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

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 ourfinancial standing,” and “returns to shareholders.”

Taking on the challenge ofa new management phase.

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, wewill 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.

Business Strategy ❷Financial Policy

Targeted Management Indicators (through fiscal 2019)

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

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 policyfor 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 leasingbusiness) and ¥100.0 billion for investment in large-scale development and new market development.
Meanwhile, to “continuous strengthening our financialstanding,” 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.

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 anaging 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 businessesoutside 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.

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 inMay 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.

New Management Phase (fiscal 2016 through fiscal 2019)

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

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

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

Expected outstanding balance of interest-bearing debt at end offiscal 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

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

Outstanding balance of interest-bearing debt:

Duration ofinitial plan extended

Plan’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

FY2013

Targeted fiscal year
achieving initial planPayback from major projects¥970.0 billion (forecast)Fiscal 2015 Outlook

March 2012 rolling forecast

Formulation of Medium-Term
Management Plan

FY2008

Achieve one year
ahead of schedule

FY2014FY2015FY2016

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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

Financial Policy

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.

Distribute cash flow in a balancedand flexible mannerBusiness Strategy1

Enhance 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 theOsaka Municipal Transportation Bureau’s Midosuji Line, isscheduled to be extended 2.5km from Senrichuo Station tothe 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 areaOverseas<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.

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

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 ofour 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

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● Investments in railway safety● Investments in renovation

pertaining real estate leasing business
Fiscal 2012–2015

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¥100.0 billion¥50.0 billion

over 5.0 times

1 timeFiscal 2016–2019Capital investment/
Investments and loans