000
0
2012

2013

2014

(FY)

REMM Shin-Osaka

Dai-ichi Hotel Tokyo

Forecasts for Fiscal 2015

Continuing on from the previous fiscal year, we expect inbounddemand to increase for hotels specialising in lodging services.
Therefore, we forecast revenues from operations will increase
0.9%, or ¥600 million year on year, to ¥64,300 million. Also, in
addition to the above-described factors that are expected toincrease revenues, we expect that the elimination of unprofitable businesses in the previous year will contribute and so are
forecasting that operating income will rise 23.6%, or ¥200 million,to ¥1,000 million.

■■ Operating income
Operatingincome(¥ billion)

Revenues from operations
Revenues
from operations(¥ billion)

1.5

64.7

75

63.7

64.3
1.0

1.0

50

0.8
0.5

0.5

25

0

0
2013

2014

Hankyu Hanshin Holdings

2015(Est.)(FY)

Annual Report 201459

Section

4 Social Responsibility and Management Organisation

Message from the President

Achieving “sustainable growth” is the mission of
corporate management, yet we only start to realise
this mission when we not only improve our profit
level, but also when we fulfil our social responsibilities
as a company and contribute to the development ofsociety. One of the elements of this is carrying out
compliance-based management, which we considered to mean not simply “obeying laws and ordinances,” but also conducting business activities withthe prerequisite that we will “meet the expectationsof all our stakeholders, including our customers, business partners, shareholders, local communities, andemployees.” It is a particularly important theme for aGroup like ours that has provided a variety of services
related to urban development and the lives of people
living along our railway lines and has grown together
with customers and companies since its founding.
But last year, at some of the hotels operated byHankyu Hanshin Hotels, which is one of the core members of the Group, an incident came to light in whichcustomers were served food made with ingredients
other than those indicated on the menu. Beginningwith our shareholders and our customers, this incident
caused considerable inconvenience and concern toeveryone involved with our Group, and moreover wasa betrayal of the expectations and trust that our manycustomers have placed in us for many years. For this, I
am sincerely sorry and I feel a deep sense of shame.
After this incident was announced, many of ourcustomers expressed harsh words including anger at
us, and moreover the independent committee madeup of specialists who we commissioned to investigate
this incident submitted to us a damning indictmentthat in the background to this incident was a “decline
in taking the position of the customer.” In conjunction
with this evaluation, as specific measures in order tosecure compliance-based management, it proposed
the following initiatives be taken immediately; areview of the organisation system, thoroughly providing employees with compliance education, andsetting rules for displaying items on menus. Based onthese proposals, we are already progressing initiatives
to prevent such an incident ever happening again.
Elsewhere, each year society views companies
more and more severely and within this trend, in orderto have the compliance-based management takeroot as a corporate culture, while paying attention totrends in society we must also at all times have a keensense of society’s perception of us and constantly
reflect on our own activities. Toward this, in addition
to once again urging every person in the Group toraise their level of awareness about the importance ofcompliance, we are instructing members of the Groupto enhance their systems and measures to investigate
and manage risks, including on the compliance side.
Going forwards, in order to restore our stakeholders’ confidence in us, executives and employees not
only in the Hotels Business but throughout the Group
must remember our founding spirit and strive tosincerely provide services, one after another. Throughthese unstinting efforts, we will fulfil our social responsibilities as a company and meet the expectations of
all our stakeholders.
August 2014

Kazuo Sumi
President and Representative Director

60 Hankyu Hanshin Holdings

Annual Report 2014

Management Organisation■

Corporate Governance rants approval in cases where a Group company takes actions
G
that significantly affect Group management (for example, wheninvestments rise above a certain threshold).
In this way, the Company aims to improve its supervision andoversight of all Group companies, and raise overall Group governance■ Our Corporate Governance Systemstandards.
In further governance measures, our Board of Directors, which

Hankyu Hanshin Holdings, Inc. (or, the Company) is a pure holding

includes external directors, receives reports with regard to the above

company, and conduct of operations is basically the responsibility

matters, and approves management decisions. The Company has setof Group member companies. Hankyu Hanshin Holdings’ principal

up a Group Management Committee including representatives ofrole is supervision and oversight of the whole Group — meaning thatcore businesses of the Group to undertake preliminary reviews.

these functions are separate from conduct of Group businesses.

In addition to these initiatives, and as part of our efforts toUnder this structure, the Company:■■■

Makes decisions regarding Group management policy and strategy;

strengthen the Group’s overall capabilities, the Group is also strength- pproves the medium-term and annual management plans of all
Acore businesses;

ening governance with regard to fund procurement. Measures
include centralising funding under the Company, and ensuring thatT he need for timely reporting of progress reports from operatingcompanies;

necessary funds are distributed to the operating companies within
specific parameters laid down in their business plans approved by theCompany.

Corporate Governance System

Section4

General Meeting of Shareholders

Board of Directors
Full-time: 5

Call/Report on
execution situation

Part-time: 8(including 2 External
Directors)

Audit

Appointment/Dismissal

Audit & Supervisory Board

ReportStanding Audit & Supervisory External Audit & Supervisory
Board Members: 2
Board Members: 3

Cooperation

Selection/
Dismissal/Supervision

President

Accounting audit

ReportReportCooperation

Accounting Auditors(CPAs)

Staff of Audit &Supervisory Board Members

Social Responsibility andManagement Organisation

Appointment/Dismissal

Appointment/Dismissal

Group Auditing Division

CallGroup Management
Committee
Participate

Participate(as observer)

Audit

Group Companies
Directors (representative of each core business)■ Management Organisation(1) Board of Directors and Directors
1. Board of Directors

The Board also received reports concerning the progress being
made in creating a fully functioning internal control system.

The Board of Directors of Hankyu Hanshin Holdings, Inc. works to real-

Meetings of the Board of Directors were held 10 times during

ise improved corporate governance for the entire Group by the means

fiscal 2014. The rate of attendance at these meetings was 85% for thedetailed in the above section “Our Corporate Governance System.”

external directors and 97% for the external Audit & Supervisory Board

In fiscal 2014, the Board gave its approval to the Group’s budget

members.

and accounts settlement, to various management plans, including the

2. Directors

policies in the current Medium-Term Management Plan. In addition, theOur Board of Directors has 13 members, and has an emphasis on

Board of Directors reported to the operating companies on the status ofstrengthening the flexibility of management and supervisory func-

transportation achievements and the acquisition and transfer of assets.

tions. Eight of these are part-time directors, including two external

Hankyu Hanshin Holdings

Annual Report 201461

table a wealth of experience in corporate management. Our aim is(3) External Directors and External Audit & Supervisory
Board Members

to strengthen our supervisory and oversight function and raise the

The Company appoints independent external directors and Audit &standard of decision-making.

Supervisory Board members with the aim of further enhancing thedirectors, who are independent of the Company and bring to the

The term of office of directors is set at one year, to clarify man-governance of the Group through their contributions to meetings ofagement responsibilities following the introduction of anti-takeover

the Board of Directors and the Audit & Supervisory Board, as well as

measures (prevention of large-scale Company share purchases).

other activities.

(2) Audit & Supervisory Board, Audit & Supervisory Board
Members, and Ensuring Effectiveness of Auditing

amongst persons with extensive experience in corporate manage-

The Company adopts the Audit & Supervisory Board system to ensuretion of the Board of Directors with respect to the Group as a whole, andadequate management oversight. We have five Audit & Supervisory

also in the expectation that the external directors will provide advice

Board members, who monitor the business operations and financial

to the Company’s management from a broad perspective. Similarly,

position of the Company and its subsidiaries, and audit the perfor-

the external Audit & Supervisory Board members whom we appoint

mance of duties by the directors. Three of the five Audit & Supervisory

are selected from amongst persons possessing high-level specialist

Board members are external, to provide an independent viewpoint

expertise in the fields of compliance and business administration.

The external directors appointed to the Board are selected from
ment, with the aim of strengthening the management oversight func-

and ensure a high degree of professionalism in Group auditing. In thisWhen selecting candidate external directors and external Audit &way, we are working to further ensure sound decision-making in the

Supervisory Board members for appointment, we employ the criteria

conduct of operations. We provide full backup to Audit & Supervisorylaid down by the Tokyo Stock Exchange in evaluating the independ-

Board members, for example by involving them in the Groupence of the candidates. By the use of these selection criteria, weManagement Committee and other meetings within the Group.

ensure that the appointment of external directors and external Audit

The Audit & Supervisory Board meets once a month, in principle, to& Supervisory Board members does not constitute a problem of any

discuss and pass resolutions on important matters.

kind, and that their appointment poses no risk of conflict of interest

In addition, as part of the auditing of the Group’s businesswith general shareholders.

operations, the Audit & Supervisory Board members peruse whenappropriate auditing plans and results of audits of the Group Auditing
Division, composed of internal audit staff. The Audit & Supervisory
Board members also receive from the Group Auditing Division regular
reports (and ad hoc reports when required) on internal audits at theCompany and its subsidiaries, including on the state of operation of
the whistle-blowing system.
At the same time, they receive regular status reports from theaccounting auditors (CPAs), and take part in on-site audits by theaccounting auditors including those of Group companies.
Please note that specialist staff members are appointed to assist

Relations with External Directors
Name

Reasons for Appointment

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.

(Independent
Director)

Shosuke
Mori(Independent
Director)

the Audit & Supervisory Board members in the performance of their

Representative Director for many years at 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 chairman of Kansai Economic Federation. Appointed for his
wealth of management experience, perspective from top businesscircles, opinions from the viewpoint of corporate social responsibility, and ability to provide independent input.

duties. To ensure the independence of these staff members, priordiscussions are held with the Audit & Supervisory Board members
over matters such as personnel changes and evaluations.
Besides, the President of the Company holds regular meetings
with the Audit & Supervisory Board members to exchange opinions,and ratify decisions regarding issues facing the Company, risks towhich the Company is exposed, progress in improving the environment for auditing and major issues encountered by the Audit& Supervisory Board members in the performance of their duties.
Management must also hold preliminary discussions with the Audit& Supervisory Board members for amendment or deletion of any regulations pertaining to the function of the Audit & Supervisory Board
members, such as matters involving corporate ethics.

62 Hankyu Hanshin Holdings

Annual Report 2014

Relations with External Audit & Supervisory Board Members
Name

Takaharu
Dohi(Independent
Board Member)

Reasons for Appointment

Former prosecutor-general, currently a lawyer. Appointed to advise
on more compliance-based management and for his ability toprovide independent input.

Haruo
Sakaguchi Currently a lawyer. Appointed to advise on more compliance-based(Independent
Board Member)

Junzo
Ishii

(Independent
Board Member)management and for his ability to provide independent input.

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 expertise in businessadministration and for his ability to provide independent input.

Management Organisation

Attendance at Meetings of the Board of Directors andAudit & Supervisory Board (Figures for Fiscal 2014)
External Directors
Name

Attendance at meetings of the Board of Directors

Noriyuki Inoue
Shosuke Mori

Attended 8 of 10 meetings
Attended 9 of 10 meetings

External Audit & Supervisory Board Members
Name

Attendance at meetings ofthe Board of Directors

Attendance at meetings of
the Audit & Supervisory Board

Takaharu Dohi
Haruo Sakaguchi
Junzo Ishii

Attended 9 of 10 meetings
Attended all 10 meetings
Attended all 10 meetings

Attended 11 of 12 meetings
Attended all 12 meetings
Attended all 12 meetings■ Compensation for Directors andAudit & Supervisory Board Members

Our system for determining compensation for directors is designed toincentivise contributions that enhance the Group’s enterprise value andbusiness performance. In this system, compensation comprises twoelements: a basic portion determined according to the post held by
the director, and a bonus-type element linked to business performance.
Half of the performance-linked compensation is paid into a fundused for the acquisition of shares in the Company (except in cases
in which stock option-based compensation is the same amount or
greater than was given by the Company or its subsidiaries).
However, the compensation paid to part-time directors, includ-■ Other Deliberative Bodies

ing external directors, and to Audit & Supervisory Board members,(1) Group Management Committee

nature of their duties.

comprises only the portion determined by post held, in light of the
The total compensation paid to directors and Audit & Supervisory(President, representative directors, head of Personnel and General

Board members is kept within the total compensation amount

Affairs Division and head of Group Planning Division) and representa-

approved by the Company’s shareholders at the General Meeting oftives of each core business, meets to discuss resolutions of the Board

Shareholders. Compensation for individual directors is determined byof Directors, Group company management strategy and businessresolution of the Board of Directors, while compensation for individ-

planning and systems and rules for maintenance of the holding

ual Audit & Supervisory Board members is determined by deliberationcompany system, and major Group management matters, such as

of Audit & Supervisory Board members.

investments beyond set parameters and reorganisations.

Note: The payment of retirement benefits to directors and Audit & Supervisory Board members was
discontinued in April 2004 in the interests of greater transparency in the compensation system.

(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

Please note that the Company does not offer stock options to its
directors.

Group Planning Division of the Company and executives of each core

However, the Board of Directors of the Company has passed abusiness. The councils deliberate future business development forresolution to issue warrants as a form of stock option-based compensa-

each core business and discuss business plans and progress manage-

tion to the full-time directors (excluding directors concurrently serving

ment (performance evaluation).

as employees of Hanshin Electric Railway Co., Ltd.) of its subsidiaries,(3) The Group Presidents’ Meeting —Initiatives to foster solidarity within the GroupThe Hankyu Hanshin Holdings Group comprises over 150 groupcompanies. The Group Presidents’ Meeting, held twice a year, brings
together presidents of those Group subsidiaries and affiliates. It
is designed to foster a deeper sense of solidarity within the Groupand ensure that the Group philosophy and management policies
permeate the whole organisation. The Group Presidents’ Meeting
aims to encourage a joint sense of commitment to the Medium-Term
Management Plan. Awards are made to companies that boost earn-

Number of Meetings of Deliberative Bodies Held
(Figures for Fiscal 2014)
Group Management CommitteeCore Business Strategy Councils
The Group Presidents’ Meeting

13 meetings
3 meetings
2 meetings

4

Hankyu Corporation and Hanshin Electric Railway Co., Ltd. This measurehas been taken to ensure that the directors of these two companies,
which are core members of the Group, share equally with theshareholders both the possibility of gain in the event of a rise in theircompany’s share price and the risk of loss in the event that the shareprice falls, and that, therefore, they will be further motivated to pursue
the improvement of their company’s business performance and theenhancement of its enterprise value over the medium-to-long term.

Compensation Paid to Directors andAudit & Supervisory Board Members

ings or individuals and groups that successfully launch initiatives ormake significant contributions at their units.

SectionSocial Responsibility andManagement Organisation

The Group Management Committee, comprising full-time Directors

Directors (external)
Audit & Supervisory Board
Members (external)
Total (external)

No. of recipients

Total paid out in fiscal 2014
(Millions of yen)

15 (2)

112 (16)6 (3)

17 (6)

21 (5)

129 (22)*1. Recipients of compensation in fiscal 2014 include one director and one Audit & Supervisory
Board member who retired at the conclusion of the General Meeting of Shareholders held on
14th June 2013, and one director who retired on 1st November 2013.
*2. In addition to the above, compensation received by external directors and Audit & Supervisory
Board members from subsidiaries of the Company for their duties as directors and Audit &Supervisory Board members amounted to ¥23 million for the fiscal 2014.

Hankyu Hanshin Holdings

Annual Report 201463

Of the Company’s full-time Directors and Audit & Supervisory Board

Internal Control Systemmembers, directors Kazuo Sumi, Mitsuo Nozaki and Naohisa Nogami,
and Audit & Supervisory Board member Tsunenori Kawashima are alsosenior executives at the Company’s subsidiary Hankyu Corporation.
Director Shinya Sakai, Masao Shin, and Audit & Supervisory Board
member Masayoshi Ishibashi, are also senior executives at theCompany’s subsidiary Hanshin Electric Railway Co., Ltd. They havereceived additional compensation from each company.

■ Overview
Recognising the importance of ensuring that the business operationsof the Company are conducted in an appropriate manner, we haveestablished an internal control system for the entire Group, and revise
it when deemed necessary. As things stand, our internal control sys-

■ Dialogue with Shareholders and Investors
Measures taken to enhance the effectiveness of
the Company’s General Meeting of Shareholders andto facilitate the exercise of voting rights

Early dispatch ofnotices ofconvocation

tem is characterised as follows.
■A Group Management Philosophy was compiled following themanagement integration of Hankyu Holdings, Inc. and Hanshin
Electric Railway Co., Ltd., along with a Group mission (our goals),

Remarks

statement of values (what we consider important) and a code of

To allow shareholders sufficient time to examine the items
for resolution at the shareholders’ meeting before exercising their voting rights, we endeavor to send out the noticesof convocation at the earliest possible date. We sent out
such notices on 23rd May 2014, 21 days before the General
Meeting of Shareholders.

conduct (what actions to take to realise them). We ensure that all

Avoiding the“busiest day”
for shareholder
meetings

To enable as many shareholders as possible to attend ourgeneral meeting of shareholders, we held our 2014 General
Meeting of Shareholders on 13th June, 14 days before the“busiest day” on which a large proportion of Japanesecompanies hold their general shareholders’ meetings.

Online andelectronic voting

To enable shareholders who cannot attend our generalshareholders’ meetings to nevertheless exercise their voting 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

Notices of convocation of general shareholders’ meetingsand of resolutions passed at the meetings are posted on
the Company’s website. We also post translations of thenotices of convocation into English.

employees from executive down understand them.
■We ensure compliance-focused management by compiling and distributing a Compliance Manual, and have established a dedicatedwhistle-blowing system. (For further information on the Company’s
compliance activities, please refer to the following section.)■We have established the Group Auditing Division, composed ofinternal audit staff under the direct control of the President, forindependent monitoring of Groupwide business activities. It carries
out internal audits into Hankyu Hanshin Holdings Group and all its
operating companies.

■

To create a structure for ensuring appropriate operations, the Groupvests Audit & Supervisory Board members of each Group company
with authority not only in accounting but also in operational audits,
and at the same time provides guidance to smaller Group companies on Board of Directors resolutions for creation of an internal

Investor Relations Activities
As a rule, the Company arranges results meetings for analysts andcontrol system.
■

institutional investors in Japan after earnings announcements twice

Division receive regular reports from the Risk Management Officea year. Earnings results and business plans are discussed by senior

with regard to creation and operation of internal controls at the

management representatives.

Company and its subsidiaries (including implementation status for

Our website (http://holdings.hankyu-hanshin.co.jp/ir/) includes

risk management and promotion of compliance-based manage-(mostly Japanese-language) materials necessary for investment

ment measures). Through such measures, they deepen their links

judgements (earnings reports, securities reports, due disclosure

with, and strengthen the role of, internal control divisions.

materials, and summaries of results meetings). The website also
carries a profile of the Group and its competitive strengths, mainly for
individual investors.

A udit & Supervisory Board members and the Group Auditing■

With regard to systems for “Management Assessment and Audit
Concerning Internal Control Over Financial Reporting,” a sectionof the Financial Instruments and Exchange Act, the Company
responds appropriately by carrying out management evaluations
on a consolidated basis, in line with in-house rules.

64 Hankyu Hanshin Holdings

Annual Report 2014

Management Organisation■ Measures for Avoidance of Contact■ Corporate Ethics Consultation Desk

To ensure compliance and protect the interests of the Company, we

We have set up a dedicated whistleblower hotline enabling all

have a basic policy of avoiding all contact with antisocial elements

employees to discuss or quickly bring to management’s notice sus-that pose a threat to public order and safety, such as criminal gangs

pected or known legal violations and unethical conduct. Businessand companies associated with them, and sokaiya racketeers who dis-partners are also welcome to use this consultation and notification

rupt shareholder meetings, and of never yielding to extortion. Thesefacility, and when necessary we will use lawyers and other outside

policies are basic policies in our internal control system and are clearlyspecialists to improve its effectiveness.

with Antisocial Elements(internal whistleblower procedures)stated in the Hankyu Hanshin Holdings Group Compliance Manual
distributed among executives and employees of Group companies.

Corporate Ethics Consultation Desk

Specific measures include routinely strengthening communications with external organisations such as lawyers and the police, andintroducing into all contracts signed by Group companies’ clauses

Reports

that forbid contact with antisocial elements.

Audit &
Supervisory
Board
MemberReports

Audit &
Supervisory
Board
MemberIn addition to working to raise awareness of this issue throughinformation exchange and a range of employee training courses, weare aggressively involved in regional activities and gatherings aimed

Consultation
Desk

Reports

President

Directs

Consultation
Desk

Reports

President

at rooting out antisocial elements.
When an incident does occur, we respond as a single organisa-

Approves/Directs

tion, rallying round the division in charge, and work in partnership

Reporting of investigation
progress and findings

with outside experts.

Consultation
Desk■ Establishment of
As a system to ensure compliance-focused management, the Group

Risk Management Committees

has set up a dedicated compliance office, and is working to raise

In the case of identification of a major compliance issue during theawareness of compliance issues among executives and employees bycourse of an Ethics Consultation, a risk management committee ismeans of the measures detailed below.

convened as soon as possible to discuss and decide on appropriate

4Social Responsibility andManagement Organisation

Compliance

Sectionresponses.

■ Compliance Manual andTraining Programmes

The Company’s Compliance Manual and Compliance Card express
the Company’s determination not to tolerate violation of laws orsocial norms or betrayal of customer trust, by any Group employee

In addition, we are setting up compliance promotion offices
at major Group companies such as Hankyu Corporation, Hanshin
Electric Railway Co., Ltd., Hankyu Travel International Co., Ltd., Hankyu
Hanshin Express Co., Ltd. and Hankyu Hanshin Hotels Co., Ltd. At othercompanies we are appointing “compliance leaders,” to ensure our
response is on a Groupwide basis.

from executives down. It also aims to raise awareness by pointing out
cases where compliance errors can easily be made.
The Company provides intensive compliance training on aGroupwide 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, withthe aim of further increasing compliance awareness.

Hankyu Hanshin Holdings

Annual Report 201465

Management Organisationof Shareholders held on 14th June 2012, and remains in effect for

Overview of Group Compliancethree years.
For more details (in Japanese) of the Company’s basic policies[Examples]

Information to Group companies
Guidance and training
for Group companies
Risk management
Risk Management
Committee secretariat
Corporate Ethics Consultation Desk
(internal whistle-blower procedures)
Internal auditing

Compliance promotion officeInternal whistle-blowing,
responsible for planning andorganising seminars and otherawareness-raising activities

regarding governance of joint-stock companies including thesetakeover prevention measures, please see:
http://holdings.hankyu-hanshin.co.jp/ir/library/others/data/bouei.pdf

Risk Management
Compliance leaders

Hankyu Hanshin Holdings

Liaise with compliancedepartments ofhigher-level companies

At the Company, risks to which many different divisions are exposed

Group Company

orare managed by the Risk Management Office, while risks arising inGroup Companyorthe business operations of individual divisions are managed by risk

HanshinElectric Railway

Group Company

orrisks are identified and analysed, and risk management systems

Group Companyorare overhauled from time to time. We evaluate the likelihood ofHankyu Travel
International

Group Company

Hankyu Hanshin
Express

Group Company

Hankyu Corporation

Hankyu Hanshin
Hotelsmaterialisation of each risk and its frequency, as well as the extent
of impact in the event of materialisation and its importance. On thatbasis, we draw up measures to prevent the materialisation of risk orGroup Company

to mitigate its impact (“risk mitigation measures”). These measures
are documented in the form of risk management manuals, and theresults of risk analysis and how such a risk is being handled when aGroup Company

risk arises are, reported, as appropriate, to the Board of Directors.
We have also established a liaison system enabling the effective

Group Company

transmission of information in the event of unforeseen circumstances.

Group Company
Cross-Organisational Companies

management units within the divisions themselves. In both cases,

Under this system, in the event of materialisation of a risk, executivesorand employees immediately take risk-mitigation measures as specified in the above-mentioned documentation and other measures toprevent the further spread of the impact. They also submit reports to

Measures to Prevent Takeovers

pre-appointed risk management liaison personnel.
The Company provides supervision to all companies in the Groupso that the same system is operated by them all, and has set up asystem enabling the transmission to the Company of accurate infor-

To secure and further enhance the enterprise value of the Company,

mation in the event of an unforeseen development.

and therefore the common interests of its shareholders, we believe

A particular area of importance in this regard is the Company’sthat it is imperative to conduct business operations from a medium-core railway business, which entails direct risk to people’s lives

to long-term perspective, to build and maintain a relationship of trust

through accidents. Even in the event of a minor mistakes andwith local government institutions and residents in the areas served

problems where no individual responsibility arises, it is important toby our railway lines, and to place the highest management priority on

make every effort to bring the number of problems and mistakes thatstrengthening cohesion and collaboration within the Group, so as tocould cause an accident as close to zero as possible, by continuingenhance the Group’s comprehensive power.

to meticulously railway business staff, and share and analyse data.

For this reason, we have introduced a system to prevent a

Such painstaking efforts to forestall even one human error are one

takeover of the Company whereby, in the event of the appearanceof the foundation stones on which the Company ensures safety ofof a potential buyer of the Company that wishes to raise their stake

operations and meets public expectations.

above 20% or more of the Company’s outstanding shares, new sharesubscription rights are granted to shareholders who are, de facto,

In the following pages, readers will find a summary of the safety

shareholders other than the potential buyer, to confirm a potential

management systems at Hankyu Corporation and Hanshin Electricbuyer’s intention. This system was approved at the General Meeting

Railway, both of which are our major private sector railway operators.

66 Hankyu Hanshin Holdings

Annual Report 2014

Safety Initiatives

Safety policy andsafety objectives

Every day, countless customers use the services of both Hankyu Corporation and Hanshin
Electric Railway and for precisely this reason, our mission is to ensure their absolute safety andpeace of mind. Our measures to improve safety on a day-to-day basis, and also to ensure safety
when problems occur, are all consolidated in the safety policy and objectives described below.

Hankyu Corporation

Hanshin Electric Railway[Safety Policy][Safety Policy]

Provide safe, high-quality transportation services that fully
justify public trust• Maximum priority on safety“Safety and comfort,” Hankyu Corporation[Priority safety measures](1) Increasing awareness of safety, safety measures(2) Measures to improve safety(3) Personnel training and technology transfer provided
uniformly in all Group companies’ business divisions[Safety objectives]

Maintaining zero accidents for which we bear responsibility
In fiscal 2014, we once again set the safety objective that we haveset since 2006, of “Maintaining zero accidents for which we bear
responsibility,” and we are working diligently to achieve this objective.

The president, directors and employees shall do whatever they can toensure safety of operations, based on the understanding that putting thehighest priority on ensuring safety is the mission of railway businesses.

• Compliance with laws and regulations
The Company shall comply with all laws and regulations related tosafety and apply them rigorously and sincerely in its operations.

• Maintenance of safety management systems
The Company shall implement continuous verification procedures toensure safety management systems are operating appropriately.
[Safety objectives]

Maintaining zero accidents for which we bear responsibility
We have maintained zero accidents for which we bear responsibility
since April 1985 up to the present day.

Section4

We have constructed a seamless Safety Management System that enables us to share information and solve problems in an integrated manner, from senior management through to currently
operational divisions. If a problem should arise, all of the divisions discuss it and work together
to speedily resolve it.

Hankyu Corporation
Positions and roles

Safety Management System• President
The President determines the implementation, the management organisation, and therules of the railway business and when formulating the Medium-Term Management Plan,
which includes facilities and transportation, factors, investment, and budget, the President
verifies and ascertains the situation from the perspectives of safety and feasibility andinstructs on improvements.

President
Directors
Head of Urban
Transportation Business(Chief Safety Manager:
director)
Deputy Head of Urban
Transportation Business

Manager, Urban
Transportation Planning(Head of Investment
and Financing Team)Manager,
Transport Division(Chief Train Operations
Manager)Manager,
Technical Division(Chief Civil Engineering
Facilities Manager)

Manager,
Kobe LineOperations

Manager,
Takarazuka LineOperations

Manager,
Kyoto LineOperations

Deputy Operations
Manager(Crew Training Manager)

Deputy Operations
Manager(Crew Training Manager)

Deputy Operations
Manager(Crew Training Manager)

Social Responsibility andManagement Organisation

Safety Management System

Manager,
Technical Division(Chief Electrical
Facilities Manager)

Manager,
Technical Division(Chief Rolling StockManager)• Chief Safety Manager
In order to prioritise securing the safety of railway facilities and rolling stock and the handling of operations, and to control and manage transportation operations in each division,
the Chief Safety Manager works to disseminate safety management regulations and toensure compliance with related laws and ordinances; to increase awareness of safety as
the Group’s most important priority; to confirm the implementation of transportation
operations, management conditions, and the progress made in implementing the safety
improvement measures stipulated in the Medium-Term Management Plan; and to implement improvement measures.
• Chief Train Operations Manager
The Chief Train Operations Manager manages operations-related duties, including utilising
the employees involved in operations, railway facilities, and rolling stock; setting andrevising the operations plan; managing train crews, the operations of rolling stock, and train
operations; and providing training for train crews and maintaining their capabilities.
• Chief Crew Training Manager
Based on the instruction and orders of the Chief Train Operations Manager, the Chief Crew
Training Manager maintains and manages the capabilities of train crew and periodicallyconfirms and submits reports on the progress being made in improving their capabilities.
• Other managers and responsible persons
In each division, other managers and responsible persons maintain and manage thefacilities they are responsible for in order to ensure there are no obstacles to realising safe
transportation.

Hankyu Hanshin Holdings

Annual Report 2014

67

The Safety Management Promotion Committees

The safety management promotion committees discuss, investigate,
and report on a variety of proposals for transportation safety man-Group Safety Management
Promotion Committee

agement. The safety management promotion committees include

Business Division
Safety Management
Promotion Committee

the President serves as chairperson; the Business Division Safety

the Group Safety Management Promotion Committee, on which
Management Promotion Committee, on which the Chief Safety

Investigative Committee
to Improve the Safety andSecurity of Operations

Investigative Committee for
Measures to Prevent Accidents

Technical Division
Technical Division
Transport Division(electrical facilities)(civil engineering facilities)
Safety Management
Safety Management
Safety Management
Promotion Committee Promotion Committee Promotion Committee

Manager serves as chairperson; and the divisional safety management
promotion committees.

Technical Division(rolling stock)
Safety Management
Promotion Committee

Hanshin Electric Railway
Positions and roles

Safety Management System
The Railway Safety Council has
been established as an organisation that specialises in promoting
safety management.

• President
The President has the ultimate responsibility for ensuring transport safety.

President
Directors
Urban Transportation
Business
Railway Safety Council
Chief Safety Manager(Head of Urban
Transportation Business)• Chief Train Operations Manager (Deputy Head of Urban Transportation Business)
Under the direction of the Chief Safety Manager, the Chief Train Operations Manager is
responsible for operations including train operations, maintaining the capabilities of traincrews, and other related operations.
• Transport Division Manager
Under the direction of the Chief Train Operations Manager, the Transport Division Manager
assists in train operations.
• Chief Crew Training Manager (the heads of the East Rolling Stock Yard and the West
Rolling Stock Yard)
Under the direction of the Chief Train Operations Manager, the Chief Crew Training
Manager is responsible for ensuring all crew are properly qualified.

Chief Train Operations Manager*(Deputy Head of Urban
Transportation Business)
Manager,
Transport Division• Chief Safety Manager (Head of Urban Transportation Business)
The Chief Safety Manager is responsible for overseeing all activities related to ensuringtransport safety.

Manager,
Electrical Division

Manager,
Rolling Stock
DivisionManager,Engineering
Division

Chief Crew Training Manager * Previously, the manager of the Transport Division served as theChief Train Operations Manager. Following the establishment(Head, East Rolling Stock Yard)of the Deputy Head of the Urban Transportation Business,(Head, West Rolling Stock Yard)
however, the Deputy Head serves as the Chief Train Operations
Manager from fiscal 2014 onward.

COLUMN

Toward realisingcontinuous improvements
Implementation of a management review*by the President in Hanshin Electric Railway

68 Hankyu Hanshin Holdings

Annual Report 2014

• Electrical Division Manager
Under the direction of the Chief Safety Manager, the Electrical Division Manager has overall
control of items relating to electrical facilities.
• Rolling Stock Division Manager
Under the direction of the Chief Safety Manager, the Rolling Stock Division Manager has
overall control of items relating to rolling stock.
• Engineering Division Manager
Under the direction of the Chief Safety Manager, the Engineering Division Manager has
overall control of items relating to track, civil engineering and construction facilities.

In Hanshin Electric Railway, the Railway Safety Council is the meeting
utilised for investigating, determining, and instructing on safety-related
items. It is composed of senior management in the Urban Transportation
Business, (below the Chief Safety Manager, the Chief Train Operations
Manager, each railway division manager [Transport Division, Electrical
Division, Rolling Stock Division, Engineering Division], etc.) and in principle meets twice a month. Under this system, previously, the results of
the implementation of safety policy were reported to the President by
the Chief Safety Manager (Head of Urban Transportation Business) in a

Safety Initiatives

Initiatives to Reinforce the Safety
Management System (Using the PDCA Cycle)

By applying our safety management system (PDCA cycle) to a range ofsafety initiatives, we are aiming to create a virtuous cycle of improvement
based on even higher safety goals.

Revisions to the Railway Business Law in October 2006 required railway companies to create new safety management systems dedicated totransport safety. Under our new safety management system, we are realising even higher levels of safety by applying the PDCA cycle, ensuring
compliance with all related laws and regulations, conducting operations that place the highest priority on safety, and fostering greater awarenessof safety issues among employees from directors down.

DO
Safety management
implementationand operation

Creation of safety control
plans and systems

Continuous
improvement

CHECK

4

Social Responsibility andManagement Organisation

PLAN

Section

Safety management
and operational checks

ACT
Improvements (proposals
for improvements)
and revisions to safety
management plans
and systems

management review and a venue had not been established in which the
managers of each division in the Urban Transportation Business reported
to the President. But from fiscal 2013, when there is to be reporting on the
results of the implementation of safety policy, the President attends theRailway Safety Council and each division manager reports directly to him.
In this way, the President is provided with a detailed report on the resultsof the initiatives carried out by each division, and in addition, the President
can communicate his instructions to each division more appropriately.

The 2013 safety policy
management review** A management review corresponds
to A in the PDCA cycle and it is anactivity to appropriately manage
the Safety Management System, toconfirm that it is functioning effectively, and to review and improve it
if necessary.

Hankyu Hanshin Holdings

Annual Report 201469

Implementation andoperation of safety management

Hankyu Corporation and Hanshin Electric Railway are proactively implementing initiatives
on both the infrastructure side, such as at facilities to ensure trains operate safely, and on the
personnel side, including employee education and drills.

Initiatives for natural disasters

1 Responding to rain storms
Operational instructions are given based on the information obtained from the rain gauges, windgauges, and water metres that we have installed along the railway lines of both Hankyu Corporationand Hanshin Electric Railway, and also on the meteorological information acquired from the Japan
Meteorological Agency. This includes instructing trains to lower their speeds or suspend operations.
Moreover, since fiscal 2014, Hankyu Corporation has been utilising information from a private-sector
meteorological information company and working to respond as much as possible to heavy rainfalls
that occur suddenly and over an extremely narrow range, such as the so-called guerrilla rainstorms.

2 Responding to earthquakes
To further enhance the safety of train operations when an earthquake occurs,
we have installed systems for receiving earthquake early warnings fromthe Japan Meteorological Agency. In the event that such a warning is foran earthquake expected to be of seismic intensity of four or above, trainsthat operate in earthquake zones will immediately prepare for emergency
stopping. In addition, the same measure is taken when an earthquake ofseismic intensity of four or above is detected by the seismographs that wehave independently installed alongside the railway lines of both companies.

Safety measures for rolling stock

1 Installation of emergency alert devices and emergency call devices
In case a person suddenly becomes ill or there is an emergency situation in one of the passenger cars,
we have installed emergency alert devices in the rolling stock of Hankyu Corporation and Hanshin
Electric Railway so that customers can notify a member of the train crew. In addition to this, we aresequentially installing emergency call devices that enable customers to talk to train crew through aninterphone.

2 Equipment recording trains’ operation conditions
We install data recording equipment to record data such as train speeds and brake-use conditions
that would be useful in determining the causes of an accident should one involving rolling stock
occur, and also in preventing such accidents from occurring again. At Hanshin Electric Railway, thisequipment has been installed in all rolling stock (in the driver’s cabs), and in Hankyu Corporation, work
is underway to install it in all rolling stock.

70 Hankyu Hanshin Holdings

Annual Report 2014

Safety Initiatives

Measures to improve safety on platforms

1 Measures to prevent people from falling from platforms onto tracks■ Installing yellow warning-line tiles
Yellow warning-line tiles add bumps to the usual warning lines and they canbe felt through the shoe and indicate to the person which side of the platform is safe. In fiscal 2013, Hankyu Corporation and Hanshin Electric Railway
completed the installation of yellow warning-line tiles at all their stations.

■ Devices to prevent people falling in train transition areas(outside hood)
We have installed fall-prevention devices (outside hood) in the transition
spaces between trains and platforms to prevent people from falling intothem.

2 Measures to prevent accidents when people fall from platforms

Section4

Social Responsibility andManagement Organisation■ Emergency alert devices
When somebody or something falls onto the track, the event is detected by
special mats under the platform edge, or an emergency stop button on theplatform can be pressed. These set off alarm indicators and an emergency
buzzer for crews and station staff, in order to prevent serious accidents.
Hanshin Electric Railway completed the installation of emergency stop buttons at all stations in fiscal 2012, while Hankyu Corporation plans to complete
their installation at all stations by the end of fiscal 2016.

■ Platform evacuation steps
For when a customer falls onto the tracks and it is difficult for them to finda shelter below the platform, we have installed platform evacuation steps(ladder type and bar type) at constant intervals to enable them to climb backon to the platform.

Hankyu Hanshin Holdings

Annual Report 201471

Features of the ATS (Automatic Train Stop)
ATS equipment automatically slows down or stops trains
when drivers fail to notice or respond to, or misinterpretsignals or signalled speed limits. Hankyu Corporation andHanshin Electric Railway both use continuous speed-

Continuous speed-checking type ATS system:

Hankyu Corporation’s continuous
speed-checking ATS system

checking type ATS systems on all their lines*, including
branch lines, ensuring a high level of safety.
In an effort to further improve safety, Hankyu
Corporation has been adding a new pattern control system

Under

115km/hUnder

Train speed

70km/hUnder

50km/hUnder

to its existing ATS equipment. This new control system isaimed at preventing overrun into level crossings, failure tostop at designated stations, and collisions in which a train

30km/hUnder

ProceedsignalCautionsignalStopsignalruns into the end block of lines. This system is already inoperation on rail lines.
Control point

Both companies are also working to improve safety byControl point

installing ATS equipment on sharp curves and branches inlines to prevent derailments caused by excessive speed.
In March 2011, Hankyu Corporation finished compilationof independent safety standards stricter than those of the
Ministry of Land, Infrastructure, Transport and Tourism. In
May 2011, Hanshin Electric Railway completed installation of
ATS facilities at all 28 junctions on its network.
Hankyu Corporation is planning to introduce a safety

Obstruction signal

ATS pickup

ATS indicator in driver’s cab

Speedometer in driver’s cab

system enabling automatic braking of rolling stock using
ATS, even if the driver misses a ‘stop’ shunting signal in a train
depot. This measure is intended to avoid damage to points
if a train jumps a ‘stop’ light, as happened at Nishinomiya
depot on the Kobe Line in June 2012. This system is alreadybeing used at the Nishinomiya depot and installation work iscurrently underway at the Shojaku and Katsura depots.
* B etween Sakuragawa and Osaka-Namba stations on the Hanshin Namba
Line, Hanshin Electric Railway relies on an onboard control-point continuous
speed-checking type ATS system that Kintetsu Corporation employs.

Inspections by senior management of field work divisions and exchanges of opinions
Senior management, including the President and the Headof Urban Transportation Business (Chief Safety Manager)
inspect field work divisions, confirm and ascertain the conditions at each facility and for each work duty, and moreover
talk directly to the employees at workplaces and strive toimprove communication with them.

72 Hankyu Hanshin Holdings

Annual Report 2014

20km/hSafety Initiatives

Implementation of practical drills to prepare for emergency situations
Hankyu Corporation and Hanshin Electric Railway both conduct specific drills in their train operations, civil engineering (workshop) facilities,
electrical facilities, and rolling stock divisions, as well as drills to prepare for specific emergency situations. Both companies also hold joint drills for
emergency situations where cooperation across business divisions is required.

Descriptions of Hankyu Corporation drills

Fiscal 2014 joint drills conducted across business divisions

Descriptions of Hanshin Electric Railway drills
Section4

Social Responsibility andManagement Organisation

Tsunami Evacuation Guidance Drills

Joint drills at the Daimotsu Training Centre

Alcohol checks
All employees that are involved in train operations, including
drivers and supervisors, use an alcohol checker during the workroll-call prior to boarding trains to confirm that they are notunder the influence of alcohol. Also, superintendents carry out
face-to-face inspections at roll calls to confirm the health statusof employees.

Hankyu Hanshin Holdings

Annual Report 201473

Safety Initiatives

Training employees who value safety and comfort

Acquiring a service care-fitters qualification
Hanshin Electric Railway’s goal is to cultivate in its employees at all its work sites a spirit of hospitality and for them to acquire the skills to appropriately assist the elderly and people with disabilities.
Toward this, it aims for all station employees to acquire the service care-fitters qualification and tofurther improve the hospitality they show to customers. Qualified staff where a “service care-fitter”
name tag so that customers know they possess this qualification.

Training School and Staff Training Centre
Hankyu Corporation and Hanshin Electric Railway have established a training school (certified by
the Ministry of Land, Infrastructure and Transport) to train drivers, conductors, and assistants, and in
addition, Hankyu Corporation has set up a staff training centre to improve the services provided tocustomers by station staff.

Activities to raise awareness of safety at elementary schools along our railway lines
Hankyu Corporation employees visit the elementary schools located along its railway lines to raise thechildren’s awareness about safety. This includes explaining to them how a railroad crossing works andthe correct way to cross it, the things that they should pay attention to when they are waiting for a
train on a platform, and manners in the train.

Our mission is to work with our customers and the people who live in the communities
alongside our railway lines to build a better society. Going forwards, we will continue to focus
our energies into measures to improve safety in cooperation with the people who live alongside
our railway lines and in our local communities, including through drills with the police and firestations and by raising awareness of safety in elementary schools.

74 Hankyu Hanshin Holdings

Annual Report 2014

Corporate Social Responsibility— Social Contribution & Environmental Protection Activities

Social Contribution Activities:
Moving forward with our customers over the next century

Promoting the Hankyu Hanshin Dreams and Communities of the Future Project
For over 100 years, the Hankyu Hanshin Holdings Group has grown with the local community, primarily in areas along its
railway lines, and built up relations of mutual trust. To ensure that the Group will continue to exist and prosper over the next
century as a member of the local community, in April 2009 we launched the Hankyu Hanshin Dreams and Communities of
the Future project as a community contribution initiative.

Basic Policy

We intend to promote the creation of towns and cities along our railway lines that people will truly want to live in.

Priority
Areas

Environmentfriendly
development

As a Group with strong local roots, weare committed to sustainable community
building with environment-friendly
developments that provide local residents
with security, peace of mind and culturalenrichment.

Social contribution activities of each Group company— In fiscal 2014, 83 activities were undertaken<Hanshin Electric Railway, Hankyu Corporation>
We run a range of events in Umeda during
both summer and winter, including candle
art exhibitions. We turn off the buildings’
lighting and neon and envelop the participants in the light of the candles, which is
aimed at encouraging people to think moredeeply about sustainable living.

Charity concert for parents and children
in the Hankyu Dreams and Communities programme<Hankyu Corporation, Umeda Arts Theater>
Every year, we hold a full orchestra concert at
Umeda Arts Theater. The event features songs
everyone is familiar with and a conductor experience and it has provided an opportunity foraround 1,800 parents and children to encounter real music. All the proceeds from ticket sales
are donated to Ashinaga Scholarship Fund.

Hankyu Hanshin Dreams and Communities Challenge Troop<Group companies>
We hold summer hands-on learning programmes for elementary school students.
The Group provides a multitude of “experience” and “learning” opportunities that
contribute to the healthy development ofchildren, who are the future, by leveraging
our long-standing businesses, various facilities and personnel.

Hankyu Hanshin Dreams and Communities of
the Future Fund for support of citizens’ activities
This grant programme is exclusively for citizens’ groups located along
Hankyu Hanshin lines. We provide grants to citizens’ groups that contribute to the creation of desirable local living environment and developmentof the next generation by matching funds accumulated from Group
employee donations. Over the past five years, we have donated at total of¥26.3 million to 57 organisations.

■ Dreams and Communities of the Future Fund structure

Section4

Social Responsibility andManagement Organisation

Holding the Million Person Candle Night in Osaka City

We are creating opportunities
for the healthy development of
ambitious children, upon whoseshoulders the task of building thecommunities of the future rests.

Humancapitaldevelopment

Employees
Donations mainly through payroll deductions

Endowment consisting of funds accumulated
through Group employee donations

Hankyu Hanshin Holdings

In the case that the endowment
reaches ¥3 million

Hankyu Hanshin HD will matchamounts over ¥3 million¥3 million + ¥3 million = ¥6 million, which is allocated as grants to local citizens’ groups
Group AGroup B

Group CGroup D

Social contribution point system
We support regional and social
contribution activities by establishinga system that grants points to Group
employees and retired employees for
related volunteer activities.

Group employee andretired employee activities• Volunteer activities• Participate in activities sponsoredby departments• Purchase Fairtrade products,
etc.

Point exchange(once a year in June)

For more detailed information, please visit this (Japanese-language) website: http://holdings.hankyu-hanshin.co.jp/yume-machi/• Donating to Dreams andCommunities of the Future Fund
• Plant seedlings on Mt. Rokko• Exchanging for Fair Trade products,
etc.

Hankyu Hanshin Holdings

Pointapplication

Annual Report 201475

“The Hankyu Hanshin Dreams and Communities of the Future Fund” Report on the group receiving financial assistanceThrough the Hankyu Hanshin Dreams and Communities of the Future Fund, we not only provide groups with financial assistance, but also by cooperating withthe public relations of these groups, we introduce their activities to the readers of the information magazine that we publish for people living alongside ourrailway lines and also of the Group’s public relations magazine in order to communicate their efforts to tackle social problems to our customers and employees.

Giving courage and confidence to children who have lost their hair

The 4th group provided with financial assistance (NPO) Japan Hair Donation & Charity (JHDAC)JHDAC makes and gives wigs made with human hair free of charge to children who have losttheir hair due to illness, such as infant cancer, or due to an accident. They make the wigs from hair
donations that the NPO requests from people. The three beauticians who played the central role instarting-up this NPO wanted to contribute to society through their work as beauticians. Based on thisidea, they focused their attention on the hair donation charities that have been established in Europe
and the United States and began to make wigs themselves. In the beginning they had a hard time
finding people willing to donate their hair, but today awareness of their efforts has increased andthey receive hair donations from people throughout the country. Their goal for the future is to raise
funds and collaborate with more other beauty parlors in order to fulfil the wishes of children who
need wigs. In the form of wigs, JHDAC is giving courage and confidence to children by reorganisingthat they are the same person as they were before.

Environment Protection Activities:
Improving local communities and living environments for our children.
The Group has compiled environmental basic concepts and policies and pursues environmental protection activities. Earlier measures to saveenergy in light of the need to curb global warming have been stepped up since the Great East Japan Earthquake, as strengthened measures tosave electricity have become a pressing public need.

Basic Concept

Mindful that global environmental protection is a task facing all mankind, the Hankyu Hanshin HoldingsGroup works for a sustainable society through environmental activities aimed at handing down a sounderglobal and human environment to the next generation.

Curb global warming and save energy
Installing LED lighting

Installation of solar panels

We are progressively installing LED lighting at stations and Group facilities along Hankyu andHanshin lines. LED lighting reduces electricity consumption, while its long lifespan contributes towaste reduction. For instance, the installation of LED lighting at underground sections along theHankyu Kyoto Line, from Saiin Station to Kawaramachi Station, has been selected by the Ministry ofEnvironment as a model project. By installing LED lighting in 4,261 light fixtures and signs, we have
reduced a significant amount of CO2.

We have installed solar panels capable of generating a total of 444kW at eight Group-company facilities, including Settsu-Shi Station and the “Silver
Umbrella” roof of the Hanshin Koshien Stadium.
The electricity generated is used at these facilities.

Hankyu Kawaramachi Station
platform

76 Hankyu Hanshin Holdings

Takarazuka Grand Theatre

Annual Report 2014

Hotel New Hankyu OsakaCorporate Social Responsibility

Protect the natural environment

Reducing waste andencourage resource recycling

Donation of environmentally-friendly toilets,and forestry protection

100% biodiesel buses

Hankyu Travel International has donatedenvironmentally-friendly toilets, which
use bacterial techniques to break down
human waste, to such tourist areas as
Yakushima Island (World Heritage). In
addition, Hankyu Travel International
employees volunteer in tree thinning
activities.

Hankyu Bus operates four of its buses
purely on biodiesel fuels refined fromused edible oils. The oil is collected fromGroup hotels, food factories and residents of Hankyu Realty’s Geo-branded
condominiums.

For more detailed information, please visit this (Japanese-language) website: http://holdings.hankyu-hanshin.co.jp/csr/eco/

Disclosing information on the CO2 emissions of the entire Group
Breakdown of CO2 emissions in the entire Group in fiscal 2013
CO2 emissions(by business)

Total

Section

Real Estate4* The emissions included in the calculation are those by
Hankyu Hanshin Holdings’ 94 domestic subsidiaries.
Those places of business where it is difficult to ascertain
the volume of energy used were excluded from thecalculation. The business divisions at the end of fiscal
2013 were used.

Commendations received and initiatives with the national government
Environmental initiative on the underground section of the Hankyu Kyoto Line

LED lighting at Hanshin
Kobe Sannomiya Station

Social Responsibility andManagement Organisation

607,000 t

64%
18%
Entertainment and Communications
3%
Travel and International Transportation
1%
Hotels13%
Other
1%
Urban Transportation

Environmental initiative at
Hanshin Koshien Stadium<Hankyu Corporation><Hanshin Electric Railway><Hanshin Electric Railway, Hanshin Tigers>

For the underground section of the Kyoto Line
under Kyoto City, we received a commission from
the Ministry of the Environment for its Model
Project for the Concentrated Support of LowCarbon Community Building and implemented
large-scale environment initiative.
For this project, we installed LED lighting at
4,261 locations and achieved a 24% reduction
in electricity usage compared to 1990 (approximately 54% if the comparison is made only with
the LED lighting installed in this project).
In the Model Project for the Concentrated
Support of Low-Carbon Community Building, forprojects to achieve low carbon communities thatcan become models for other areas, the Ministryof the Environment commissions a private sector
company to implement a project in order toverify its effect. Our lighting installation is the sole
project in Kansai to be selected as a model project(as of March 2014).

All the lighting fixtures within the premises ofthe Hanshin Kobe Sannomiya Station have been
converted to LED lighting, which has achieve a
reduction in CO2 of more than 40% compared toconventional lighting.
In terms of design also, in order to give feelings of “breadth” and “depth” on the concourse
floor, we installed the lighting within the ceilingslits to utilise the ceiling’s design theme of “waves”
and we deliberately minimised the presence ofthe lighting. But on the other hand, on the platform floor, we installed lighting that is reminiscentof 1933, which is when this station was became
an underground station. In such ways, we havecreated a station space that is suitable for thisstation as the gateway to Kobe.
These efforts were reorganised and this lighting installation was selected as a model of excellence in 2014 in the Ministry of the Environment’s
4th Energy Efficient Lighting Design Awards.

At Hanshin Koshien Stadium, we installed photovoltaic power generation facilities on top of its“Silver Umbrella” roof cover, and these facilities
have been operational since March 2010. In fiscal
2011, these facilities generated approximately
221,000kWh of power, which is equivalent to thepower required to light all the night games at
Koshien Stadium in one year, or about 4.1% of theelectricity used by the entire stadium in one year.
Also, during the fiscal 2014 Ultra Tiger
summer period, we achieved effectively zero CO2emissions at the 9 Hanshin Tigers games held atthe Hanshin Koshien Stadium, thanks to a carbon
offset initiative we implemented in cooperation
with Osaka Gas. This initiative received the Prize of
the Minister of Economy, Trade and Industry in the
3rd Carbon Offset Awards in 2014.

Hankyu Hanshin Holdings

Annual Report 201477

Directors and Audit & Supervisory Board Members(As of 13th June 2014)

Directors

Kazuo Sumi

Shinya Sakai

Noriyuki Inoue

President and Representative Director

Representative Director

Director (External*)

1973 Joined Hankyu Corporation
2000 Director, Hankyu Corporation
2002 Managing Director, Hankyu Corporation
2003 President, Hankyu Corporation2005 President, Hankyu Holdings
2006 President, Hankyu Hanshin Holdings (Current position)2008 Director, Hankyu Hanshin Hotels (Current position)2013 Director, Hankyu Travel International (Current position)2013 Director, Hankyu Hanshin Express (Current position)2014 Chairman, Hankyu Corporation (Current position)1970 Joined Hanshin Electric Railway
2002 Director, Hanshin Electric Railway
2005 Managing Director, Hanshin Electric Railway
2006 President, Hanshin Electric Railway
2006	Representative Director, Hankyu Hanshin Holdings(Current position)2008	Chairman, Hanshin Tigers Baseball Club
(Current position)2011 Chairman, Hanshin Electric Railway (Current position)

1957 Joined Daikin Industries
1994 President, Daikin Industries
2002 Chairman and CEO, Daikin Industries
2003 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2014	‌Chairman of Daikin Industries and Chief Global Group
Officer (Current position)

Shosuke Mori

Isao Matsuoka

Shunichi Sugioka

Director (External*)

Director (Part-time)

Director (Part-time)

1963 Joined Kansai Electric Power2005 President, Kansai Electric Power2010 Director, Hankyu Hanshin Holdings (Current position)2010 Chairman, Kansai Electric Power (Current position)

1957 Joined Toho
1977 President, Toho
1985 Director, Hankyu Corporation
1995 Chairman, Toho2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2009 Honorary Chairman, Toho (Current position)

1964 Joined Hankyu Department Store
2000 President, Hankyu Department Store
2000 Director, Hankyu Corporation2005 Chairman, Hankyu Department Store2005 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2007 Chairman and CEO, H2O Retailing (Current position)2008 Director, Hankyu Hanshin Hotels (Current position)2008	Chairman, Hankyu Hanshin Department Stores(Current position)

Takaoki Fujiwara

Yoshihiro Nakagawa

Ichiro Namai

Director (Part-time)

Director (Part-time)

Director (Part-time)1975 Joined Hanshin Electric Railway
2005 Director, Hanshin Electric Railway
2007 Managing Director, Hanshin Electric Railway
2011 President, Hanshin Electric Railway (Current position)2011 Director, Hankyu Hanshin Holdings (Current position)

1976 Joined Hankyu Corporation2005 Director, Hankyu Corporation2007 Managing Director, Hankyu Corporation2013	Representative and Senior Managing Director,
Hankyu Corporation2014 President, Hankyu Corporation (Current position)2014 Director, Hankyu Hanshin Holdings (Current position)

1971 Joined Hankyu Express International
2000 Director, Hankyu Express International
2008 Vice president, Hankyu Travel International
2008	Audit & Supervisory Board Member, Hankyu Hanshin
Hotels (Current position)2010 President, Hankyu Travel International
2013 Director, Hankyu Hanshin Holdings (Current position)2014	Chairman, Hankyu Travel International (Current position)*	Mr. Noriyuki Inoue and Mr. Shosuke Mori satisfy the qualifications of external directors as provided in Article 2, Paragraph 15of the Corporate Law.
The Company has submitted notifications to the stock
exchanges on which its shares are listed, naming Mr. Noriyuki
Inoue and Mr. Shosuke Mori as external (independent) directors.

78 Hankyu Hanshin Holdings

Annual Report 2014

Seisaku Okafuji

Mitsuo Nozaki

Masao Shin

Director (Part-time)

Director In charge of Personnel and General Affairs Div.

Director In charge of Group Planning Div. (Group Management Planning)

1974 Joined Hankyu Express International
2005 Director, Hankyu Express International
2008 Director, Hankyu Express International
2009 Director, Hankyu Hanshin Express International
2010	President, Hankyu Hanshin Express International(Current position)2013 Director, Hankyu Hanshin Holdings (Current position)

1981 Joined Hankyu Corporation2005 Director, Hankyu Corporation
2006 Director, Hankyu Holdings
2006 Director, Hankyu Hanshin Holdings (Current position)2007 Managing Director, Hankyu Corporation2013	Senior Managing Director, Hankyu Corporation(Current position)2013 Chairman, Hankyu Hanshin Hotels (Current position)

1981 Joined Hanshin Electric Railway
2006 Director, Hanshin Electric Railway
2006 Director, Hankyu Hanshin Holdings (Current position)2008	Managing Director, Hanshin Electric Railway
2013	Audit & Supervisory Board Member, Hankyu Hanshin
Hotels (Current position)2014	Senior Managing Director, Hanshin Electric Railway(Current position)

Audit &
Supervisory
Board Members
Section4

Tsunenori Kawashima

Masayoshi Ishibashi

Director In charge of Group Planning Div. (Group Business Planning)Standing Audit & Supervisory Board Member

Standing Audit & Supervisory Board Member

1982 Joined Hankyu Corporation2007 Director, Hankyu Corporation2013 Managing Director, Hankyu Corporation2014	Senior Managing Director, Hankyu Corporation(Current position)2014	Audit & Supervisory Board Member, Hankyu Travel
International (Current position)2014	Audit & Supervisory Board Member, Hankyu Hanshin
Express (Current position)2014 Director, Hankyu Hanshin Holdings (Current position)

1977 Joined Hankyu Corporation
2002 Director, Hankyu Corporation2005 Director, Hankyu Holdings
2005 Managing Director, Hankyu Corporation
2006 Representative Director, Hankyu Holdings
2006	Representative and Managing Director, Hankyu
Corporation
2006 Representative Director, Hankyu Hanshin Holdings
2009	Standing Audit & Supervisory Board Member, Hankyu
Corporation (Current position)2012	Standing Audit & Supervisory Board Member, Hankyu
Hanshin Holdings (Current position)

1979 Joined Hanshin Electric Railway
2008	President and Representative Director, Hanshin Contents
Link Corporation2013	Standing Audit & Supervisory Board Member, Hankyu
Hanshin Holdings (Current position)2013	Standing Audit & Supervisory Board Member, Hanshin
Electric Railway (Current position)

Takaharu Dohi

Haruo Sakaguchi

Junzo Ishii

Audit & Supervisory Board Member (External**)Audit & Supervisory Board Member (External**)Audit & Supervisory Board Member (External**)1958 Prosecutor
1996 Prosecutor-General (until 1998)
1998 Lawyer (Current position)
2002	Audit & Supervisory Board Member, Hankyu
Corporation (Current position)2005 Audit & Supervisory Board Member, Hankyu Holdings
2006	Audit & Supervisory Board Member, Hankyu Hanshin
Holdings (Current position)

1958 Lawyer (Current position)
1989 Vice Chairman, Japan Federation of Bar Association
2006 Audit & Supervisory Board Member, Hankyu Holdings
2006	Audit & Supervisory Board Member, Hankyu
Corporation (Current position)
2006	Audit & Supervisory Board Member, Hankyu Hanshin
Holdings (Current position)2013	Audit & Supervisory Board Member, Hankyu Hanshin
Hotels (Current position)

1986 Professor of Faculty of Commerce, Doshisha University
1989 Professor of Faculty of Business Administration, Kobe University
1999	Professor of Faculty of Business Administration, Graduate
School of Kobe University
2008	President of the University of Marketing and Distribution
Sciences (Current position)2010	Audit & Supervisory Board Member, Hankyu Hanshin
Holdings (Current position)2010	Audit & Supervisory Board Member, Hanshin Electric
Railway (Current position)**	Mr. Takaharu Dohi, Mr. Haruo Sakaguchi, and Mr. Junzo Ishii satisfy the qualifications of external Audit & Supervisory Board Members 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) Audit &Supervisory Board members.

Hankyu Hanshin Holdings

Annual Report 2014

Social Responsibility andManagement Organisation

Naohisa Nogami

79Section

5 Financial Section and Corporate Data

81 Consolidated Six-Year Summary
82 Consolidated Financial Review
85 Business Risks
88 Consolidated Balance Sheets
90 Consolidated Statements of Income/Consolidated Statements ofComprehensive Income

91 Consolidated Statements of
Changes in Net Assets

93 Consolidated Statements of Cash Flows
94 Notes to the Consolidated
Financial Statements

118 Major Group Companies
119 Investor Information

80 Hankyu Hanshin Holdings

Annual Report 2014

Consolidated Six-Year Summary
FY2009FY2010Result of Operations (millions of yen and thousands of U.S. dollars): *FY2011FY2012FY2013

FY2014FY2014

1¥683,715¥653,287¥638,770¥649,703¥682,439¥679,157$6,593,757

Operating income

77,82370,12664,74373,80987,921

91,828891,534

EBITDA*

135,300

133,200

127,100

133,500

145,100

149,200

1,448,544

Income before income taxes and minority interests

34,06433,89932,76043,41962,192

83,542811,087

Net income

20,55010,79318,06839,25239,702

46,352450,019

Revenues from operations

2—

12,541

14,72844,99254,081

55,941

543,117

Capital expenditure

109,688

132,386

68,431

55,26759,51280,722

783,709

Depreciation and amortisation

54,79860,41859,66956,96854,54054,474

528,874

Comprehensive income

Cash Flows (millions of yen and thousands of U.S. dollars):
Cash flows from operating activities¥108,597¥146,955¥103,252¥124,525¥127,655¥146,991$1,427,097

Cash flows from investing activities(115,047)(132,737)(62,516)(44,295)(58,923)(45,517)(441,913)

Cash flows from financing activities

7,014(24,200)(39,544)(78,978)(69,195)(105,079)(1,020,184)

Increase (decrease) in cash and cash equivalents(2,174)(9,680)

474

767

817

(1,840)(17,864)

Cash and cash equivalents at end of year

30,69021,44022,592

23,57225,581

24,497

237,835¥2,307,332 ¥2,337,331 ¥2,314,669 ¥2,274,380 ¥2,281,007 ¥2,286,928$22,203,184

Financial Position (millions of yen and thousands of U.S. dollars):
Total assets
Total net assets
Interest-bearing debt

473,878

480,633

486,947

524,801

573,154

617,598

5,996,097

1,275,620

1,282,583

1,251,665

1,183,647

1,126,633

1,032,307

10,022,398¥ 16.28¥  8.55¥ 14.32¥ 31.13¥ 31.48¥ 36.76$0.36

Per Share Data (yen and U.S. dollars):
Net income—Basic
Net income—Diluted

16.18

8.51

14.27

31.13

31.47

36.75

0.36

Net assets

366.96371.70377.17407.01443.63477.69

4.64

Dividend

5.00

5.00

5.00

5.00

5.00

6.00

0.06

Operating income margin (%)

11.4

10.7

10.1

11.4

12.9

13.5

—

3

ROA (%)*

2.5

2.2

2.0

2.8

3.3

3.6

—

ROE (%)*4

4.4

2.3

3.8

7.9

7.4

8.0

—

Interest-bearing debt/EBITDA (times)

9.4

9.6

9.8

8.9

7.8

6.9

—

Equity ratio (%)

20.1

20.1

20.6

22.6

24.5

26.3

—

Debt/equity (D/E) ratio (times)*5

2.8

2.7

2.6

2.3

2.0

1.7

—

Interest coverage ratio (times)*6

4.7

6.3

4.6

6.0

6.7

8.8

—

1,271,406

1,271,406

1,271,406

1,271,406

1,271,406

1,271,406—

20,80520,93821,302

20,811

20,751

20,913—

Ratios:Number of outstanding shares (thousands)
Number of employees

5Financial Section andCorporate Data

Others:Section*1. The U.S. dollar amounts have been translated, for convenience only, at ¥103 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange Market as of 31st March 2014.
*2. EBITDA = operating income + depreciation expenses + amortisation of goodwill
EBITDA figures are rounded to the nearest ¥100 million.
*3. ROA = ordinary income/total assets (average of period-start and period-end totals)*4. ROE = net income/equity (average of period-start and period-end totals)*5. D/E ratio = interest-bearing debt/equity*6. Interest coverage ratio = cash flows from operating income / interest expense

Hankyu Hanshin Holdings

Annual Report 201481

Consolidated Financial Review
Analysis of Operating Results for fiscal 2014 (fiscal year ended March 2014)
Revenues from operations for the year under review decreased by¥3,281 million (0.5%) year on year, to ¥679,157 million. This was primarily because the effects of the sale of the bookstore business to an
outside company were offset by demand for commuter passes andother items generated in advance of the hike in the consumption tax
rate in the Urban Transportation Business. Furthermore, in addition
to the full-year operations of the Umeda Flagship Store of Hankyu
Department Store in the Umeda Hankyu Building in the Real EstateBusiness, the sports business and stage business performed well in
the Entertainment and Communications Business.
Operating income rose ¥3,907 million (4.4%) year on year, to¥91,828 million, mainly as a result of efforts to keep down costs ineach segment.

In addition, ordinary income increased ¥6,277 million (8.4%)
year on year, to ¥81,191 million. This was because although equity inincome of affiliates declined, interest expenses decreased in line withthe lower interest-bearing debt (consolidated basis).
Net income increased ¥6,649 million (16.7%) year on year to¥46,352 million. This was mainly due to an improvement in the netof extraordinary income and loss, resulting from a gain on sales of
noncurrent assets following the sale of part of the equity held inHankyu Nishinomiya Gardens.
Summary of consolidated business results: please also see Message
from the President (Fiscal 2014 performance) on pages 16 and 17.

Analysis of Operating Income(¥ million)

87,921FY2013-3,282

Decrease revenues from operations+3,796

Decrease in operating expenses and cost of sales*+1,075Decrease in personnel expenses
Decrease in expense+2,230

Increase in taxes -63

Decrease in selling, general andadministrative expenses*+3,392

Decrease in depreciation and amortisation +191
Increase in amortisation of goodwill -41

91,828FY2014

YoY difference +3,907*Retirement benefit expenses are included in each cost of revenues from operations, with the change being +1,553.

Segment Information
The following table shows business performance for each core segment. For a review of these results, please refer to the page indicatedat the foot of the table.
From the fiscal year under review, the previous six reportablesegments of “Urban Transportation,” “Real Estate,” “Entertainment andCommunications,” “Travel and International Transportation,” “Hotels”

and “Retailing” have been changed to the six segments of “Urban
Transportation,” “Real Estate,” “Entertainment and Communications,”“Travel,” “International Transportation,” and “Hotels.” In order to compare fiscal periods, the fiscal 2013 segment information has been
prepared based on the segments after the change.
(¥ million)

Urban Transportation

Real EstateEntertainment andCommunications

FY2014

234,555

208,610

110,350

33,006FY2013249,342

198,343

102,695

34,086

Difference-14,787+10,267+7,654

YoY (%)

-5.9%

5.2%

38,49438,008FY201337,20837,278Difference+1,285+729

YoY (%)

3.5%

2.0%

P.40–41

P.46

TravelInternational
Transportation

HotelsOther

Adjustments

Consolidated

37,696

63,69534,713-43,469

679,157

36,74564,69736,045-39,516

682,439-1,079950-1,002-1,332-3,953-3,282

7.5%

-3.2%

2.6%

-1.5%

-3.7%

10.0%

-0.5%

14,172

1,224

2,051

809

849

-3,781

91,828

11,238

2,451

1,809

525

307

-2,89887,921+2,933-1,227

+241

+284

+542

-883

3,907

26.1%

-50.1%

13.4%

54.2%

176.5%

30.5%

4.4%

P.50

P.53

P.56

P.59

—

—

—

Revenues from operations

Operating income/loss
FY2014

Reference page82 Hankyu Hanshin Holdings

Annual Report 2014

Review of Financial Position
1. Assets, Liabilities and Net Assets

2. Cash Flows

Total assets at the end of the fiscal year under review increased by¥5,920 million from the previous term-end, to ¥2,286,928 million. Thiswas mainly as the result of an increase in property and equipment
following the acquisition of real estate leasing properties.
Total liabilities decreased by ¥38,523 million from the previous
term-end to ¥1,669,330 million, due partly to the reduction in interestbearing debt.
Net assets increased ¥44,443 million from the previous term-end
to ¥617,598 million due to an increase in retained earnings.
Equity came to ¥602,050 million, an increase of ¥42,651 million
over the previous fiscal year-end. This was the result of an increase
in retained earnings mainly due to the posting of net income, as well
as a rise in valuation difference on available-for-sale securities thatprimarily reflected higher stock prices.
As a result, the equity ratio stood at 26.3% and ROE was 8.0%.

Cash and cash equivalents decreased by ¥1,840 million from theprevious term-end to ¥24,497 million.

(1) Cash Flows from Operating Activities
Net cash provided by operating activities was ¥146,991 (up 15.1%
year on year). The main factors were income before income taxes andminority interests of ¥83,542 million, depreciation and amortisation of¥54,474 million, and income taxes paid of ¥14,013 million.

(2) Cash Flows from Investing Activities
Net cash used in investing activities was ¥45,517 million (down 22.8%
year on year). This was chiefly because expenditures for the purchasesof noncurrent assets of ¥89,845 million exceeded proceeds fromthe sale of noncurrent assets of ¥21,619 million, and proceeds fromreceipt of contributions for construction of ¥14,115 million.

(3) Cash Flows from Financing Activities
Net cash used in financing activities was ¥105,079 million (up 51.9%
year on year). This was due partly to a net decrease in borrowings of¥92,578 million and dividends paid of ¥9,500 million.

Trends in Cash Flow Indicators
FY2010FY2011FY2012FY2013

FY2014Equity ratio (%)

20.1

20.6

22.6

24.5

26.3

Equity ratio (%) (market value basis)

23.4

20.9

20.0

31.5

31.0

Cash flows/interest-bearing debt ratio (times)

8.7

12.1

9.5

8.8

7.0

Interest coverage ratio (times)

6.3

4.6

6.0

6.7

8.8

3. Fund Procurement
During the fiscal year under review, the outstanding balance ofinterest-bearing debt (consolidated basis) declined by ¥94,325 million
to ¥1,032,307 million at the end of the fiscal period. This was mainly
because the acquisition of part of the equity in “HEP FIVE” and theacquisition of “NU chayamachi,” that were as results of property swaps
between the Group and Hankyu REIT Inc., and also capital investment

Section5

Financial Section andCorporate Data

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).

to construct new rolling stock, was exceeded by the cash flows fromoperating activities.
The ratio of consolidated interest-bearing debt/EBITDA (operating income before amortisation), the benchmark we use for assessing
the soundness of our financial position, stood at 6.9 times (7.8 times in
the previous fiscal year).

Hankyu Hanshin Holdings

Annual Report 201483

Consolidated Financial Review

Consolidated Capital Expenditure and Depreciation and Amortisation
Capital expenditure in the fiscal year under review (consolidated basis; including intangible assets) increased by ¥21,209 million (35.6%) year on yearto ¥80,722 million.
The following is a breakdown for each business segment.
FY2014YoY

Urban Transportation

27,522 (Millions of yen)

5.0 %Real Estate

43,451

71.6

Entertainment and Communications

5,561

34.8

Travel

1,178

9.5

578

8.3

1,817

-5.9

Other

510

27.1

Total

80,61935.3

International Transportation
HotelsAdjustments

103—

Consolidated

80,722

35.6

Urban Transportation

TravelThe railway business carried out capital investment with a focus onsafety and service improvement, as well as implemented rebuilding
and improving of the existing rolling stock.

In the Travel Business, systems investment was carried out tostrengthen Internet sales.

International Transportation

Real Estate
The real estate leasing business acquired part of the equity of “HEPFIVE” and “NU chayamachi” both owned by Hankyu REIT Inc.

Entertainment and Communications
In the Entertainment and Communications Business, the Takarazuka
Grand Theatre was repaired and refurbished and terminal equipment
for cable television were purchased.

84 Hankyu Hanshin Holdings

Annual Report 2014

In the International Transportation Business, system investment was
conducted to further global IT cooperation.

HotelsIn the Hotels Business, refurbishments of the guest rooms were carried out at each hotel.
Depreciation and amortisation decreased by ¥66 million (0.1%) fromthe previous year (consolidated basis) to ¥54,474 million.

Business Risks
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 31st March 2014.

Legal Risk
In accordance with the stipulations of Article 3 of the Railway Business
Law, the Group must obtain separate permissions, from the Ministryof Land, Infrastructure, Transport and Tourism (MLIT), 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 andon each occasion when it wishes to change the fares. Consequently,
there is a certain risk that the Group’s railway operations may beconstrained in some way by the Ministry’s administration of theseregulations.

Progress in Large-Scale Development
Projects
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: “Umeda 1-1 Project” (rebuilding of the Dai Hanshin
Building and the Shin Hankyu Building) 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, and management will beworking to steadily complete them. However, in the event of rapid
and major changes in the business environment, affecting land prices
or urban development plans, the business performance and financial
position of the Group could be adversely affected.

Interest-Bearing Debt

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)
has agreed to a plan transferring railway facilities held by Hokushin
Kyuko Railway to Kobe Rapid Transit Railway Co., Ltd. (a consolidated
subsidiary) and retaining railway business as a tier 2 railway operator.
To facilitate the plan, in fiscal 2003 Hankyu Corporation provided
Kobe Rapid Transit Railway with financing 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.

Decline in the Market Value of Assets
Held by Members of the Hankyu Hanshin
Holdings GroupIn 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.

Natural Disasters
Operating as it does a very wide range of businesses in its Urban
Transportation, Real Estate, Entertainment and Communications,
Travel, International Transportation, and Hotels segments, the Group
has a correspondingly large assortment of facilities necessary for conduct of business, such as railway installations and buildings and retail
outlets for rent. In the event of earthquakes or other major disasters,
the business performance and financial position of the Group could
be adversely affected by damage to these facilities.

Hankyu Hanshin Holdings

Annual Report 2014

Section5

Financial Section andCorporate Data

The balance of interest-bearing debt held by the Group as of the endof March 2014, on a consolidated basis, was ¥1,032,307 million.
As a result of the acquisition of shares in Hanshin Electric Railway
Co., Ltd. through a successful public tender offer (takeover bid) on
27th June 2006, Hanshin Electric Railway has become a consolidated
subsidiary of Hankyu Holdings. This acquisition has resulted in an
increase in the balance of interest-bearing debt of the Group. On theother hand, management integration between the Hankyu HoldingsGroup and Hanshin Electric Railway Group has increased cash flows,
so the Group is not expected to have any significant difficulty inrepaying its debts.
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
the negative impact of interest rate movements. But in the unlikely
event 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.

Affiliated Companies

85

Other Risks and Countermeasures
The following is the Group’s perspective 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 determined by the Group to be current asof 31st March 2014 and is not intended to negate the possibility of these risks impacting the business performance, financial positionand other aspects of operations of the Group.

Economic Environment-related Risks
Changes in the Financial Market
Despite increases in the interest rate set by the Bank of Japan andthe difficulties associated with market-based financing accompanying changes in financial markets, the Group limits its exposure
to risk associated with interest rate increases by prioritising theundertaking of long-term loans with fixed interest rates. In addition,
the Group secures financing by working to establish back-up lines
based on commitment lines set up with correspondent financial
institutions.
Nevertheless, in the event that financial markets were tochange dramatically, the business performance and financial position of the Group could be adversely affected.

Foreign Currency Market Fluctuations
The Group assumes that sudden fluctuations in foreign currency
markets will occur as economic conditions change. However,foreign exchange rate contracts, currency swap contracts and currency option contracts are employed to avoid the exchange rate
fluctuation risks attendant on some foreign currency-denominatedassets and liabilities.
Nevertheless, although foreign currency market fluctuation risk
is mitigated through the use of foreign currency exchange-related
derivative transactions, in the event that sudden fluctuations
exceed assumptions, the business performance and financial position of the Group could be adversely affected.
The Group’s overseas sales constitute less than 10% of its consolidated operating revenues.

Business-related Risks
Demographic Change
Due to the aging population, it is expected that capital expenditureon safety measures and construction aimed at making facilities
barrier-free will increase. At the same time, due to future population decline caused by the falling birth rate, it is possible thattransportation demand (for the Group’s railways, buses and taxis)
will recede, and that demand in other businesses may also decline.
In order to respond to this challenge, the Group is working
with government and educational institutions on communitybuilding initiatives with a focus on peace of mind, education andcultural enrichment. By doing so, we are working to enhance theappeal of the areas served by our stations so as to ensure that ourrailway lines enjoy the patronage of large numbers of people.

Safety Management
In the Group’s core railway business, our passengers would suffer
greatly if an accident were to occur. We are keenly aware of the
responsibility entrusted to us for our passengers’ lives. Therefore,
the cornerstone of our business is placing the utmost priority on
ensuring the safety of customers.
Accordingly, the Group has upgraded all aspects of its safety
capabilities in the conviction that putting passengers first andprioritising safety come above all else. We are engaged in a wide
variety of endeavours for ensuring that we go one step further tooffer our passengers even safer transportation.
(For safety measures in our railway business, please refer to Page
67.)

Risks Associated with Power Supply
Shortages and Electric Utility Rates
In the event of a shortage of power supply, train and other services
may be disrupted. In addition, increases in electric utility rates
are a factor driving up power and other costs. In order to curb
power usage to the maximum extent possible while minimising its
impact on earnings and expenses, the Group is undertaking suchmeasures as gradually introducing energy-saving equipment andstrengthening cost reduction awareness among employees.

86 Hankyu Hanshin Holdings

Annual Report 2014

Business Risks

Damage to the trust regarding the quality
and safety of our products and services,
as well as the displaying of them
The Group’s performance may deteriorate due primarily to adecrease in revenues in the event of damage to the trust in thequality and safety of our products and services as well as the displaying of them.
The Group confirms that all relevant laws and regulations arebeing complied with and carries out checks of quality, sanitation
management, and food labeling. It also strives to ensure the quality
and safety of its products and services and that the correct information is displayed.

Natural Disasters and Acts of Terrorism

Group businesses could be significantly affected if economic activities were restricted or customers refrained from going out due
to an outbreak or epidemic of an infectious disease such as SARS
(Severe Acute Respiratory System) or H1N1 flu.
In response to the spread of infectious diseases such as H1N1
flu, the Group has developed a Business Continuity Plan (BCP) for
each division, under the direction of core companies. During the
H1N1 outbreak in 2009 and 2010, ongoing surveys into infection
rates among employees and their families in each division gave us
a good idea of the scale of risk, minimising the impact of H1N1 on
our business. Also, in the railway business, which is a particularly
important part of the social infrastructure, we drew up plans inadvance to minimise the impact of any explosive spread of the disease, including multiple schedules assuming a shortage of railway
staff.

Section5

Financial Section andCorporate Data

The Group’s businesses and transportation network infrastructure
could be significantly damaged by natural disasters such as earthquakes, typhoons and floods or acts of terrorism.
Hankyu Corporation and Hanshin Electric Railway Co., Ltd. haveinstalled rain, wind and river water gauges in the areas along ourrailway lines for collecting observation data. We also use real-time
information provided by meteorological observatories to ensure
the safe operation of our trains. If an earthquake of JMA seismic
intensity 4 or above is detected by a seismograph or predicted byan earthquake early warning system, all trains that operate in thezone in question will immediately prepare for emergency stopping.
For possible acts of terrorism, or where suspicious items or persons
are identified or damage has occurred, we have risk-graded management response systems.
We have also developed emergency response systems forminimising the social impact in the unlikely event of an incident
which causes long-term disruption to transit services or results in agreat number of casualties.

Infectious Disease Outbreaks andEpidemics

Hankyu Hanshin Holdings

Annual Report 201487

Consolidated Balance Sheets
As of 31st March 2013 and 2014

Millions of yen
2013
2014

Thousands of
U.S. dollars
2014

Assets:Current assets:
Cash and deposits...................................................................................................................................................................

¥   26,602¥   25,368$   246,291

Trade receivables.....................................................................................................................................................................

75,18180,063

777,311Land and buildings for sale ..............................................................................................................................................

112,192

105,147

1,020,845

Finished products and merchandise...........................................................................................................................

7,024

2,503

24,301Work in progress.......................................................................................................................................................................

3,389

4,079

39,602

Materials and supplies..........................................................................................................................................................

3,971

4,206

40,835

Deferred tax assets..................................................................................................................................................................

6,802

5,736

55,689Other................................................................................................................................................................................................

39,92844,163428,767

Allowance for doubtful receivables..............................................................................................................................

(318)

(349)

(3,388)

Total current assets.................................................................................................................................................................

274,773

270,919

2,630,282

594,669

596,308

5,789,398

Noncurrent assets:
Property and equipment:
Buildings and structures—net [NOTE 7 ③].................................................................................................
Machinery, equipment and vehicles—net [NOTE 7 ③]......................................................................

44,521

44,762434,583

Land [NOTES 7 ③ and ⑤]......................................................................................................................................

890,683

921,004

8,941,786

Construction in progress.............................................................................................................................................

115,722

94,200914,563

Other—net [NOTE 7 ③]...........................................................................................................................................

20,652

20,349197,563

Total property and equipment [NOTES 7 ① and ②]............................................................................

1,666,249

1,676,624

16,277,903

Intangible assets:
Goodwill................................................................................................................................................................................

36,21933,687

327,058

Other [NOTES 7 ② and ③]....................................................................................................................................

17,405

17,718172,019

Total intangible assets..................................................................................................................................................

53,62451,406

499,087

Investment securities [NOTES 7 ③ and ④].................................................................................................

239,997

246,617

2,394,340

Deferred tax assets..........................................................................................................................................................

5,224

4,906

47,631

Net defined benefit asset............................................................................................................................................

—

2,395

23,252Other........................................................................................................................................................................................

41,67534,532335,262

Investments and other assets:

Allowance for doubtful receivables.....................................................................................................................

(536)

(473)

(4,592)

Total investments and other assets......................................................................................................................

286,360

287,978

2,795,903

Total noncurrent assets........................................................................................................................................................

2,006,234

2,016,009

19,572,903

Total assets..................................................................................................................................................................................................

2,281,007

2,286,928

22,203,184

88 Hankyu Hanshin Holdings

Annual Report 2014

Thousands of
U.S. dollars
2014

Millions of yen
2013
2014
Liabilities:
Current liabilities:
Trade payables...........................................................................................................................................................................

¥   44,110¥   42,943$   416,922

Accrued expenses...................................................................................................................................................................

20,983

19,373

188,087

Short-term borrowings [NOTE 7 ③].........................................................................................................................

354,358

313,305

3,041,796

Current portion of bonds....................................................................................................................................................

10,00020,000

194,175

Lease obligations.....................................................................................................................................................................

2,132

2,028

19,689

Income taxes payable...........................................................................................................................................................

8,883

5,729

55,621

Provision for bonuses............................................................................................................................................................

4,079

4,214

40,913

Other [NOTE 7 ③]................................................................................................................................................................

133,592

156,626

1,520,641

Total current liabilities...........................................................................................................................................................

578,140564,220

5,477,864

Long-term liabilities:
Long-term debt [NOTE 7 ③].........................................................................................................................................

637,624585,300

5,682,524

Bonds...............................................................................................................................................................................................

112,000

102,000

990,291

Lease obligations.....................................................................................................................................................................

10,516

9,673

93,913

Deferred tax liabilities............................................................................................................................................................

160,017

189,178

1,836,680
53,951

Deferred tax liabilities related to land revaluation [NOTE 7 ⑤]...............................................................

5,572

5,557

Provision for retirement benefits...................................................................................................................................

59,439——Net defined benefit liability...............................................................................................................................................

—

60,093

583,427

Long-term deferred contribution for construction............................................................................................

28,48337,258361,728

Other................................................................................................................................................................................................

116,057

116,047

1,126,670

Total long-term liabilities....................................................................................................................................................

1,129,712

1,105,109

10,729,214

Total liabilities...................................................................................................................................................................................

1,707,853

1,669,330

16,207,087

Net assets:
Shareholders’ equity:
Common stock..........................................................................................................................................................................

99,474

99,474

965,767

Capital surplus............................................................................................................................................................................

150,027

150,027

1,456,573

Retained earnings....................................................................................................................................................................

307,108

344,020

3,340,000

Less treasury stock, at cost.................................................................................................................................................

(4,209)(4,553)(44,204)

Total shareholders’ equity..................................................................................................................................................

552,400

588,969

5,718,146

Valuation difference on available-for-sale securities..........................................................................................

2,817

8,885

86,262

Deferred gains or losses on hedges.............................................................................................................................

770

480

4,660

Revaluation reserve for land [NOTE 7 ⑤]..............................................................................................................

5,130

5,060

49,126

Foreign currency translation adjustments...............................................................................................................

(1,719)

366

3,553

Remeasurements of defined benefit plans.............................................................................................................

—(1,712)(16,621)127,000

Section5

Accumulated other comprehensive income:

6,999

13,081

112

208

2,019

Minority interests [NOTE 7 ⑤]............................................................................................................................................

13,642

15,338148,913

Total net assets.................................................................................................................................................................................

573,154

617,598

5,996,097

Total liabilities and net assets........................................................................................................................................................

2,281,007

2,286,928

22,203,184

Hankyu Hanshin Holdings

Annual Report 2014

Financial Section andCorporate Data

Total accumulated other comprehensive income.............................................................................................
Subscription rights to shares.................................................................................................................................................

89

Consolidated Statements of Income
Years ended 31st March 2013 and 2014

Revenues from operations.............................................................................................................................................................................

Millions of yen
2013
2014
¥682,439¥679,157

Thousands of
U.S. dollars
2014$6,593,757

Costs of revenues from operations:Operating expenses and cost of sales of transportation [NOTE 8 ①].......................................................................
Selling, general and administrative expenses [NOTE 8 ②]..............................................................................................
Total costs of revenues from operations [NOTE 8 ③].........................................................................................................
Operating income................................................................................................................................................................................................

560,143
34,375594,518
87,921

556,346
30,983587,329
91,8285,401,417
300,806
5,702,223
891,534

Non-operating income:Interest income...............................................................................................................................................................................................
Dividends income.........................................................................................................................................................................................
Equity in income of affiliates...................................................................................................................................................................
Miscellaneous income................................................................................................................................................................................
Total non-operating income..................................................................................................................................................................

111
1,186
4,302
2,294
7,895

130
1,341
3,798
2,575
7,845

1,262
13,01936,87425,00076,165Non-operating expenses:
Interest expenses...........................................................................................................................................................................................
Miscellaneous expenses............................................................................................................................................................................
Total non-operating expenses..............................................................................................................................................................
Ordinary income...................................................................................................................................................................................................

18,646
2,256
20,902
74,914

16,2352,246
18,481
81,191

157,62121,806
179,427
788,262

Extraordinary income:Gain on contributions for construction...........................................................................................................................................
Gain on sales of noncurrent assets [NOTE 8 ④].....................................................................................................................
Other......................................................................................................................................................................................................................
Total extraordinary income.....................................................................................................................................................................

5,783
806
1,604
8,193

1,885
8,508
1,324
11,71818,30182,602
12,854
113,767

Extraordinary loss:
Loss on reduction of noncurrent assets..........................................................................................................................................
Loss on impairment of fixed assets [NOTE 8 ⑤].....................................................................................................................
Provision for loss on removal of property and equipment.................................................................................................
Other......................................................................................................................................................................................................................
Total extraordinary loss..............................................................................................................................................................................
Income before income taxes and minority interests..................................................................................................................
Income taxes—current.....................................................................................................................................................................................
Income taxes—deferred.................................................................................................................................................................................
Total income taxes...............................................................................................................................................................................................
Income before minority interests.............................................................................................................................................................
Minority interests in income.........................................................................................................................................................................
Net income................................................................................................................................................................................................................

5,717
5,402
4,391
5,405
20,91562,192
13,701
7,532
21,23440,957
1,254
39,702

1,910
2,297
1,146
4,013
9,367
83,542
7,042
28,57835,62047,921
1,569
46,352

18,54422,301
11,12638,961
90,942811,087
68,369277,456
345,825465,252
15,233450,019

Consolidated Statements of Comprehensive Income
Years ended 31st March 2013 and 2014

Income before minority interests.............................................................................................................................................................
Other comprehensive income:
Valuation difference on available-for-sale securities...............................................................................................................
Deferred gains or losses on hedges...................................................................................................................................................
Revaluation reserve for land...................................................................................................................................................................
Foreign currency translation adjustments.....................................................................................................................................
Share of other comprehensive income of associates accounted for using equity method..........................
Total other comprehensive income [NOTE 9 ①]...............................................................................................................
Comprehensive income..................................................................................................................................................................................
Comprehensive income attributable to:
Owners of the parent..................................................................................................................................................................................
Minority interests...........................................................................................................................................................................................

90 Hankyu Hanshin Holdings

Annual Report 2014

Millions of yen
2013
2014
¥40,957¥47,921

Thousands of
U.S. dollars
2014$465,252

6,735
900
—
1,287
4,201
13,12454,081

4,443
(293)
(15)
2,180
1,704
8,019
55,941

43,136(2,845)(146)
21,165
16,54477,854543,117

52,6701,411

54,201
1,739

526,223
16,883

Consolidated Statements of Changes in Net Assets
Years ended 31st March 2013 and 2014

Millions of yen
Shareholders’ equity

Balance as of 1st April 2012
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2013
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2014

Commonstock¥99,474

Capitalsurplus¥150,027

Retainedearnings¥276,059

Less treasury
stock, at cost¥(4,140)(6,334)39,702(2,160)
(2)
(157)

—
99,474—150,027

31,048307,108(82)
13—
99,474—150,027

36,912
344,020(6,334)39,702(2,160)
(82)
10
(157)

—

—

(69)
(4,209)30,978552,400(9,500)46,352
54
(13)
19

Total
shareholders’equity¥521,421(385)
41(9,500)46,352
54
(385)
28
19

(0)

(0)

(344)
(4,553)36,568588,969

Millions of yen
Accumulated other comprehensive income
Total
Foreignaccumulated
currency
Remeasurements
othertranslation of defined benefit comprehensive Subscription
adjustments
rights to sharesincomeplans¥(2,924)¥    —¥ (8,128)¥ 32

Minority
interests¥11,476

Total
net assets¥524,801(6,334)39,702(2,160)
(82)
10
(157)
—

10,862
10,862
2,817

901
901
770

2,158
2,158
5,130

1,204
1,204
(1,719)———15,127
15,127
6,999

79
79
112

2,166
2,166
13,642

17,37448,352
573,154

Section5

Financial Section andCorporate Data

Balance as of 1st April 2012
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2013
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2014

Valuationdifference on Deferred gains
available-foror losses on
Revaluation
hedgesreserve for landsale securities¥ (8,044)¥(131)¥2,972(9,500)46,352
54
(385)
28
19
(0)
6,067
6,067
8,885

(289)
(289)
480

(70)
(70)
5,060

2,086
2,086
366

(1,712)(1,712)(1,712)

6,082
6,082
¥13,081

96
96
208

Hankyu Hanshin Holdings

1,696
1,696
15,3387,875
44,443
617,598

Annual Report 201491

Consolidated Statements of Changes in Net Assets

Thousands of U.S. dollars
Shareholders’ equity

Balance as of 1st April 2013
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2014

Commonstock$965,767

Capitalsurplus$1,456,573

Retainedearnings$2,981,631

Less treasury
stock, at cost$(40,864)(92,233)
450,019
524
(126)
184

—
965,767—
1,456,573

358,369
3,340,000(3,738)398

Total
shareholders’equity$5,363,107(92,233)
450,019524(3,738)
272
184

(0)

(0)

(3,340)(44,204)

355,029
5,718,146

Thousands of U.S. dollars
Accumulated other comprehensive income

Balance as of 1st April 2013
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
Changes in equity in affiliates accounted
for by equity method-treasury stock
Net changes of items
other than shareholders’ equity
Total changes of items during the period
Balance as of 31st March 2014

92 Hankyu Hanshin Holdings

Valuationdifference on Deferred gains
available-foror losses on
Revaluation
hedgesreserve for landsale securities$27,350$7,476$49,806

Total
Foreignaccumulated
currency
Remeasurements
othertranslation of defined benefit comprehensive Subscription
adjustments
rights to sharesincomeplans$(16,689)$     —
$ 67,951$1,087

Minority
interests$132,447

Total
net assets$5,564,602(92,233)
450,019524(3,738)
272
184
(0)

58,90358,90386,262(2,806)(2,806)
4,660

Annual Report 2014

(680)
(680)
49,126

20,252
20,252
3,553(16,621)(16,621)(16,621)59,04959,049127,000

932
932
2,019

16,466
16,466
148,91376,456
431,485
5,996,097

Consolidated Statements of Cash Flows
Years ended 31st March 2013 and 2014

Millions of yen
2013
2014

Thousands of
U.S. dollars
2014

Cash flows from operating activities:
Income before income taxes and minority interests..............................................................................................................
Depreciation and amortisation.............................................................................................................................................................
Loss on impairment of fixed assets....................................................................................................................................................
Amortisation of goodwill..........................................................................................................................................................................
Equity in (income) losses of affiliates.................................................................................................................................................
Increase (decrease) in provision for retirement benefits......................................................................................................
Increase (decrease) in net defined benefit liability...................................................................................................................
Increase (decrease) in allowance for doubtful receivables.................................................................................................
Increase (decrease) in provision for loss on removal of property and equipment..............................................
Interest and dividend income...............................................................................................................................................................
Interest expense.............................................................................................................................................................................................
Loss (gain) on sales of noncurrent assets.......................................................................................................................................
Loss on reduction of noncurrent assets..........................................................................................................................................
Gain on contributions for construction...........................................................................................................................................
Decrease (increase) in trade receivables.........................................................................................................................................
Decrease (increase) in inventories......................................................................................................................................................
Increase (decrease) in trade payables...............................................................................................................................................
Other......................................................................................................................................................................................................................
Subtotal...............................................................................................................................................................................................................
Interest and dividends received...........................................................................................................................................................
Interest paid......................................................................................................................................................................................................
Income taxes (paid) refunded...............................................................................................................................................................
Net cash provided by operating activities.....................................................................................................................................

¥ 62,192
54,5405,402
2,875(4,302)
(340)
—
(24)
4,391
(1,297)
18,646(594)
5,717(5,783)(4,058)
8,516
659
4,993
151,530
2,701(19,028)(7,548)
127,655¥ 83,542
54,474
2,297
2,916(3,798)
—
(726)
34
1,146
(1,471)
16,235(8,133)
1,910(1,885)(4,200)12,106877
19,441
174,766
3,036(16,797)(14,013)
146,991$  811,087
528,874
22,301
28,311(36,874)—(7,049)330
11,126(14,282)
157,621(78,961)
18,544(18,301)(40,777)
117,534
8,515
188,748
1,696,757
29,476(163,078)(136,049)
1,427,097(83,506)
5,600(2,353)
4,515—
21
16,134666(58,923)(89,845)
21,619(2,438)
1,010
3,285
2,335
14,115
4,401(45,517)(872,282)
209,893(23,670)
9,806
31,893
22,670137,039
42,728(441,913)(8,924)
100,754(137,064)
19,882(35,010)(6,334)(344)(2,154)(69,195)
1,280
817
23,572
1,191
25,581(13,191)
105,350(184,737)
9,934(10,000)(9,500)(329)(2,606)(105,079)
1,765(1,840)25,581755
24,497(128,068)
1,022,816(1,793,563)
96,447(97,087)(92,233)(3,194)(25,301)(1,020,184)
17,136(17,864)
248,359
7,330
237,835

Cash flows from investing activities:
Purchases of noncurrent assets............................................................................................................................................................
Proceeds from sales of noncurrent assets.....................................................................................................................................
Purchases of investment securities....................................................................................................................................................
Proceeds from sale of investment securities................................................................................................................................
Proceeds from sales of investments in subsidiaries resulting in change in scope of consolidation.........
Net decrease (increase) in short-term loans receivable........................................................................................................
Receipt of contributions for construction......................................................................................................................................
Other......................................................................................................................................................................................................................
Net cash used in investing activities..................................................................................................................................................

SectionCash flows from financing activities:
Net increase (decrease) in short-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 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............................................................
Cash and cash equivalents at end of year..........................................................................................................................................

Hankyu Hanshin Holdings

Annual Report 2014

Financial Section andCorporate Data

Proceeds from long-term debt.............................................................................................................................................................

593Notes to the Consolidated Financial Statements
1 FRAMEWORK FOR PREPARING CONSOLIDATED FINANCIAL STATEMENTS① Method of preparation for consolidated financial statements
The Company’s consolidated financial statements were preparedin accordance with the “Regulations Concerning the Terminology,
Forms and Preparation Method of Consolidated Financial Statements”(Finance Ministry Ordinance No. 28 of 1976, hereinafter, “Regulations for
Consolidated Financial Statements”).
Comparative information contained in the consolidated financial
statements for the consolidated current fiscal year (1st April 2013 to 31st
March 2014) has been prepared based on the Regulations for Consolidated
Financial Statements before the amendment, in accordance with “Cabinet
Office Ordinance Partially Revising Regulation on Terminology, Forms andPreparation of Financial Statements” (Cabinet Office Ordinance No. 61, 21st
September 2012), Supplementary Provisions Article 3 Paragraph 2.
② Audit verification
The Company’s consolidated financial statements for the current fiscal year
(1st April 2013 to 31st March 2014) were audited by KPMG AZSA LLC, as per
Article 193-2 (1) of the Financial Instruments and Exchange Act.

③ Special measures to ensure the appropriateness of consolidated
financial statements and other reports
The Company makes special efforts to ensure the appropriateness of
its consolidated financial statements and other reports. In addition to
subscribing to related publications, it has joined the Financial AccountingStandards Foundation and participates in seminars and other events
held by the Foundation, audit firms and other relevant organisations toestablish a system for understanding the accounting standards in detailand responding suitably to changes made to them. The Company also
compiles and provides common manuals for preparing the consolidated
financial information on a group basis, and arranges training courses foraccounting staff at affiliates.
④ Translation into U.S. dollars
The U.S. dollar amounts have been translated, for convenience only, at¥103 = $1, the prevailing exchange rate on the Tokyo Foreign Exchange
Market as of 31st March 2014.

2 BASIS OF PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS① Scope of consolidation(a) Number and names of consolidated subsidiaries
Number of consolidated subsidiaries—95.
Names of primary consolidated subsidiaries are listed on Page 118.
Due to its increased significance Rworks, Inc., has been included in thescope of consolidation.
Hankyu Hanshin Express Holdings Corporation and 4 other companies
have been excluded from the scope of consolidation due to a merger, andBook 1st. Corporation has been excluded because of its sale.
(b) Names of 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 (amount equivalent to equity interests), retained earnings(amount equivalent to equity interests), and other figures are limited, andthe effect on the consolidated financial statements as a whole is negligible.
② Items related to application of equity-method accounting(a) Number and names of affiliates for which equity method is applied
Number of affiliates for which equity method is applied—10.
Names of major equity-method affiliates
H2O Retailing Corporation, Kobe Electric Railway Co., Ltd., Toho Co., Ltd.,Tokyo Rakutenchi Co., Ltd.
From the current fiscal year, equity-method accounting is applied to
Nikkei Culture Inc. due to its increased significance.
Also, in the current fiscal year, Sanyo Jidosha Unso Co., Ltd., has been
excluded from the scope of equity-method accounting due to the sale ofits shares.
(b) Names of nonconsolidated subsidiaries and affiliates for which equity
method is not applied
The nonconsolidated subsidiaries to which the equity method does not
apply (Hankyu Mediax Co., Ltd., etc.) and affiliates (OS Co., Ltd., etc.) use thecost method rather than the equity method because the total amounts of
their net income or loss (amount equivalent to equity interests), retained
earnings (amount equivalent to equity interests) and other figures arelimited, and the effect on the consolidated financial statements as a wholeis negligible.

94 Hankyu Hanshin Holdings

Annual Report 2014

③ Items related to fiscal year-ends, etc. for consolidated subsidiaries
The account closing date for Hankyu Hanshin Express (USA) INC., Hankyu
Hanshin Express (Deutschland) GMBH and 20 other consolidated subsidiaries is 31st December. The consolidated financial statements have been
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(a) Valuation standards and method for major assets
I. Securities
Available-for-sale securities
Available-for-sale securities with fair market values:
The market value method is applied based on the market price, etc., at
the fiscal year end. (Related valuation differences are directly included
under net assets and the cost of securities sold is determined by themoving average method.)
Available-for-sale securities without fair market values:
The moving average cost method is mainly applied.
For investments in limited liability investment partnerships andsimilar investments, however, the Company’s share of assets held bysuch partnerships is recorded.
II. Derivatives
The market value method is applied.
III. Inventories
Land and buildings for sale:
The identified cost method is applied. (Balance sheet values are calculated by writing down book values based on decreased profitability.)
Finished products and merchandise, work in progress, and materials andsupplies:
The moving average cost method is mainly applied. (Balance sheet
values are calculated by writing down book values based on decreased
profitability.)

(b) Depreciation methods for major depreciable assets
I. Property and equipment (excluding leased assets)
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.
II. Intangible assets (excluding leased assets)
Intangible assets (excluding leased assets) are amortised using thestraight-line method.
Software (used by the Company), however, is amortised by thestraight-line method over the internal available life (Mainly 5 years).
III. Lease assets
Lease assets are depreciated using the straight-line method with thelease term as the useful life and the residual value as zero.
(c) Accounting for contributions for construction
Some consolidated subsidiaries of the Company accept contributions forconstruction from local governments and other organisations as part of thecost 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 noncurrent
assets at the acquisition cost, after deducting the amounts corresponding
to the contributions.
The amounts received for construction including such contributions arerecorded in extraordinary income as “gain on contributions for construction”
in the consolidated statements of income, and the amount directly deductedfrom the acquisition cost is recorded in extraordinary loss as “loss on reduction of noncurrent assets” in the consolidated statements of income.
(d) Accounting standards for significant transactions
I. Allowance for doubtful receivables
Allowance for doubtful receivables is provided based on the ratio of pastloan loss experience for general accounts and individually estimateduncollectible amounts for certain individual accounts.

(e) Accounting methods for retirement benefits
When calculating retirement benefit obligations, the straight-line attribution method is used to distribute the estimated amount of retirement
benefits into the period up to the end of the current fiscal year.
Prior service costs are recorded in expenses in equal amounts using
the straight-line method over a certain number of years (mainly 10 years),
which is within the average remaining years of service of the employees at
the time when these costs are incurred, commencing, in principle, in thefiscal year in which they arise.
Actuarial differences are recorded in expenses using the straight-line
method over a certain number of years (mainly 10 years), which is within
the average remaining years of service of the employees at the time whenthese costs are incurred, commencing, in principle, in the fiscal year following the year in which they arise.
(f) Basis for converting significant assets and liabilities in foreign currency
into Japanese yen
The assets, liabilities, income and expenses of overseas subsidiaries areconverted to yen based on the spot exchange rate on the balance sheet(g) Significant hedge accounting methods
I. Method of hedge accounting
Deferred hedge accounting is applied.
Exceptional accounting applies to interest rate swaps that satisfy
the requirements for exceptional accounting for interest rate swaps.
Designation accounting applies to foreign currency denominatedassets and liabilities with foreign exchange forward contracts.
II. Hedging instruments and hedged items
Hedging instruments

Hedged items

Foreign exchange contracts
Currency swap contracts
Currency option contracts

Foreign currency tradereceivables and trade payables
and future foreign currencytransactions

Interest rate swap contracts
Interest rate option contracts

Interest on bonds andloans payable

III. 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.
IV. 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.
V. Other risk management methods concerning hedge accounting
Internal rules regarding the segregation of duties, maximum transaction
amounts, etc., have been established for the use of derivative transactions based on which derivative transactions are used. The implementation and management of derivative transactions are carried out by theaccounting department with the approval of the decision makers ineach Group company. An internal control system has been developed
to ensure that the contract signing and termination comply with theinternal rules.
(h) Method and period of amortisation of goodwill
Goodwill is amortised, in general, in equal amounts over five years. The
goodwill resulting from the management integration with Hanshin Electric
Railway Co., Ltd. in the fiscal year ended 31st March 2007 is being amortised in equal amounts over 20 years.
(i) 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.

Section5

Financial Section andCorporate Data

II. Provision for bonuses
Provision for bonuses is recorded in the amount expected to be paid bysome consolidated subsidiaries as bonuses during the fiscal year.

date. Differences in conversion are included in foreign currency translation
adjustments and minority interests in the net assets section.

(j) Other significant matters for preparing consolidated financial statements
I. Accounting for consumption tax
Accounting for consumption tax is based on the tax exclusion method.
The non-deductible amount of the consumption tax on assets thatare not tax deductible is included in “Other” in investments and otherassets on the consolidated balance sheets as long-term prepaid consumption tax and is amortised in equal amounts based on provisions ofCorporation Tax Law.
II. Adoption of consolidated tax payment system
A consolidated tax payment system has been adopted.

Hankyu Hanshin Holdings

Annual Report 201495

3 CHANGES IN ACCOUNTING POLICIES① Application of the accounting standard for retirement benefits
The Accounting Standard for Retirement Benefits (ASBJ Statement No. 26,
17th May 2012; hereinafter “retirement benefits’ accounting standard”) and
Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance
No. 25, 17th May 2012; hereinafter “retirement benefits’ guidance” wereapplied at the end of the current fiscal year (excluding the provisions
described in Paragraph 35 of the retirement benefits’ accounting standard
and in Paragraph 67 of the retirement benefits’ guidance), and the methodchanged so that the amount after the plan assets has been deducted fromthe retirement benefit obligations is recorded as “Net defined benefit liability” and unrecognised actuarial differences and unrecognised prior service
costs are recorded as “Net defined benefit liability.”
Regarding the application of the retirement benefits’ accounting
standard, in accordance with the transitional methods of handlingprovided for in Paragraph 37 of the retirement benefits’ accounting standard, at the end of the current fiscal year, the amount of financial impact
from the relevant change was added or subtracted from the remeasurements of defined benefit plans under accumulated other comprehensive
income.
As a result, at the end of the current fiscal year, “Net defined benefit
asset” of ¥2,395 million ($23,252 thousand) and “Net defined benefit liability” of ¥60,093 million ($583,427 thousand) (in the fiscal year ended 31st
March, 2013, prior to the application of the retirement benefits accounting
standard, “Provision for retirement benefits” on the consolidated balance
sheets was ¥59,439 million) were recorded. In addition, “Accumulated othercomprehensive income” decreased ¥1,712 million ($16,621 thousand) and“Minority interests” increased ¥102 million ($990 thousand).
Net assets per share decreased ¥1.36 ($0.01).

4 ACCOUNTING STANDARDS NOT APPLIED AS YET① Accounting Standard for Retirement Benefits—Accounting Standard for Retirement Benefits (ASBJ Statement No. 26,
17th May 2012)—G uidance on Accounting Standard for Retirement Benefits (ASBJ
Guidance No. 25, 17th May 2012)(a) Summary
The methods of processing unrecognised actuarial differences and unrecognised prior service costs, the methods of calculating retirement benefit obligations and service costs, and the expansion of disclosure were amended.
(b) Effective dates
The amendments to the methods of calculating the retirement benefit
obligations and service costs shall be effective from the beginning of the
fiscal period ending 31st March 2015.
As transitional methods of handling these accounting standards havebeen laid down, they shall not be applied retroactively to consolidated
financial statements for prior fiscal years.
(c) Effect of application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards on the
consolidated financial statements.
② Accounting standards for business combinations—A ccounting Standards for Business Combinations (ASBJ Statement
No. 21 13th September, 2013)—A ccounting Standards for Consolidated Financial Statements (ASBJ
Statement No. 22 13th September, 2013)96 Hankyu Hanshin Holdings

Annual Report 2014

—Accounting Standard for Business Divestitures (ASBJ Statement No. 7,
13th September, 2013)—Accounting Standard for Earnings Per Share (ASBJ Statement No. 2, 13th
September, 2013)—G uidance on Accounting Standard for Business Combinations andAccounting Standard for Business Divestitures (ASBJ Guidance No. 10,
13th September, 2013)—G uidance on Accounting Standard for Earnings Per Share (ASBJ
Guidance No. 4, 13th September, 2013)(a) Summary
1) Handling of changes in equity of the parent company for subsidiaries
in the event that it continues to have control following purchases ofadditional shares in subsidiaries, etc., 2) handling of expenses related topurchases, 3) presentation of net income and changes of the presentation
to non-controlling interests from minority interests, and 4) handling ofprovisional accounting, etc., were amended.
(b) Effective dates
The amendments will come into effect from the beginning of the fiscal
period ending 31st March 2016. The handling of provisional accounting
will come into effect after the beginning of the fiscal period ending March
2016 following the implementation of the business combination.
(c) Effect of application of the standards
The Company and its consolidated domestic subsidiaries are currently
in the process of determining the effects of these new standards on the
consolidated financial statements.

Notes to the Consolidated Financial Statements

5 CHANGES TO THE METHOD OF PRESENTATION① Consolidated balance sheets
To present the items on the consolidated balance sheets more clearly,“Lease obligations” that were included in “Other” of current liabilities andlong-term liabilities up to the fiscal year ended 31st March, 2013, will bepresented as separate item from the current fiscal year, and “Provision for
directors’ retirement benefits,” which was presented as a separate item
until the fiscal year ended 31st March, 2013, will be included in “Other” inlong-term liabilities from the current fiscal year.
As a result, in the consolidated balance sheets in the fiscal year ended
31st March, 2013, “Other” of ¥135,724 million in current liabilities is replaced
by “Lease obligations” of ¥2,132 million ($20,699 thousand) and “Other”
of ¥133,592 million ($1,297,010 thousand), while in long-term liabilities,“Provision for directors’ retirement benefits” of ¥724 million and “Other”
of ¥125,849 million are replaced by “Lease obligations” of ¥10,516 million($102,097 thousand) and “Other” of ¥116,057 million ($1,126,767 thousand).

② Consolidated Statements of Income“Gain on sale of securities” in extraordinary income and “Loss on salesof noncurrent assets,” “Loss on retirement of noncurrent assets,” and“Restructuring costs” in extraordinary loss were presented separately in thefiscal year ended 31st March, 2013. But as the importance of these items
has diminished, in the current fiscal year they are included in “Other” inextraordinary income and extraordinary loss respectively.
As a result, in the Consolidated Statements of Income for the fiscal
year ended 31st March, 2013, “Gain on sale of securities” of ¥1,206 million
was included in “Other” in extraordinary income, and “Loss on sales of noncurrent assets” of ¥211 million, “Loss on retirement of noncurrent assets”
of ¥1,730 million, and “Restructuring costs” of ¥2,161 million were each
included in “Other” in extraordinary loss.

6 ADDITIONAL INFORMATION① Changes in the purpose of holding
Due to changes in the purpose of holding in the current fiscal year, certain land that was previously recorded in “Construction in progress” was reclassified to“Land and buildings for sale.” The amount of the reclassification resulting from this change was ¥6,209 million ($60,282 thousand).

7 CONSOLIDATED BALANCE SHEETS① Accumulated depreciation of property and equipment
Millions of yen
2013

2014

Thousands of U.S. dollars
2014¥1,019,293¥1,044,359$10,139,408② Accumulated contributions for construction directly deducted fromthe acquisition cost of noncurrent assets
2013

Millions of yen
2014

Thousands of U.S. dollars
2014¥370,073¥373,682$3,627,981③ Pledged assets and secured liabilities
The following table shows the assets pledged as collateral.
Millions of yen¥219,000
34,509266,5772,221[¥214,464][34,509][256,052][2,221]¥216,551
34,633
266,480
1,864[¥212,362][34,633][255,955][1,864]$2,102,437
336,2432,587,184
18,097[$2,061,767][336,243][2,485,000][18,097]

129

[129]

128

[128]

1,243

[1,243]

14,036536,474[—][507,377]

13,236532,895[—][504,944]

128,505
5,173,738[—][4,902,369]

The following table shows the secured liabilities.
Millions of yen

Current liabilities:
Short-term borrowings.......................................
Other..............................................................................
Long-term liabilities:
Long-term debt.......................................................
Total........................................................................

5

Thousands of U.S. dollars
2014

2014

2013

SectionFinancial Section andCorporate Data

Property and equipment:
Buildings and structures....................................
Machinery, equipment and vehicles..........
Land................................................................................
Other..............................................................................
Intangible assets:
Other..............................................................................
Investment and other assets:
Investment securities...........................................
Total........................................................................

Thousands of U.S. dollars
2014

2014

2013

¥ 11,024109[¥  8,819][—]¥ 13,80586[¥  7,980][—]$  134,029
835[$   77,476][—]

104,920
116,055[92,651][101,471]

107,291
121,182[99,703][107,683]

1,041,660
1,176,524[967,990][1,045,466]

The amounts in brackets are the amounts for the Railway Foundation within the total of each category.

Hankyu Hanshin Holdings

Annual Report 201497

④ The following table shows the securities of nonconsolidated subsidiaries and affiliates.
Millions of yen
2013
2014

Investment securities (stocks)....

¥169,678¥170,790

Thousands of
U.S. dollars
2014$1,658,155⑤ T wo consolidated subsidiaries and an equity-method affiliate
revaluated land 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 ofLand (Law No. 19, promulgated on 31st March 2001). Of the valuationdifferences identified as a result of this, the consolidated subsidiaries
recorded the amount corresponding to the taxes on the valuationdifference in the liability section as “Deferred tax liabilities related toland revaluation” and the amount belonging to minority shareholders as “Minority interests.” The amount remaining after subtracting
these was recorded in the net assets section as “Revaluation reserve
for land.” The equity-method affiliates recorded the amount corresponding to its equity in the valuation difference (after subtracting
taxes) in the net assets section as “Revaluation reserve for land.”
Revaluation method
The revaluation amounts were determined based on the revaluatedvalue of noncurrent assets provided for in Article 2, Paragraph 3 of the
Enforcement Ordinance for the Law 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 land and the book value
after revaluation at the end of previous fiscal year and current fiscal year
was as follows:
2013

Millions of yen
2014

Thousands of U.S. dollars
2014¥(6,093)¥(6,067)$(58,903)⑥ Contingent liabilities
The Company and its subsidiaries provide a liability guarantee for loans of
the companies, etc., listed below.
Fiscal year ended 31st March 2013
Millions of yen

Nishi-Osaka Railway Co., Ltd. ...................................
Borrowers on loans for purchase ofland and buildings.......................................................
Other (one company)...................................................
Total.................................................................................

¥22,367
9,794
38
32,199Fiscal year ended 31st March 2014
Nishi-Osaka Railway Co., Ltd. ...................................
Borrowers on loans for purchase ofland and buildings.......................................................
Other (one company)...................................................
Total.................................................................................

Millions of yen

Thousands of
U.S. dollars¥22,054$214,117

7,373
40
29,467

71,583388
286,087

8 CONSOLIDATED STATEMENTS OF INCOME① Closing inventory is the amount after write-down of book value due
to a decline in profitability. As a result, valuation loss of inventory
included in operating expenses and cost of sales were as follows.
2013

Millions of yen
2014

Thousands of U.S. dollars
2014¥2,807¥3,564$34,602② The breakdown of selling, general and administrative expenses isshown below.
Millions of yen
2013
2014

Personnel expenses.........................
Expenses.................................................
Taxes..........................................................
Depreciation andamortisation.......................................
Amortisation of goodwill..............
Total...................................................

98 Hankyu Hanshin Holdings

Thousands of
U.S. dollars
2014¥16,372
13,454651¥15,297
11,224715$148,515
108,971
6,942

1,020
2,875
34,375829
2,916
30,9838,049
28,311
300,806

Annual Report 2014

③ The retirement benefit expenses and amounts of allowance and provision included in the costs of revenues from operations are shown
below.
Millions of yen
2013
2014

Retirement benefit expenses.....
Special allowancefor doubtful receivables..............
Provision for bonuses.....................

Thousands of
U.S. dollars
2014¥8,620¥7,067$68,612

140
4,116

94
4,415

913
42,864④ The breakdown of the gain on sales of noncurrent assets is as follows.
Fiscal year ended 31st March 2013
Millions of yen

Land, etc. .............................................................................

¥806

Fiscal year ended 31st March 2014
Land, etc. .............................................................................

Millions of yen

Thousands of
U.S. dollars¥8,508$82,602

Notes to the Consolidated Financial Statements⑤ Loss on impairment of fixed assets
Fiscal year ended 31st March 2013
The Group recorded a loss on impairment of fixed assets for the following
asset groups.
Use

Property for rent
Total: 8
Gardens, etc.
Total: 3
Working assets, etc.
Total:14

Type of assets

RegionLand, etc.,

Kyoto,etc.

Buildings andHyogo
structures, etc.
Tokyo,
Land, etc.,
etc.

Millions ofyen¥1,7668742,761(a) Method of grouping assets
The grouping of assets is based on the minimum unit that generates a cash
flow that is generally independent of the cash flows of other assets or asset
groups.

Fiscal year ended 31st March 2014
The Group recorded a loss on impairment of fixed assets for the following
asset groups.
Use

Gardens, etc.
Total: 2
Property for rent
Total: 6
Working assets, etc.
Total: 24

Type of assets

RegionMillions ofyen

Thousands of
U.S. dollars

Land, etc.

Hyogo

¥1,214$11,786

539

5,233

542

5,262

Hyogo,etc.
Buildings and Hyogo,
structures, etc. etc.
Land, etc.

(a) Method of grouping assets
The grouping of assets is based on the minimum unit that generates a cash
flow that is generally independent of the cash flows of other assets or asset
groups.

(b) Procedure up to the recognition of a loss on impairment of fixed assets
The book values of the fixed assets groups, the market values of whichhave been declining sharply from their book values due to a continuous
decrease in land value, and those that have continuously resulted in operating losses and whose profitability is unlikely to recover in the future werereduced to the recoverable amount. The reduction has been recorded as“Loss on impairment of fixed assets” in the amount of ¥5,402 million under
extraordinary loss.

(b) Procedure up to the recognition of a loss on impairment of fixed assets
The book values of fixed assets groups for which a decision for dismantlement has been taken, those whose market values have been declining
sharply from their book values due to a continuous decrease in land value,
and those that have continuously resulted in operating losses and whose
profitability is unlikely to recover in the future were reduced to the recoverable amount. The reduction has been recorded as “Loss on impairmentof fixed assets” in the amount of ¥2,297 million ($22,301 thousand) under
extraordinary loss.

(c) Breakdown of the loss on impairment(c) Breakdown of the loss on impairment

Type of assets

Millions of yen

Land.........................................................................................
Buildings and structures.............................................
Machinery, equipment and vehicles...................
Construction in progress............................................
Other.......................................................................................
Intangible assets..............................................................
Total.........................................................................................

¥3,307
1,503
18
287
144
140
5,402

Millions of yen

Thousands of
U.S. dollars

Land.........................................................................................
Buildings and structures.............................................
Machinery, equipment and vehicles...................
Other.......................................................................................
Intangible assets..............................................................
Total.........................................................................................

¥1,392
793
67
39
4
2,297

$13,515
7,699
650
379
39
22,301(d) Method of determining the recoverable value
The recoverable value is based on the net sale value or value in use.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or fixed asset tax assessment values. The value in use isbased on the discounted future cash flow, mainly used 4.0% as a discountrate.

Hankyu Hanshin Holdings

Annual Report 2014

Section5

Financial Section andCorporate Data(d) Method of determining the recoverable value
The recoverable value is based on the net sale value or value in use.
The net sale value is determined by rationally adjusting the expectedsale prices, appraised values based on the Japanese Real Estate Appraisal
Standards, and/or fixed asset tax assessment values. The value in use isbased on the discounted future cash flow, mainly used 4.0% as a discountrate.

Type of assets

99

9 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME① Reclassification adjustments and tax effects relating to other comprehensive income
2013

2014

Thousands of
U.S. dollars
2014¥10,349(959)
9,389(2,654)
6,735¥6,922(72)
6,849(2,405)
4,443$67,204(699)
66,495(23,350)
43,136

1,165
311
1,476
(576)
900

(755)
221
(533)
239
(293)

(7,330)2,146(5,175)2,320(2,845)

—
—
—
—
—

—
—
—
(15)
(15)

—
—
—
(146)
(146)

1,287
—
1,287
—
1,287

2,174
6
2,180
—
2,180

21,107
58
21,165—
21,165

4,182
19
4,201
13,124

1,718
(14)
1,704
8,019

16,680(136)
16,54477,854

Millions of yen

Valuation difference on available-for-sale securities:
Increase (decrease) during the year......................................................................................................................................
Reclassification adjustments......................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................
Tax (expense) or benefit.......................................................................................................................................................
Valuation difference on available-for-sale securities...........................................................................................
Deferred gains or losses on hedges:
Increase (decrease) during the year......................................................................................................................................
Reclassification adjustments......................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................
Tax (expense) or benefit.......................................................................................................................................................
Deferred gains or losses on hedges..............................................................................................................................
Revaluation reserve for land:
Increase (decrease) during the year......................................................................................................................................
Reclassification adjustments......................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................
Tax (expense) or benefit.......................................................................................................................................................
Revaluation reserve for land...............................................................................................................................................
Foreign currency translation adjustments:
Increase (decrease) during the year......................................................................................................................................
Reclassification adjustments......................................................................................................................................................
Subtotal, before tax..................................................................................................................................................................
Tax (expense) or benefit.......................................................................................................................................................
Foreign currency translation adjustments................................................................................................................
Share of other comprehensive income of associates accounted for using equity method:
Increase (decrease) during the year......................................................................................................................................
Reclassification adjustments......................................................................................................................................................
Share of other comprehensive income of associates accounted for using equity method.....
Total other comprehensive income.....................................................................................................................

10 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS① Items related to types and total number of shares issued and types and number of treasury stock sharesFiscal year ended 31st March 2013
No. of shares issued
Common stock
Total
Treasury stock, at cost
Common stock (Notes 1 and 2)
Total(Thousands of shares)

No. of shares as of 1st April 2012

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2013

1,271,406
1,271,406

—
—

—
—

1,271,406
1,271,406

10,27910,279

186
186

24
24

10,441
10,441(Overview of reasons for fluctuations)
Notes:
1. The increase of 186 thousand shares of treasury stock is due to the purchase of odd-lot shares.
2. The decrease of 24 thousand shares of treasury stock is due to the sale of odd-lot shares.

Fiscal year ended 31st March 2014
No. of shares issued
Common stock
Total
Treasury stock, at cost
Common stock (Notes 1 and 2)
Total

100 Hankyu Hanshin Holdings(Thousands of shares)
No. of shares as of 1st April 2013

Increase in number of shares

Decrease in number of shares

No. of shares as of 31st March 2013

1,271,406
1,271,406

—
—

—
—

1,271,406
1,271,406

10,441
10,441

692
692

76
76

11,057
11,057

Annual Report 2014

Notes to the Consolidated Financial Statements(Overview of reasons for fluctuations)
Notes:
1. The increase of 692 thousand shares of treasury stock includes an increase of 401 thousand shares due to the purchase of shares from shareholders whose whereabouts is
uncertain and an increase of 291 thousand shares due to the purchase of odd-lot shares.
2. The decrease of 76 thousand shares of treasury stock is due to a decrease of 64 thousand shares in conjunction with the exercise of stock-option rights and a decrease of 12
thousand shares due to the sale of odd-lot shares.

② Items related to subscription rights to sharesFiscal year ended 31st March 2013

Classification
The Company(Parent company)

Breakdown of new sharesubscription rights
Subscription rights as
stock options
Total

Type of sharessubject to sharesubscription rights——

Number of shares subject to share subscription rights
As of 1st
As of 31st
April 2012
Increase
Decrease
March 2013
—
—

—
—

—
—

Balance as of 31st March 2013
(Millions of yen)

—
—

¥112
112

Fiscal year ended 31st March 2014

Classification
The Company(Parent company)

Breakdown of new sharesubscription rights
Subscription rights as
stock options
Total

Type of sharessubject to sharesubscription rights——

Number of shares subject to share subscription rights
As of 1st
As of 31st
April 2013
Increase
Decrease
March 2014
—
—

—
—

—
—

Balance as of 31st March 2014
(Thousands of(Millions of yen) U.S. dollars)

—
—

¥208
208

$2,0192,019③ Items related to dividends
Fiscal year ended 31st March 2013(a) Dividends paid
(Resolution)
14th June 2012
General meeting ofshareholders

Type of shares

Dividends paid
(Millions of yen)

Dividend per share(Yen)

Record date

Effective dateCommon stock¥6,334¥5

31st March 2012

15th June 2012(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date
(Resolution)
14th June 2013
General meeting ofshareholders

Type of shares

Dividends paid
(Millions of yen)

Source of dividends

Dividend per share(Yen)

Record date

Effective dateCommon stock¥6,333Retained earnings¥5

31st March 2013

17th June 2013

Fiscal year ended 31st March 2014(a) Dividends paid

Type of shares

Dividends paid
(Millions of (Thousands ofyen)
U.S. dollars)

5

Dividend per share(Yen)(U.S. dollars)

Record date

Effective dateCommon stock¥6,333$61,485

¥  5

$0.05

31st March 2013

17th June 2013

Common stock

3,166

30,7382.5

0.02

30th September 2013

3rd December 2013

Financial Section andCorporate Data

(Resolution)
14th June 2013
General meeting ofshareholders
31st October 2013
Board of Directors

Section(b) Dividends whose effective date falls in the fiscal year following the fiscal year of the record date

(Resolution)
13th June 2014
General meeting ofshareholders

Type of shares
Common stock

Dividends paid
(Millions of (Thousands ofyen)
U.S. dollars) Source of dividends¥4,431$43,019

Retained earnings

Dividend per share(Yen)(U.S. dollars)

Record date

Effective date

¥3.5

$0.03

31st March 2014

16th June 2014

Hankyu Hanshin Holdings

Annual Report 2014101

11 CONSOLIDATED STATEMENTS OF CASH FLOWS① Relationship between cash and cash equivalents at fiscal year-end
and amounts shown on consolidated balance sheets
Millions of yen
2013
2014

Cash and deposits
in the consolidatedbalance sheets..................................
Deposits with maturities
over 3 months...................................
Cash and cash equivalentsin the cash flow statements.....

Thousands of
U.S. dollars
2014¥26,602¥25,368$246,291(1,020)(871)(8,456)25,581

24,497

237,835② M ajor items of assets and liabilities of a company that has been
excluded from the scope of consolidation due to the sale of its sharesFiscal year ended 31st March 2013
Hotel New Hankyu Kochi Co., Ltd.

Millions of yen

Current assets....................................................................
Noncurrent assets ..........................................................
Current liabilities .............................................................
Long-term liabilities.......................................................

¥  876
3,038
664
5,385

Fiscal year ended 31st March 2014
Book 1st. Corporation

Current assets....................................................................
Noncurrent assets ..........................................................
Current liabilities .............................................................
Long-term liabilities.......................................................

Millions of yen

Thousands of
U.S. dollars¥5,963
2,619
4,994
25

$57,893
25,42748,485243

12 LEASE TRANSACTIONS<As lessee>① Operating lease transactions<As lessor>① Operating lease transactions
Millions of yen
2013
2014

Future lease payments
Due within one year................
Due after one year....................
Total...........................................

¥ 2,363
11,335
13,699¥ 3,799
13,787
17,586

Thousands of
U.S. dollars
2014$ 36,883
133,854
170,738

Millions of yen
2013
2014

Future lease payments
receivables
Due within one year................
Due after one year....................
Total...........................................

¥  4414,618
5,060¥  486
4,539
5,025

Thousands of
U.S. dollars
2014$ 4,718
44,06848,78613 FINANCIAL INSTRUMENTS① Matters regarding the conditions of financial instruments(a) 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 raises funds mainly
through loans from financial institutions, bonds and commercial paper.
Derivative transactions are used to avoid risk, as discussed later, and it is ourpolicy to refrain from speculative transactions.
(b) Details of the financial instruments used, the risk involved, and the risk
management system
Marketable and investment securities consist mainly 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 the risk
management system is 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 balance bycustomer, 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 assets and liabilities denominated by foreign currency are
exposed to exchange rate fluctuation risk (market risk), which is hedged
through forward exchange contracts.
Long-term debt and bonds are used mainly to raise the long-term
funds necessary for capital investment plans, and short-term borrowingsand commercial paper are used mainly to raise short-term funds for working capital. Some floating-rate debt is exposed to interest rate fluctuation

102 Hankyu Hanshin Holdings

Annual Report 2014

risk (market risk). Exposure to interest rate fluctuation risk is limited by fixing
interest rates through interest rate swap transactions. In addition, there isliquidity risk that payment will not be made by the due date. Liquidity risk islimited by the timely preparation of financing plans and proper fund management. In addition, surplus funds of the Group companies are concentrated and used effectively through centralisation of Group funds by using
the cash pool system, etc. Immediate fund raising from financial institutions
became possible through the establishment of backup financing such ascommitment lines. In addition, the Company maintained a proper balance
between direct financing and indirect financing and diversified raisingfunds by using multiple financial institutions, thus securing liquidity.
Regarding the use of derivative transactions, internal regulations prescribe the division of duties and transaction limits. With respect to derivativetransactions, the main purpose of interest rate swap transactions is to hedge
the interest rate fluctuation risk involved in certain loans. Forward exchange
contracts are used mainly to hedge exchange rate fluctuation risk involvedin a portion of foreign currency denominated assets and liabilities. These
derivative transactions involve credit risk because, if the other party to atransaction defaults on debts based on contracted conditions, or becomesbankrupt, the benefit that would have been obtained in the future if thetransaction had continued will not be enjoyed. However, credit risk is limited
by carrying out transactions only with financial institutions with high ratings.
More information regarding the means and objectives of hedging,hedging policy, and the method of evaluating the effectiveness of hedges
related to hedge accounting for derivative transactions, is described in“④ Items related to accounting treatment and standards” “(g) Significant
hedge accounting methods” outlined in “ 2 BASIS OF PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS.”

Notes to the Consolidated Financial Statements② Matters regarding fair values of financial instruments
Book value, fair value and the differences between them as of the end of the previous fiscal year and current fiscal year are as shown below.
Millions of yen
Book value(a) Cash and deposits............................ ¥   26,602(b) Trade receivables..............................
75,181(c) Securities...............................................
48,469Total assets...........................................
150,253(d) Trade payables...................................
44,110(e) Short-term borrowings (*1).......
167,778(f) Bonds (*2)..............................................
122,000(g) Long-term debt (*1).......................
824,205
Total liabilities..................................... 1,158,094(h) Derivative transactions.................
—

2014
Fair value

2013
Fair value

DifferenceBook value¥   26,602
75,181
48,469150,253
44,110167,778
126,564
840,350
1,178,803(12,129)¥     —
—
0
0
—
—
4,564
16,14420,709—¥   25,368 ¥   25,368
80,06380,06355,62355,623161,055
161,055
42,94342,943
154,616
154,616
122,000
125,860
743,988763,430
1,063,549 1,086,851—(8,595)Difference

Thousands of U.S. dollars
2014Book value
Fair value
Difference¥     —
—
0
0
—
—
3,860
19,441
23,302—$   246,291 $   246,291 $      —777,311
777,311—
540,029
540,0290
1,563,641 1,563,641
0416,922416,922—
1,501,126 1,501,126—
1,184,466 1,221,942
37,476
7,223,184 7,411,942
188,748
10,325,718 10,551,951
226,233—(83,447)—(*1) Current portion of long-term debt is included in (g) Long-term debt.
(*2) Current portion of bonds is included.
(Note 1) Method for calculating the fair values of financial instruments and matters regarding securities and derivative transactions(a) Cash and deposits, (b) Trade receivables
The fair values of these are almost equal to their book values because they will be settled within a short period of time. As a result, their fair values are based on their book values.
(c) Securities
The fair values of stocks are based on prices quoted by stock exchanges, and the fair values of bonds are based on prices quoted by stock exchanges or prices presented bytrading financial institutions. Securities categorised by the purpose for which they are held are described in “ 14 SECURITIES.”(d) Trade payables, (e) Short-term borrowings
The fair values of these are almost equal to their book values because they will be settled within a short period of time. As a result, their fair values are based on their book values.
(f) Bonds
The fair values of bonds issued by the Company and some of its consolidated subsidiaries are based on market prices.
(g) 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 is assumed forthe introduction of similar new debt. The fair values of floating-rate long-term debt are based on their book values because the fair values of floating-rate long-term debts reflectmarket interest rates within a short period of time and closely approximate their book values.
(h) Derivative transactions
Described in “ 15 DERIVATIVES.”(Note 2) The book value of financial instruments whose fair value is extremely difficult to ascertain
Millions of yen
2013
2014

Classification

Available-for-sale securities:
Non-listed equity securities..........................................................................................................................................................................................
Investments in limited liability investment partnerships and similar investments....................................................................
Negotiable certificates of deposit.............................................................................................................................................................................
Total.....................................................................................................................................................................................................................................

¥ 4,868
3,075
13,91021,853¥ 4,832
2,265
13,115
20,213Thousands of
U.S. dollars
2014$ 46,913
21,990127,330
196,243(Note 3) The securities of nonconsolidated subsidiaries and affiliated companies are not included in (c) Securities.
(Note 4) Supplementary explanation regarding fair values of financial instruments
The fair value of financial instruments is based on market price. If market price are not available, the fair value of financial instruments is 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“ 15 DERIVATIVES” does not indicate the market risk involved in derivative transactions themselves.

Hankyu Hanshin Holdings

Annual Report 2014

5

Financial Section andCorporate Data

It is extremely difficult to ascertain the fair values of these because market prices are not available and future cash flows cannot be estimated. As a result, they are not included in(c) Securities.

Section103

(Note 5) Redemption and repayment schedule of monetary claims and securities with maturities

Fiscal year ended 31st March 2013
Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due within
one year

Cash and deposits..................................................
Trade receivables....................................................
Securities:
Held-to-maturity debt securities(government bonds, etc.).......................
Available-for-sale securities withmaturities (government bonds).........
Total................................................................

Due after
ten years¥ 26,602
75,181

¥—
—

¥ —
—

¥—
—

5

9

—

—

—
101,789

46
56

352
352

—
—

Fiscal year ended 31st March 2014
Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due within
one year

Cash and deposits..................................................
Trade receivables....................................................
Securities:
Held-to-maturity debt securities(government bonds, etc.).......................
Available-for-sale securities withmaturities (government bonds).........
Total................................................................

Due after
ten years

Due within
one yearThousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years

Due after
ten years¥ 25,368
80,063

¥—
—

¥ —
—

¥—
—

$  246,291
777,311

$ —
—

$   —
—

$—
—

9

—

—

—

87

—

—

—

8
105,449

37
37

390
390

—
—

78
1,023,777

359
359

3,786
3,786

—
—

(Note 6) Amount of planned redemption and repayment of bonds and long-term debt after the consolidated closing dateFiscal year ended 31st March 2013

Bonds.............................................................................
Long-term debt.......................................................
Total........................................................................

Due within
one year

Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due after
ten years¥ 10,000
186,580
196,580¥ 60,000
345,860
405,860¥     —
125,273
125,273

Due within
one year

Millions of yen
Due after one Due after five
year through years throughfive years
ten years

Due after
ten years

Due within
one yearThousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years¥ 20,000
158,688
178,688¥ 40,000
233,975
273,975¥     —
157,541
157,541$  194,175
1,540,660
1,734,835$  388,350
2,271,602
2,659,951¥ 52,000
166,491
218,491

Fiscal year ended 31st March 2014

Bonds.............................................................................
Long-term debt.......................................................
Total........................................................................

¥ 62,000
193,783
255,783$  601,942
1,881,388
2,483,330

Due after
ten years$       —1,529,524
1,529,524

14 SECURITIES① Held-to-maturity debt securities
Millions of yen
Classification

Securities with fair value
exceeding book value.........................
Securities with fair value notexceeding book value.........................
Total..........................................................

104 Hankyu Hanshin HoldingsBook value

Difference

¥ 0

¥ 9

¥ 9

¥ 0

$87

$87

$ 0

—
0

—
9

—
9

—
0

—
87

—
87

—
0

Book value

Difference

¥ 9

¥ 9

5
14

5
14

Annual Report 2014

Thousands of U.S. dollars
2014Book value
Fair value
Difference

2014
Fair value

2013
Fair valueNotes to the Consolidated Financial Statements② Available-for-sale securities
Millions of yen

Classification

Securities with book value
exceeding acquisition cost:(a) Equity securities................................
(b) Bonds.......................................................
(c) Other........................................................
Subtotal..................................................
Securities with book value notexceeding acquisition cost:(a) Equity securities................................
(b) Bonds.......................................................
Subtotal..................................................
Total..................................................

Book value

2014
Acquisition
cost

Difference

Thousands of U.S. dollars
2014
Acquisition
Book value
cost
Difference¥11,056
19
1
11,077¥35,406426—
35,833¥22,112409—
22,522¥13,29317—
13,310$343,748
4,136—
347,893$214,680
3,971—
218,660$129,058
165—
129,223(14,910)—(14,910)(3,833)

19,77010
19,78055,61330,093
10
30,10352,625(10,323)(0)(10,323)
2,987

191,94297
192,039
539,932

292,16597292,262
510,922(100,223)(0)(100,223)
29,000Book value

2013
Acquisition
cost

Difference¥26,178398
4
26,581¥15,121379
3
15,503

21,872—
21,87248,45436,783—36,78352,287③ Available-for-sale securities sold during previous fiscal year and current fiscal year
Millions of yen

Classification

Amount sold2013
Total gains
on saleEquity securities.........................................

¥4,411¥1,234

Total losses
on sale¥42

Amount sold2014
Total gains
on saleTotal losses
on sale

¥663

¥574

¥4

Thousands of U.S. dollars
2014
Total gains
Total losses
Amount soldon saleon sale$6,437$5,573$39

15 DERIVATIVES① Derivative transactions for which hedge accounting has not been applied
No items② Derivative transactions for which hedge accounting has been applied(a) Currency
Fiscal year ended 31st March 2013

Classification

Type

Trade
receivablesTradepayablesContract
amountFair value(Note)¥    173¥——¥    0014,290
7,581
26
1,677
680
149
340
81
10
42
540
25,442

—
—
—
—
—
—
—
—
—
—
—
—

1,248
761
(0)
155
33
26
36
(1)
(0)
(0)
(29)
2,230

Hankyu Hanshin Holdings

Section5

Financial Section andCorporate Data

Forward exchange contracts
Sell contract
U.S. dollar
Japanese yen
Buy contract
Euro
Designation
U.S. dollar
of forward
Pound sterlingexchange
Swiss franc
contracts,
Canadian dollar
etc.
New Zealand dollar
Australian dollar
Hong Kong dollar
Singapore dollar
Thai baht
Japanese yen
Total

Main hedged
items

Millions of yen
Portion ofcontract amountexceeding
one year

Annual Report 2014105

Fiscal year ended 31st March 2014

Classification

Main hedged
items

Type

Forward exchange contracts
Sell contract
U.S. dollar
Japanese yen
Buy contract
Euro
Designation
U.S. dollar
of forward
Pound sterlingexchange
Swiss franc
contracts,
Canadian dollar
etc.
New Zealand dollar
Australian dollar
Hong Kong dollar
Singapore dollar
Thai baht
Japanese yen
Total

Trade
receivablesTradepayablesContract
amountMillions of yen
Portion ofcontract amountexceeding
one year

Fair value(Note)

Thousands of U.S. dollars
Portion ofcontract amountContract
exceedingFair value
amountone year(Note)¥   42113¥——¥    1(0)$  4,087
126$——$    10(0)

19,533
10,030
26
2,057
846
199
396
90
10
89
690
34,405

—
—
—
—
—
—
—
—
—
—
—
—

913
237
0
114
(0)
22
17
0
0
(0)
(24)
1,282

189,641
97,379252
19,971
8,214
1,932
3,845
874
97
864
6,699
334,029

—
—
—
—
—
—
—
—
—
—
—
—

8,864
2,301
0
1,107
(0)
214
165
0
0
(0)
(233)
12,447

Note: Fair value calculation
Fair value is based mainly on prices quoted from counterparty financial institutions.

(b) Interest rate
Fiscal year ended 31st March 2013

Classification

Type

Deferral hedge Interest rate swap
contracts
accounting andexceptional
Payable fixed rate/accounting ofReceivable floatinginterest rate swaps
rate
Total

Main
hedgeditems

Millions of yen
Portion ofcontract amountexceedingContract amount
one year

Fair value(Note)

Long-term
debt¥462,618
462,618¥345,727
345,727¥(14,359)(14,359)

Contract
amountMillions of yen
Portion ofcontract amountexceeding
one year

Fair value(Note)¥342,802
342,802¥264,440
264,440¥(9,878)(9,878)

Fiscal year ended 31st March 2014

Classification

Type

Deferral hedge Interest rate swap
contracts
accounting andexceptional
Payable fixed rate/accounting ofReceivable floatinginterest rate swaps
rate
Total

Main
hedgeditems

Long-term
debt

Note: Fair value calculation
Fair value is based mainly on prices quoted from counterparty financial institutions.

106 Hankyu Hanshin Holdings

Thousands of U.S. dollars
Portion ofcontract amountContract
exceedingFair value
amountone year(Note)

Annual Report 2014

$3,328,175
3,328,175$2,567,379
2,567,379$(95,903)(95,903)

Notes to the Consolidated Financial Statements

16 RETIREMENT BENEFITS
Fiscal year ended 31st March 2013
① Overview of retirement benefit plans
Some consolidated subsidiaries of the Company provide two types ofdefined benefit plans, defined benefit pension plans and unfunded lumpsum payment plans. Hankyu Corporation has also established a retirement
benefits trust.
② Items related to retirement benefit obligations
Millions of yen

1) Retirement benefit obligations................................................................ ¥(127,240)
2) Plan assets.............................................................................................................
64,541
3) Unfunded retirement benefit obligations (1+2)...........................
(62,699)
4) Unrecognised actuarial differences.......................................................
7,251
5) Unrecognised prior service costs............................................................
(1,120)
6) Book value (net) (3+4+5).............................................................................
(56,568)
7) Prepaid pension costs....................................................................................
2,871
8) Provision for retirement benefits (6–7)...............................................
(59,439)
Note: Certain consolidated subsidiaries use simplified methods for calculating retirement benefit obligations.

③ Items related to retirement benefit expenses
Millions of yen

1) Service costs (Note 1).....................................................................................
2) Interest costs on retirement benefit obligations..........................
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)....................................

¥6,323
2,260
(910)
1,453
(292)
8,834

Notes:
1. Retirement benefit expenses of consolidated subsidiaries that use a simplified
method are recorded in 1) Service costs.
2. In addition to the retirement benefit expenses shown above, the Company madeextra retirement payments of ¥139 million, mainly recorded as an extraordinary loss.

④ Items related to basis for calculating retirement benefit obligations, etc.
(a) P eriodic distribution method for estimated amount of retirement
benefits
Allocated equally to each service year using the estimated number of total
service years(c) Expected rate of return on plan assets
Mainly 2.0%(d) Number of years over which prior service costs are written off
Mainly 10 years (amortised using the straight-line method over a period
not exceeding the average remaining service period of active employees)(e) Number of years over which actuarial differences are written off
Mainly 10 years (amortised using the straight-line method over a period
not exceeding the average remaining service period of active employees
and recognised in expenses starting from the following fiscal year)② Defined benefit plan(a) Movement in retirement benefit obligations
Balance at the beginning of the year.................
Service costs...............................................................
Interest costs..............................................................
Actuarial loss (gain)................................................
Retirement benefits paid....................................
Loss (gain) in prior service costs.....................
Other...............................................................................
Balance at the end of the year................................

Millions of yen

Thousands of
U.S. dollars¥127,240
6,414
2,011
(378)
(7,460)(2,003)
440
126,263$1,235,340
62,272
19,524(3,670)(72,427)(19,447)
4,272
1,225,854

Note: Amounts in the table include the retirement benefit obligations of consolidated
subsidiaries using simplified methods.

(b) Movements in plan assets
Balance at the beginning of the year.................
Expected return on plan assets......................
Actuarial loss (gain)................................................
Contribution paid by the employer............
Retirement benefits paid....................................
Balance at the end of the year................................

Millions of yen

Thousands of
U.S. dollars¥64,541
1,330
2,831
4,281
(4,419)68,565$626,612
12,91327,48541,563(42,903)
665,680

Note: Amounts in the table include the plan assets of consolidated subsidiaries using
simplified methods.

(c) At the end of the year, reconciliation from retirement benefit obligations
and plan assets to net defined benefit liabilities (assets) recorded on the
consolidated balance sheets
Funded retirement benefit obligations.............
Plan assets............................................................................
Unfunded retirement benefit obligations.......
Total net defined benefit liability and asset....
Net defined benefit liability......................................
Net defined benefit assets.........................................
Total net defined benefit liability and asset....

Millions of yen

Thousands of
U.S. dollars¥64,845(68,565)(3,719)61,41857,69860,093(2,395)57,698$629,563(665,680)(36,107)596,291
560,175
583,427(23,252)
560,175

Section5

Financial Section andCorporate Data(b) Discount rate
Mainly 2.0%

Fiscal year ended 31st March 2014
① Overview of retirement benefit plans
Some consolidated subsidiaries of the Company provide a defined
benefit plan (defined benefit pension plan and lump sum payment plan)or a defined contribution plan. Hankyu Corporation has also established aretirement benefits trust.
In addition, some consolidated subsidiaries subscribe to the employees’ pension funds plan in the multi-employer plan. Among them, thecompany recorded as same as defined contribution plan when the amountof plan assets corresponding to contributions by the company cannot be
rationally calculated.

Note: Amounts in the table include the retirement benefit obligations and plan assetsof consolidated subsidiaries using simplified methods.

Hankyu Hanshin Holdings

Annual Report 2014107

(d) The breakdown of retirement benefit expenses
Service costs.......................................................................
Interest costs......................................................................
Expected return on plan assets..............................
Amortisation of actuarial differences..................
Amortisation of prior service costs.......................
Other.......................................................................................
Retirement benefit expenses...................................

Millions of yen

Thousands of
U.S. dollars¥6,4142,011(1,330)
577
(689)
288
7,272

$62,272
19,524(12,913)
5,602(6,689)2,796
70,602

Notes:
1. Amounts in the table include the retirement benefit expenses of consolidated
subsidiaries using simplified methods.
2. In addition to the retirement benefit expenses shown above, the Company madeextra retirement payments of ¥26 million, mainly recorded as an extraordinary loss.

(e) Remeasurements of defined benefit plans
The breakdown of items (prior to the deduction of the tax effect) is asfollows.
Unrecognised prior service costs .........................
Unrecognised actuarial differences.....................
Other.......................................................................................
Total.........................................................................................

Millions of yen

Thousands of
U.S. dollars¥(2,435)
3,464
71
1,101

$(23,641)
33,631689
10,689Note: The above relates to consolidated subsidiaries, and in addition to the above
items, the remeasurements of defined benefit plans include unrecognised items(the amount corresponding to equity) of equity method affiliates.

108 Hankyu Hanshin Holdings

Annual Report 2014(f) Items relating to plan assets
I. Breakdown of the major plan assets
The ratios of the major types of assets to the total plan assets were as
follows.
%

Bonds.......................................................................................................................
Equity securities.................................................................................................
Cash and deposits............................................................................................
General accounts of life insurance........................................................
Other........................................................................................................................
Total..........................................................................................................................

30
32
6
31
1
100

Note: The retirement benefits trust established for the Company’s pension plan
constitutes 7% of the plan assets total.

II. Method of determining the long-term expected rate of return on plan assets
Current and target asset allocations, historical and expected returns on
various categories of plan assets have been considered in determining
the long-term expected rate of return on plan assets.
(g) Items related to actuarial assumptions
The major actuarial assumptions the end of the current fiscal year
Discount rate: Mainly 2.0%
Long-term expected rate of return on plan assets: Mainly 2.0%
③ Defined contribution plan
The required contribution for the consolidated subsidiaries’ defined
contribution plan (including employees' pension funds plan in the multiemployer plan to which the same accounting method is applied as for thedefined contribution plan) is ¥45 million ($437 thousand).

Notes to the Consolidated Financial Statements

17 STOCK OPTIONS, ETC.
① Cost amount and account associated with stock options
Millions of yen
2013
2014

Operating expenses andcost of sales of transportationand cost of sales..............................

¥79

¥118

I. Number of stock options
Thousands of
U.S. dollars
2014$1,146② Details and size of stock options and changes therein(a) Details of stock options


Resolution date: 16th June 2011

Classification and number of
10 directors of subsidiaries
eligible personnel
Class and number of shares (Note) 104,000 shares of common stock
Grant date
25th July 2011
Vesting conditions
Not definedService period
Not defined
Exercise period
From 26th July 2011 to 25th July 2041


Resolution date: 29th March 2012

Classification and number of
11 directors of subsidiaries
eligible personnel
Class and number of shares (Note) 112,000 shares of common stock
Grant date
25th April 2012
Vesting conditions
Not definedService period
Not defined
Exercise period
From 26th April 2012 to 25th April 2042
Resolution date: 14th June 2012

Classification and number of
8 directors of subsidiaries
eligible personnel
Class and number of shares (Note) 102,000 shares of common stock
Grant date
25th July 2012
Vesting conditions
Not definedService period
Not defined
Exercise period
From 26th July 2012 to 25th July 2042
Resolution date: 29th March 2013

Note: Indicated in the equivalent number of shares.

(b) Size of stock options and changes therein
The covered stock options are those which existed during the fiscal year
ended 31st March, 2014 the number of which is indicated in the equivalent
number of shares.

29th March2012

14th June2012

29th March
2013

—
—
—
—
—

—
—
—
—
—

—
—
—
—
—

—
192,000—
192,000—

104,000—
32,000—72,000112,000—
32,000—80,000102,000———
102,000—
192,000——
192,000

Resolution date

16th June
2011

29th March2012

14th June2012

29th March
2013

Exercise price

¥  1

¥  1

¥  1

Average stock priceat exercise
Fair value unit priceat the grant date

¥530

¥530

¥ —

¥311

¥361

¥387

¥  1
[US$0.01]¥ —[US$  —]
¥615
[US$5.97]

Before vested (shares)
At the end of theprevious fiscal year
GrantedExpired
VestedUnvested
After vested (shares)
At the end of theprevious fiscal year
VestedExercised
Expired
Unexercised
II. Unit price information③ Estimation method for fair value unit price of stock options
The following method was applied to fairly valuate the unit price of stock
options granted during the current fiscal year.
(a) Valuation method used: Black–Scholes model(b) Major basic data and estimation methodResolution date: 29th March 2013

Volatility of stock price (Note 1)
Expected life (Note 2)
Expected dividends (Note 3)
Risk-free interest rate (Note 4)

19.72%
3.729 years¥5 [US$0.05] / share
0.177%

Notes:
1. Volatility of stock price is based on the closing prices in regular transactions for theCompany’s common stock on individual transaction dates during the period of
3.729 years (2nd August 2009 through 25th April 2013).
2. Expected life is based on the actual length of service of eligible directors of subsidiaries who had resigned in the past, as well as on the actual length of service of
eligible personnel as of the grant date.
3. Expected dividends are based on the actual dividends paid for the fiscal year ended
31st March 2012.
4. Risk-free interest rate is the yield of government bonds for the period corresponding to the expected life.

Section5

Financial Section andCorporate DataClassification and number of
18 directors of subsidiaries
eligible personnel
Class and number of shares (Note) 192,000 shares of common stock
Grant date
25th April 2013
Vesting conditions
Not definedService period
Not defined
Exercise period
From 26th April 2013 to 25th April 2043

16th June
2011

Resolution date

④ Estimation method for the number of vested stock options
Since the stock options were vested on the grant date, vested and granted
stock options are the same in number.

Hankyu Hanshin Holdings

Annual Report 2014109

18 DEFERRED TAX① Significant components of the Company’s deferred tax assets andliabilities
Millions of yen
2013
2014

Deferred tax assets:
Loss on revaluation ofreal estate for sale...........................
Tax loss carryforwards.....................
Provision for
retirement benefits........................
Net defined benefit liability........
Loss on impairment of
fixed assets..........................................
Losses on revaluation of
investment securities...................
Loss on adjustment oftransferred profit and loss..........
Unrealised profit from assets.....
Provision for bonuses.....................
Enterprise taxes andbusiness office taxes.....................
Other.........................................................
Subtotal ofdeferred tax assets.................
Valuation allowance........................
Less amounts offset against
deferred tax liabilities...................
Total deferred tax assets.......
Deferred tax liabilities:
Gain on reversal of difference
from land revaluation...................
Revaluation of assets
on consolidation.............................
Net unrealised holding gains
on securities.......................................
Gain on valuation ofproperties ofbusiness reorganisation..............
Other.........................................................
Subtotal ofdeferred tax liabilities...........
Less amounts offset against
deferred tax assets..........................
Total deferred tax liabilities...
Net deferred tax liabilities....

Thousands of
U.S. dollars
2014¥ 30,055
14,881¥ 29,828
21,314$  289,592
206,932

20,949——21,008—203,961

38,766

11,440111,068

7,549

7,065

68,592

6,490
6,005
1,910

5,958
5,904
1,964

57,84557,32019,0681,039
17,487

1,156
13,663

11,223
132,650

145,135(46,361)

119,305(47,088)

1,158,301(457,165)(86,747)
12,026(61,573)
10,643(597,796)
103,330(128,476)(127,707)(1,239,874)(94,688)(93,987)(912,495)(17,840)(20,288)(196,971)(2,299)(3,469)(2,250)(6,550)(21,845)(63,592)(246,775)(250,783)(2,434,786)

86,747(160,028)(148,001)

61,573(189,210)(178,566)

597,796(1,836,990)(1,733,650)

Note: The Company reversed the “Surplus from land revaluation” when, as a result ofa (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 sameday). As a result, “Deferred tax liabilities relating to land revaluation” has beenrecorded as deferred tax liabilities starting from the fiscal year ended 31st March
2006.

② A reconciliation of the significant differences between statutory tax
rate and the effective tax rate reflected in the accompanying consolidated statements of income
Statutory tax rate.................................................................
(Adjustment)
Elimination of dividends
from consolidated subsidiaries................................
Amortisation of goodwill................................................
Valuation allowance..........................................................
Nondeductible expenses...............................................
Per capita amount of inhabitants tax.....................
Non taxable income..........................................................
Equity in (income) losses of affiliates.......................
Other...........................................................................................
Effective tax rate...................................................................

2013

2014

38.0%

38.0%

9.7
1.7
(2.6)
1.5
0.7
(10.4)
(2.6)
(1.9)
34.1

9.8
1.3
1.1
0.6
0.5
(11.0)
(1.7)
4.0
42.6

③ Amendments to the amount of deferred tax assets and liabilities due
to changes to the effective tax rate
The “Act for Partial Amendment of the Income Tax Act” (Act No. 10 of 2014)
was promulgated on 31st March, 2014, and the special corporate tax forreconstruction was not levied from the consolidated fiscal years beginning on or after 1st April, 2014. Also, the “Act on Local Corporation Tax”
(Act No.11 of 2014) was promulgated on 31st March, 2014. Instead of theresident tax rate being reduced from the consolidated fiscal year that will
begin on 1st April, 2015, the local corporation tax that is considered to bea national tax will be levied. In conjunction with this, with regards to thetemporary differences that is expected to be canceled in the consolidated
fiscal year that began on 1st April, 2014, the statutory tax rate used to calculate deferred tax assets and liabilities will be decreased from the previous
38.0% to 35.6%.
This change had an insignificant impact on the consolidated financial
statements for the fiscal year ended 31st March, 2014.

19 ASSET RETIREMENT OBLIGATIONS① Asset retirement obligations recorded in the consolidated balance
sheetsNone of the Group’s asset retirement obligations are recorded in the consolidated balance sheets.
For certain consolidated subsidiaries, instead of recording asset
retirement obligations as liability, a reasonable estimate of the amount ofdeposits from rental properties that cannot be finally recovered is made,and the portion for that fiscal year is recorded as expenses.

110 Hankyu Hanshin Holdings

Annual Report 2014

② A sset retirement obligations not recorded in the consolidatedbalance sheets(a) Asset retirement obligations related to the restoration of certain rental
assets to their original state
For certain consolidated subsidiaries, obligations arise in connection withthe restoration of offices, etc., to their original state at the end of tenancies
based on the rental contract. However, the period of the rental assets
involved is not stated with certainty, and there is currently no plans totransfer, etc. Accordingly, no reasonable estimate can be made of the corresponding asset retirement obligations, and the asset retirement obligations
corresponding to these undermined liabilities have not been recorded.

Notes to the Consolidated Financial Statements(b) Retirement obligations related to structures containing asbestos
Certain consolidated subsidiaries own structures containing asbestos.
However, they have mechanisms in place to prevent airborne dispersalof asbestos. At the present time, no definite dates have been set for the

demolition of the structures and no decisions have been made the mannerin which any demolition would be carried out. Consequently, it is not possible to reasonably estimate the related asset retirement obligations, andthe obligations corresponding to these liabilities have not been recorded.

20 RENTAL PROPERTY
Some consolidated subsidiaries own rental property, such as office buildings for lease and commercial facilities for lease in the Kita Ward of Osakaand other areas. Rental income related to such rental property in the fiscal
year ended 31st March, 2013, is ¥30,536 million (significant rental revenues
are recorded in revenues from operations and significant rental expenses
are recorded in costs of revenues from operations). Impairment loss totaling¥1,499 million and provision for loss on removal of property and equipmentof ¥4,391 million were recorded as extraordinary loss. Rental income related
to such rental properties in the fiscal year ended 31st March, 2014 is ¥30,417
million ($295,311 thousand) (significant rental revenues are recorded in revenues from operations and significant rental expenses are recorded in costsof revenues from operations). Gain on sales of noncurrent assets totaling¥8,093 million ($78,573 thousand) was recorded as extraordinary income.
Provision for loss on removal of property and equipment totaling ¥1,146
million ($11,126 thousand) was recorded as extraordinary loss.
Book value, increase/decrease and fair value are as follows:
Thousands ofMillions of yen
U.S. dollars
2013
2014
2014
Book value (Note 1):
Balance at the beginningof year............................................ ¥562,677¥671,176$6,516,272
Increase/decrease (Note 2)....
108,498
41,714404,990
Balance at the end of year....
671,176
712,891
6,921,272
Fair value at the end of year
(Note 3)..................................................
806,114855,359
8,304,456

Notes:
1. Book value is acquisition cost less accumulated depreciation and loss on impairment of fixed assets.
2. For the amounts of the fiscal year ended 31st March, 2013, the main increases wereacquisitions of real estate of ¥4,808 million and completion of development properties of ¥121,860 million. The main decreases were depreciation of ¥13,398 million
and impairment loss of ¥1,499 million. For the amounts of the fiscal year ended 31st
March, 2014, the main increases were acquisitions of real estate of ¥35,754 million($347,126 thousand), and completion of development properties of ¥32,553 million($316,049 thousand). The main decreases were depreciation of ¥15,009 million($145,718 thousand) and gain on sale of real estate of ¥10,875 million ($105,583
thousand).
3. Fair value as of end of the fiscal year is the appraisal value according to an outside
real estate appraiser based on Japanese Real Estate Appraisal Standards in the caseof key properties and the fair value based on indicators such as the assessed valueof noncurrent assets and road tax rating in the case of other properties.

21 SEGMENT INFORMATION

Section5

Financial Section andCorporate Data

① Segment information(a) Summary of reportable segment
The Company’s reportable segments are regularly reviewed, using the segment specific financial information available to enable the Board of Directors todetermine the allocation of management resources and evaluate business results.
The Group comprises six core businesses: “Urban Transportation,” “Real Estate,” “Entertainment and Communications,” “Travel,” “International
Transportation” and “Hotels.” The businesses are operated by five core companies: Hankyu Corporation, Hanshin Electric Railway Co., Ltd., Hankyu Travel
International Co., Ltd., Hankyu Hanshin Express Co., Ltd. and Hankyu Hanshin Hotels Co., Ltd., under the leadership of the Company, which manages the Group.
The nature of business in each reportable segment is as follows:
Urban Transportation: railway operations, automobile, retailing and advertising businesses
Real Estate: rental real estate, real estate sales and other businesses
Entertainment and Communications: sports related businesses, stage events, communications and media, and other businesses
Travel: travel services
International Transportation: international cargo services
Hotels: hotel ownership and management business(b) Method for calculating revenues from operations, income (loss), assets and other items for each reportable segment
The accounting treatment for each reportable business segment is based on practically the same methods described in “ 2 BASIS OF PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS.” in the recent securities report (filed on 17th June, 2013) and internal transactions (land and structure lease andrental transactions, etc.) calculated by management accounting at companies with businesses spanning multiple segments are recorded.
Income (loss) for each reportable segment refers to operating income (loss).
Intersegment revenues from operations and transfers are based on similar arms length third-party transaction data. Where no such data exist, calculations follow certain in-house rules.

Hankyu Hanshin Holdings

Annual Report 2014111

(c) Information regarding totals for revenues from operations, income (loss), assets and other items by reportable segment
Fiscal year ended 31st March 2013
Millions of yen
Reportable segment

Urban
Transportation

Revenues fromoperations:
I. Customers........................ ¥244,157
II. Intersegment.................
5,185
Total................................... 249,342
Segment income(loss)........................................
37,208Segment assets................... 760,596
Other items
Depreciation andamortisation...............
26,948
Increase in property
and equipment
and intangible
assets..............................
26,199Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other(Note 1)

Total

Amounts
appearingin theconsolidated
financial
Adjustment statements(Note 2)
(Note 3)¥  180,950
17,392
198,343¥ 95,669
7,025
102,695¥34,02264
34,086¥36,73114
36,745¥64,054643
64,697¥  655,584
30,325685,910¥26,145
9,899
36,045¥  681,730
40,225
721,955¥    709 ¥  682,439(40,225)—(39,516)
682,439

37,2781,016,188

11,238
141,616

2,451
71,804

1,809
32,672525
87,23290,512
2,110,110

307
45,53290,8192,155,642(2,898)125,365

87,921
2,281,007

16,424

7,607

624

673

2,194

54,474362

54,836(296)

54,54025,325

4,124

1,075

533

1,931

59,190401

59,592(79)

59,512

Notes:
1. The “Other” segment is a business segment not included in the reportable segments and includes construction, etc.
2. The main item in the adjusted amount of segment profit and loss was amortisation of goodwill of ¥(2,875) million (refers mainly to the amortisation of goodwill arising from the
management integration with Hanshin Electric Railway Co., Ltd. in the fiscal year ended 31st March, 2007).
In addition to the balance of unamortised goodwill of ¥35,986 million (refers mainly to the goodwill arising from the management integration with Hanshin Electric Railway Co.,
Ltd. in the fiscal year ended 31st March, 2007), the segment assets’ adjusted amount consists mainly of surplus working capital (cash and deposits); unallocated assets, such as
long-term investment funds (investment securities) and land, etc.; and intersegment eliminations at the Company, Hankyu Corporation and Hanshin Electric Railway Co., Ltd.
3. Segment profit and loss is adjusted with the operating income of the Consolidated Statements of Income.

Fiscal year ended 31st March 2014
Millions of yen
Reportable segment

Urban
Transportation

Revenues fromoperations:
I. Customers........................ ¥228,701
II. Intersegment.................
5,853
Total................................... 234,555
Segment income(loss)........................................
38,494
Segment assets................... 764,053
Other items
Depreciation andamortisation...............
25,951
Increase in property
and equipment
and intangible
assets..............................
27,522112 Hankyu Hanshin Holdings

Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other(Note 1)

Total

Amounts
appearingin theconsolidated
financial
Adjustment statements(Note 2)
(Note 3)¥  191,397
17,212
208,610¥101,048
9,301
110,350¥32,96144
33,006¥37,682
13
37,696¥63,057
637
63,695¥  654,850
33,064
687,914¥23,795
10,917
34,713¥  678,645
43,981
722,627¥    512 ¥  679,157(43,981)—(43,469)
679,157

38,0081,009,407

14,172
142,827

1,224
74,473

2,051
39,786809
85,73094,7602,116,279

849
46,094

95,6102,162,374(3,781)
124,554

91,8282,286,928

18,017

7,059

806

703

2,089

54,627349

54,977(503)

54,47443,451

5,561

1,178

578

1,817

80,109510

80,619103

80,722

Annual Report 2014

Notes to the Consolidated Financial Statements

Millions of yen
Reportable segment

Urban
Transportation

Revenues fromoperations:
I. Customers........................ $2,220,398
II. Intersegment.................
56,825
Total................................... 2,277,233
Segment income(loss).......................................
373,728
Segment assets.................. 7,417,990
Other items
Depreciation andamortisation...............
251,951
Increase in property
and equipment
and intangible
267,204
assets..............................

Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other(Note 1)

Total

Amounts
appearingin theconsolidated
financial
Adjustment statements(Note 2)
(Note 3)

$1,858,223
167,1072,025,340$  981,049
90,301
1,071,359$320,010
427
320,447$365,845
126
365,981$612,204
6,184
618,398$ 6,357,767
321,010
6,678,777$231,019
105,990
337,019$ 6,588,786
427,000
7,015,796$     4,971 $ 6,593,757(427,000)—(422,029) 6,593,757

369,0109,800,068

137,592
1,386,670

11,883723,039

19,913386,272

7,854
832,330

920,000
20,546,398

8,243
447,515928,252
20,993,922(36,709)
891,534
1,209,262 22,203,184

174,922

68,534

7,825

6,825

20,282

530,359

3,388

533,757(4,883)528,874

421,854

53,99011,437

5,612

17,641

777,757

4,951

782,709

1,000

783,709

Notes:
1. The “Other” segment is a business segment not included in the reportable segments and includes construction, etc.
2. The main item in the adjusted amount of segment profit and loss was amortisation of goodwill of ¥(2,916) million ($(28,311) thousand) (refers mainly to the amortisation of
goodwill arising from the management integration with Hanshin Electric Railway Co., Ltd. in the fiscal year ended 31st March, 2007).
In addition to the balance of unamortised goodwill of ¥33,511 million ($325,350 thousand) (refers mainly to the goodwill arising from the management integration with Hanshin
Electric Railway Co., Ltd. in the fiscal year ended 31st March, 2007), the segment assets’ adjusted amount consists mainly of surplus working capital (cash and deposits); unallocated assets, such as long-term investment funds (investment securities) and land, etc.; and intersegment eliminations at the Company, Hankyu Corporation and Hanshin
Electric Railway Co., Ltd.
3. Segment profit and loss is adjusted with the operating income of the Consolidated Statements of Income.

② Related information(a) Information about product and service categories
Information about product and service categories is the same as that
described in “① Segment information” “(c) Information regarding totals forrevenues from operations, income (loss), assets and other items by reportable segment.”(b) Information by region
I. Revenues from operations
Since over 90% of revenues from operations in the consolidated statements of income are revenues from external customers in Japan, adescription of regional breakdown is omitted.
II. Property and equipment
Since over 90% of the total value of property and equipment in the consolidated balance sheets relates to property and equipment in Japan, abreakdown by region is omitted.

Section5

Financial Section andCorporate Data(d) Items related to changes of reportable segments
From the fiscal year ended 31st March, 2014, the previous six reportable segments of “Urban Transportation,” “Real Estate,” “Entertainment
and Communications,” “Travel and International Transportation,” “Hotels”
and “Retailing” have been changed to the six segments of “Urban
Transportation,” “Real Estate,” “Entertainment and Communications,”“Travel,” “International Transportation” and “Hotels.”
This change occurred in conjunction with the Company’s revisingof some of its certain core businesses on 1st April, 2013, and the travel
operations and international transportation operations that were previously included in the “Travel and International Transportation” segment
have each become independent reportable segments, the “Retailing”
segment has been discontinued, and retailing operations have beentransferred to the “Urban Transportation” segment. In addition, Hankyu
Corporation’s advertising operations, which were previously included in
the “Entertainment and Communications” segment, have been transferredto the “Urban Transportation” segment.
Segment information for the fiscal year ended 31st March, 2013, hasbeen prepared and presented based on the reportable segments after theabove-described changes.

III. Information about important customers
No single external customer accounts for more than 10% of therevenues from operations reported in the consolidated statements ofincome, and so a description of them has been omitted.

Hankyu Hanshin Holdings

Annual Report 2014113

③ Information regarding loss on impairment of fixed assets by reportable segment
Fiscal year ended 31st March 2013
Millions of yen
Reportable segment

Urban
Transportation

Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other

Total

¥704

¥1,711¥1,135

¥—

¥—

¥404

¥3,956¥11¥3,968Loss on impairment of
fixed assets.....................................

Amounts
appearingin theconsolidated
Adjustment financial(Note)
statements¥1,433¥5,402

Fiscal year ended 31st March 2014
Millions of yen
Reportable segment

Urban
Transportation

Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other

Total

¥69

¥547

¥1,214

¥—

¥—

¥434

¥2,266¥—¥2,266

Loss on impairment of
fixed assets.....................................

Amounts
appearingin theconsolidated
Adjustment financial(Note)
statements¥30¥2,297

Millions of yen
Reportable segment

Amounts
appearingin theconsolidated
Adjustment financial(Note)
statements

Urban
Transportation

Real
EstateEntertainment &Communications

TravelInternational
Transportation

HotelsSubtotal

Other

Total

$670

$5,311$11,786$—$—$4,214$22,000$—$22,000

Loss on impairment of
fixed assets....................................

$291$22,301

Note: The amounts under “Adjustment” are the amounts for land etc., not allocated to business segments.

④ Information regarding amortisation of goodwill and the balance of unamortised goodwill by reportable segment
Omitted as the significance is negligible.
⑤ Information regarding gains from negative goodwill by reportable segment
Omitted as the significance is negligible.
22 RELATED PARTY TRANSACTIONS① Related party transactions(a) Transactions between the company submitting the consolidated financial statements and related parties
No items(b) Transactions between consolidated subsidiaries of the company submitting the consolidated financial statements and related parties
Directors and principal shareholders (only individual shareholders) of the company submitting the consolidated financial statements
Fiscal year ended 31st March 2013
Type

Name ofrelated party

Audit&
Supervisory
Haruo
Board
Sakaguchi
MemberAudit&
Supervisory
Junzo Ishii
Board
MemberCompany inwhich director
Tateishior close family
Sangyo Co.,
thereof holds
Ltd.
majority ofvoting rights

Address

Amount ofcapital(Millions of yen)

Business

Voting interest

Relationship withrelated party

Details oftransaction

Transaction
amounts(Millions of yen)

Item

Balance as of
31st March 2013
(Millions of yen)—

¥ —Auditor of
the Company

Directly
0.0%

Lease of realestateRent income¥46

Deposit¥33——

Auditor of
the Company

Directly
0.0%

Sale of
Sale ofcondominiums condominiums

27

—

—

None

Operation andmanagement of Operation andreal estate
management
fee for real
Concurrent post
estate(director)

35

Accounts
receivable

3

Ikeda City,Osaka

114 Hankyu Hanshin Holdings

100

Annual Report 2014

Real estatebusiness

Notes to the Consolidated Financial Statements

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, etc.
(1) The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.
(2) The terms and conditions of the sale of the condominiums were determined with reference to similar transactions in the neighbouring area.
(3) Director of the Company, Koichi Kobayashi, and his close family own 77% of the voting rights in Tateishi Sangyo Co., Ltd. Any decisions on operation and management of realestate are made by reference to neighborhood transactions.

Fiscal year ended 31st March 2014

Type

Name ofrelated party

Audit&
Supervisory
Board
Haruo
MemberSakaguchi
Company inwhich director
or close family
thereof holds
majority of Tateishi Sangyo
voting rights
Co., Ltd.

Address

Amount of capital(Millions of (Thousands ofyen)
U.S. dollars)

Transaction amounts(Millions of (Thousands ofyen)
U.S. dollars)

Business

Votinginterest

Relationship withrelated party

Lease ofreal estate
Rent income
Operation andmanagement ofreal estate
Operation andmanagement
Concurrent post fee for real
(director)
estate

—

¥ —

$ —

Auditor of
the Company

Directly
0.0%

Ikeda City,
Osaka

100

971

Real estatebusiness

None

Details oftransaction

Item

Balance as of 31st
March 2014
(Millions of (Thousands ofyen)
U.S. dollars)

¥47

$456

Deposit

¥33

$320

34

330

Accounts
receivable329

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, etc.
(1) The terms and conditions of the property lease are determined with reference to similar transactions in the neighbouring area.
(2) Director of the Hankyu Corporation (consolidated subsidiary), Koichi Kobayashi, and his close family own 77% of the voting rights in Tateishi Sangyo Co., Ltd. Any decisions on
operation and management of real estate are made by reference to neighborhood transactions.

② Notes about parent company and major affiliated companies
No items
23 PER SHARE INFORMATION
The following tables show net assets per share, net income per share, diluted net income per share, and the basis for their respective calculations.

② Net income per share (yen / U.S. dollars)(Basis for the calculation)
Net income (Millions of yen / Thousands of U.S. dollars)
Amount not belonging to common stockholders (Millions of yen / Thousands of U.S. dollars)
Net income related to common shares (Millions of yen / Thousands of U.S. dollars)
Average number of common shares during term (Thousands of shares)③ Net income per share—diluted (yen / U.S. dollars)(Basis for the calculation)
Adjustment to net income (Millions of yen / Thousands of U.S. dollars)(Equity in income of affiliates)
Increase in number of common shares (Thousands of shares)(Of the amount, subscription rights to shares)
Summary of potential shares that were not includedin the calculation of diluted income per share because their effect was not dilutive

2013

2014

¥443.63¥477.69

2014

$4.64

¥573,154¥13,754¥[112]¥[13,642]¥617,598¥15,547¥[208]¥[15,338]$5,996,097$150,942$[2,019]$[148,913]¥559,399
1,271,406
4,696¥602,050
1,271,406
5,312$5,845,146

5,745
1,260,965

5,745
1,260,349

2013

2014

2014

¥31.48¥36.76$0.36¥39,702¥—¥39,702
1,261,052¥31.47¥46,352¥—¥46,352
1,260,858¥36.75$450,019$—$450,019¥(4)¥[(4)]
277
[277]

¥(0)
¥[(0)]
432
[432]

$(0)
$[(0)]——

Hankyu Hanshin Holdings

Section5

Financial Section andCorporate Data

① Net assets per share (yen / U.S. dollars)(Basis for the calculation)
Total net assets (Millions of yen / Thousands of U.S. dollars)
Amount to be deducted from total net assets (Millions of yen / Thousands of U.S. dollars)(Of the amount, subscription rights to shares)(Of the amount, minority interests)
Net assets at the end of the fiscal year related to common shares(Millions of yen / Thousands of U.S. dollars)Common shares issued (Thousands of shares)
Treasury stock shares (Thousands of shares)
Common shares held by consolidated subsidiaries and equity-method affiliates(Thousands of shares)
Common shares used to calculate net assets per share (Thousands of shares)$0.36

Annual Report 2014115

24 CONSOLIDATED SUPPLEMENTARY STATEMENTS① Corporate Bond Statements

Company

Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hankyu Hanshin Holdings, Inc.
Hanshin Electric Railway Co., Ltd.
Total

Name

Issue date

Series 35 unsecured
corporate bonds
Series 37 unsecured
corporate bonds
Series 38 unsecured
corporate bonds
Series 39 unsecured
corporate bonds
Series 40 unsecured
corporate bonds
Series 41 unsecured
corporate bonds
Series 42 unsecured
corporate bonds
Series 43 unsecured
corporate bonds
Series 44 unsecured
corporate bonds
Series 45 unsecured
corporate bonds
Series 46 unsecured
corporate bonds
Series 14 unsecured
corporate bonds

14th Nov.
2007
23rd Oct.
2009
23rd Oct.
2009
28th Jan.
2010
22nd Sept.
2010
22nd Sept.
2010
17th Mar.
2011
9th Sept.
2011
25th Oct.
2012
14th Mar.
2013
25th Oct.
2013
23rd June
2004

—

—

Millions of yen
Balance as of
Balance as of
31st March
1st April, 20132014

Thousands of
U.S. dollars
Balance as of
31st March2014

10,000¥     —
10,000[10,000]$       —97,087[97,087]

10,00010,00020,000116 Hankyu Hanshin Holdings

Annual Report 2014

Security

1.66%

None

1.10

None

97,0871.87

None

20,000

194,175

1.25

None

15,00015,000145,631

1.43

None

7,000

7,000

67,9611.72

None

10,00010,00097,087

1.54

None

10,00010,00097,0870.55

None

10,00010,00097,087

0.406

None

10,00010,00097,087

0.589

None

—

10,00010,000[10,000]
122,000[20,000]

97,08797,087[97,087]
1,184,466[194,175]

0.819

None

2.22

None

14th Nov.
2013
23rd Oct.
2014
23rd Oct.
2019
27th Jan.
2017
18th Sept.
2020
22nd Sept.
2022
17th Mar.
2021
9th Sept.
2016
25th Oct.
2017
13th Mar.
2020
25th Oct.
2023
23rd June
2014

—

—

—

¥ 10,000

Notes:
1. The amount in parenthesis in the “Balance as of 31st March 2014” column is thecurrent portion of the total amount and is recorded in current liabilities on the
consolidated balance sheets.
2. Redemption schedule of bonds for five years subsequent to 31st March 2014

Redemption
dateInterest rate

10,000122,000

Due within one year......................................................
Due after one year through two years...............
Due after two years through three years..........
Due after three years through four years.........
Due after four years through five years.............

Millions of yen

Thousands of
U.S. dollars¥20,000—
30,00010,000—$194,175—
291,262
97,087—

Notes to the Consolidated Financial Statements② Statements of Loans Payable

Item

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.............................................................................................................

Millions of yen
Balance as of
Balance as of
1st April 2013
31st March 2014

Thousands of
U.S. dollars
Balance as of
31st March 2014

Average interest
rate

Repayment deadline$1,501,126
1,540,660
19,6895,682,524
93,913—
8,837,932

0.687%
1.053
—
1.233
—
—
—

—
—
—
2015 – 2034
2015 – 2026——

¥154,616
158,6882,028
585,300
9,673—
910,307¥  167,778
186,580
2,134
637,624
10,515—
1,004,633

Notes:
1. The balances are expressed after the elimination of transactions with companies in
the consolidation group.
2. The “Average interest rate” of loans payable is the weighted average interest rate foroutstanding loans payable as of end of the current fiscal year.
3. The “Average Interest rate” is not shown for lease obligations because the Company
mainly uses the method that includes the amounts equal to interest in total capitallease obligations and that spreads the total amount equal to interest equally overeach 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 2014.

Long-term debt

Millions of yen

Thousands of
U.S. dollars¥81,075
68,967
41,72842,203$787,136
669,583
405,126
409,738

Millions of yen

Thousands of
U.S. dollars¥1,716
1,450
1,248
847

$16,660
14,078
12,1178,223

Due after one year through two years...............
Due after two years through three years..........
Due after three years through four years.........
Due after four years through five years.............
Lease obligations

Due after one year through two years...............
Due after two years through three years..........
Due after three years through four years.........
Due after four years through five years.............

③ Schedule of Asset Retirement Obligations
No items
25 OTHERS① Quarterly financial information in fiscal year ended 31st March 2014
Cumulative period

1st Quarter

2nd Quarter

3rd Quarter

4th 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)¥160,565
32,87920,19016.01¥349,566
64,271
39,64631.44¥510,626
79,94250,31339.90¥679,157
83,542
46,352
36.76

Cumulative period

Accounting period

Net income per share (yen)Accounting period

Net income per share (U.S. dollars)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter$1,558,883$3,393,845$4,957,534$6,593,757

319,214
196,0190.16

623,990384,9130.31

776,136
488,4760.39

811,087
450,019
0.36

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter¥16.01¥15.43¥8.46¥(3.14)

1st Quarter

2nd Quarter

3rd Quarter

4th Quarter

$0.16

$0.15

$0.08

$(0.03)

Hankyu Hanshin Holdings

Annual Report 2014

Section5

Financial Section andCorporate Data

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)117

Major Group Companies(As of 31st March 2014)

Consolidated Subsidiaries■ Urban Transportation

Railway Operations

Automobile

Retailing

Advertising
Other■ Entertainment and Communications

Name of Company

Name of Company

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Nosé Electric Railway Co., Ltd.
Kita-Osaka Kyuko Railway Co., Ltd.
Hokushin Kyuko Railway Co., Ltd.
Kobe Rapid Transit Railway Co., Ltd.
Hankyu Hanshin Railway Technology Co., Ltd.
Hankyu Hanshin Electric System
Hankyu Bus Co., Ltd.
Hanshin Bus Co., Ltd.
Hankyu Kanko Bus Co., Ltd.
Osaka Airport Transport Co., Ltd.
Hankyu Denen Bus Co., Ltd.
Hankyu Taxi Inc.
Hanshin Taxi Co., Ltd.
Hankyu Hanshin Motor Technology Co., Ltd.
Nippon Rent-A-Car Hankyu Inc.
Hankyu Corporation
Hankyu Retails Corporation
Iina Dining Co., Ltd.
Hankyu Corporation
Hankyu Advertising Agency Inc.
Alna Sharyo Co., Ltd.

Hanshin Electric Railway Co., Ltd.
Hanshin Tigers Baseball Club, Ltd.
Hanshin Contents Link Corporation
Wellness Hanshin Inc.
Hankyu Corporation
Takarazuka Creative Arts Co., Ltd.
Takarazuka Stage Co., Ltd.
Umeda Arts Theater Co., Ltd.
Hankyu Communications Co., Ltd.
Itec Hankyu Hanshin Co., Ltd.
Bay Communications Inc.
Himeji Cable Television Co., Ltd.
Mt. Rokko Cable Car & Tourism Company■ Real Estate
Name of Company

Real estate leasing

Real estate sales andother business

Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.
Osaka Diamond Chikagai Co., Ltd.
Hanshin Real Estate Co., Ltd.
Hankyu Corporation
Hanshin Electric Railway Co., Ltd.
Hankyu Realty Co., Ltd.
Hankyu Hanshin Building Management Co., Ltd.
Hankyu Hanshin High Security Service Co., Ltd.
Hankyu Hanshin Clean Service Co., Ltd.
Hankyu REIT Asset Management, Inc.

SportsStage

Communication andMedia
Leisure, etc.

■ Travel
Name of Company

Travel Agency

Hankyu Travel International Co., Ltd.
Hankyu Hanshin Business Travel Co., Ltd.
Hankyu Travel Support Co., Ltd.

■ International Transportation
Name of Company

International
Transportation

Hankyu Hanshin Express Co., Ltd.
Hankyu Hanshin Logipartners Co., Ltd.
HHE (USA) INC.
HHE (DEUTSCHLAND) GMBH
HHE (HK) LTD.
HHE (SINGAPORE) PTE. LTD.

HHE: HANKYU HANSHIN EXPRESS■ HotelsName of Company

Hotel Management

Hankyu Hanshin Hotels Co., Ltd.
Hanshin Hotel Systems Co., Ltd.
Amanohashidate Hotel Co., Ltd.
Arima View Hotel Co., Ltd.
Hankyu Hanshin Restaurants Co., Ltd.

■ OtherName of Company

Construction
Group FinanceOutsourcing Services
for Personnel andAccounting Services

Equity-method Affiliates
Main Business

Department Store

Name of Company

H2O Retailing Corporation[Securities code: 8242]
Nishi-Osaka Railway Co., Ltd.

Railway Operations

Kobe Electric Railway Co., Ltd.
[Securities code: 9046]

Real Estate Leasing
Motion Picture Business
Commercial Broadcasting

Tokyo Rakutenchi Co., Ltd. [Securities code: 8842]
Toho Co., Ltd. [Securities code: 9602]
Kansai Telecasting Corporation

118 Hankyu Hanshin Holdings

Annual Report 2014

Hanshin Construction Co., Ltd.
Chuo-Densetsu Co., Ltd.
Hankyu Hanshin Financial Support Co., Ltd.
Hankyu Hanshin Business Associate Co., Ltd.

Investor Information(As of 31st March 2014)

Hankyu Hanshin Holdings, Inc.
Head Office:1-16-1, Shibata, Kita-ku, Osaka 530-0012, Japan
Phone: +81-6-6373-5001(Group Planning Div., IR Office)Fax:+81-6-6373-5042

Paid-in Capital:¥99,474 million
Fiscal Year-End:
31st March
Number of Employees: 20,913 (consolidated basis)
Authorised Shares:
3,200,000,000
Issued Shares:
1,271,406,928
Number of Shareholders: 87,811
Unit of Trading:
1,000 shares
Stock Exchange Listing: Tokyo
Transfer Agent:	Mitsubishi UFJ Trust and Banking
Corporation

Tokyo Office (Personnel and General Affairs Div.):
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(thousands)

Percentage(%)

Individuals
and others

Japan Trustee Services Bank, Ltd. (Trust account)

52,7804.15

47.55%The Master Trust Bank of Japan, Ltd. (Trust account)

35,853

2.82

Nippon Life Insurance Company

31,583

2.48

Name

Sumitomo Mitsui Banking Corporation

21,9091.72

H2O Retailing Corporation

21,037

1.65

Japan Trustee Services Bank, Ltd.
(The Sumitomo Mitsui Trust & Banking Co., Ltd. Retirement Benefit Trust Account)

13,665

1.07

State Street Bank West Client Treaty(Standing Proxy: Mizuho Bank, Ltd. Settlement & Clearing Services Division)

13,578

1.07

Japan Trustee Services Bank, Ltd. (Trust account 2)

13,244

1.04

Japan Trustee Services Bank, Ltd. (Trust account 3)

13,217

1.04

Japan Trustee Services Bank, Ltd. (Trust account 5)

12,925

1.02

National government andlocal public organisations

0.00%

Financial
institutions

25.16%
Securities
companies

0.71%
Other
corporations

9.39%
Foreign corporations
and individuals

17.20%

Stock Price Range and Trading Volume (Tokyo Stock Exchange):
Stock Price (¥)

Nikkei Average (¥)

650

18,000Section5

Nikkei Average (right scale)350
200
200,000

12,0006,000

Stock Price (left scale)0

100,000
Trading Volume 0(thousand shares)

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

FY2012FY2013

FY2014

High

385

588

648

Low

290

349

492

At year-end

361

569

562

Hankyu Hanshin Holdings

1

2

3

Annual Report 2014

Financial Section andCorporate Data

500

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

Printed in Japan